ores and the losses caused by fraudulent and imperfect milling.

As to the other element or item of damage exorbitant charges for milling-the evidence and findings are so clear that nothing is left for decision, except a pure question of law.

The finding of the superior court that the cost of milling did not exceed $4.50 per ton is fully sustained by the evidence; and it is equally clear that $4.50 was not a fair price for milling as between a miner and a miller dealing on equal terms, and under circumstances entitling the miller to a fair compensation for the use of his mill. The question, therefore, is whether, in view of the manner in which the contract to mill these ores was obtained and executed, the mill-owners are entitled to receive any thing for the use of their mills. If they are there must be a new trial of this part of the case; if they are not, then, so far at least as Levy and the mill-owners are concerned, there is no need of a new trial. As to the other directors against whom there are several judgments the case may be to some extent different.

Were the mill-owners in this case entitled to retain out of the moneys paid them for milling the ordinary and reasonable price of milling, including a fair return on the capital invested in the mills?

The authorities to which we have been cited, including the case so much relied on by counsel for respondent (St. Paul Distilling Co. v. Pratt, 45 Minn. 215), are all consistent with, and several of them directly sustain, the proposition that a trustee who has contracted with himself on behalf of his cestui que trust, and has received the stipulated prices of his goods or services, although he cannot, when called upon to account, retain the whole sum so received, may be, and in equity ought to be, allowed to retain what is equivalent to the benefits and advantages actually received by his cestui que trust; or, in other words, that he is entitled to the reasonable value of his goods or services, measured by their current

market price. According to this doctrine the appellants contend that the mill-owners in this case must be allowed the ordinary market price of milling Comstock ores, which was $7 per ton.

But I do not think this case can be determined by the rule applied to cases which involved no element of misconduct, except an express agreement of a trustee to pay himself more than reasonable value.

Here, as has been shown, was a contract which made it to the interest of the actual manager of the mining company to sacrifice the interests of the stockholders by mining and milling ores which would not pay the cost of mining added to the current price of milling. The court has found, and the evidence is sufficient to sustain the finding, that such low-grade ores were intentionally mined and sent to the mills, involving certain loss to the stockholders if the current price were allowed, but involving no loss if the millers were limited to the actual cost of milling. Under these circumstances it was not inequitable to allow only the actual cost of milling. It is true that a large proportion of the ores of sufficient value to pay a profit on the mining and milling current rates, with a return of 75 per cent of the pulp assay, and it may be argued that, as to such ores, the market price of milling should be allowed. But in cases of this kind the courts cannot be expected to go into very nice calculations and estimates to save parties from the consequences of wrongdoing; and, where it appears that the intention was to mine and mill ores that would barely pay the cost of handling, and where this intention was in fact carried out, a court of equity is justified in applying to the whole transaction one measure of compensation, and that measure must be actual cost.

were

My conclusion is that the superior court did not err in requiring the mill-owners to account for $2.50 per ton for all the ores milled by them; and this part of the judgment, which is erroneous only so far as it includes the ores worked at the Vivian mill, may be modified

The proper

upon the findings contained in the record. sum is $2.50 per ton on 84,079 tons, the quantity of ore sent to the Nevada and Mexican mills, amounting to $210,197.50. To this extent the judgment against Hayward and Levy is fully warranted by the findings and evidence.

As to the Nevada Mill & Mining Company, it would be necessary to reduce this part of the judgment still further on account of the fact that it had nothing to do with the ores reduced at the Mexican mill, but this and all other errors in the proceedings affecting that corporation became immaterial in view of my conclusion that it was never brought under the jurisdiction of the superior court. It is a Nevada corporation, and the only service of summons was made on Evan Williams, the superintendent of its mill at Virginia City, who was at the time of service in attendance upon the trial of this cause, but not engaged in attending to any business of the corporation in this state. Such service was wholly insufficient to confer any jurisdiction over the company, and the judgment as to it is erroneous in toto.

As to the directors of the Hale & Norcross Company, other than Levy, it is not seriously contended that they are liable except on the ground of negligence, and it is clear that such was the opinion of the superior court. But they were not charged with negligence in the complaint, but only with fraud. Fraud and negligence, however culpable, are not the same thing. It is true that, when negligence causes an injury of the same character as would be occasioned by an intentional fraud, it is visited with the same consequences, so far as compensation to the injured party is concerned, but the plaintiff has no right to demand a conviction of fraud when no fraud has been committed; when he relies on fraud he ought to plead fraud, and when he relies on negligence he ought to plead negligence, not only because the defendant has a right to know what the charge is which he is called upon to meet, but because the defenses are different. An action for relief on the ground

of negligence is ordinarily barred by the statute in a shorter time than an action for relief on the ground of fraud. In this case, however, it is contended that the action against the directors is founded upon the liability created by statute, and, consequently, that the same limitation of the right to maintain the action applies as in cases of fraud. (Code Civ. Proc., sec. 338.) The statute referred to is section 3, article XII, of the constitution, which contains the following provision: "The directors or trustees of corporations and joint-stock associations shall be jointly and severally liable to the creditors and stockholders for all moneys embezzled or misappropriated by the officers of such corporation or joint-stock association during the term of office of such director or trustee."

This clause of the constitution has never been construed, so far as I can discover. According to its literal terms, every director of a corporation is severally liable for the full amount of any misappropriation of its funds during his term of office, without respect to any question as to his own culpability, and the argument of counsel is that it must be enforced according to its letter. Ita lex scripta est, and hence a director, no matter how innocent he may be, and no matter how hard the case may be, must be adjudged to pay, at the suit of any stockholder, the whole of any misappropriation of corporate funds occurring during his term of office. And, therefore, according to the contention of counsel, if some large stockholder of the Hale & Norcross company, with the sole purpose of protecting his own interests and the interests of the other stockholders, had by cumulating his stock, secured an election to the board of directors, and, as a member of the board, had opposed the milling of low-grade ores, or the payment of more than $4.50 per ton for milling, and had, to the utmost of his ability, guarded the interests of the company in every direction, he could, nevertheless, have been singled out by any stockholder and compelled to make

good the entire loss caused by the willful and corrupt misconduct of a hostile board.

If this construction must obtain, it seems very clear that no man with any property or character to lose will be willing to serve as director of a California corporation after it becomes known that the constitution contains such a provision. I do not think, however, that the construction contended for can be allowed. It does seem that it was the intention of the framers of the constitution to make each director of a corporation severally liable, whether individually culpable or not, for certain kinds of losses to the corporation occurring during his term of office; that is to say, he is made liable for embezzlement or misappropriation of corporate funds by officers of the corporation. But, in my opinion, the word "misappropriation" is to be construed by the maxim noscitur a sociis; it means some thing like embezzlement, or, in other words, it means the misapplication of funds intrusted to an officer for a particular purpose, by devoting them to some unauthorized purpose, and does not apply to the payment of an extravagant price for services or materials properly appertaining to the business of the corporation-which is this case. For losses occasioned by such means the law affords an ample remedy, without the need of resorting to the constitution against those who are justly responsible, whether by reason of fraud or negligence; but the law does not in such cases visit upon the innocent the sins of the guilty, and, if the liability arises from negligence, the action must be commenced in two years after it accrues, whereas, if it arises out of fraud, it may be commenced at any time within three years after the discovery of the facts. In this case, if the directors had been sued for negligence only in paying too much for milling the ores, the statute of limitation would have been a complete defense as to some of them, and a partial defense as to others. For these reasons I think the directors other than Levy are entitled to a new trial of the whole issue.

Objection is made to the right of the plaintiff, Fox,