Hammond v. Du Bois

Thomas, J., delivered the opinion of the Court. On the 6th of June, 1907, Willard D. Doremus, Addison G. Du Bois and others, of Washington, D. C-, parties of the first part, entered into a contract with John P. Miller, of Virginia, party of the second part, which recites : “That whereas the said parties of the first part are the ownersi for the United States of the entire right, title and interest in a certain invention of said Doremus, being an improvement in cotton ginning machinery for which application for letters patent of the United States was filed in the United States Patent Office, May 17, 1907, by said Doremus, and whereas said party of the second part is desirous of securing said entire right, title and interest in and to said invention, and in and to the letters1 patent, which may be granted for said invention by the United States of America..” The agreement then provided that in consideration of the sum of $50,000, to be paid by Miller as therein specified, the parties of the first part did thereby grant, bargain and sell unto him, his heirs and assigns, “all the right, title and interest in and to said invention, and in and to any improvements thereon that may be made by said Doremus, and in and to the letters ¹¹⁸ patent for said invention, and for said improvements thereon that may he hereafter granted by the United States.” On the 27th day of June, 1907, Doremus assigned and transferred to Miller “the entire right and. interest in and to any and all patents which may be obtained in accordance with this agreement in countries foreign to the United States on said cotton gin, and on any and all improvements, thereon,” in consideration of the agreement that he was to' receive one-half of the profit, in bonds, stocks or money, realized from the sale of letters patent in the United States or in foreign countries, and on the first day of July, 1907, Miller, in consideration- of ten dollars, “and other valuable consideration,” sold to Addison G. Du Bois “one-fourth part of the entire net proceeds from said invention derived from either United States or foreign patents on said invention, whether the proceeds shall be in money, stocks, bonds or other thing or things of value.” Thereafter the National Cotton Improvement Company was organized under the laws of Maine1, and its entire capital stock of $1,500,000, except a few organization shares, was issued to Miller for the American rights to the Doremus invention, and the Doremus patents were assigned to that company by Miller and hy Doremus. There was also formed a corporation called the Doremus Holding Company, to which Doremus assigned his application for the foreign rights, and the stock of the latter company was held by Doremus, Miller and Daniel J. Sully. Miller gave to one John J. Welch an option on the majority of the stock of the National Cotton Improvement Company, and through Welch the D'oremus invention was brought to the attention of the appellant in this case, John Hays Hammond.

Mr. Hammond referred the matter to Mr. Sully, with whom he was interested in a plan for warehousing cotton, for investigation and a report as to the value of the invention, and Mr. Sully reported that in his opinion the Doremus invention was very valuable and “would revolutionize the whole cotton industry.” ¹¹⁹ Welch failed to make the payments under his option, and his rights became forfeited, and on the 28 th of December, 1909, John P. Miller, John Hays Hammond and Daniel J. Sully entered into the following agreement: “Agreement made this twenty-eighth day of December, 1909, between John P. Miller, party of the first part, and John Hays Hammond and Daniel J. Sully, acting for a syndicate to be composed of themselves and one or more other persons, parties of the second part, witnesseth: “Whereas the party of the first part is the owner of $471,200 at par of the preferred stock and $967,-200 at par of the common stock of the National Cotton Improvement Company; and “Whereas the parties of the second part are about to incorporate, or cansé to be incorporated, a corporation to be known as the General Cotton Securities Company, or some other suitable name, for the' purpose of promoting the incorporation and organization of and holding the stock and other securities of corporations engaged in the ginning, warehousing and general development of the cotton business, which said corporation is to have a capital of $7,000,000 common and $3,000,000 preferred stock, which preferred stock is to be 7% cumulative, with a preference as to assets upon dissolution without participation in profits beyond 7%, and without voting power as long as the 1% dividend is paid; and “Whereas the party of the first part desires to sell his stock to the said corporation to be formed and to take in payment therefor cash and common stock, and the parties of the second part desire to obtain the same for the new corporation and also propose to finance the said corporation by the sale of this preferred stock. “Now, therefore, this agreement witnesseth that in consideration of the premises and of the mutual covenants and agreements herein contained the parties hereto agree to and with each other as follows, to wit: ¹²⁰ “1. The party of the first part agrees to deliver to the parties of the second part $471,200 at par of the preferred stock and $967,200 at par of the common stock of the National Cotton Improvement Company, the certificates for the same duly endorsed for transfer to he lodged with John Hays Hammond forthwith. “2. The party of the first part agrees to accept in payment for the said stock $37,500 in cash to he paid upon the delivery of the certificates as hereinbefore provided, $1,000,000 in full-paid common capital stock of the new corporation and $1,000,000 in full-paid preferred stock thereof, it being understood and agreed, however, that the common capital stock of the new corporation may be transferred upon the issuance thereof into the names of John Hays Hammond, D. J. Sully and Frank S. Bright, as voting trustees, to be held by them for a period not exceeding five years, which voting trust is to be established for the purpose of maintaining a continuous and efficient administration of the new corporation during the period of its formation, promotion and commencement of its operations, and in the event that such voting trust is formed the party of the first part agrees that the $1,000,000 of common stock may be paid and delivered in the shape of certificates of beneficial interest in that amount of stock, subject to a voting trust. The parties of the second part may, if necessary to effect the sale of the preferred, withdraw or omit from the voting trust so much of the common stock as may be used as bonus on such sales, provided that at all times at least a majority of the common stock shall be subject to said trust. ‘ “3.

Party of the first part agrees that the parties of the second part may transfer the said stock of the National Cotton improvement Company to the new corporation upon such terms and conditions as will provide for the issuance by the new corporation to the parties of the second part of $3,000,000 at par of its common stock and $3,000,000 at par of its pre ¹²¹ ferred stock, the balance of the common stock to remain unissued, to be issued hereafter at the discretion of the Board of Directors for cash or property, in accordance with the needs of the corporation, provided, however, that in addition to receiving from parties of the second part the stock of the National Cotton Improvement Company, the new corporation shall also receive from the sale by parties of the second part of the stock to be transferred to them $1,600,000, which sum is to be paid into, the treasury of the new corporation by the parties of the second part as the same is derived from the sale of the preferred and common stock of the new corporation issued by it to the parties of the second part. “4. The party of the first part agrees that the $1,000,000 of preferred stock to be issued to him as aforesaid shall be lodged with the syndicate, of which parties of the second part are members and for which they are acting in executing this agreement for sale by them so as to net to party of the first part the sum of $400,000. “5. The parties of the second part agree upon the deposit of the said certificates of stock of the National Cotton Improvement Company with John Hays Hammond aforesaid to pay to the party of the first part $37,500 in cash, and to proceed forthwith to incorporate the new corporation and to procure the issuance of its stock to them as hereinbefore provided, and when and as soon as the same is issued to establish a voting trust as above provided, and deliver to party of the first part certificates of beneficial interest, subject to the voting trust, in $1,000,000 par of the common stock of the new corporation, and to receive and hold for the account of the party of the first part $1,000,000 at par of the preferred stock of the new corporation. They further agree to transfer the said stock of. the National Cotton Improvement Company to the new corporation, and to enter into an agreement with it to use their best endeavors to sell $2,000,000 of ¹²² its preferred stock and so much as may he necessary of the common stock which they receive, so as to net to its treasury the sum of $1;600,000.

For the purposes of sale, the $2,000,000 of preferred stock to be sold for the new corporation and the $1,000,000 preferred stock to be sold 'for the party of the first part, shall be taken and considered as one block, and the parties of the second part shall use their best endeavors in every respect to sell and market the same. Upon the sale of each share of said preferred stock there shall be paid out of the proceeds of such sale by the parties of the second part to the party of the first part the sum of $14 in cash until the sum of $400,000 has been paid in full as herein provided for, and a proportionate amount shall, be paid into the treasury of the new corporation until the $1,600,000 herein provided for has been paid in full. Any sum or sums of money received by parties of the second -part from the sale of the $1,000,000 preferred stock in excess of the sum of $400,000 shall belong to parties of the second part as and for their compensation for carrying out this agreement. The parties of the second part shall be under no personal liability by virtue of this agreement, except to transfer the stock received by them from the party of the first part to the new corporation, to pay the sum of $37,500 in cash, to deliver to party of the first part $1,000,000 in common stock or voting trust certificates, to receive for the account of party of the first part $1,000,000 preferred stock, to use their best endeavors to sell said $1,000,000 of preferred for the party of the first part and $2,000,000 preferred for the new corporation, and to account to party, of the first part and to the new corporation for their respective proportions of the moneys received from the said sales. “6.

It is understood and agreed by and between the parties hereto that all deliveries of stock and all payments of moneys herein provided to be made to party of the first part may be made to Frank S. Bright, as ¹²³ Ms representative, and the parties of the second part shall not be accountable or responsible for the distribution by him of the securities or moneys among the other parties if any entitled thereto. “In witness whereof the parties hereto have hereunto set their hands the day and year first above. Jno. P. Miller. John Hays Hammond.

D. J. Sully. Kalph Polk Buell.” In pursuance of the above agreement, the General Cotton Securities Company was incorporated under the laws of Delaware, and the “first meeting of.the corporation” was held at its office in Wilmington, Delaware, on the 5th day of January, 1910. On the 7th of January, 1910, the General Cotton Securities Company entered into the following' contract with Daniel J. Sully: “This agreement, Made the 7th day of January, 1910, between Daniel J. Sully, party of the first part, and General Cotton Securities Company, a corporation of the State of Delaware, party of the second part. “Whereas Daniel J. Sully, party of the first part, has offered to deliver to this company $471,200 at par of the preferred stock and $967,200 at par of the common stock of the [National Cotton Improvement Company, a corporation of the State of Maine, with a total authorized and outstanding issue of $500,000 preferred stock and $1,000,000 common stock, and to pay hilo the treasury of the party of the second part $1,600,000 as and when payment thereof is demanded, in consideration of the issuance to him by the party of the second part of $3,000,000 at par of the preferred and $3,000,000 at par of the common stock, full paid and non-assessable, of this company; and “Whereas the said National Cotton Improvement Company is the owner of valuable patents and patent rights in an improved cotton gin known as the ‘Dore ¹²⁴ mus Gin/ and by virtue of said ownership the stock which said party of the first part has offered to convey is in the estimation of the board of directors of party of the second part, worth not less than $5,000,000 and is necessary for the purposes and objects of the incorporation of party of the second part. “Now, therefore, this agreement witnesseth, That, in consideration of the premises and of the mutualities of this agreement, the parties hereto covenant to and with each other as follows, to wit: “First—Party of the first part hereby agrees to deliver or cause to be delivered to party of the second part one certificate of the preferred and one or more certificates of the common stock of the National Cotton Improvement Company, aggregating 4,712 shares of the said preferred stock and 9,672 shares of the common stock thereof, properly executed and endorsed for transfer, the said delivery to be made to the treasurer of the party of the second part. “Second—Party of the first agrees to pay to the party of the second part from time to time, upon its demand, the sum of $1,600,000 in cash, without interest, and agrees to make the said'payments at such times and in such amounts as the party of the second part may nominate. “Third—Party of the second part agrees to execute and deliver to the party of the first part, upon the delivery to it of the certificates of stock hereinbefore provided for of the National Cotton Improvement Company one or more certificates of the preferred stock and of the common stock of party of the second part, aggregating $3,000,000 at par of the preferred and $3,000,000 at par of the common, which stock is hereby declared to be and is full paid and non-assessable. “In witness whereof the party of the first part has signed and sealed this agreement and the party of the second part has caused the same to be executed by its President and its corporate seal to be hereunto affixed, ¹²⁵ duly attested by its secretary tbe day and year first above written. Daniel J. Sully.

(Seal) General Cotton Securities Company, Attest: By Ralph Polk Buell, President. O. H. Stanton, Secretary.” On the 7th of January, 1910, an agreement was entered into between John Iiays Hammond, Daniel J. Sully and Frank S. Bright, as constituting voting trustees, and the stockholders of the General Cotton Securities Company, by which the common stock of the company was placed in the hands of the voting trustees fox the period of five years upon the trustees issuing therefor to the stockholders common stock trust certificates. This agreement was signed by Daniel J. Sully as the holder of 29,965 shares of the common stock. On the same day a syndicate composed of Daniel J. Sully, John Hays Hammond, Harris Hammond, Mont D. Rogers and D. B. Atherton was formed for the purpose of selling three million dollars of preferred stock and $750,000 of the common stock of the General Cotton Securities Company.

This syndicate agreement recited that Mr. Sully had acquired from the General Cotton Securities Company $3,000,000 of its preferred stock and $3,000,000 of its common stock, and provided that each member of the syndicate was to use his best endeavors to sell the $3,000,000 of preferred and $750,000 of the common stock; that the preferred stock was to be offered fox sale at the “price of $100 for each $100 par value of preferred stock and $25’ par value of common stock if payments therefor he made in one sum, but for the price of $105 for like amount of preferred and common stock if payment be made in instalments.;” that Daniel J. Sully should be syndicate manager, for the purposes therein specified, and that the $3,000,000 of preferred and $750,000 of common stock should be transferred to Daniel J. Sully into his hands as. syndicate manager and the certifi ¹²⁶ cates therefor deposited in some trust company, to be selected by him, under an agreement by which the purchasers of the stock were to make payments therefor to the trust company. 0'n the 9th of February, 1910, Daniel J. Sully delivered to the United States Trust Company of Washington, D. C., certificate Do. 1 for 30,000 shares of the preferred stock of the General Cotton Securities Company, and certificate Do. 3 for 7,500 shares of the common stock voting trust certificates of the company, both certificates being in his name as syndicate manager, which the Trust Company agreed tO' hold in accordance with the terms of his letter of that date, and in accordance with the provisions of the syndicate agreement. On the 3rd of February, 1910, John P. Miller executed the following declaration of trust: “Declaration of Trust. “Whereas I, John P. Miller, have this day received the following described common stock trust certificates of the General Cotton Securities Company: Do. 4—2550 shares.........John P. Miller, Trustee. Do. 5—1550 shares....... .John P. Miller, Trustee. Do. 6— 100 shares.........J ohn P. Miller, Trustee.

Do. 7— 100 shares.........J ohn P. Miller, Trustee. Do. 8— 100 shares.........John P. Miller, Trustee. Do. 9— 100 shares.........John P. Miller, Trustee. Do. 10— 100 shares.........John P. Miller, Trustee.

Do. 11—2275 shares.........John P. Miller, Trustee. Do. 12—1500 shares.........John P. Miller, Trustee. Do. 13— 500 shares.........John P. Miller, Trustee. Do. 14— 500 shares.........John P. Miller, Trustee.

Do. 15— 400 shares.........John P. Miller, Trustee. Do. 16'— 110 shares.........John P. Miller, Trustee. Do. 17— 165 shares.........John P. Miller, Trustee. “And whereas I have redelivered said certificates for deposit in escrow for the period of 18 months, and said certificates have been deposited in a safe deposit box, rented in the names of Daniel J. Sully and P. S. Bright. ¹²⁷ “And whereas said certificates are deposited under an agreement that they shall not he sold for said period. “And whereas I am the owner of certificate Number 11 for 2,275 shares of said common stock. “And whereas I hold the others in trust. “Now, therefore, I, John P. Miller, trustee, do hereby declare that upon the termination of said escrow Willard D. Doremus will be entitled to receive said certificates Numbers 4, 5, 6, 7, 8, 9 and 10; Addison G. Du Bois will be entitled to receive certificates Numbers .12, 13, 16 and 17; and P. S. Bright will be entitled to receive certificate Number 14; and Wm. Muerling will be entitled to receive certificate Number 15; and said voting trustees are hereby authorized and dirested to transfer said common stock trust certificates to the individuals thereto entitled as above indicated. “This declaration of trust is to be deposited with said certificates and is to be irrevocable, without the consent in writing of the beneficiaries hereto. “In testimony whereof, I hereunto set my hand and seal this 3rd day of February, A. D. 1910, at the City of Washington, District of Columbia.

John P. Miller, (Seal) Trustee.” On the 4th of March, 1910, Mr. Sully, Mr. Hammond, Mr. Miller, Mr. Harris Hammond, Mr. Bright, Mr. Atherton, treasurer of the General Cotton Securities Company, and Mr. Baldwin met at the office of the National Cotton Improvement Company in the Union Trust Building in Washington. Mr. Sully gave Mr. Bright an order on the United States Trust Company of Washington for certificate A-3 for 30,000 shares of preferred stock of the General Cotton Securities Company, and. Mr. Bright got the certificate of stock from the Trust Company and brought it back to the meeting. Certificate A-3 was then cancelled, and certificate No. 5-A was issued to John P. Miller for 10,000 shares, and certificate ¹²⁸ No. 6-A for 4,000 shares was issued tO' Daniel J. Sully, syndicate manager.

The 10,000 shares were transferred by Miller to Daniel J. Sully, syndicate manager, and a certificate therefor, being certificate 7-A, was issued to him. Certificates 6-A and 7-A were then returned to the Hnited States Trust Company by Mr. Bright and receipted for by that company, and the remaining 16,000 shares were turned into the treasury of the General Cotton Securities Company. It thus appears from the evidence referred to that the American patents for the Doremus invention were purchased by Miller in 1907 from Doremus and others interested therein for fifty thousand dollars. The National Cotton Improvement Company, which will hereafter be referred to as the Improvement Company, was then organized with a capital stock of $1,500,000, and the- American patents were transferred by Miller to that company in consideration of 96 per cent, of its entire capital stock, and the patents were assigned by Miller and by Doremus to the company.

Hpon the organization of the General Cotton Securities Company, Miller transferred to that company the stock of the Improvement Company in consideration of the payment of $37,500 in cash, and $1,000,000 of the common stock and $1,000,000 of the preferred stock of the latter company. It also appears from the evidence that the $37,500 was paid by Mr. John Hays Hammond to Mr. Bright, who .paid the same to Mr. Miller, Mr. DuBois, Mr. Doremus and others interested therein, and that Mr. Hammond had previously paid the $12,500, being the balance of the $50,000 which Mr. Miller had agreed to pay for the American rights. From the organization of the General Cotton Securities Company in January, 1910, until the fall of 1910, Mr. Sully was actively engaged in trying to sell the stock of the Securities Company, and to dispose of the foreign rights in the Doremus invention. To that end he made several trips to England, and a number of tests were made of cotton gins constructed in accordance with the Doremus patent.

The ¹²⁹ cost of these tests as well as the personal expenses of Mr. Sully were borne by Mr. Hammond. In September and October, 1910, serious differences arose between Mr. Hammond and Mr. Sully, which resulted in Air. Hammond telling Mr. Sully lhat he would not make any further advances to him for his personal use, hut that he would make further efforts himself to sell the stock of the company and would pay the cost of any further tests of the Doremus gin. Mr. Sully then threatened to issue a prospectus and ff> sell the stock of the company, and Mr. Hammond told him that if he did he would “repudiate” the prospectus in every paper in the country.

The attitude of 'Mr. Hammond being, according to his own testimony, that it would not be honest to sell the stock of the company until the value of the Doremus invention could be fully demonstrated by further tests of tbe gin. Fallowing this interview Mr. Sully wrote Mr. Hammond as follows: “Office of Vice-President and General Manager. Washington, D. C., October 12, 1910. Mr. John Hays Hammond, 71 Broadway, New York, H. Y. Dear Sir: I enclose you herewith a copy of a letter which I have tendered to Mr. John P. Miller today.

Yours truly, Daniel J. Sully. P. S.—I have informed Mr. Miller and his associates that yon yesterday absolutely refused to furnish any more money, which you were obliged to do under our contract, for the further protection of the General Cotton Securities Company. And that yon notified ine that you would repudiate in every newspaper in the country any prospectus that I might issue. D. J. 8.” ¹³⁰ The letter enclosed to Mr. Hammond was as follows: “Washington, D. C., October 12, 1910.

Mr. John P. Miller, Washington, D. C. Dear Sir: Under a contract made with you the 28th day of December, 1909, between John Hays Hammond and myself jointly, acting as a syndicate, which was to be composed of John Hays Hammond and myself and one or more other parties, wherein we entered into a contract with you whereby we were to organize a corporation with the capital stock of $7,000,000 common and $3,000,000 preferred stock, which preferred stock was to be 7% cumulative, with a preferment as to assets upon dissolution without participation in profits beyond 7%. And also we desired to obtain from you your interest in the National Cotton Improvement Company, for the General Cotton Securities Company; and also obligated ourselves to finance the said General Cotton Securities Company by the sale of the preferred stock of the General Cotton Securities Company, and to use our best endeavors to sell the preferred stock to meet the obligations which we entered into with you. “Under that contract now, therefore, please take notice that the General Cotton Securities Company was formed, under the requirements of that contract the , syndicate was formed; also under the requirements of that contract I have used my best endeavors to get the consent of my co-partner (John Hays Hammond) to co-operate with me in placing this stock where it could be sold. I have been unable to so do. “Therefore, to absolve myself from any liability financially or morally respecting the contract I herewith inform you that I will on your demand proceed as far as I can to turn back to you legally all and any of the right or interests that I may have under this contract. Yours truly, Daniel J. Sully.” ¹³¹ On the 12th of October Mr. Sully also wrote Mr. Hammond tendering his resignation as a director of the General Cotton Securities Company to take effect when the board of directors accepted the same.

Mr. Hammond and Mr. Sully met again on the 6 th of November, when, according to the testimony of Mr. Hammond, friendly relations between him and Mr. Sully were partially restored, with the understanding that Mr. Hammond would take up active measures to establish the value of the Doremus invention with the view of selling the stock of the company, and arrangements were made for a meeting of the "directors. On the 16th of November the directors met at the office of the company in Washington and the meeting resulted in a further breach between Mr. Hammond and Mr. Sully, and no action on the part of the directors. Following this meeting W. D. Doremus and A. G. DuBois wrote to Mr. Hammond, Mr. Sully and Mr. Bright, as the board of trustees, advising them that they were interested to the extent of three-fourths in the trust certificates issued by them to John P. Miller, and stating: “Our information is to the effect that an alleged meeting of the board of directors held at the office of the company on Wednesday, the 16th inst., the previous minutes of the board of directors, or what was. supposed to be the previous minutes of the board of directors (which were, in fact, made by a board differently constituted from those who were present the 16th inst.), were physically altered in an attempt to release the gentlemen interested in the syndicate, for whom Daniel J. Sully was acting, from the obligation to pay into the treasury of the company, upon demand made therefor, the sum of $1,600,000, as provided for under the contract made by the former president of the company with said Sully, acting for said syndicate, under date of January 7, 1910.” The letter also demanded that the board of trustees request the president of the company to call a special meeting of the stockholders for the purpose of removing4 the then board of directors. On the same day Messrs.

DuBois and ¹³² Doremus wrote to Mr. Atherton, the treasurer of the General Cotton Securities Company, calling his attention to the fact that there was in his possession the preferred and common stock of the Improvement Company; stating that they had been informed of certain illegal action taken by the board of directors of the Securities Company on the 16th of November which was greatly to their detriment as the beneficial owners of three-fourths of the trust certificates issued to John P. Miller, and demanding, that he retain in his possession the stock of the National Cotton Improvement Company until a proper board of directors could be elected by the stockholders of the Securities Company. They also wrote to Mr. Hammond informing him that they were interested in the stock held by Mr. Miller, and that “Among the conditions on which the delivery of the stock of the General Cotton Securities Company by it to Mr. Sully was the agreement that he made on behalf of the syndicate to pay in the treasury of the said company the sum of $1,600,000;” that they had been informed that an attempt had been made to alter the contract made by Mr. Sully with the company so as to relieve the syndicate of the payment to the company of said sum of $1,600,000, and that they were advised that such action was absolutely illegal. The letter concluded by stating that they would hold him personally responsible for any injury suffered by them by reason of any change or transfer of the stock then standing in the name of John P. Miller. Mr. DuBods and Mr. Doremus also wrote to* Mr. Miller, on the 18th of November, 1910, as follows: “Dear Sir: Under the several agreements in existence between us you have been authorized to act in our behalf and interests in relation to the stock in the National Cotton Improvement Company, which stood in your name alone, and as you know, we acquiesced in the agreement made by you in December, 1909, with the syndicate represented by John Hays Hammond and Daniel J. Sully.

In carrying out the agreement in behalf ¹³³ of the syndicate, we are all aware of the fact that the General Cotton Securities Company, through its president and secretary, secured a contract from Mr. Sully made in behalf of the syndicate that was greatly to the advantage of all of us, as under its terms the syndicate is required to pay into the treasury of that company upon demand $1,600,000. Through our consent you have been the representative member for our joint interests on the board of directors of the General Cotton Securities Company, we assuming, of course, that you would in every way protect our mutual interests. If we have been correctly informed, you have failed to appreciate that the recent action taken by the board of directors of the General Cotton Securities Company, or what is supposed to be a board of directors, at a meeting held in this city on Wednesday, the 16th inst., has jeopardized our rights. We feel sure that you must appreciate that in agreeing to the minutes of the previous meeting held by the board of directors in New York on January 7th, 1910, should be physically changed so as to relieve the syndicate from its obligation to pay into the treasury of the company $1,600,000 upon demand, practically places us in the position of being at the mercy of the syndicate.

Consequently, we demand that you take necessary steps to at once protect the interests of all of us in the stock of the National Cotton Improvement Company, which was turned over by you through the syndicate to the General Cotton Securities Company, by such appropriate action in the premises that will impress that stock with the trust that you represent in our behalf. Yours respectfully, W. D. Doremus. A. D. Du Bois.” It is apparent that the theory upon which Mr. Doremus and Mr. Du Bois acted in writing these letters was that Mr. Hammond was personally liable for the $1,600,000 which ¹³⁴ Mr. Sully agreed, to pay to the Securities Company, and that the course they pursued was based upon the assumption that there had been a formal meeting of the board of directors of the Securities Company on the 16th of November, 1910. There are no minutes of such a meeting in the record, and there are no grounds upon which Mr. Hammond could be held liable for the sum named.

After receiving the letter from Mr. Du Bois and Mr. D'oremus, Mr. Hammond tried to arrange for a meeting be^ tween himself and Mr. Du Bois and Mr. Doremus, and went to Washington on November 19th to meet Mr. Doremus for the purpose of explaining to him that he was not liable for the $1,600,000 referred to in Mr. Sully’s contract with the company, and that the directors had not attempted on November 16th to do anything that would prejudice his interest. While in Washington on the 19th of November Mr. Hammond learned from Mr. Bright that Mr. Sully had executed a contract on behalf of the Securities Company with the Fordyce Company, which involved the stock of the Ser curities Company. Mr.' Bright would not explain to him the exact terms of the contract, and Mr. Hammond immediately telegraphed to Mr. Atherton, the treasurer of the Securities Company, who was then in Little Rock, Arkansas, that he had just learned of an “attempted contract” between Mr. Sully, on behalf of the Securities Company, and the Fordyce Company, but that he was not acquainted with the details, and directing him to wire Mr. Fordyce, Sr., in St. Louis, that Mr. Sully had no authority to make the contract; that it was in violation of the syndicate agreement, and absolutely void. A special meeting of the board of directors of the General Cotton Securities Company was called, and was held at the New York office of the company on the 23rd day of November, 1910.

The minutes of that meeting show that the return of the $1,600,000 of the preferred stock of the company to the treasurer of the'company was approved; that s' ¹³⁵ the letter of Daniel J. Sully to John P. Miller of October 12th, 1910, a copy of which was sent by Mr. Sully to Mr. Hammond, was presented to the board, and with it the following communication from Mr. Hammond to Mr. Miller referring to Mr. Sully’s letter: “Since the receipt of that letter I have made great efforts to carry out the contract of December 28th, 1909, which is referred to in Mr. Sully’s letter to you. I find I also am entirely unable to carry out the contract of December 28th, 1909, which is referred to in Mr. Sully’s letter to you. I find I also am entirely unable to carry out the unfulfilled provisions of that contract, and I, therefore, join with Mr. Sully in informing you that I will, on your demand, proceed as far as I can to turn back to you legally all and any of the rights or interests that I may have under that contract. Yours truly, John Hays Hammond.

P. S.—I made this proposal to you by word of mouth on Saturday, November 19th, 1910, and I am writing this to formally confirm my verbal proposal. J. II. H. We hereby assent to the above proposal as members of said syndicate. Harris Hammond.

D. B. Atherton.” Mr. John Hays Hammond then offered “on behalf of the vendors (the members of the syndicate), those members preSf ecnt assenting thereto,” to return the stock of the company received by them upon the acceptance by the company of the proposal, except the forty-nine shares held by the directors and officers of the company, to permit the cancellation of the certificates for the same. Mr. Miller stated that he had written a letter to Mr. Sully accepting the proposal contained in his letter of October 12th, 1910, “and demanded the redelivery to him of the capital stock of the National Oot ¹³⁶ ton Improvement Company as on the terms set forth in Mr. Sully’s letter.” Thereupon the board of directors adopted the following resolution: “Whereas heretofore this company entered into an agreement with Daniel J. Sully as set forth in the minutes of the first meeting of the board of directors whereby there was transferred to this company 4,712 shares of the preferred and 9,672 shares of the common stock of the National Cotton Improvement Company for certain considerations moving from this company, to wit, $3,000,000 at par of common stock of this company, and $1,400,000. of preferred stock of said company; and “Whereas thereby and thereunder Daniel J. Sully obligated himself personally to pay on demand for the additional $1,600,000 of the preferred stock of this company issued to him and his associates; and “Whereas the aforesaid agreement was entered into on or about the 7th day of January, 1910, and it appears from the statements of the vendors to this company (other than Mr. Sully and Mr. Rogers) of the said National Cotton Improvement Company’s stock, who were present at this meeting, that no sales of this company’s stock have been effected, and that all efforts put forth by said vendors to effect such sales have thus far failed; and “Whereas the said vendors present hereat are unable to state definitely when any sales can be effected by them under said agreement; and “Whereas the said John P. Miller has received the offers made by each of the vendors aforesaid embodied in letters read to this board; “Resolved, That it is to the interest of the General Cotton Securities