and all through it, he is said "to be speaking as president of that company." There is no allegation anywhere that Winston ever gave his personal pledge or statement to any one about to invest in the bonds of the company that the road would be 50 miles long, or any other length. It is obvious from the nature of these circulars that the branch road had not then been located, and Mr. Winston, as an individual, could give no pledge on that subject which would bind the company, nor could he do so as president of the company. The road had yet to be located, and this could only be done by the board of directors, of whom Mr. Winston was but one of eight or ten. A source of much safer reliance as to the security which these purchasers of the bonds were getting was the mortgage given by the company. This, of course, was made and recorded before the negotiation for the loan was commenced, and copies of it accompanied the bonds when offered for sale. Every prudent man, knowing that this mortgage was his main security, would examine it, or his agent would, before investing his money. In this mortgage or deed of trust, the trustees being David Dows, Frederick S. Winston, and Calvin F. Burnes, the property conveyed is described as "the branch railroad of said party of the first part, as the same now is or may be hereafter surveyed, and being constructed and leading from the Missouri river, in the state of Missouri, at a point opposite the city of Atchison, in the state of Kansas, by the most practicable route, not exceeding 50 miles in length, to a junction with the main line of the railroad of said party of the first part." Whatever representations may have been made in the circulars of the company was, according to all rules of evidence, superseded by this solemn instrument between the parties. If they differed in any respect, the latter must be looked to as the security on which the bondholders alone had a right to rely. This instrument, so far from giving any pledge or assurance that the branch road should be 50 miles long, or near that, is careful to say it shall not exceed that length. The limitation is in its length, not its shortness. The latter is provided for by saying that it should be by the most practicable route. It is impossible to read this description of the line of road conveyed as security for the bonds without seeing clearly that the line was not yet located, that its future location was to be governed by two considerations: (1) that it should be the most practicable route between Atchison and the main line of the road; and (2) that its length should not exceed 50 miles. If the most practicable line, by which is evidently meant the best working line for the company who was building it, should require a shorter line than 50 miles, there is not the shadow of a promise or suggestion that it should not be so long, and no longer, as that required. But in the provision that its length should not exceed 50 miles there was a protection against wasting the money received from the bondholders on a long and unprofitable line of road made only for the benefit of people living along that line. But this line of road was not the only security for the payment of these bonds. The mortgage included also the entire main line from Washington to Leavenworth, (266 miles,) which was now nearly completed. This made a direct connection between the rich agricultural country of western Missouri and the city of Chicago by means of the Chicago, Rock Island & Pacific Company, then a rich and prosperous corporation, so deeply interested in this Southwestern Railway that it had guarantied $5,000,000 of the bonds of the company. It was further stipulated in this mortgage or deed of trust that the proceeds of the sale of these bonds should be placed in the hands of the Rock Island Company, which should only pay them out in the regular prosecution of the work. It was further provided in that mortgage that if any of these proceeds remained with that company after the completion of the road, it should be paid over to Frederick H. Winston or his agent. * It cannot be doubted that this mortgage on the main line, though a second lien, was regarded as an important part of the security of the bondholders under it, and when taken in connection with the aid and interest of the Rock Island Company the precise length of the branch line could not have been held to be very important. In fact, as the two lines belonged to one company, and that company was liable for all the bonds, it was obviously the interest of the bondholders and of the stockholders that the branch line should be so located as to make it add to the profits of the entire enterprise on which the bondholders held a lien. In regard to the allegation of fraud in this matter it is apparent (1) that all that is charged against Mr. Winston is that he signed, or permitted his name to be affixed to, a circular which stated the probable length of the branch road, then unsurveyed and unlocated, as about 50 miles; (2) that the place of junction with the Southwestern road, which necessarily determined the length of the branch road, was not described or mentioned; (3) that in the mortgage which was made on said branch road all that was said was that it should not exceed 50 miles; (4) that it is nowhere averred that the line was not properly located, or that it should have been located otherwise; (5) that the security which the bondholders had upon that line and the other seemed to render the place of connection between the branch and the main line unimportant as regards the security for their loan. We are of opinion, therefore, that the complainants had no right to rely on the statement concerning the length of the line as materially affecting their security, and that Mr. Winston committed no fraud in the part he took in that matter. This view is reinforced by the admission of the bill that the branch road was completed mainly out of the money arising from the bonds sold to plaintiff and others, and that several years after both it and the main line had been finished and in operation, both roads were sold under the two mortgages;*that the branch line was sold under foreclosure proceedings inaugurated by Van Weel, and was bought in for $10,000 by Mr. Berg, one of Van Weel's associates as bondholder, and that they now, as far as appears, own the road their money was used to build. Other transactions are mentioned as fraudulent, such as that Mr. Winston converted some of the money arising from these bonds to his private use, and not to the purposes of the company. The answer to this is that Mr. Winston came under no obligation to see to the application of this money as the bondholders might think it ought to be applied. They had bought their bonds,' paid their money, and received their security. The money so diverted was the money of the Southwestern Company, and not their money. The wrong done by Winston in that matter, if wrong there was, was done to that company, and not to the bondholders. They had provided their own means of insuring the building of this branch road by disbursing the money through the Rock Island Company, and it was successful. The road was built. There was no privity between Mr. Winston and these bondholders as to his use of money which they had loaned to the company, which was no longer their money. The error which pervades the bill throughout is to treat this corporation, to which the bondholders loaned their money, as if it had no existence, as if they had loaned it to Mr. Winston and held his personal obligation that it should all be honestly applied, and be responsible for the repayment of the loan. If Mr. Winston cheated this company out of its money, the right to redress for that wrong is in the company or in its stockholders. As a creditor of the company, Mr. Van Weel has no right to interfere in the matter until he has a judgment against the company, with an execution returned nulla bona. He has not, in this suit, shown any right to use the name of the company, or of its stockholders, to obtain redress for a tort committed on them. U. S. v. Union Pac. R. Co., 98 U. S. 614. There are probably other allegations of fraud, but they are no better founded than these, and we can give them no further attention. * 2. As regards the matter of trust, which is one of the grounds of relief set up in the bill, we need not occupy much time in its consideration. The trustees in the mortgage, which is the only express trust that we can find set out in the bill, were Frederick S. Winston, David Dows, and Calvin Burnes, neither of whom reside within the jurisdiction of the court, or has been served with processes or appeared to the suit. If, however, they were before the court, they are not charged with any breach of the duty with which they were entrusted. The application of the money arising from the mortgage bonds was not by the mortgagees intrusted to them, nor had they any control over it after the bonds were sold. It is not alleged that they refused to foreclose the mortgage when it became forfeited by non-payment of interest, or that they failed to perform any duty imposed upon them by the mortgage. It is asserted, however, that Frederick H. Winston, as president of the company, was bound to see that the money raised on these bonds was used exclusively in the construction of the branch road, and that, in this regard, he was a trustee for the lenders of the money. We are unable to see any such trust in the matter. The contracting parties in regard to this loan were the bondholders and the Southwestern Company. The one became debtor for the money loaned, the other became creditor. Mr. Winston, as the president of the company, represented the company, the borrower. The lenders desired a security for the repayment of their money, which they obtained in the mortgage, and their trustees in that trust were Dows, Burnes, and F. S. Winston. They in that instrument undertook to secure the building of this road out of the money loaned by requiring its deposit with the Rock Island Company, and its disbursement, for that purpose, under its supervision. But if the loan should produce more than was necessary for that purpose, what was to become of it? Was it to go back to the lenders? There is no hint of the kind. It was impracticable to do so, because the bonds would, many of them, have changed hands. As to the new owner, it would have been a mere gratuity to return it; and the original lender had no interest in the matter. Instead of this, it is expressly declared that the Rock Island Company could relieve itself of further obligation in the matter by payment to Winston as president of the company. When thus paid, did he hold it as trustee for the bondholders? If so, under what trust or what obligation? Could he return it to the bondholders, with the bonds still outstanding against the company? Or did he hold it merely as the representative of the company of which he was president? We think it was clearly the money of the company, and could have been used by it for the purchase of rolling-stock, general equipment, or any other legitimate use of its own money. This money belonged to the company. The road was built, the only interest in the nature of a trust which the lenders had attempted to protect by the control of the funds. The obligation of Mr. Winston in the disposition of the money, if any of it came to his hands, was to the company. If it was lost, it was the company's loss, not appellants'. If he improperly or fraudulently converted it to his own use, he was liable to the company and not to the plaintiff in this suit. There was no privity or trust relation between him and them in this regard. We think appellant has shown no right to relief in this suit, that the demurrer was properly sustained, and the decree of the circuit court dismissing the bill is therefore affirmed. NOTE. Fraudulent Representations. Where fraud has been committed, and by it plaintiff has been injured, equity will relieve against it, Singer Manuf'g Co. v. Yarger, 12 Fed. Rep. 487; Elfelt v. Hart, 1 Fed. Rep. 264; Taylor v. Saurman, 1 Atl. Rep. 44; otherwise, however, if no damage is sustained. Dunn v. Remington, 2 N. W. Rep. 230. Misrepresentations are fraudulent, Lynch v. Mercantile Trust Co., 18 Fed. Rep. 486; Buckner v. Street, 15 Fed. Rep. 365; Chandler v. Childs, 3 N. W. Rep. 297; Cavender v. 47 Roberson, 7 Pac. Rep. 152; even when believed to be true by party making them, Lynch v. Mercantile Trust Co., 18 Fed. Rep. 486; Seeberger v. Hobert, 8 N. W. Rep. 482; and the vendor cannot purge himself of fraud by offering to rescind. Lynch v. Mercantile Trust Co., 18 Fed. Rep. 486. Fraudulent representations must be material, Hall v. Johnson, 2 N. W. Rep. 55; and must have been relied on. Lynch v. Mercantile Trust Co., 18 Fed. Rep. 486; Seeberger v. Hobert, 8 N. W. Rep. 482. But the purchaser need not suppose every statement made to him literally true in order to entitle him to relief. Heineman v. Steiger, 19 N. W. Rep. 965. Where the vendor honestly expresses an incorrect opinion as to the amount, quality, and value of the goods he disposes of in a sale of his business, and good-will thereof, and the purchaser sees or knows the property, or has an opportunity to know it, no action for false representations will lie. Collins v. Jackson, 19 N. W. Rep. 947. And mere "dealing talk in the sale of goods, unless accompanied by some artifice to deceive the purchaser or throw him off his guard, or some concealment of intrinsic defects not easily detected by ordinary care and diligence, does not amount to misrepresentation, Reynolds v. Palmer, 21 Fed. Rep. 433; unless there be false statements in some manner affecting the character, quality, value, or title of the articles sold. Bank of Barnesville v. Yocum, 9 N. W. Rep. 84. But a statement recklessly made without knowledge of its truth is a false statement knowingly made within the settled rule. Cooper v. Schlesinger, 4 Sup. Ct. Rep. 360. Whether or not omission to communicate known facts will amount to fraudulent representation depends upon the circumstances of the particular case, and the relations of the parties. Britton v. Brewster, 2 Fed. Rep. 160. "Where a vendor conceals a material fact, which is substantially the consideration of the contract, and which is peculiarly within his knowledge, it is fraudulent misrepresentation. Dowling v. Lawrence, 16 N. W. Rep. 552. Fraud is a good defense to an action on a contract, but it is not sufficient to plead fraud in general terms. The specific statements and acts relied upon as constituting the fraud must be set out. Mills v. Collins, 25 N. W. Rep. 109. Evidence of fraudulent representations must be clear and convincing. Wickham v. Morehouse, 16 Fed. Rep. 324. Where a man sells a business, and the contract of sale contained a clause including all right to business done by certain agents, evidence that the seller was willing to engage in the same business with such agents is not proof of fraud in making the contract. Taylor v. Saurman, 1 Atl. Rep. 44. Equity will not presume the ratification of fraudulent contract. Northern Pac. R. Co. v. Kindred, 14 Fed. Rep. 77. (115 U. S. 248) STARIN and others v. MAYOR, ETC., OF THE CITY OF NEW YORK. Filed November 2, 1885. 1. REMOVAL OF CAUSE-CASE ARISING UNDER CONSTITUTION AND LAWS OF UNITED STATES -FERRY PRIVILEGES-CHARTER OF NEW YORK CITY. The character of a case is determined by the questions involved. If from the questions it appears that some title, right, privilege, or immunity on which the recovery depends, will be defeated by one construction of the constitution, or a law of the United States, or sustained by the opposite construction, the case will be one arising under the constitution or laws of the United States within the meaning of that term as used in the act of 1875; otherwise not. 2. SAME-SEPARATE CONTROVERSY-SEPARATE DEFENSE BY ONE DEFENDANT IN JOINT ACTION. A separate defense by one defendant in a joint suit against him and others upon a joint, or a joint and several, cause of action does not create a separate controversy, so as to entitle that defendant, if the necessary citizenship exists as to him, to a removal of the cause under the second clause of section 2 of the act of 1875. Appeals from the Circuit Court of the United States for the Southern District of New York. Roscoe Conkling and Charles McNamee, for appellants. W. W. MacFarland, for appellees. WAITE, C. J. These are appeals from orders of the circuit court remanding a suit which had been removed from a state court under the act of March 8. C. 21 Fed. Rep. 593, and 22 Fed. Rep. 801. 3, 1875, с. 137, (18 St. 470.) The questions to be decided arise on the following facts: The mayor, aldermen, and commonalty of the city of New York, a municipal corporation of the state of New York, commonly called the city of New York, brought a suit in equity on or about the eleventh of August, 1884, in the superior court of the city of New York, against John H. Starin, Independent Steam-boat Company, Starin's City, River & Harbor Transportation Company of New York, New York & Staten Island Steam-boat Company, David Manning, Franklin Wilson, William Clark, John G. Belknap, James B. Corwin, Max Golden, Samuel Underhill, and Frank Smith, to restrain them from using and employing the steam ferry-boats Pomona, D. R. Martin, Laura M. Starin, and Castleton, or any other vessel or vessels of any kind, for and in the transportation of persons, animals, vehicles, freight, goods, and chattels from or to pier No. 18, North river, or from or to any place in Manhattan island to or from certain landing places on the shore of Staten island, without the license or permission of the plaintiffs; and also for an account of moneys received by the defendants, or any or either of them, for such transportation. Both Manhattan island and Staten island are in the state of New York. The cause of action as stated in the complaint is that the city, under its charter granted originally January 15, 1730, by the province of New York, and since confirmed by the state of New York, has the exclusive right of establishing ferries from Manhattan island to the opposite shores, in such and so many places as the common council may think fit; that the defendants, without the permission of the city, have set up and are maintaining a ferry between Manhattan island and certain landing places on Staten island, and for that purpose employ the boats above named; that the defendant Starin is the owner of the Castleton and the D. R. Martin, and the person chiefly interested in Starin's City, River & Harbor Transportation Company, of New York, which owns the Laura M. Starin, and in the New York & Staten Island Steam-boat Company, which owns the Pomona; that while the business is done in the name of the Independent Steam-boat Company, that company was organized and incorporated through has instrumentality and in his interest, and is composed of but three persons, all of whom are in his employ and under his control; that the incorporation of the company was a device for his own personal benefit; and that he is in fact the person actually operating the ferry. The certificate of incorporation, a copy of which is attached to the complaint, shows that the company was organized under the laws of New Jersey, July 26, 1884, with a capital of $5,000, divided into 500 shares of $10 each, all owned by three persons, for the transportation of persons and property upon water as common*carriers for hire; that the principal part of the business of the company in New Jersey was to be transacted in Jersey City; and that the business out of that state was to be done in the cities of New York and Brooklyn, and the several villages, landing-places, cities, and towns on the Hudson river, Staten island, and Long island, in New York, accessible by water. The defendants Starin, Independent Steam-boat Company, Starin's City, River & Harbor Transportation Company, and New York & Staten Island Steam-boat Company each filed a separate answer to the complaint. All the other defendants, who are the masters or pilots or engineers employed in running the several boats, united in one answer. The answers all contain substantially the same defenses. They admit the ownership of the boats, as set forth in the complaint, except that it is alleged the Castleton belongs to the New York & Staten Island Steam-boat Company instead of Starin. They admit the charter of the city, with words purporting to grant certain rights as to the establishment of ferries from Manhattan island to the opposite shores, but deny that this grant extends to ferries between New York and that part of Staten island which borders upon the Kill von Kull. They ad *249 *250 |