Bettendorf v. Bettendorf

Ladd, J. — "William P. Bettendorf died intestate, June 3, 1910. He left a widow, Elizabeth H., whom he had married September 9, 1908, his first wife having departed this life several years before. He was without children; but a father and mother, Michael and Katherine Bettendorf, and one brother, J. "W. Bettendorf, survived him. Aside from household furniture, life insurance, patents, and royalties owed for their use, his estate consisted of 643 shares of the capital stock, consisting of 1,000 shares of the par value of $100 each, issued by the Bettendorf Axle Company. This property, other than such as was exempt to the widow, passed to the administrator, J. W. Bettendorf, who qualified as such a few days after decedent’s death. No claims were filed; and, save the cost of administration, the widow was entitled to one half of the estate, and the parents to the other half. The Bettendorf Axle Company was incorporated on January 1, 1895, with a capital of $500,000; $100,000 in common stock, divided into shares of $100 each; and $400,000 in preferred stock, issued as a means of borrowing money. Whether any of the preferred stock was outstanding at the time of the transactions hereinafter referred to, does not appear; and, as such stock was not referred to in defendant’s propositions or argument, and as there was no suggestion of any mistake’s having been made in omitting its consideration from the court’s computation, it requires no further attention. Of the common stock, 355 shares had been issued to J. "W. Bettendorf, 2 shares to others, to qualify them to act as directors, and 643 shares to W. P. Bettendorf. The enterprise developed rapidly, under the masterful guidance of the decedent, and, at the • time of his death, the net value of the company’s property, after all deductions, exceeded $2,000,000. "William P. Bettendorf was a man of inventive genius and marked constructive ability, a rare combination of qualifications for great enterprise. Throughout the growth of this company and development of the plant, he was the dominant and controlling spirit, even in matters of detail. He had begun life — 87 — as a clerk in. a hardware store. For a time he was superintendent of a plow company. Having moved to Davenport in 1886, he began the manufacture of metal wheels; and, later on, having lost the management of this business, he turned his attention to making hollow metal axles; and to do this; the company was organized, as recited. This business expanded into the manufacturing of steel parts for railroad cars, out of which large profits were realized. The idea developed was that of working of sheet steel cold by the pressure of powerful hydraulic presses in steel forms or dies, and thereby producing steel brake beams, car bolsters, car underframes, cast steel trucks, and possibly other parts. These so differed from the parts then in use that some difficulty was experienced in disposing of the product; but the decedent, who planned all the necessary machinery, obtained orders by devising forms or dies or necessary machinery to produce parts meeting the ideas of the master mechanics of the several railway companies. He not only invented the several parts, but the mechanisms to produce them, and any changes therein to meet the whim or judgment of railway experts, required as a condition to contracting therefor. A large number of patents had been obtained by him, and others applied for,— over 100 altogether. He had entered into an agreement with the Bettendorf Axle Company, December 26, 1903, reciting that, under previous contracts, it was indebted to him, up to December 31st following, in the sum of $60,000, stipulating the payment thereof at the rate of $12,000 per annum, that said contracts were canceled, and that decedent— “Transfer and set over to the party of the second part, and to its successors and assigns, the authority and license of applying and using the inventions and improvements described and claimed in any or all of said letters patent to the manufacture in the county of Scott, in the state of Iowa, and nowhere else, to the full end of the terms of said letters patent, respectively, of all kinds of wagons and wagon parts; also of all kinds of body and truck bolsters, car underframes, and car parts for railroad ears only, and to no other purpose; and of all of the aforesaid improvements in brake beams, and according to the designs as described and claimed in? said letters patent, respectively; and to sell the same in any foreign country so long as, — 88 — and no longer than, said first party may remain the owner of foreign patents on said improvements and designs, respectively, or until he shall make other arrangements concerning the disposal of said foreign patents or rights thereunder. And first party does hereby further sell, transfer, and set over to seeond party a similar authority and license of applying and using all the .inventions and improvements which may be described and claimed in any applications for letters patent of the "United States which have been filed by him in the patent office of the United States and which relates to the manufacture of wagons and railway cars, or parts thereof; and further agrees that he will grant to second party a similar authority and license of applying and using all such inventions and improvements for which he shall at any time hereafter, while employed by the second party, during the existence of this contract, receive letters patent of the United States of America. It is now agreed between the parties hereto that the amount of the royalties or compensation to be paid by the second party to the first party, his heirs or assigns, for the right of the seeond party to manufacture and sell any or all of the articles which the seeond party may produce under the licenses herein granted to it by the first party, and also the compensation which the first party shall receive from the seeond party in addition to the salary, if any, which he may be entitled to receive as an officer of the seeond party, so long as he is actually engaged in and about the active management of the second party’s business, shall be ascertained and paid as follows: ‘ If in any calendar year, commencing with the first day of January, 1903, the net earnings of second party from all departments of its business shall be more than sufficient to enable it to pay a dividend of seven (7) per cent for such year upon all the shares of its preferred capital stock outstanding, then thirty-five (35) per cent of the remainder of said net earnings for such year which may have accrued exclusively from the railway department of second party’s business shall be paid to the first party by the second party.’ If in any one calendar year there shall be no net earnings in excess of the amount necessary to pay a dividend of seven (7) per cent on all of seeond party’s outstanding preferred stock, then the first party shall not be entitled to receive for that year any royalties — 89 — or extra compensation in excess of the salary of such office in said corporation which he may then hold.” Nothing had been paid decedent under this agreement, though, according to the computation' of J. W. Bettendorf,$540,000 was owed him thereunder at the time of his death; while appellee contends that the royalties then amounted to $802,340. Upon the petition of the plaintiff, J. W. Bettendorf was appointed administrator of the estate of decedent on June 8, 1910, and duly qualified. Though an inventory was filed, the appraisement was waived, at his instance, by the heirs of the estate. He was elected president of the company June 18, 191Ó, and, on July 9th, the widow and parents of the decedent entered into a contract with the company, by the terms of which the latter released a claim of about $122,000 which decedent had overdrawn on his salary and dividend account with the company, and the widow and parents relinquished all royalties mentioned. On the same day, the widow and parents transferred all letters patent held by decedent, and those applied for, to J. W. Bettendorf as trustee, with authority and obligation on his part to permanently license the company to make use thereof without exacting any compensation; and this he did immediately. These papers, of course, would not affect the relative proportions of the widow and parents in the patents and royalties; for the transfer enhanced the value of the stock in its entirety to the extent of the value of said patents and royalties, less the claim against decedent; but it resulted in increasing the value of the stock of J. W. Bettendorf to the extent of 355/1000 of such difference, for which he neither paid nor undertook to pay anything. In the latter part of May, 1911, he suggested to the plaintiff the purchase of her portion of the stock in the company; and, on June 1st, following, made a written proposal to pay therefor $431,252; and on June 7th of that year, she accepted this proposition, and on the same day, with the parents, in writing requested the defendant, as administrator of the estate, to make distribution of the shares and transfer the portion belonging to plaintiff, i. e., 321% shares, to her. On that day, the administrator so did, reserving the right, “if necessary or advisable, during the period of administration of said — 90 — estate, to sell any of said stock for tbe purpose of paying debts against said estate for any other purpose whatsoever;” and the shares were distributed by the administrator, and immediately transferred to the defendant accordingly. In this suit, the widow, as plaintiff, seeks to recover one half of the enhancement in value of J. W. Bettendorf’s shares of stock, consequent on the release of the royalties for the use of the patents and the transfer of the perpetual use of the patents to the company, and the difference between the actual value of the 321% shares of stock sold to him and the amount paid therefor. The ground for such recovery and the defenses interposed will appear in the further discussion of the case. The trial court found the plaintiff entitled to judgment for $471,929.86, recapitulating the items as follows: “Par value common stock $100,000.00 Surplus at date of stock sale 2,422,285.35 Intangible value common stock 600,000.00 Gross value common stock $3,122,285.35 Deduct: Account Shoal Creek investment 87,475.00 Net value common stock $3,084,810.35 Value plaintiff’s 321% shares 991,766.51 Deduct : Sale price plaintiff’s stock $431,252 Amount paid Feb. 8, 1913, 50,000 One half of $122,000 overdraft 61,000 One half of $104,000 owed by estate 52,000 On value of house 68,000 662,252.00 329,514.51 Add benefit received by defendant’s 355 shares from plaintiff’s cancellation of royalties 142,415.35 $471,929.86” — 91 — In these items, the “account Shoal Creek investment” was a depreciation or loss on realty; the item of “one half of $122,000 overdraft” was the claimed overdraft of decedent, heretofore mentioned; and the “one half of $104,000 owed by estate” was the widow’s share of the amount expended in the construction of the dwelling house set apart to her. The item “on value of house” represented a discount allowed the widow in a general agreement between the parties. l. Fraudulent conveyances: fiduciary rela* tionI. We first inquire whether plaintiff has been overreached in the several transactions involved; and, in doing so, it will be more convenient to take up the several transactions separately. (a) We have discovered in the record no reasonable justification of the release or waiver by plaintiff of her interest in the royalties owed by the' company to the estate, without exacting from the defendant the payment of one half of the relative portion thereof which his stock bore to all the stock. It may be that the discharge of this large indebtedness was desirable, and possibly essential to the welfare of the company; but, to accomplish this, it was not necessary that plaintiff should make any contribution to the defendant, either directly or indirectly. For all that appears, had fair compensation been exacted of defendant for the benefit derived by him from such release, neither the company’s interests nor prospects would have been affected or impaired thereby. The royalties so waived amounted to $802,340. One half of this claim belonged to the plaintiff, or $401,170; and this was turned over to the company by plaintiff without other compensation than the enhancement in value of the 321% shares of stock held by her. In other words, Bettendorf received 355/1000 of this amount gratuitously, and solely on the specious pretense that the gift was essential for the protection of the Bettendorf Axle Company. The defendant computed the amount owed for royalties at $540,000. The discrepancy in amounts arises from different constructions of the contract between decedent and the company with respect to- the payment of said royalties. Reverting to the excerpt therefrom above, it will be observed that it provides that, unless the net earnings from all departments exceeded enough to pay a dividend on the preferred stock of — 92 — 7 per cent, nothing was to be paid decedent for the license of the patents; but “if, in any calendar year, commencing with the first day of January, 1903, the net earnings of said second party from all departments of its business shall be more than sufficient to enable it to pay a dividend of 7 per cent for such year upon all shares of its preferred stock outstanding, then.the 35 per cent of the remainder of said net earnings for such year which may have accumulated exclusively from the railway department of the second party’s business shall be paid to the first party by the second party.” The contention of the defendant is that the 35 per cent is to be computed on the remainder, after paying interest on the preferred stock, or the earnings of all departments; while plaintiff says that the computation was to be madepn the net earnings derived from the railway department alone, after said payment of interest. That the latter is the correct construction seems too plain for argument. The language hardly could have been plainer than was employed. The “net earnings” are those which accrue “exclusively” from the railway department, and there is no room for construing the language to mean the net earnings from all departments. The evident design was to award decedent’s remuneration on the more valuable patents, and eliminate deductions owing to loss in other departments, — and there were such losses almost continually in the wagon department. The defendant was hardly excusable in making the computation of royalties on the net surplus or profits of all departments, and representing to the plaintiff $540,000 as the sum total of all royalties for which the company was indebted to decedent. In fact, they amounted to $802,340, and she waived or released her interest in this sum over and above the $122,000 the decedent had overdrawn, which constituted a legitimate claim by the company against the estate. One half of' this difference, or $340,170, plaintiff waived or canceled, and thereby enhanced the value of defendant’s stock to the extent of 355/1000 of this amount. As said, the record affords no reasonable explanation of the gratuity to Joseph W. Bettendorf, then administrator of the deceased husband’s estate and president of the company. Counsel for defendant undertake to defend this on the grounds that none of the royalties had ever been collected, nor had they — 93 — been entered on the books as debits of the company, and had not appeared in the company’s statements, sent out to creditors or prospective creditors, and that it was not the intention of the decedent ever to collect these royalties. As the existence of the indebtedness is not questioned, we are not concerned with this situation, further than in so far as it may have influenced the action of the plaintiff. The condition of the books does not appear to have been called to her attention, nor does it appear that the circumstance that the decedent may have entertained an intention to cancel the indebtedness has had any influence on her action. C. N. Voss, who was appointed director to succeed decedent, at defendant’s instance, first talked with the latter about the royalty contract, and pointed out the changed condition brought about by the fact that the title to the claim for x’oyalties had passed to the widow aixd parents of the decedent, and suggested that the contract ought to be canceled. With Best, aixother director, they agreed, though recognizing the large benefit to accrue to defendaixt, upon the plan, and both defendaxxt and Voss talked to the plaintiff concerning the cancellation of the claim. Both claim to have explained to her that the decedent never iixtended to collect these royalties, and, that they had never appeared in the statements sent out to the creditors. Voss suggested that defendant ascertain, from an examination of the boobs, the amount of the royalties. This defendant did, and explained to plaintiff, as he testified, “the amount of the royalties that had accrued, as he had figured it, and stated at the same time what W. P. had talked to me about as regards his intention xxot to collect;” and told her decedent never intended to collect the royalties under the contract; that these had never been'ref erred to in statements seixt out to creditors; aixd that he would be the only one benefited if these were not paid, because of the enhancing of the value of his stock thereby; and that she replied that that was perfectly satisfactory to her; and that she said, in her judgment, as he explained, that it was the only thing that could be done; that he informed C. N. Voss what he had done, and her attitude. Mr. Voss testified to having advised that the royalties indebtedness should be canceled, in the interest and for the protection of the company, and to having stated to plaintiff his understanding that decedent intended not — 94 — to collect said royalties; that plaintiff said, with reference to defendant’s interest’s being affected thereby, “Well, poor Joe, upon whom the whole load, — he has got to carry the burden of the business, and ought to have that little advantage, whatever it was;” and that she told him she fully, understood the situation, — that is, she fully knew that the stock, the share of the stock that she would have in the company, would generally be just exactly what was given out. Mrs. Bettendorf admitted that she was told that her husband did not intend to collect these royalties, but was not aware that this had any influence on her, and testified, in substance, that she was told that, if payment of the amount due was enforced, this might break up the company; and that defendant “wanted above everything the concern to be prosperous, and the concern to be in good standing;” that she made no demands, because of being told that “it might break up the company, and I agreed to what they told me;” that she signed the waiver or release because the defendant wished it; that she “signed whatever they handed to me to sign, and upon their reading [that contract] to me, I signed that,” perhaps not understanding; that she “wanted everything to be .peaceful and in harmony, and many a thing I suppose I sacrificed for that,” and because of the confidence she reposed in the defendant. It will be observed that the amount of these royalties was represented to be $262,340 less than it really was, and that she was given to understand that payment thereof would jeopardize the credit of the company; that its business was poor, and the outlook otherwise not promising; and that she relied upon these representations. The defendant admitted that, upon signing the agreement, she remarked, “We must save the company,” and further on, he was asked: “Well, what did she say, when you first presented the mat-. ter to her, as to her judgment about canceling the royalties and the royalty contract; what was her first attitude when it was first explained to her? A. Why, she was perfectly satisfied, as I stated before. She said that, in her judgment, as I explained it, that was naturally the only thing that could be done. ’ ’ Even though decedent had expressed the intention of canceling his claim to the royalties owed him, he had never done — 95 — so, and the record discloses no sound reason for the widow’s making a large gift to the brother, which decedent is said to have contemplated, but, with ample opportunity, never made. JNor can the reasonableness of the royalties, in view of the large earnings of the company, be questioned. The record leaves no doubt that she had given the affairs of the corporation little or no attention; that she had reposed entire confidence in defendant; and that she was influenced entirely by his representation that what was done was necessarily for the protection of the company. If she expressed sympathy for the defendant, she does not appear to have been aware that he was then receiving a salary of $1,000 per month, to compensate him for the burden he was bearing. Voss also insisted that the letters patent should be assigned to the company; that this course was essential to its prosperity: and in this undoubtedly he acted in good faith toward the company, of which he was a director; for he had suggested the same, though without avail, to the decedent. Plaintiff testified that both Voss and defendant advised her that the patents would not be of any value to her; that they would only be a source of worry, annoyance, and expense, and the defendant told her that they might become involved in lawsuits. The matter, as seen, was finally adjusted by the transfer of the letters patent to defendant as trustee, with direction to license the same to the company perpetually. This, in effect, canceled the contract, and obviated all claims for future royalties. That the patents were of great value to the company cannot be questioned. They constituted the basis of the enterprise, and enabled the corporation, issuing only $100,000 in common stock, to develop an enterprise which, during the five years previous to 1911, yielded an average net annual income of $660,283.33; and in eight years, assets of over $2,500,000 in value had accumulated. The defendant, then administrator of the estate, derived practically one third of the value of these letters patent without any compensation whatever. Their value will be considered in connection with that of good will. At that time, defendant was administrator of the estate, as well as president of the corporation. As such administrator, he held the legal title to these claims, and occupied a fiduciary relation toward the plaintiff. The existence of such relation be — 96 — tween administrator and the widow of decedent is conceded by counsel for defendant. The authorities agree that an executor or administrator, .¡dealing with those interested in the estate, must act in entire good faith, and owes the duty of truthfully-advising them of all the facts bearing upon transactions between such executor or administrator and the interested parties. He might not deal with the widow and heirs at “arm’s length,” and indulge in arbitrary offers, even though known to be such; and doing so furnished no excuse for omitting full disclosure-of the facts. Nor might he be the recipient of benefits from the widow or heirs through the influence of another, not acting for them, without such disclosure. We entertain no' doubt that he failed to advise the plaintiff correctly with reference to the amount of royalties owed by the company to the estate; that the deal was made with reference thereto, and without explanation to plaintiff of the extent to which defendant would be benefited by the release of the royalties and by the contracts relieving the company from paying royalties on the patents in the future. This is apparent from’ her manifestation of sympathy for “poor Joe,” who was being well paid for his services, and her characterization of what he was receiving as “that little advantagefor she could hardly have thought a benefit running up into hundreds of thousands of little advantage, even to anyone thinking in large figures. Of course, if these patents were to be considered apart from their usefulness to the company, their value would probably be much less; but. that would not be a fair way of considering them, nor can it be thought that either the defendant or Voss talked to them in this sense. They were fundamental in the development and continuance of the great enterprise. The profits earned in their use are indicative of their salability, apart from the company, for a large amount. We entertain no doubt that the defendant violated his duty as administrator in dealing with the plaintiff’s interest in the property, in that he induced her to part with claims and property of great value; without any adequate understanding of the values with which she was parting; and this was due to his failure to bring to her knowledge explanation of the facts bearing -thereon, and the extent to which the administra — 97 — tor, as an individual, was profiting by the contracts which he induced her to enter into. 2. Fraudulent conveyances: administrator and corporate president in fiduciary relation. II. As stated, the bulk of the estate of the decedent consisted of 643 shares of stock in the Bettendorf Axle Company, of which the widow was entitled to one half, and the parents of decedent to the other half. In the latter part of May, J. W. Bettendorf began negotiations for the widow’s portion of this stock, and, on June 1, 1911, submitted to her the following written statement of the assets of the company, and proposition to purchase: “Bettendorf, Iowa, June 1, 1911. “Mrs. Elizabeth H. Bettendorf, “City. “My Dear Sister-in-law: “Pursuant to our conversation in the matter of my purchasing your common stock interest in the Bettendorf Axle Company, I make the following statement and proposition: “The surplus and common stock as of date of January 1, 1911, of the Bettendorf Axle Company being........................$2,381,570 Deductions account depreciation, etc........ 536,305 Net surplus and common stock............$1,845,265 Your equity in the above as owner of . 321% shares of stock being....................$ 593,252 Less % the amount the estate owes the Bettendorf Axle Company and which I will assume and agree to pay approximately.. 52,000 $ 541,252 Deductions account of patent suits, part of your portion of the contingent liability.. 110,000 Net amount I offer to pay.................$ 431,252 — 98 — I propose to pay you as follows: In cash. ................'..........$150,000 By Shaw Land & Timber Co. note 50,000 By Allen & Watkin’s note ........ 60,000 Bettendorf Axle Company preferred stock .......................... 18,000 By my notes for 1, 2 and 3 years at 5% per cent per annum, secured by common stock of Bettendorf Axle Company, 321% shares as collateral-153,252 $431,252 “Respectfully submitted, .“ J. W. Bettendorf.” "“Bettendorf, Iowa, June 1, 1911. “I hereby accept the above proposition and agree to the terms thereof. Elizabeth H. Bettendorf.” It will be observed that this offer was but $30,082 more than the royalties plaintiff had gratuitously assigned to the company, to say nothing of the value of the patents. But she accepted the offer, June 7th; and, on the same day, the widow and parents filed written application to the defendant, as administrator, requesting him to distribute the shares of stock to which they might be entitled, after exacting a written agreement that, if the administrator “should find it necessary or advisable during the period of administration of said estate to sell any of said stock for the purpose of paying debts against said estate or for any other purpose whatsoever, that he, or his successor as administrator, may have the right to have possession of said stock. The first parties will upon demand deliver said shares of stock to said J. W. Bettendorf or his successor as administrator, or to pay value thereof to him or his successor upon demand. ’ ’ And on the same day, the plaintiff transferred her 321% shares of the capital stock of the company to the defendant. The' record satisfactorily discloses that the price paid by the defendant' was inadequate. The plaintiff was without information concerning the company’s affairs, was unaware of the extent of its property, or what it had been earning and had in prospects in the business world. The defendant was fully — 99 — advised that she was relying, in large part or wholly, upon his representations as contained in the letter, and that she was acting largely, if not wholly, on the confidence she reposed in him. It is true, as argued by counsel for defendant, that decedent had been the dominating figure in the business, and, without his genius of invention and his business capacity, the enterprise might not have succeeded, and undoubtedly his demise interrupted its affairs and was an occasion of some misgiving as to the future of the company; but, during the 17 years of the company’s existence, the defendant had been intimately associated with his deceased brother. Though possessing little or none of his capacity for invention, he was familiar with all the details of the manufacturing plant, and with the manner of doing business pursued by decedent; had been in charge of the plant always during the frequent absences of the latter; and, as was demonstrated shortly after the latter’s death, was possessed of large business capacity, and was thoroughly qualified to succeed the latter, as he well knew. Indeed, it would be difficult for anyone to explain the contract entered into with the widow for the purchase of this stock on any other theory than that he had entire confidence, not only in his own capacity for the management of its affairs, but in the future prosperity of the corporation. Even his financial adviser, Yoss, to whom the outlook is said to have seemed so dubious, could hardly have approved the transaction without having entertained confidence in defendant’s ability, and in the future prosperity of the corporation. As it had earned profits, during the five-year period from 1906 to 1910, inclusive, averaging annually $660,283.33 on its common stock, it would seem to have been fairly successful in putting its productions, though then somewhat novel, on the markets of the world; and the defendant’s confidence in the future of the company, as evidenced by his purchase of this stock, was well justified by its past record, and amply vindicated by what subsequently occurred. On February 13, 1911, the directors, on motion of Yoss, had increased the salary of the defendant as president from $12,000 to $18,000 per annum. Surely, this was done in recognition of his ability and the services he was rendering, and bespoke the confidence not only of Yoss but of the other directors. — 100 — On. July 11th following, 36 days after the above letter was written, the minutes of the directors of the company disclosed that the defendant, as president, “stated that, on July 1st, the company had" business on hand to the amount of $1,283,915; that cash in bank was $279,078.60, and accounts receivable good for merchandise sold was $204,329.28, while there was owing for merchandise, etc., only $72,838.37, whereupon Mr. C. N. Yoss offered the following resolution: ‘Whereas, during the 17 years the company has been in business, no dividend has been declared on the common stock of the company, during which time a surplus of $2,422,285.35 has been accumulated, and under the very favorable condition of the finances of the company, as stated by President Bettendorf, be it resolved that the board declare a dividend of $300 per share on the $100,000 common stock of the company, and the notes of the Shaw Land & Timber Company, $50,000, and of C. R. Allen et al., $60,000, be applied in making payment of such dividend.’ The resolution was unanimously adopted.” The defendant and others organized a corporation known as the Bettendorf Company, with capital stock of $7,500,000; and, on December 30, 1912, it, by its president, Joseph W. Bettendorf, filed application with the executive council for permission to issue capital stock in said sum, $5,000,000 in common stock and $2,500,000 in preferred, at 7 per cent cumulative, nonparticipative stock, representing that it had purchased the property, assets, and good will of tho Bettendorf Axle Company at the price of $7,500,000, to be represented by the par value of the stock hereinbefore mentioned; that the factory, shops, and machinery were appraised as of date, February 1, 1912, by the American Appraisal Company, together with its balance sheet at the close of business November 30, 1911, and included the following “classified statement of assets:” “Foundry, shops, power plant, other buildings, including machinery and appliances (see Exhibit A) ....................$4,000,000.00 Real estate occupied by present plant, approximately 96 acres (see Exhibit B).. 192,000.00 — 101 — Beal estate adjoining plant, approximately 145 acres (see Exhibit C) ............ 145,000.00 Investments in bonds and stocks (see Exhibit D) ............................ 156,829.00 Patent development (see Exhibit E).... 61,902.00 Quick assets, consisting of material finished and in process of manufacture: Cash, bills receivable, accounts receivable ...............$2,155,848.00 Less actual liabilities ...... 1,189,603.00 Net (see exhibit F) .................. 966,245.00 Total .............................$5,521,976.00 Patents, patent licenses and good will (see Exhibit G) ..............'...........$1,089,713.00 Value of $15,000,000.00 of orders booked for 1913 delivery (see Exhibit H).... 1,300,000.00 Total .............................$7,811,689.00” The petitioners represented that “the officers are thoroughly familiar with all the property, assets, letters patent, and good will of the Bettendorf Axle Company, and that it is in their judgment and belief that the said property and good will are fully worth the valuation as hereinbefore shown.” This was sworn to by the defendant and Voss, saying that: “We are familiar with the property, assets and business of the Bettendorf Axle Company of Davenport, Iowa; that we have each read the foregoing application of the Bettendorf •Company to the Executive Council; that we have knowledge of the value of assets, property, patents and good will as classified and set forth in the foregoing application and that the values thereof as shown in the foregoing application are true and correct to the best of our knowledge and belief.” To this were attached certain schedules and estimates of values of the accepted property and good will. From the evidence submitted, the executive council found the property to be of the value of $8,689,603, and that the out — 102 — standing indebtedness of the old company was $1,189,603, which the new company was to assume, and authorized the issuance of stock to the amount of $7,500,000. 3‘ fueXWciarations as to value. Of course, the value of the plant must be ascertained as of the date of the sale of the plaintiff’s stock, and subsequent enhancement of values cannot be taken into account as bearing thereon. But this does not preclude the consideration of subsequent declarations by defend-a;Qt an¿ y0SS; as bearing on the good faith and correctness of their previous representations to plaintiff, especially when there was no substantial -increase in the physical estate. If .the outlook for this was so unpropitious when plaintiff sold her stock, it must have brightened rapidly after defendant acquired it; otherwise, Voss could not have brought himself to have pronounced the condition of its finances very favorable, little more than a month later, nor, in view of his anxiety over the indebtedness for royalties, could he have consented to the voting of a dividend of $300,000 out of its assets, about $96,000 of which must have gone to plaintiff, but for the transfer, and, in less than a year and a half, swear that the plant was worth $7,500,000! The explanation sought to be made is that these values were exaggerated, in order to obtain acceptance of the property equivalent to cash in the organization of the company; and, of course, there is no established criterion for estimating values of property. Between the low and top values, even when fairly estimated, there may exist honest differences of relatively large amounts. But where the estimates of practically the same property, at periods scarcely more than eighteen months apart, vary as one to three, or, in other words, the property is sworn to be worth three times what it was earlier represented to be, without suggestion of any cause for the increase, the mere difference of opinion as to value, or swelling estimates thereof for a purpose, furnish no adequate explanation. It is inconceivable that reputable citizens, even though possessed of large means, would thus exaggerate values of property on oath, even though this were done to induce those in authority to authorize the acceptance of property as equivalent in value to cash, in payment for the — 103 — capital stock of a corporation. Rather than say that defendant and Yoss swore that this property was worth three times its value, in order to deceive and thereby induce the executive council to permit the issuance of capital stock in amount greatly in excess of its cash value, we are inclined to believe that the unsworn representations to the plaintiff were too low; and this will appear as we proceed. Reverting to defendant’s letter, it appears that he there represented the surplus and common stock, when that was written, to be $2,381,570; but, on July 11th following, Yoss, in his motion that a 300 per cent dividend be declared, represented, that the surplus alone was $2,422,285.35; and there is no pretense that this increased amount was due to additions made in the intervening 40 days. If to this is added the $100,000 par value of the common stock, the value of the property, as estimated by Yoss at this meeting of the directors at which the defendant presided, was $2,522,285.35, or $140,715.35 more than defendant had stated such value in his letter. The figures probably were furnished by defendant to the directors, of which Yoss was one, for defendant only was familiar with the books, and, in any event, the inference from his having accepted the dividend on this motion without protest warrants the conclusion that he approved the same. The discrepancy is nowhere explained satisfactorily. Again, in the letter, $536,305 is deducted on account of depreciation. The defendant testified that this was arbitrarily determined as the amount, and that he gave the figures making up this amount to Mr. Yoss. His examination on the subject is quite illuminating. It appears that the company had purchased 186 acres of land east of its foundry, up to Duck Creek, and an old stone crusher, for which it had paid $160,000. The defendant computed $80,000 as a part of the above deductions on account of this real estate. He admitted that it was. desirable to retain this land for the future development of the company, and his only explanation is that, as it was not required for immediate use, and was being leased at a low rental,- he thought it ought not to be computed at the value paid. Notwithstanding this, and although the property had not increased — 104 — in value, it was listed as worth. $1,000 an acre, in the application to the executive council, and this value was sworn to by himself and Voss. It appears that, when the company purchased malleables, more than required for the particular job were bought, in order to meet emergencies of breakage and the like, and accounts thereof were carried in what was called surplus stock. After being carried for several years, they were put in the scrap heap, as new material came in. Deduction of $25,000 or $30,000 was made on this account, and without any investigation as to its .correctness. $25,000 was deducted on account of what is known as the Shoal Creek Company investment, consisting, as we understand it, of about $60,000 in bonds and stocks. There is no basis for determining the measure of discount which might properly have been made. The Bettendorf Improvement Company had been organized to purchase lots and to build houses for the employees of the company, and to handle the property. $92,529 was the amount so invested in stock, being issued at the par value of $100 per share for that amount. The deduction on this account was made on the apparent theory that defendant would not know whether the company would ever get all its money back. $33,000 was charged off on account of the Sargent car, though it was listed in the application to the executive council, and transferred to the new company at the price of $54,2(^6.35, to which both the defendant and Voss testified, as being a, fair value. Otherwise, this item has no explanation. Again, the company had been conducting “a, big test,” to demonstrate the “rigid versus the flexible truck.” Its competitors had undertaken by test to demonstrate that the company’s principle of truck construction was wrong, and this test was made to counteract the effect of that made by them; and it was expending or expecting to expend certain sums of money on account of these tests. Manifestly, all this was done to aid in the future disposition of the company’s output, and was not appropriate matter for deduction of $20,000 or $25,000. Other items were even more questionable. Indeed, defendant paid no — 105 — heed to his trust obligation to disclose the facts fully and fairly, but, according to Voss, “he had in mind to satisfy Mrs. Bettendorf, and show her, as near as he could, that he was justified in making those deductions, — those arbitrary deductions. ’ ’ The business had not been good during the early part of 1911, as compared with the previous year, and the company, during the first five months, earned a net profit of only $150,000, or more than 6 per cent of his estimate of the value of the plant; and so defendant figured off $50,000 or $75,000 as the probable loss of business during that year! His good or bad faith in so doing appears from the increase of $5,000 per month in salary in February previous, and the recital that business was prosperous, when, shortly after the purchase of the stock, a dividend of 300 per cent was declared! The witness was unable to recall other items, but these seem to have been noted on paper, of which a poor copy is attached to the abstract, and these seem without better justification. The statement of the financial condition of the company of June 30, 1910, has a deduction of $929,419.13 as “reserve for depreciation,” and it would seem to dispose of the items alluded to, especially that of the deduction “on account of the plant.” We do not animadvert on the necessity of taking into account depreciation in estimating the value of going concerns. Every well-conducted factory or manufacturing company should make provision to cover wasted property and losses through exhaustion or obsolescence. If book deductions are too great, this is of little concern to the shareholders. Though the effect is to reduce dividends, actual value is not impaired thereby, and the surplus is increased. The amounts of deductions charged off a company’s books, then, furnish little aid in ascertaining values. Depreciations other than those accepted by the trial court were without warrant, as must have been known to defendant, who was familiar with the books of the company. The item of $52,000 was one half of the amount which had been withdrawn by decedent for the construction of his home, and was properly deducted. It will also be observed that $110,-000 was deducted on “account” of patent suits, “part of your portion of the contingent liability.” This item does great — 106 — credit to the defendant’s ingenuity as an expert in paring down values in order to mislead the unwary! It seems not to have been thought enough that she donate her one-half interest in the patents to the perpetual use of the company, about one third of which he thereby acquired gratuitously: he proposed that, in addition to this, she should also share in the expense of defending them, and this without including any estimate of the value of their' permanent use in computing the value of the company’s property! 4’ raio^foS^cSmputation. The element of “good will” is entirely omitted from defendant’s statement, as is the value of the patents. His explanation of the exclusion of these items but emphasizes the fact that his entire aim was to mislead as to the value of the stock, and that he felt himself under obligation to make a fair statement of the condition and property of the company. Indeed, Voss describes the transaction as dealing at arm’s length. That good will is an element of value proper to be taken into consideration in ascertaining the value of a going concern, is well established. Millspaugh Laundry v. First Nat. Bank, 120 Iowa 1; Iowa Seed Co. v. Dorr, 70 Iowa 481; Thompson v. Winnebago County, 48 Iowa 155. See Crichfield v. Julia, 147 Fed. 65. The value of good will varies with the facts of each particular case, depending on the extent of the use of the trade name, the stability of the business, consistent earnings, the character of the organization, the reputation of the concern, the personality of the manager, the possession of valuable patent rights, and all other elements which make for excess profits over and above a fair return on the capital stock invested. Moore v. Rawson, 185 Mass. 264 (70 N. E. 64); Rowell v. Rowell, 122 Wis. 1 (99 N. W. 473); Feige v. Burt, 124 Mich. 565 (83 N. W. 367); Moffit v. Hereford, 132 Mo. 513 (34 S. W. 252). It is always difficult to estimate the value of the good will of a business, and impossible so to do with accuracy. The following rule seems to have been approved by the courts of New York: (1) Determine the average annual net earnings of a fair and representative number of years; (2) determine the average annual net investment over the same period; (3) deduct from the average annual net earnings a fair interest return on the average annual net investment, — 107 — —6 per cent or 7 per cent; and the remainder represents one year’s earnings of assets of the company other than physical assets, because a fair return on physical assets has already been allowed. It must, therefore, represent one year’s earnings of the nonphysical portion, or good will. To determine the worth of the good will, therefore, this figure must be capitalized on a fair percentage basis, depending on the reasonable likelihood of continuance of such earnings. See Von Au v. Magenheimer, 126 App. Div. 257 (110 N. Y. Supp. 629); same case, 196 N. Y. 510 (89 N. E. 1114); In re Silkman, 121 App. Div. 202 (105 N. Y. Supp. 872); same case, 190 N. Y. 560 (83 N. E. 1131). The record discloses that the net income earned by the company each year for the five years preceding 1911 was as follows: In 1906 ......................$ 452,176.58 In 1907 ...................... 586,079.80 In 1908 ...................... 278,740.49 Jn 1909 ...................... 1,134,276.50 In 1910 ...................... 850,144.30 Dividing the total amount of the several sums by the number of years, we have the average annual income of $660,283.55. After deducting 7 per cent on the average investment, there would remain over $500,000 of the average annual income to be capitalized. Of course, such a computation is not conclusive, for other circumstances may have bearing on the productivity of the corporation, and its salability. Thus it appears that th§re was local uncertainty as to the future of the company; but its dealings were not local, save with the banks. Its credit with them appears to have been unimpaired. As one of the witnesses expresses it, “the railroad world was at a low ebb,” early in 1911, but more of the company’s share of orders was obtained later-on. The business of furnishing supplies for railroads is shown to be subject to changing conditions of the companies, • and varies greatly from year to year. The year was concededly a bad one until after July, and this may have affected the outlook of the enterprise. All these matters should be taken into consideration in estimating- the value of the good will and — 108 — the perpetual use of the patents upon which the business of the corporation rested, as well as its prosperity in the past. As remarked by Emerson, “Every successful business is the lengthened shadow of some one man.” But such enterprises, however, do not ordinarily perish with the man who creates them. However large the sphere of human activity, someone is sure to take up the burden where laid down, and carry it onward, often with increased efficiency, as in the present instance, and sometimes at a loss. The business had been thoroughly organized, and there was nothing in the situation to indicate that the work would not be carried on. The net earnings of the company during the year 1910, notwithstanding the change of management during the last seven months thereof, amounted to •$850,144.30, and, during the first five months of 1911, to $149,-366.67, or more than 6 per cent of the fair valuation of the physical property, leaving the earnings, if any, for the remainder of the year, in excess: that is, as additional income on the investment. The record furnishes no basis for estimating the Value of the perpetual use of the patents, save the income earned in the plant; though defendant and Voss, in their representations to the executive council, fixed their value at $1,089,713. Of course, this was 18 months after the sale, and their value may have been greatly enhanced in the meantime by the receipt of large orders; or the statement might have been intended to mislead the executive council. Surely, the perpetual use must have been worth something. At any rate, there was every reason to believe, in June, 1911, that the company would continue in business and continue to earn a large income, not only on its tangible, but on its intangible property as well ;• and we are of the opinion that the valuation of the good will and perpetual use of the patents at $600,000 by the trial court was very moderate. But for the peculiar situation at the time, the depression in business and other matters referred to, we should be inclined to largely increase the amount. The majority are not inclined to do so, and for that reason, we shall not interfere with the finding of value as made by the trial judge. III. During the period when the contracts concerning the royalties and patents were entered into, and the plaintiff’s por — 109 — tion of the capital stock purchased, defendant was administrator of the estate of decedent. As such administrator, he held the legal title to the several properties in trust for the widow and heirs, and owed the same duty to them as trustees generally owe to their cestuis que trustent. As said by Judge Deemer in Ryan v. Hutchinson, 161 Iowa 575: ‘ ‘ Our Code expressly recognizes that an executor or administrator is a representative of the estate, and stands in law on an equality with a trustee of an express trust. ’ ’ See, also, Lampman v. Lampman, 118 Iowa 140; 11 Am. & Eng. Encyc. of Law (2d Ed.) 986; Cole v. Stokes, 113 N. C. 270; Herriott v. Potter, 115 Iowa 648. An executor or administrator, in dealing with the estate and with those interested therein, is regarded as a trustee, and, as such, is subject to the principle which raises a presumption of fraud against him when he undertakes to purchase the trust property from his cestwi que trust. Counsel for defendant seek to avoid the application of this rule by saying that the widow’s portion of the stock had been distributed prior to its purchase by defendant. The record is to the contrary. All the negotiations occurred prior to June 7, 1911. His written proposition to purchase was dated the first of that month, though Voss thought it was made earlier, and defendant fixed the date later. There is no dispute, however, that the acceptance was on the 7th; and, though the application of the widow and parents to the administrator for distribution, and his agreement thereto and the assignment of the stock, were dated on the same day, in the absence of any explanation, it may well be presumed that these occurred in the natural course of things, and therefore that the application for and distribution and the assignment of the stock took place subsequent to the negotiations. This is true, or else all these occurrences were part of the same transaction. In either event, defendant had not shaken off his trust relationship, prior to the purchase of the stock. Even were the proposition to purchase accepted after, but on the same day that the distribution occurred, the law would scrutinize with great care the transaction, in order to see to it that the cestui que trust had not been overreached. Tuche v. Buchholz, 43 Iowa 415. — 110 — There is another ground for saying that defendant stood in a trust relation toward the plaintiff in this transaction. He was a director of the Bettendorf Axle Company, and the president of that corporation. As such, he owed the duty, in purchasing her stock, to make a full and fair disclosure of any facts within his knowledge, bearing upon the value thereof, which he knew were not known to her, before taking over the stock. This doctrine was settled in Dawson v. National Life Ins. Co., 176 Iowa 362. Appellant suggests that that decision might well have rested on the ground that actual fraud was perpetrated; and so it might, but it was designedly made to turn on the proposition stated, to which the court adheres. It is said, however, that this case is to be distinguished from that, for that the account books here contained all of the information possessed by the defendant, and therefore the widow might have ascertained everything known to the defendant by resort to said books. Appellant relies on this excerpt from the opinion: “If the market or contract price of the stock should be different from the book value, he would be under no legal obligation to call especial attention to that fact; for the stockholder is entitled to examine the books, and this source of information, at least theoretically, is equally accessible to both.” This does not mean that an officer of a corporation may take advantage of a stockholder whom he knows to be uninformed concerning the condition of the books, and who is without appreciation of what they will disclose, and who is relying upon his statement of such conditions, which is misleading in what it contains, as well as in its admissions. Such deception is quite as much to be condemned as that of withholding facts not appearing in the record; and, under the facts of this case, the doctrine as to the existence of the trust relation between officer and shareholder is quite as applicable as in the Dawson case. "Whether the defendant be held to the obligations of a trustee on the theory that the trust relation arose from his relation as administrator of the estate of the decedent, or from his position as director and president of the company, he owed to plaintiff the duty of dealing with her in absolute good faith. Because of relationship, the transactions reviewed are presumed to have been brought about by undue influence, and the burden was — 111 — and is on defendant to explain these, so as to be consistent with the exercise of good faith and fair dealing on his part. Ordinarily, this is shown by proof that all the facts within his knowledge were disclosed to the cestui que trust, and, if an inadequate price were paid, that this was fully understood by the latter, and acquiesced in. Evidence of inadequacy in prices raises a suspicion of unfair dealing; but this may be avoided by showing that the cestui que trust intended to sell at less than an adequate price, and thus, in effect, make a gift of the difference to the trustee. Another exception is where it is necessary that the cestui que trust sell without delay, and it appears that he had received offers of purchase at less than an adequate price, and had importuned the trustee to buy at the same or a higher price than offered, and the cestui que trust was aware of the sacrifice that was being made. In either of these situations, the sale cannot be interfered with because of the inadequacy of the price received. Golson v. Dunlap, 73 Cal. 157 (14 Pac. 576) ; Cole v. Stokes, 113 N. C. 270 (18 S. E. 321). In Golson v. Dunlap, supra, the court said: “With respect to adequacy of consideration, no unbending rule applicable to all cases can, be framed, because there are classes of cases which have features which prevent the operation of a fixed rule. The leading text-writers speak of adequacy of consideration as essential. See 1 Perry on Trusts, Section 195; 2 Pomeroy’s Equity Jurisprudence, Section 958; 1 Story’s Equity Jurisprudence, Section 311. Compare, also, Grosvenor v. Sherratt, 28 Beavan 663; Edwards v. Meyrick, 2 Hare *70; Boyd v. Hawkins, 2 Dev. [N. C.] 329, 331; Coffee v. Ruffin, 4 Coldw. [Tenn.] 515; Rose v. Mynatt, 7 Yerg. [Tenn.] 30; Kisling v. Shaw, 33 Cal. 425; Rubidoex v. Parks, 48 Cal. 215. But this is too sweeping. For there may be cases in which no valuable consideration at all is necessary. Thus, while a gift from a cestui que trust to his trustee is exceedingly difficult to sustain (see Hatch v. Hatch, 9 Ves. 292), it will, in proper cases, be upheld. See Hunter v. Atkins, 3 Mylne & K. 113; Harris v. Tremenheere, 15 Ves. 34, 39; Marshall v. Stephens, 8 Humph. [Tenn.] 159. The principle upon which such cases rest is, that it was the intention of the cestui que trust to part with his property without consideration; and, if a court of equity can clearly — 112 — see that such intention was induced by laudable motives, and .not by want of knowledge of the situation, or by undue influence or deceptive arts on the part of the trustee, it will allow the intention to prevail. So there may be eases where, owing to special circumstances, it is necessary for the cestui que trust to sell without delay, and no one can be found who will buy, and the trustee, acting in entire good faith, gives more for the property than anyone else will give. In such case, it is for the interest of the cestwi que trust to allow the trustee to buy, and it would be hard measure to set aside the sale merely because the sum which the trustee was able or willing to give was less than the value of the property, — the transaction being unexceptionable in other respects. It is too sweeping, therefore, to say that, in all cases, there must be an adequate consideration, if the word is to be used in any ordinary acceptation. On the other hand, the element of adequacy of consideration is most important. The great object of the rule is to prevent imposition on the part of trustees; and, in one sense, this may be said to be to prevent trustees from acquiring the property of their cestuis que trust for an inadequate consideration. To disregard the question of inadequacy, therefore, is to attempt to apply a rule while shutting one’s eyes to its object and purpose. The writers above referred to are not very far out of the way in speaking of adequacy of consideration as essential.” There was no evidence that, in making the deal, the plaintiff was aware that the price was inadequate. On the contrary, she was assured that it was all the stock was worth. There is no escape from the conclusion that the price was inadequate, and that the defendant omitted important matters from His statement, and included those that should not have been mentioned, and that plaintiff was induced thereby, without knowledge of the facts and the value of her stock, to part with it to defendant. .5. fraudulent puTOhaIeWbyS: fiduciary: roiianee of third , .Party-IV. The appellant contends, however, that the widow acted on the advice of C. N. Voss, and entirely disconnected herself from any reliance on the defendant. The fact of having obtained the independent advice of a third party d°es not alone obviate the presumption of the exercise of undue influence. It is merely a cir- * cumstanee tending to show the “uberrima fides” — 113 — of a transaction between tbe fiduciary and tbe beneficiary. The purpose of such proof is to establish the freedom of the cestui que trust from any influence or control of the trustee. This may be done by proof that the beneficiary acted on his own judgment, or solely on the advice of another. Manifestly, if either of these situations is established, the dominant party could not have exercised control in bringing about the deal between himself and the cestui que trust. The effect of this would be to obviate the presumption of unfair dealing quite as completely as proof that the cesttd que trust was fully advised of all the facts, and, being sui juris, acted freely in dealing with the trustee. The force to be given proof of independent advice necessarily depends on whether the adviser has been put in possession of all the facts and circumstances, and, if not, whether the means of inquiry to ascertain these were at hand: in short, whether the adviser was so informed of the facts as that he might intelligently guide the cestui que trust in reaching a determination, and whether the cestui que trust relied entirely upon the advice given, in connection with what he may have known himself, and without placing confidence in the trustee. See Curtis v. Armagast, 158 Iowa 507, 527; Cole v. Stokes, 113 N. C. 270 (18 S. E. 321); Korn v. Becker, 40 N. J. Eq. 408 (4 Atl. 434); Dunn v. Dunn, 42 N. J. Eq. 431 (7 Atl. 842); Nichols v. McCarthy, 53 Conn. 299 (55 Am. Rep. 105); Maas v. Lonstorf, 194 Fed. 577; Zeigler v. Illinois Tr. & Sav. Bank, 245 Ill. 180 (91 N. E. 1041) ; Colton v. Stanford, 82 Cal. 351 (23 Pac. 16). As pointed out in the last-mentioned ease, if, at the time of the purchase, the trustee has shaken off his fiduciary character and the confidence which is presumed to have resulted therefrom, he is free to deal with the cestui que trust; and it matters little how this is done, whether because of the distrust of the latter, or his confidence in his own ability to conduct the transaction alone, or through the independent advice of a third person. If “ ‘the cestui que trust clearly discharges the trustee from the trust, and considers him as an indifferent person, he may purchase; but it must clearly appear that the purchaser, at the time of purchase, had shaken off his confidential character by the consent of the cestui que trust, freely given, after full information, and bargaining — 114 — for the right to purchase.’ 2 Sugden on Vendors 693.” Of course, if the alleged independent adviser is misled by the trustee as to the facts bearing on the transaction, or is in a situation such as to preclude impartiality,, the adviser is in no better situation than the cestui que trust, and therefore would be laboring under the same difficulties, and proof of obtaining such advice would not be sufficient to rebut the presumption of bad faith. To be conclusive, the advice must come from a third person, disassociated with the transaction and the parties, so as to preclude the inference which otherwise might be drawn of interest in either one or the other, with relation to the transaction. The record has not convinced us that Mr. Voss was in a situation to act as independent adviser with reference to the sale of the stock. He was not so disassociated from the interests of the trustees that he could well actn impartially, and solely in the interest of the cestui que trust. He was asked whether he had acted as “a sort of financial adviser of J. W. Bettendorf after the death of his brother, ’ ’ and answered in the affirmative. Nor does it appear that he had information other than that furnished by the trastee, on which to base his advice, save that coming to him as a creditor of the company, and as financial adviser of the defendant. Nor did he assume to base such advice as he gave on anything other than statements furnished by defendant, and the latter’s written proposition to the widow. These were made out in response to his request for statements as to the condition of the company. Doubtless he had ascertained other matters as director of the company, and as financial adviser of the decedent and subsequently of defendant, but only in a general way, as bankers usually keep in touch with the trend of a debtor’s business affairs. The record leaves no doubt that he made no personal investigation of the books or affairs or property of the company, but relied on the statements, including that contained in the written proposition, as did the plaintiff. Voss testified that, after some parley about arbitration, the plaintiff 'requested him to act for her in these negotiations; that he had many conversations with defendant, including some concerning deductions, and reported all of these to plaintiff, arranged with defendant that she should have the house, which was being constructed, for $65,000, instead of the $180,000 — 115 — which she had agreed to allow; that he knew that the figures of the proposition were arbitrary; that he “never talked about the real value of that stock,” for that “he didn’t know what it was or might be;” that he tried to get all he could for Mrs. Bettendorf, and acted, in what he did, entirely for her interest; that it was difficult to say what the stock was worth, and, in considering whether she should sell, there were two questions: ‘ ‘ First, whether the price offered is adequate for the commodity, itself; and second, her situation, and whether or not it would be expedient for her to sell. ’ ’ He finally wrote her a letter, referring to his discussions with defendant and to the difficulty “for anyone to fix a value and determine what the stock represented by a plant such as the Bettendorf Axle Company plant might be worth, unless the property were actually offered for sale as a whole. “I have been reasonably conversant with, the affairs of the company for years and having carefully gone over the statements made by J. W. B. in connection with his proposition and offer for your holdings made to you now, and fully recognize the uncertainties, fluctuations, and risks naturally attached to the business carried on and furthermore considering the fact that you are a minority stockholder, have no hesitation to recommend and advise you to accept his offer for the purchase of your interests. The price offered may be low and the deduction from book-values insisted upon by Mr. B. may be excessive, in fact, future results may and it is to be hoped will demonstrate that it might have been better for you not to have sold. On the other hand, the amount which you will realize is a large fortune, and properly and safely invested will yield a nice income. A sale surely relieves you of tremendous and continued risk and anxiety, and it is for this reason mainly, and the further reason that you yourself can hardly expect to have a voice in the future management of the company that I have advised you to accept the offer.” On cross-examination, the plaintiff testified that she did not remember of ever having seen the original of this letter, until shown her at the trial. Even if she did, — and we are inclined to think it came into her hands, — it gave her no information as to the facts, and indicates that he possessed only figures fur — 116 — nished by defendant. It was an argument based on plaintiff’s situation, without reference to the extent of the property owned by the company, or its actual value. Voss has been the financial adviser and friend of W. P. Bettendorf, and, upon his death, became such adviser of the defendant. Upon the latter’s request, he succeeded decedent as a director of the company, and his first service in that capacity, apparently, was to advise the cancellation of its obligation to decedent’s estate for royalties owed it by the company, estimated by defendant at $540,000, but, in fact, amounting to over $800,000; and that it be relieved from the payment of royalties on patents thereafter. According to his testimony, the alleged intention of decedent to cancel the indebtedness for royalties was explained to plaintiff, and “she replied that she knew,” and that, concerning its effect on defendant’s interest, she remarked: “Well, poor Joe, upon whom the whole load, — he has got to bear the burden of the business and ought to have that little advantage,” — the small sum being $284,830.70, or á contribution by her of one half of this amount, or $142,415.35! Voss must have known that, whatever may have been the intention of decedent as to making such a gift, he had not done so, and that the'widow was under no obligation to carry it out; and that, whatever the explanation to her, she did not appreciate the amount owed, or the benefit being conferred on defendant. This was the first manifestation of the interest of Voss in the affairs of plaintiff! The second was in inducing her to part with all royalties on patents to be earned in the future, and perpetually part with their use. Talk of benefiting the credit of the company was well enough, but doing that did not necessitate contributing to.the wealth of defendant of hundreds of thousands of dollars. It would seem that, to a real friend of this widow’s, it would have occurred that fair compensation might have been exacted from defendant for a just proportion of royalties owed and to be earned in the future, in relieving the corporation of its burden of indebtedness. Again, Voss knew that the letters patent had been assigned defendant and permanently licensed to the company, and were at the foundation of its great earning capacity; and yet he recommended the sale of the stock, without taking into consid — 117 — eration. the great value o£ the use of these patents, even consenting to a charge of $110,000 for their defense in the courts! Such was his impartiality as adviser! Nor was any attention given by Yoss to the value of the good will of the concern. As a business man, he must have known that the good will of a business yielding an average net profit of over $660,000 per annum on capital stock of $100,000, with a plant of the estimated value of $2,500,000, was of great value. Even with all the doubts he entertained with reference to the outlook of the company, he does not seem to have been adverse to defendant’s paying nearly a half million dollars for less than a third of the stock. In every instance, except the transaction wherein the price of the dwelling house was lowered, the advice of Yoss was in the interest of the defendant. Undoubtedly, he negotiated with defendant concerning the purchase of the stock at her instance, but there are several reasons for saying that he cannot be regarded as an independent adviser: (1) He was too intimately associated with defendant, and could not well divest his interest in him in acting in behalf of plaintiff; (2) he relied implicitly on defendant’s statements concerning the property, precisely as plaintiff must have done, and was misled by the misrepresentations and concealments of defendant, and, therefore, bad faith toward him in not making full disclosures was quite as effective as though plaintiff had negotiated directly with defendant; and (3) the evidence fails to show that plaintiff acted solely on such advice, but, on the contrary, leaves little or no doubt that she was influenced in what she did by her confidence in defendant and his representations. Yoss seems to have acted merely as a “go-between, ’ ’ reporting all he learned to her. She was at all times aware that he had only the statements of defendant, and both relied on these! There is no escape from the'conclusion that she relied quite as much on defendant’s fidelity as on any advice received. It is difficult, in the light of this record, to find justification for the advice given this woman. If the business during 1911 was not good, this was due to a temporary situation: i. e., to the fact that the railway companies were not purchasing cars and other materials in any considerable quantities, owing to the rates of transportation fixed by the interstate commerce commission, and to the efforts that were being made to have these re — 118 — duced. This but paved the way for larger orders in the future, and furnished no ground for expectation of permanent cessation in the output of cars, as subsequently appeared. If competition seemed probable, the company had met it before, to its great profit, and, for all that appeared, it would be able to obtain and take care of its share of the business in the future. There seems to have been no occasion for pessimism concerning the future of the company, though some local capitalists of ripe judgment seem to have shaken their heads. We shall not analyze their motives nor those of Mr. Voss in imparting his advice. A man of large interests, and greatly desiring .the expansion and development of this enterprise, he might have thought this would be better accomplished with all the stock in Bettendorf’s possession, and have exaggerated the disadvantages of a woman shareholder, ignorant of the company’s affairs. He may have given some significance to the thought that she was sharing liberally in the estate, in view of the circumstance that she had been decedent’s wife only two years. He talked with Best, a director of the company, and somewhat familiar with its affairs, who at first denounced the offer of defendant as much too low, but who, upon explanation by Voss that plaintiff was a woman, and unfamiliar with the affairs of the company, concluded that it would be all right. Thus both Voss and Best were inquiring concerning, not the fair value of the property and what she should be paid therefor, but what would be best for plaintiff in her situation; and even this much was based on not only lack of information, but misinformation and implied concealments on the part of defendant: Nor, as said, do we find that plaintiff relied solely on Voss’s advice. She was asked: “Did you think, at the time you accepted this offer to purchase your stock, that the offer placed upon the stock in this letter was all the stock was worth, according to Mr. J. W. Bettendorf? A. Why, I placed confidence in him to give me the right figures. I had no reason to doubt him, and no reason to disbelieve him, because I knew nothing. Q. Did you have anyone go over the books of the company for you? A.- No, I did not. Q. Did you consult an attorney or anyone ? A. No, sir, I did not. Q. At any time, from the death of your husband down -until the time you signed this paper accepting his — 119 — offer to buy your stock, did you have a legal adviser ? A. No, sir, I didn’t. Q. Did you have any adviser other than J. W. Bettendorf, or perhaps Mr. Voss? A. Mr. Voss, — that was all. I remember, when talking with Mr. Voss at the bank about this offer to. purchase my stock, that he had figured on yellow paper. I did not read them: Mr. Voss read them to me, and it was very offhand. I don’t know whether the figures Mr. Voss read to me were explaining this item of $536,000. It says here on this excerpt ‘net surplus and common stock, $1,845,265.’ I don’t know .now what is meant by ‘net surplus.’ I didn’t understand at the time what was meant by the words, ‘Your equity in 'the above as owner of 321 shares of stock, being $593,252.’ I don’t know the meaning of the word ‘equity.’ I must admit I was very dense. A fair explanation would have made me understand; but I didn’t get it, so I didn’t understand. I didn’t ask for any explanation. * * * I naturally took for granted the figures he gave me was correct. Q. Well, didn’t you have— do you mean to say that you never conferred or advised with Mr. C. N. Voss about how much you ought to receive for your stock ? A. Why, the figures proved what I was to have for it. Q. When Mr. J. W. Bettendorf talked to you about buying your stock, didn’t you go and talk to Mr. Voss about whether you ought to sell it or not, and how much you ought to get for it ? A. I did not ask how much I was to get for it, but I did have a conversation with Mr. Voss in regard to selling out. Q. Well, wasn’t it Mr. Voss who told you what Mr. Bettendorf’s figures were? A. Yes, sir.' Q. Well, now you were advised by Mr. C. N. Voss to sell your stock at the figure Mr. Bettendorf named? A. Yes, sir, I was. # * * Q. Well, didn’t you then seek to advise with anyone about what the figures were? A. Why, Mr. Voss and I talked it over, and he figured out to me the amount of money that would be my yearly income. And Mr. Voss suggested in these words: ‘ “A bird in the hand is worth two in the bush.” You had better take his proposition.’ These are the very words he said. * * * I felt absolutely confident that what figures would be placed before me would be all right. * * * I expected, naturally expected, to get just what was coming to me. Q. Now, if you stop and think about it, you didn’t believe Mr. Bettendorf just went ahead and — 120 — got up those figures without having any talk whatever with you about the price? A. I certainly did. -He certainly got the figures of what I supposed always would be the right thing. * * * Q. Well, Mr. Voss did act in the matter for you, and did talk with you and advise with you about it, didn’t he? A. Well, he did so, but I would not have objected to Mr. J. W. Bettendorf’s attending to that. I didn’t say**anything. I didn’t expect Mr. Voss to assume all of that, which, in a measure, he did, but I didn’t expect it of him. * * * Mr. Bettendorf made a very few appearances at the time of the settlement, and, knowing that Mr: Voss was a gentleman whom I could talk with, — I needed someone to talk with. I know that I used Mr. Voss as a personal friend to talle matters with, but what the conversations were, I don’t remember. Q. Now, don’t you remember, Mrs. Bettendorf, that, when the-figures did come to you finally, that they came to you through Mr. Voss? A. Well, the bank was the proper place for me to go to see. I expected Mr. J. W. Bettendorf there, but he did not make an appearance. Q. Oh, then you saw Mr. Voss at the bank, and talked about the figures that Mr. J. W. had submitted, — was that it? A. Had submitted. The figures were there, were submitted to me at the bank. Q. And that was the time when Mr. Voss figured out to you what your income would be if you sold at the price? A. If I sold at the price Mr. Voss figured out what my regular income would be? Q. Yes, and it was at that time that he told you you could not afford — out of that amount of money, you could not afford to buy the house at $180,000 ? A. Yes, that was the conversation we had at that time, — or at one time, — I won’t say at that time; but at one time. ’ ’ Then follow the inquiries concerning the arrangement whereby she was to be released from the agreement under which she was to pay $180,000 for the house, and whereby she paid only $65,000 for it, and she testified that she did not think this was.conditional upon the purchase of the stock; that she then supposed that she was entitled to the house as widow of the decedent ; and that she accepted the figures that were put before her. ‘Q. For what did you accept them? A. For my right, what was coming to me for the right of the estate, and for the — 121 — right of anything that might be dne me. A. If you knew that Mr. Voss was director, would you regard him as a person who would look after, and upon whom you relied to look after, your interest? A. From a decidedly friendly standpoint. I supposed Mr. Voss was the only man whom I could talk with.” This evidence as a whole indicates very satisfactorily that the plaintiff, in selling her stock, relied upon the representations and computations of the written proposition of defendant; and that throughout the transaction, she reposed quite as much, if not moré, confidence in the defendant than she did in Mr. Voss. The former had been the close associate of his brother during many years, and enjoyed his entire confidence; and it is manifest from this record that the plaintiff relied entirely upon his integrity, and believed that he did have due regard for her interest in all the transactions between them. She had parted with her share of the claim to the royalties because of her confidence in him; she had signed contracts which avoided any liability for the future use of the patents on the part of the company; and, when he spoke to her about purchasing her stcfck, nothing had occurred to impair this confidence. She accepted his statements as correct, and, in dealing with him, relied upon him to tell her what the stock was worth, quite as implicitly, if not more so, than she did on the advice of Voss. The defense that confidence reposed in defendant was superseded by reliance on independent advice, was not made out. 6 compromise ment*b asking part of a fraud. V. Upon the filing of articles of • incorporation of the Bettendorf Company, articles appeared in the local newspaper, commenting upon the new $7,500,000 corporation and the reasons f°r the organization, and describing it as. the largest incorporated company in the state, T]j.e plaintiff noticed these on the last day of the year 1912, and thereupon went to the office of Lane & Waterman, in Davenport, for the purpose of employing Mr. Lane; and, as he was away, she called on Mr. Voss, on the following day, in order to talk with him about the matter, and asked him to explain where ‘ ‘ all this money came from in such a short while,— the $7,500,000 for the company that was formed.” Voss, in response, referred to the $15,000,000 order which the company had taken, and stated that “there is always a lot of water con — 122 — neeted in a big transaction of this kind, ’ ’ and, according to the plaintiff, she was pacified by this explanation, and Voss testified that she seemed satisfied. .She gave up the notion of employing an attorney. But she had previously talked about the item of $110,000 deducted in estimating the value of her stock for expenses of litigation over patents, and it seems that Voss was not quite satisfied with that part of the deal. Later on, an interview-was had with Mr. Lane, as attorney for the defendant, who, without conceding any obligation, consulted his client, and it was subsequently arranged that she should be paid $50,000. A contract was thereupon entered into, bearing date of February 8, 1913, by the terms of which, after reciting the transfer of the stock, and that, in making the sale thereof, she was charged with ‘ ‘ deductions account of patent suits, part of your portion of the contingent liability, $110,000, ’ ’ and some matters concerning litigation, and that J. W. Bettendorf desired to acquire all the rights of the plaintiff in the patents, and that Bettendorf was willing to pay $50,000 as an equitable adjustment of the above item and for the conveyance of her interest in the patents, the defendant undertook to pay the sum of $50,000, in consideration of which she agreed to “ratify and confirm the certain sale made by” her of her shares of common stock to defendant, and to sell and assign unto Bettendorf all of her interest in the patents, and she did assign same, and she elected to take 500 shares of preferred capital stock, instead of the $50,000 in cash. To effect thó transfer of the several patents, she executed, at the same time, three other instruments. These instruments are pleaded by defendant as having confirmed and ratified the sale of the stock, and are said to have estopped her from now setting up the claims she asserts. The record shows that counsel for defendant insisted that, if she had any other claims, she must assert them at that time, so that everything could be finally settled. However, nothing was specifically referred to, except the item deducted on account of patent suits, and nothing was said concerning defendant’s failure to make full disclosure to plaintiff concerning the facts bearing on the value of the stock in other respects. The mere circumstance that plaintiff’s suspicion of unfair dealing had been aroused was not enough to charge her with knowledge of the facts, or to put her on inquiry with refer — 123 — ence thereto. For all that appears, save in the one particular, she was as much in the dark concerning the conditions under which she sold the stock as at the time of the sale; and the authorities uniformly hold that, in such a situation, a purported settlement is not to be regarded as a ratification of a prior fraudulent transaction. Indeed, without knowledge of the facts, ratification would seem impossible. Barton v. Fuson, 81 Iowa 575; Booth v. Bradford, 114 Iowa 562. The principle is well settled in 2 Pomeroy on Equity Jurisprudence (3d Ed.) Section 964: “Wherever a confirmation would itself be subject to the same objections and disabilities as the original act, a transaction cannot be confirmed and made binding; for confirmation assumes some positive, distinct action or language, which, taken together with the original transaction, amounts to a valid and binding agreement. * * * If the party originally possessing* the remedial right has obtained full knowledge of all the material facts involved in the transaction, has become fully aware of its imperfection and of his own rights to impeach it, or ought, and might, with reasonable diligence, have become so aware, and all undue influence is wholly removed, so that he can give a perfectly free consent, and he acts deliberately, and with the intention of ratifying the voidable transaction, then his confirmation is binding. * * * If, on the other hand, the original undue influence still remains, or if the act is simply a continuation of the former transaction, or if the party wrongly supposes that the original contract or transaction is binding, or if he has not full knowledge of all the material facts, and of his own rights, no act of confirmation, however formal, is effectual; the voidable nature of the transaction is unaltered.” Defendant contends, however, that the facts, as cited above, were sufficient to put her on inquiry, and that, had she followed up such clues as she knew of, she must have ascertained all the facts bearing upon the value of the shares of stock sold, and that, for that reason, she failed to act with reasonable promptness in bringing her action to rescind the contract of settlement. Mere suspicion is not alone sufficient to put a person on inquiry. Such feelings .as were excited in her were satisfied by Yoss in explaining that earnings had been added and the stock — 124 — watered, — at least, Yoss testified that she so appeared; and she gave no further attention to the matter. The deduction of $110,000 on account of the patent suits had been talked of by Yoss, as both she and her son testified, previously to her reading the article in the local paper and her talk with Lane. Only this item was discussed, but undoubtedly she asserted, in substance, that she made no other claim; for she was then ignorant of any facts entitling her to -assert any, consequent on the indirection of the defendant in other respects. She was no better informed concerning the fraud practiced by not making full disclosure of all the facts, — as was exacted of defendant, both as administrator and president of the company, in buying the stock of her, — than at the time of the transaction. If her suspicions had been aroused, they had been pacified by Yoss; and we have discovered in the record no clue which can be said to be such as would have put an ordinarily prudent person on inquiry. As said, mere suspicion is not enough, and she had no more than this at the time of entering into the alleged settlement, and even that was fully pacified. In these circumstances, the plaintiff must be held not to have estopped herself, by entering into the contract, from claiming damages consequent on the fraud perpetrated on her as widow and stockholder. It was not until she met the lawyer who had prepared all the instruments relating to the patents in the fall of 1914 that she seems to have given any thought to the matter. As a result of this interview, Thomason, an attorney, was employed by her to investigate, and advise her as to whether she had any claim against the defendant. He did so, and reported, in the early part of 1915, that she had “a good lawsuit;” and this action was begun in May following. The Bettendorf Axle Company had transferred all its stock to the Bettendorf Company, newly organized in 1913, and the stock had been issued on February 23d of that year. No one could well pretend that she, as a person of ordinary diligence, must have asserted the facts prior to that time; and between that time and the beginning of the action the defendant’s situation does not appear to have been changed, and such delay as there was, was not inimical to his interest. It may be that plaintiff was not fully advised, even at the time of beginning the — 125 — suit, of the facts bearing thereon; but she was informed by her attorney that conditions were such as that she might maintain an action. This was not a case where the fraud was perpetrated by parties dealing at arm’s length: the plaintiff had a right to rely upon defendant, and was not at fault in not doubting the fairness of all his transactions; and we are of the opinion that it cannot be said that the plaintiff should be estopped by the contract of 1913 from claiming damages, or that she was guilty of laches, as contended by appellant, in delaying the prosecution of her cause of action. tracts • af ‘ firmance in toto sión in toto01(?): exception. VI. The court appears to have canceled that part of the contract of settlement which transferred plaintiff’s interest in the letters patent, and to have confirmed that portion which re^ate^ the settlement of the $110,000 deduction, because of suits pending relating to the patents; and it is argued that it was without power so to do. Reliance is placed upon Allen v. Pegram, 16 Iowa 163, where, in an action at law, the court refused to permit a party to rescind in part and sue for damages. Here, plaintiff asked for the cancellation of the entire contract, and also that an accounting between the parties be had, and the true value uf the patents be ascertained, and for such other relief as might seem proper. The evidence disclosed that it was impossible to put the parties in statu quo■, as the interest of other parties had intervened, and therefore the transfer of the patents was allowed to stand, and defendant was required to account for the value when transferred. The assistance of the court in rescinding was invoked, and it was endowed with authority to enter such order as might be just to the parties. The principle is well stated in Mills v. Morris, 156 Vis. 38 (145 N. W. 369). ‘ ‘ Though, in general, one may not affirm in part and rescind in part, the rule is equitable, and ceases to operate where equity requires it to do so, as indicated in Gay v. D. M. Osborne & Co., 102 Wis. 641 (78 N. W. 1079), Ludington v. Patton, and other cases. One must distinguish between situations where equity requires the rule to apply, and where it requires an exception; and also' between an action for rescission and one based on re-" scission; also, between an action for rescission and an action to prevent injury where rescission would not furnish an adequate — 126 — remedy. One may retain the benefit of a contract and sue for damages because of a breach affecting it in part (McConnell v. Hughes, 83 Wis. 25, 53 N. W. 149), or affirm in part and rescind in part, obtaining a proportionate rebate in the purchase price, where some such course is necessary to conserve the real right of the matter. Gay v. D. M. Osborne & Co., supra. The court there said: ' ‘ ‘ The right of rescission of a contract for fraud, though a legal right, is based on equitable principles. Therefore, the requisites of its exercise should go no further than strict compliance which the dictates of good conscience requires. For that reason, the exception to the rule of total rescission indicated has become a part of our jurisprudence.’ “A proper conception of the real ethics of the law will enable, one to perceive that rules are based on principles of justice and are limited by the effects in that regard. Therefore, when it is said that application of a rule to a particular situation would work injustice instead of justice, especially where the controversy is being dealt with in equity, wisdom will lead one to search for some recognized exception to fit the case, and, if none of the particular character can be found illustrated, to classify the circumstances within the broad principles'that rules based on supposed necessities of justice are not to be applied beyond their reasonable scope.” 8‘ not^necéssary^to pIead‘ VII. Finally, counsel for defendant contend that the plaintiff, in order to maintain the action, must have tendered the return of the $50,000 in preferred stock received by her, in consideration of the execution of the contracts of February, 1913; and that as no such tender was pleaded in the petition nor shown by the evidence, the petition must be dismissed. Were this an action at law, there would be much force in their argument. The matter of such a tender relates to the remedy, and involves the rule that one asking equity must show his readiness to do equity. The omission of such a tender was apparent on the face of the .petition, and the omission was not referred to by demurrer or answer; and, according to the defendant’s brief, the defect/ if such it was, was not mentioned in the trial court. This latter contention is somewhat confirmed by the omission of any refer — 127 — ence thereto in the written opinion of his honor. To permit any advantage to be taken at this time would indulge the practice of nursing a masked battery, contrary to the approved methods of open warfare. In such a case, the court may well deem the rule in its strictness, requiring the adverse party to be placed in statu quo, waived; or, in the interest of justice, the decree may require the return of existent property to the status quo, as a condition precedent to the recovery. A like question was raised in Ormsby v. Budd, 72 Iowa 80, where the court says: “Defendants insist that, as plaintiff fails to tender, or offer to pay, in his petition, these several sums, thus putting defendants in statu quo, he is not entitled to any relief. Upon this point, it is sufficient to say that defendants do not set up in their answer the failure to tender these sums as a defense.” And further on: “Defendants also insist that plaintiff’s offer to retransfer the stock is not sufficient. But no objection of this kind was raised by. the pleadings, or urged in the court below, so far as we are able to discover. Plaintiff, in his petition, does not offer to make the transfer of the stock. We discover no prejudice which can result to defendant, if plaintiff file with the clerk of the court proper assignments of the stock certificates, before the reconveyance to him of the lands is made by defendants, or before the deeds to defendants are canceled. The decree should so provide. ’ ’ The point is touched upon in Schneider v. Schneider, 125 Iowa 1, where the contention was that a tender in open court alone was not sufficient. The court held otherwise, saying that: “In equity, a willingness and readiness to do an act is all that is required; and, if the plaintiff be otherwise entitled to relief, the court will not deny it simply because no profert in evidence has been made of the subject of the tender, but will, by its decree, if it be deemed necessary for defendant’s protection, require the act to be done before the relief becomes effective. ’ ’ See, also, Clapp v. Greenlee, 100 Iowa 586. The doctrine is that, in case of a contract’s voidability upon the ground of fraud, the injured party must totally rescind it, and restore to — 128 — the guilty party all that he has received from him as a condition precedent to the maintenance of the action; for what he parted with is based on the thought that he may not retain what he has received, and at the same time insist upon restoration; for, in that event, he would occupy inconsistent positions, which the law will not tolerate. Such is the rule ordinarily applicable in actions at law, to which, however, there are exceptions. See O’Brien v. Chicago, M. & St. P. R. Co., 89 Iowa 644; Howard v. McMillen, 101 Iowa 453; and other cases. It does not apply arbitrarily to actions in equity for the rescission of contracts; for therein plaintiff does not proceed on the theory that the contract has already been voided on the ground of fraud, but that the jurisdiction of equity is needed to accomplish that aim, and to give such incidental relief as he is entitled to. All that is essential in such a case is to show a willingness to do equity. The distinction is that an action at law is based upon a rescission; while, in equity, the suit is to effect a rescission, — that is, the court is asked to decree a rescission. In the latter case, it is sufficient for the plaintiff to offer to restore to the defendant what he has received in the petition, or to indicate in some manner a willingness to do equity, to submit to complete rescission, so far as practicable, and to make the defendant good for what was received from him in such manner as the court may direct. In such cases, the court has jurisdiction of the subject-matter and of the parties, and has the power to do equity between them. It may compel full restoration to the defendant in specie, so far as justice requires, as a condition for rescission, and may deny or give costs, having regard to the necessity of resorting to litigation for relief finally awarded. See Ludington v. Patton, 111 Wis. 208, 245 (86 N. W. 571, 582), where, after full consideration, the court remarked: “If the complaint had not been so framed as to show such willingness, the defect could only have been reached by a demurrer for insufficiency on the particular ground that a cause of action in equity was not stated for the reason that plaintiff failed to show a willingness to do equity. Taylor v. Fulks’ Admr., (Ky.) 29 S. W. 349; Ormsby v. Budd, 72 Iowa 80; and Newman v. Smith, 77 Cal. 22.” The record leaves no doubt that the preferred stock was — 129 — still in the possession and control of plaintiff, and that it would not exceed in value the $50,000 agreed upon as a consideration; and undoubtedly, had the court’s attention been directed to the matter, the decree would have been so framed as to require the deposit of the stock with the clerk, as a condition to the enforcement of the decree. Otherwise, the sufficiency of the petition to raise the issues passed on is not challenged by either party. version by fiduciary. VIII. The trial court allowed interest on $142,415.35, charged defendant for benefit derived from the cancellation of royalties by plaintiff from date thereof, July 9, 1910, but denied interest on the additional $329,514.51 found due on sale of stock, June 7, 1911. The defendant acquired plaintiff’s stock at that time, and has since enjoyed all the advantages of its ownership, and so manipulated it that restoration is impossible. There seems no good reason for denying plaintiff compensation for the use of the money which she should then have been paid for the stock, and which, through deception, defendant avoided paying. What happened was tantamount to the conversion of the deficiency in the purchase price by defendant in his trust capacity, and is clearly within the rule which includes interest from the date of conversion as part of the damages allowed. See Doyle v. Burns, 123 Iowa 488; In re Estate of Young, 97 Iowa 218; Hook v. Payne 14 Wall. (U. S.) 252; Ludington v. Patton, 121 Wis. 649 (99 N. W. 614)., The award is merely for the difference between what the fiduciary actually paid and what he should have paid for the stock; and simple interest thereon at the legal rate is not only just, as he has enjoyed the income from the stock, but adequate, inasmuch as the cestui que trust intentionally parted with said stock. The court erred in not including interest at the rate of 6 per cent per annum from June 7, 1911. The decree will be so modified as to require the deposit of the $50,000 worth of preferred stock received by plaintiff, together with dividends received thereon, with the clerk of the district court for defendant, immediately upon the deposit by him of $50,000 with that officer, with interest thereon at the rate of 6 per cent per annum from February 13, 1913, for the use of — 130 — plaintiff, within 60 days from the filing of the opinion; also, the addition of interest, as stated, to the amount for which the judgment was entered; and the judgment, as so modified, will bear interest from the date entered in the district court. — Modified and affirmed. [Weaver, C. J., Evans, Preston, Stevens, and Arthur, JJ., concur.