have been the only eyewitnesses to the character or condition of the spark arrester. No one of the plaintiff's witnesses gave any evidence founded in their own knowledge as to the construction or condition of the spark arrester. There was no conflicting evidence as to the spark arrester's condition, except such as may be said to be circumstantial or inferential from the defendant's testimony. There was nothing in the evidence to show that the spark arrester was not of the most improved plan, and that it was not at the time in good repair and working condition. Much of the adverse testimony as to the defective condition of the spark arrester appeared on the trial in the suggestions and contentions in argument of zealous counsel for the plaintiff. On the trial the evidence showed that some of the bagging on some of the cotton bales had been cut open on top of the exposed end of the cotton bales by cotton samplers, and more or less cotton protruded from the open space cut in the bagging and made the ales so cut more liable to catch fire if sparks from the engine fell upon the exposed places. Such evidence was only suggestive of a condition or incident which might show contributory negligence. The evidence, which seemed to be strongly persuasive, if not conclusive, on the issue of contributory negligence, shows that the compress company, recognizing the danger to which the cotton bales, remaining exposed and uncovered on the platform, were exposed from falling parks of passing engines, took upon, or imposed upon, itself the duty of employing a servant, whose only duty seems to have been to keep water in the barrels on the platform for use in extinguishing fire and oking out, as the plaintiff's witness himself says, "for falling fire parks." The testimony of Butler Napoleon, a witness for the plainif company, was as follows: "Q. Had you been at the compress that day before the fire? A. Just about 15 or 20 minutes before. Q. Had you done any work in the compress building that morning? A. I had filled some barrels with water. Q. What was your duty about the compress? A. To keep the barrels filled up and keep a lookout for fire, and clean up. Well, yes, sir; those were my duties, to notice for arks and cinders. And I happened to slip off from the captain and go to er that day, and the train came in there on me, and I know it was my lace to stop, and that is the reason I stopped, because it is my business to ok out for sparks and watch them. But I did get back to the burning. I aldn't get back to the compress before the fire was all over everything. You say you were some distance from the compress when the fire occurred? 4. Yes, sir. Q. You had gone out to dinner? A. No, sir; I had done eat y dinner, I had started home. Q. You say that was your business to look it for fire, but you didn't see Capt. Miller, and you were slipping away? Yes, sir. Q. And you passed the engine on the track about 200 yards away from the compress? A. Yes, sir. Q. You were slipping off home were you? A. Yes, sir. Further on in his testimony, Butler says: "The captain always told me to keep a lookout for sparks when the engine was running on the compress track." Before this fire (or the fire in question) he had several times put out fire sparks that flew on the cotton. He says, if te had been up there with a bucket of water, that he could have done Something to put the fire out. He says it was a matter of general talk and notoriety that there was danger from flying sparks, when there 153 F.-50 was switching in there, on account of cotton being close to the track, and it was his special duty to watch the cotton. The evidence shows that Napoleon Butler was specially employed to use his activities on the platform in protecting the cotton from the very falling sparks which seem to have set fire to the cotton, and he had slipped away and was quite a distance from the compress building when he first saw the fire consuming the cotton. Butler's testimony shows that the compress company, in recognition and appreciation of such duty-of a reciprocal nature, as I have mentioned-as was suggested and imposed on it by or in the compress company's knowledge of and consideration for the conditions and environments which were apparent to the compress company, and which, necessarily, attended the business activities of the company's management in handling its patrons cotton on the platform. The evidence shows that the management of the compress company in responding to an estimate of its sense of duty, to itself and the owner of the compress building, as well as to its duties as the bailee of the several owners of the cotton which was destroyed by fire, kept a man especially appointed to discharge a service which it seems, in its own estimate of things, it fairly owed to all persons concerned Treating the compress company as such a bailee, it seems that a failure to have had such a service or duty, as was assigned to Butler, performed by some of its servants, would have been, under the circumstances, a signal omission of the bailee's obligations. If the compress company had been the actual owner of the cotton, and it was now suing the defendant railway company for damages, because of its negligence in setting the cotton on fire, I think the facts relating to Butler' neglect of the special duties assigned to him would show a damaging state of facts against the legal right of the compress company to recover damages for negligence of the railway company. The service or duty which the compress company assigned to Butler seems to show or illustrate that company's view and interpretation of the nature of its obligations, under all the circumstances, as a bailee. It may be that the defendant railway company did not know of the presence of Butler, or of the special duties which had been assigned to Butler by the compress company; but the assumption by the compress company of such a duty as was assigned to Butler is very persuasive to show that it rightfully assumed some of the risks in the dangers of the situation. It is persuasive, too, to show that the compress company recognized and was responding fairly for itself to, the nature of the reciprocal relations and obligations imposed on either of the litigant companies (treating the compress and railway companies as the litigants herein) by the apparent dangers inherent in the environments of the situation A new trial is granted. In re WYOMING VALLEY ICE CO. (District Court, M. D. Pennsylvania. May 3, 1907.) No. 559. OF L CORPORATIONS-REORGANIZATION-CONSOLIDATION COMPETING COMPA NIES BONDS AND STOCK ISSUED TO PROMOTER-CONSIDERATION-VALIDITY. Upon the reorganization of an ice company, the promoter took an option on the capital stock, amounting to $25,000, for which he agreed to pay $75,000, and at the same time secured an agreement from the owner, who controlled another ice company, that the latter company would not engage in the wholesale or retail ice business in the same territory; he on his part agreeing that the ice company, upon being reorganized, would take a certain quantity of ice at certain prices annually. He also secured similar options upon the business and property of two other ice companies, for which he was to pay cash and assume debts to the amount of $15,000. Armed with these options and agreements, he proceeded to enlist others in the enterprise, securing from them $90,000 in money, of which $75,000 was to be used to buy the $25,000 of stock bargained for, and the balance to pay the other obligations incurred; the understanding with these parties being that, when the reorganization of the company was effected, the stock of the company should be increased to $225,000, and bonds to the extent of $90,000 be issued, the bonds to be distributed among the parties according to the amounts which they had severally contributed and a certain percentage of the stock be given them as a bonus. This arrangement was carried out, and the reorganization proceeded with; the original stock being assigned and transferred to the promoter and his associates for the purpose. New directors having been selected from among their number, the options and agreements were then purchased from the promoter, $90,000 of bonds and $200,000 of increase stock being voted to him therefor, which bonds and increase of capital. they at the same time authorized as stockholders. The value of the property and business of the ice company at the time of the reorganization was approximately $75,000, the price paid for the stock to the original holders, and that of the other companies, which were bought out, about $27.500, subject, however, to some $10,000 of indebtedness which was assumed and paid; these values being somewhat augmented by the freedom from competition secured by the consolidation and the economies made possible thereby. The company having become bankrupt, upon the sale of its real estate by the trustee and the distribution of the proceeds to lien creditors: (1) Held, that in determining what the promoter contributed to the company in return for the stock and bonds turned over to him, as affecting the validity of the bonds, the property of the company itself had necessarily to be left out of consideration, belonging as it already did to the company, together with the good will and business, which could not be optioned away by the original stockholders if they had undertaken to do so, as they did not, nor sold back again to the company by the assignment of the option agreement. Nor was this to be saved by the suggestion that by the assignment of the agreement the stock secured by it was transferred to the company, which thus became the beneficial owner, the stock so acquired having been paid for by the money contributed for the purpose by the parties to whom it was distributed, by whom such money was advanced with the understanding that the stock was to be so disposed of; and the option, as so exercised by the promoter having performed its functions, there was nothing left to this feature of the agree ment when turned over to the company. (2) Held, further, that the consideration to the company for the $90,000 bonds and $200,000 of stock, which were voted to the promoter by himself and his fellow directors, was thus brought down to the property secured by the agreements with the other two companies, amounting all told to $27,500, incumbered with $10,000 of debts, and to the advantages to result by the removal of competition, which were altogether prospective and problematical. 2. SAME-CHARTER AUTHORITY-RIGHT TO BOND FOR BORROWED Money. Held, also, upon the showing so made, that as against excepting creditors the bonds were not valid obligations of the company under the authority given by the charter to borrow money and bind the property and franchises of the company by mortgage not exceeding one-half the capi tal stock at the time the loan should be made; the transaction with the promoter, by which bonds and stock were voted to him in return for the agreements which he was to turn over, by no liberality of construction being able to assume the character of a loan. 3. SAME CONSTITUTIONAL AND STATUTORY RESTRICTIONS CREASE OF INDEBTEDNESS. -FICTITIOUS IN It being provided by the state Constitution (article 16, § 7), as well as by the general corporation act of April 29, 1874 (P. L. 81), that no corporation shall issue stock or bonds except for money, labor done, or money or property actually received, and that all fictitious increase of stock or indebtedness shall be void, the bonds and stock in the present case, being issued in disregard of this, were invalid; not that the agree ments turned over by the promoter and the property and business thereby secured were devoid of all value, but the present actual value of that which they represented was comparatively so slight, and the prospective value, upon which alone the transaction could be justified, was so specu lative, that the obligations given in return must be regarded as colorable and fictitious within the meaning of the Constitution, and therefore void. 4. SAME-PRESENT VALUES TO GOVERN. Even though the parties participating may have hoped that some day the securities would approximate the figures given to them, they could not fail to know that this was not the case at the time, and it is by this that the validity of the transaction is to be determined. 5. SAME-RIGHT OF CREDITORS TO QUESTION-EXISTING CREDITORS-INNOCENT PURCHASERS. The bonds being void by the Constitution, the right of creditors to question them cannot be doubted; not, of course, in the hands of innocent purchasers, but that is not the case where, as here, both stock and bonds were held by parties who participated in their issue. Nor can the except ing creditors be said to have come in after the bonded indebtedness had been contracted, and so not be in a position to question it, being affected by conditions as then established; the obligation which was the basis of the judgments due them having arisen out of the agreement to take a certain yearly quantity of ice, made with the promoter and confirmed by the company, whereby it anticipated the bonded indebtedness, if that was material. 6. SAME UNEXECUTED GIFT-NOTE OR BOND OF MAKER. But, in addition to this, the bonds, being mere promises to pay in the hands of the original parties, were no more at best than voluntary obliga tions, not enforceable as against the claims of those to whom the company was actually indebted; the gift of a note or bond by the maker not being executed except by payment. 7. SAME-SATISFACTION OF BID BY BONDS-EXCEPTIONS TO SALE. While, then, as to all over and above the value actually contributed, the bonds were a gift--although to the extent of such value this may not have been the case, and, as representing advances made to the company upon general distribution, the holders might to that extent have a right to come in-as bonds, secured by a mortgage lien on the property and franchises of the company, made void by the Constitution, they could not be used to satisfy the bid of a purchaser at a trustee's sale, according to the local practice, and the sale, unless otherwise complied with, mus therefore be set aside. On Exceptions to Report of Referee. ARCHBALD, District Judge. At the sale by the trustee of the real estate of the bankrupt corporation the property was purchased by George R. McLean, as attorney for bondholders, for $40,000, who, after paying $1,650 in cash to recover the costs, was permitted, in conformity with the state practice in cases of judicial sales, to receipt for the balance of his bid in bonds of the company, secured by a first mortgage on the property, the lien of which was divested by the sale. A return of sale to this effect having been made by the trustee, exceptions were taken by the Bear Creek Ice Company and the Albert Lewis Lumber Company, judgment creditors, which were dismissed by the referee and the sale confirmed, the proceeds as the result being appropriated pro rata to the payment of the bonds, and it is the propriety of this disposition that is now in question. The exceptants claim that the bonds are invalid, not having been issued for value, but having been given to the parties, by whom they are now held for money advanced with which to buy up the capital stock of the company, and to a small extent also to secure the business and property of certain other companies, altogether inadequate to meet the requirements of the law. The facts are not in dispute, and are in substance as follows: The Wyoming Valley Ice Company was incorporated by act of assembly of April 15, 1869 (P. L. 1870, p. 1415), with a capital stock of $25,000, divided into 1,000 shares of $25 each, and an authorized capital of ten times that amount. And on February 12, 1901, Albert Lewis, being the owner of 690 of such shares, gave an option in writing to Dr. H. N. Young to sell him the same at $75 a share; Dr. Young undertaking to buy the shares of other stockholders at the same figure. It was at the same time further agreed by Mr. Lewis, acting on behalf of the Bear Creek Ice Company and the Albert Lewis Lumber Company, both of which he controlled, that these companies would abstain from engaging in the wholesale or retail ice business in the Wyoming Valley as hey had been doing theretofore, or from selling to other parties are, Dr. Young on his part undertaking that the Wyoming Valley le Company which was thus turned over to him and to which the ear Creek Ice Company had previously been furnishing ice, should ake from the said company, for a period of ten years, 12,000 tons of ce annually at certain prices; a contract to this effect being subseuently executed with these companies. The purpose of Dr. Young was to consolidate and control the ice busiess in the section designated, and, following upon the option obtained rom Mr. Lewis, he secured another from Isaac Stauffer and Daniel . Callahan, doing business as the Pocono Ice Company, by which they ere to sell him the property of that company for $50,000-that is to ay, $5,000 in cash and $45,000 in stock of the Wyoming Valley Ice ompany, part of an increase of it to $225,000, which was contemated-Stauffer and Callahan at the same time agreeing that they ould not, directly or indirectly, engage or become interested in the ice |