Full opinion text
Beatty, C. J. The Hale & Norcross Silver Mining Company is a corporation, organized under the laws of California, with its principal place of business at the city of San Francisco. It is the owner of one of the mining claims on the Comstock lode, in the state of Nevada, where for many years it has been' engaged in the business of mining gold and silver bearing ores. The plaintiff, M. W. Fox, since the year 1887, has been at all times a stockholder of said corporation. In August and September, 1890, he addressed communications to its board of directors, and to the individual members of the board, charging, in substance, that for three years the corporation and its stockholders had been systematically plundered, and its property stolen, to the amount of more than $2,000,000, by means of a fraudulent conspiracy and combination between said directors and the owners or lessees of the mills employed in the reduction of the ores extracted from the company’s mine; that the devices resorted to in furtherance of the object of this conspiracy were the mixture of worthless rock with high-grade ores so as to obscure their value, and at the same time increase the quantity of material to be put through the mills; the concealment from the stockholders of the average value of the ores, as thus reduced; a fraudulent system of milling by which only a small portion of the precious metals contained in the ores was returned to the company; and a disposition of the stolen bullion in a manner intended to conceal the theft. He further stated in his communication to the board that he was prepared to furnish sufficient evidence of the truth of his charges, and demanded that the directors should institute an action in the proper court, in the name of the company, to recover from the conspirators the full amount of its losses. Nothing having been done by the directors in response to this demand, the plaintiff commenced this action, in which he joined as defendants the corporation, all the individuals who had served as its directors from 1887 to 1890 inclusive, and the owners of the several mills in which its ores had been reduced during the same period — these last being sued by fictitious names. The summons does not appear to have been served on any of the mill-owners, but the other defendants filed their answer to an amended complaint, and on the issues so made the cause was brought to trial November 18,189 L. During the progress of the trial the complaint was further amended by the insertion of the true names of the mill-owners sued by fictitious names, and by the addition of some new allegations; and on March 6, 1892, at the close of the trial, a final amended complaint was filed, for the purpose, as stated, of conforming the pleadings to the proofs. All the material allegations of these amended complaints were either denied by the answers of the several defendants, or were by the court treated as denied. On June 11, 1893, the superior court filed its findings and conclusions, and entered its decree in favor of the plaintiff for the benefit of the corporation defendant, and against the other defendants (except Hobart, a mill-owner, who had died on June 2d, and as to whose estate all proceedings were continued) severally for various sums. As against Hayward and the Nevada Mill & Mining Company (a corporation)—mill-owners—and Levy, who had been president of the Hale & Norcross company during the whole period from 1887 to 1890 inclusive, there were several judgments for the entire amount of the company’s losses, estimated at $1,011,-835. As against the other defendants—directors of the corporation—there were several judgments in smaller and varying amounts, corresponding, as it is claimed, to the losses sustained by the corporation during their respective terms of office from overpayments to the mill-owners for the crushing and reduction of ores. Execution was directed to issue upon these judgments, but it was provided that no more should be collected thereon than said sum of $1,011,835, with accruing interest and costs. And a receiver was appointed, to whom the amount so collected was to be paid, and who was authorized and directed by the judgment to pay over to the attorneys for the plaintiff—as compensation for their services—25 per cent of all sums collected. In due time all of the defendants against whom judgment had been rendered moved for a new trial upon a settled statement of the case, and, their motion having been denied, they have taken this appeal from said order and from the judgment. The large amount involved in the controversy, the difficulties presented by the subjects of investigation, the great length of the trial, the immense mass of evidence, consisting largely of closely printed columns of figures, and the ability, industry, and ingenuity of counsel have combined to raise an unusual number of difficult questions for our decision, in the discussion of which it will be necessary to state in considerable detail many of the matters contained in the record. It will be more convenient to make a particular statement of these matters in connection with the several assignments of error to which they relate, but it will facilitate the discussion to state at the outset the general nature of the issues presented by the pleadings, and the facts as found by the superior court. In his last amended complaint, filed" as above stated, after the evidence was all in, and for the declared purpose of conforming the pleadings to the proofs, the plaintiff alleges, among other things: That between the 1st of January, 1887, and the 1st of July, 1890, the Hale & Norcross Silver Mining Company delivered to the Chollar or Nevada mill, and to the Vivian and Mexican mills, at or near Virginia City, in the state of Nevada, not less than 80,000 tons of gold and silver bearing ore, the property of said company, to be by said mills crushed and milled. That said ores were crushed and milled at said mills, and were of the value of not less than $3,250,-000. That said Chollar or Nevada mill was the property of the Nevada Mill & Mining Company, a Nevada corporation, organized under the laws of that state for the purpose of owning, leasing, and operating mills for crushing gold and silver bearing ores, and of which the defendants, Hayward and Hobart, were large stockholders. That the said Hayward and Hobart, acting with other persons in a conspiracy to defraud the Hale & Nor-cross Silver Mining Company, controlled and directed all the affairs of said Nevada Mill & Mining Company and of the Mexican mill during all the times mentioned in the complaint, and that all the fruits of said conspiracy Paine to the hands of said Hayward and Hobart. That said persons and corporations (owners, stockholders, and managers of mills) were at all times mentioned in the complaint also the owners of a large number of shares of the capital stock of the said mining company» and fraudulently and unlawfully, in aid of said conspiracy, procured a sufficient number of proxies of other persons in whose names stock was standing, but who were not the real owners thereof, to elect all the directors of said mining company at the annual elections, held March 9, 1887, March 14,1888, March 13,1889, and March 12, 1890. That said directors, so chosen, were at all times controlled by, and acted in subserviency to and conspired with, said mill-owners and managers in all their official acts and proceedings, and in all matters connected with" the management and business of the mining corporation and its mine. That immediately after the election of said directors they formed and organized a fraudulent combination and conspiracy with said mill-owners for the purpose of cheating and defrauding the Hale & Norcross company and its stockholders by divers cunning and unjust practices, among which were the following: That the mill-owners appointed and selected all the agents and employees about.the mills, and having, by means of said combination and conspiracy, the control of the mining company, they caused all of the ore extracted from its mine to be crushed and milled at the mills belonging to or controlled by them, and caused the superintendent of the mining company to suppress or withhold from its stockholders any report of the assays of such ores. That said superintendent did cause assays to be made of every carload of ore extracted from the mine, and reported the same to the directors, not, however, for the purpose of protecting the stockholders, or as a check upon the mills, but merely as a basis for a division of the fraudulent gains of the combination. That said directors, with the consent and approval of the millmen, caused the superintendent of the mine to extract large quantities of low-grade ores of a value below the cost of mining and reduction, and to mix these with the high-grade ores for the double purpose of concealing from the stockholders the real value of such ores, and of giving constant employment to the mills at an extravagant rate of compensation. That the loss to the mining company caused by the mining, transportation, and milling of said low-grade ores amounted to about $500,000. That the mill-owners caused false and fraudulent assays to be made of the pulp of said ores, and, knowing them to be false, represented them to be true. That said mill-owners, in furtherance of the objects of the conspiracy, caused all of said ores to be handled by a fraudulent system of imperfect milling and reduction, intended to leave in the tailings, slimes, and residues a large portion of the gold and silver contained therein, which tailings, slimes, and residues were afterward worked over for the joint benefit of the conspirators, to the damage of said mining company and its stockholders in the sum of about $1,000,000. That said directors, in furtherance of the conspiracy, ordered and permitted all of said ores to be milled at said Mexican, Vivian, and Chollar or Nevada mills, at the exorbitant and excessive rate of $7 per ton, $3.50 per ton being a fair and reasonable price—to the damage of said mining company and its stockholders in the sum of $280,000. That about 6,000 tons of ore were delivered to the Virginia & Truckee Railway Company, to be transported to the Chollar mill, which were never accounted for, causing a further loss to the company and its stockholders of $480,000. That the aggregate losses occasioned by these various acts of the conspirators amounted to $2,100,000, a large portion of which has been divided up and distributed to the directors of the mining company. The defendants were not permitted to file any answer to this last amended complaint, but their answers to the second amended complaint were allowed to stand as. answers to the last amended complaint, and, so far as its allegations were new or different from previous allegations, they seem to have been treated as if they were in issue, and I shall assume that they were so treated. The answer of the corporation and its directors admits the delivery of its ores to the mills named in the complaint, for the purpose of milling and reduction, and the answers of the mill-owners admit the receipt of said ores, but it is denied that they were of the value alleged, or of any greater value than $1,879,094.68, less the cost of transportation and reduction. Aside from these admissions, it may be said with substantial accuracy that every material allegation of the complaint is put in issue. Hayward and Hobart deny that they were owners or lessees of, or engaged in operating, any of the mills named in the complaint. The Nevada Mill & Mining Company, of which they were stockholders, admits that it owned and operated the Chollar or Nevada mill, and received and worked a portion of the Hale & Norcross ores. Upon these issues the findings of the superior court were generally in favor of the plaintiff, and I shall merely note, in this connection, some of the more important particulars in which they were otherwise. It was found that Hayward, Hobart, the Nevada Mill <fe Mining Company, and Levy, did, with the consent and approval of the directors of the Hale & Norcross company, command the superintendent of the mine to extract large quantities of low-grade ores, and mix them with high-grade ores, for the fraudulent purposes charged in the complaint, and that the cost of mining, hoisting, transporting, and milling said low-grade ores caused loss and damage to the mining company; but there is no finding as to the quantity of such ores mined and sent to the mills, or of the amount of the damage thereby caused. It is not found that all or any part of the fruits of the conspiracy came to the hands of Hayward or Hobart, otherwise than by the general findings to the effect that they were received by the whole body of the conspirators. There is no finding as to what was the reasonable price of milling Comstock ores during the years 1887-90. It is found that the actual cost of milling the ores in controversy was $4.50 per ton and no more, and that the charge made and allowed of $7 per ton was fraudulent, exorbitant, and excessive to the extent of $2.50 per ton. But it is conceded that this is not a finding of what an honest miller, entitled to a reasonable compensation for the use of his mill, might properly have charged. It is a finding only of the actual cost of reduction, without allowing any thing for the use of the mills, the court being of opinion that these mill-owners, participants as they were found to be in a conspiracy to defraud the mine-owners, were entitled to no compensation for the use of their mills. It is not found that any ores delivered to the railway company for transportation to the Nevada mill were unaccounted for, but, on the contrary-, it is expressly found that all such ores were accounted for. It is not found that the mine or car sample assays were used by the defendants as a basis for the division of profits, or that any profits were divided, but, in general terms, it is found that all the defendants, including the directors of the Hale & Norcross company, received and appropriated the entire amount of which the corporation and its stockholders were defrauded, viz.: $1,011,835. In some particulars the findings go beyond the allegations of the complaint. It is not alleged, but is found, that Hayward, Hobart, and the other conspirators controlled and directed the business and affairs of the Vivian mill, as well as of the Nevada and Mexican mills. It is not alleged, but is found, that the defendant Levy was president of the board of directors of the Hale & Norcross company during the whole period from 1887 to 1890, inclusive. The quantity of ore alleged to have been delivered at the mills for reduction was not less than 80,000 tons, and its value is alleged to have been not less than $3,250,000. It was found that 88,887 tons were delivered, of the value of $3,505,361. The defendants, in support of their appeal from the judgments, contend that they are erroneous in form and substance; and, in support of their appeal from the order denying a new trial, contend that the findings of the superior court are against the evidence, and are vitiated by numerous errors committed in the course of the trial in ruling upon objections to the evidence, and upon other matters. The most important questions which we are thus called upon to determine relate to certain legal propo- • sitions, as to which our decision must become a precedent in future controversies; but the questions which have been most elaborately discussed by counsel, and which go most directly to the merits of this case, relate to the sufficiency of the evidence to sustain the findings of the superior court, and these I shall consider first. It is contended that there is no evidence to support the findings as to the alleged conspiracy to defraud the Hale & Norcross company. So far- as the defendants Hayward and the other mill-owners are concerned, it does not seem to be of much consequence whether these findings can be sustained in their full extent or not, since their liability is sufficiently established by other and independent findings. But, with respect to the liability of the directors of the Hale & Norcross company, the findings as to their active participation in the conspiracy are very material. ' The evidence upon this point which most nearly affects the directors of the corporation is that which relates to their election. It seems that in 1887, and for some time prior thereto, the bulk of the Hale & Nor-cross stock was in the hands and under the control of certain stockbrokers in San Francisco. On the books of the company it stood in the names of trustees of these brokers, but, according to their theory, it was the property of their customers. The evidence in this record as to the exact relations between broker and customer is not very explicit, but what they really were is a matter of common knowledge, with which this court has been made especially familiar by a series of cases recently decided here, involving a construction of the constitutional provisions against sales on margin. (Cashman v. Root, 89 Cal. 373; 23 Am. St. Rep. 482; Wetmore v. Barrett, 103 Cal. 246; Sheehy v. Shinn, 103 Cal. 325; Baldwin v. Zadig, 104 Cal. 594; Kullman v. Simmens, 104 Cal. 595.) I conclude, therefore, that this Hale & Norcross stock was held as mining stocks were at that time generally held by the San Francisco brokers. It had been purchased on orders from dealers and speculators upon deposit of the customary margin, and bad been transferred to the trustees of the brokers as security for their advances. It was, in other words, according to the theory of the broker’s contract, a pledge, but, according to the constitution, it was the property of the broker, and the subject of an unlawful and void contract of sale. It is not necessary, in my opinion, to decide who, under these circumstances, had the strict, legal right to vote the stock so held. Conceding that the brokers could lawfully vote it at the annual elections of the directors of the corporation, they were, nevertheless, hound to vote it in the interest of those for whom they had purchased it. It seems, however, from the evidence that they gave proxies often as a mere matter of favor or professional comity, and occasionally for a consideration, to any one who chose to make a contest for the control of the board. By this means the defendant Levy carried the elections for some time prior to 1887, and had been made the president of the board. As president he was invested by the by-laws with the sole management of the business of the corporation, subjéct to the advice of the board of directors. When the election of 1887 was approaching, Hayward, Hobart, and other stockholders of the Nevada Mill & Mining Company — who were considerable owners of stock in the Hale & Norcross company — determined to contest with Levy for the control of the board. A compromise was, however, effected, resulting in the election of a board acceptable to both parties, and the retention of Levy in the office of president. As a part of this arrangement an agreement was entered into between Levy and the mill-owners, by which he was to receive one-eighth of the profit on the crushing of all Hale & Norcross ores milled by them. This agreement was, of course, secret, and there is no evidence that its existence was known to any member of the board of directors, except Levy and his partner Hoefiich. Sell and Bridge, who ceased to be directors in March, 1888, knew of it after that time, but there is no direct evidence that they had such knowledge while in office. None of the directors, however, had any substantial interest in the corporation. A majorit}’’ of them owned but 5 or 10 shares, respectively, out of a total of 112,000 shares, and these trifling amounts of stock had, in several instances, been transferred to them by Levy or the mill-owners for the express purpose of qualifying them to serve. Being chosen in this way and receiving no compensation for their services, except $5 for each meeting of the board at which they attended,.they gave to the affairs of the company the amount of attention that might have been expected. Several of them seem to have known next to nothing about the operations at the mine. While others took a little more trouble to keep themselves informed in a general way about the mining of ores and the price paid for reduction, they seem one and all to have intrusted the management of the entire business to the president, Levy, and to the superintendent of the mine; and, if these officers, by abuse of their trust, caused the loss and damage to the mining company which the court has found, the evidence warrants the conclusion that the directors were at least guilty of gross negligence. But, except as to Levy, Hoeflich, Sell and Bridge, I do not think there is any evidence that the directors knew of the unlawful agreement between Levy and the mill-owners, or that they were active participants in the conspiracy and frauds alleged in the complaint. That this was the view of the judge of the superior court seems to follow, not only from his decision upon the separate motion of the defendant Wheeler for a new trial, but from the amount of the several judgments rendered against him and the other directors. In denying Wheeler’s motion the judge declared, in effect, that he did not believe him to have had any share in the frauds upon the company, but he was held responsible for the consequences of his gross negligence—that is to say, he was held liable for the excessive price of $2.50 per ton paid for milling the ore reduced during the time he was director. The same judgment was rendered against all the other directors except Levy — against whom there was a several judgment fer the entire loss found to have been sustained by the Hale & Norcross company. (Hoeflich having died pending the trial, the action was dismissed as to him.) This discrimination shows that, notwithstanding the sweeping language of some of the findings, the superior judge did not really intend to convict the other directors of the fraudulent conspiracy charged; for, if he had found them equally guilty, they would have been liable to the same extent as Levy. Besides, as above shown, he expressly declared that he did not hold Wheeler guilty, and the evidence against Wheeler was substantially the same as the evidence against the other directors. For these reasons I think it must be held that the. finding as to the directors other than Levy, that they were participants in the frauds alleged, is not sustained, except so far as they were made participants by a culpable negligence which enabled others to consummate such frauds. This, indeed, seems to be conceded by counsel for respondent in their argument upon Mr. Wheeler’s appeal, in which they contend that the judgment against him is fully sustained by the proof of negligence—a point to be considered hereafter. It is next contended that the evidence does not sustain the finding that Levy, with others, controlled the Nevada mill. I do not think this point merits discussion, for the reason that the finding is immaterial. It harms no one else, and does not affect the liability of Levy one way or the other. The next finding attacked is that in which it is found that Hayward, Hobart, and the Nevada Mill & Mining Company controlled and managed the Mexican mill. The evidence on this point is conflicting, and I think the fact—clearly proved—that Hayward and Hobart paid to Levy his one-eighth share of the profits on the crushing of the Mexican mill, in the same manner and at the same time that they paid him on account of the crushing at the Nevada mill, is sufficient to sustain the finding as to them. Their payments, however, are not evidence against the mill company, and I cannot see that there is any evidence to sustain the finding as against it. It is next claimed that there -is no evidence to sustain the finding that Hayward, Hobart, and the Nevada Mill & Mining Company controlled and operated the Vivian Mill, and this contention, I think, must be sustained. The position of respondents’s counsel with respect to this point may be best shown by quoting their entire argument. They say: “The arrangement with Levy, which was made before any of the ores of the Hale & Norcross were milled, contemplated that he should have one-eighth of the profits of milling all the ores of the Hale & Norcross mine, without regard to where it was milled. The entire business of milling the ores was turned over to Hayward, Hobart, and the Nevada Mill & Mining Company. They had complete control of the affairs of the mining company so far as the milling of its ores was concerned. It is not claimed that any one else ever milled a pound of its ores. The milling of the ores began at the Vivian mill. Is there any doubt but that the same parties who had the ores sent to the Nevada and Mexican mills had them sent to the Vivian? The ownership of the mill is a matter of no consequence. Who controlled and managed the milling of the ores?” It will be observed that there is no reference here to any page or folio of the record, and I can only say that, after a very careful reading of the whole of it, I have failed to find anything to sustain the assertions of counsel. The only arrangement with Levy of which there was any evidence was, not that he should have a share of the profits of milling all ores of the Hale & Nor-cross mine, without regard to where they were milled, but only that he should have one-eighth of the profits on any ore milled by Hayward, Hobart, and the parties represented by them, including the Nevada Mill & Mining Company. There is no evidence that the entire business of milling the ores was turned over to Hayward, Hobart, and the mill company, or that they had complete control of the affairs of the mining company, so far as the milling of its ores was concerned; and it is not only claimed, but conceded, that the Vivian mill, with which the defendants are not shown to- have had any connection, milled nearly 5,000 tons of the ore. It does appear that, owing to the merely passive attitude of a majority of the board of directors of the Hale & Norcross company, the actual control of all its affairs was in the hands of Levy, the president of the board, and it is obviously true that it was to his interest to give the milling to those in whose profits he was to share. But it does not follow that he could have given no milling to outside parties. What the evidence shows is that toward the end of 1887, when the Hale & Norcross company commenced extracting considerable quantities of ore from the large ore body then recently developed, the Nevada and Mexican mills were crushing for other companies, and neither of them received any Hale & Norcross ore for several months after that company commenced crushing. During that time they were all sent to the Vivian mill; but, as soon as the Nevada and Mexican mills were ready to handle them, the employment of the Vivian mill ceased, from which it would appear that such employment was only a temporary expedient for working such ores as could not be kept for the mills in which Levy was interested, and the circumstances are entirely insufficient to warrant an inference of the principal fact which it was incumbent upon plaintiff to prove, in order to recover from Hayward, Hobart, and the Nevada Mill & Mining Company for losses on the working of ore at the Vivian mill. Moreover, since the only proof that Hajrward and Hobart controlled the Mexican mill was the evidence furnished by their own books of account that they had paid Levy one-eighth of the profits of the crushing at that mill, the absence of any evidence that they had paid anything on account of the work at the Vivian Mill is doubly significant. But, besides all this, the plaintiff, in his last amended complaint, which was expressly designed to conform the pleadings to the proofs, omitted, ex industria, apparently, to charge that Hayward and his associates had any thing to do with the Vivian mill, and the special finding of the superior court as to the separate losses on the ores milled at the Vivian mill, which was doubtless drawn or suggested by counsel for plaintiff as the basis for a modification of the judgment, indicates his lack of confidence in the sufficiency of the evidence to sustain the general finding as to the losses at the Vivian mill. It must be held, in my opinion, that this finding as to the control of the Vivian mill is contrary to the evidence, as it is unwarranted by the complaint. It is next contended that the finding to the effect that Hayward, Hobart, and the Nevada Mill & Mining Company, in conjunction with the other defendants, controlled all the business affairs of the Hale & Nor-cross company is against the evidence. This finding is material only so far as it relates to the mining and milling of the Hale & Norcross ores, and as to those matters the evidence fully warrants the conclusion that a majority of the directors were, as above stated, simply acquiescent or passive, and that Levy did as he pleased. Whatever inference, therefore, as to participation by the mill-owners in the control of the mining company may be legitimately drawn from the existence of the unlawful contract for a division of the profits of the milling, or from the manner in which the ore was milled, or from any inadequacy of returns of bullion, or neglect of proper precautions in behalf of the mining company, is to be considered as a fact proved. Undoubtedly, the existence of the contract supplied a motive to both parties to increase the amount of milling by the extraction of low-grade ores, and it may fairly be argued that it also afforded an inducement to Levy to connive at a careless and inefficient system of milling by which a larger number of tons would be milled at the same cost, and consequently at a larger profit. But proof of a motive to commit a wrong is scarcely sufficient by itself to prove that the wrong has actually been committed, and it remains to be considered whether there was any other substantial evidence of the mining of low-grade ores or of imperfect milling. This brings us to the questions which have received the principal attention of counsel both in the oral and printed arguments, a proper discussion of which involves a preliminary statement in regard to the custom prevailing along the Comstock lode in regard to the mining and reduction of its gold and silver bearing ores. It sufficiently appears from the evidence in this record, and is a notorious fact, that the ores extracted from the Comstock lode since 1887 are of a lower grade, and are produced in smaller quantities than in former years. Much of the ore at present mined barely pays the cost of mining and reduction, and much is found in the vein, mingled with ore of a better grade, that falls below that standard. Since the question whether such low-grade ores are worth extracting cannot, as in the case of richer ores, be determined by inspection, it is absolutely necessary to have daily assays of samples of the ore from the different drifts and levels in which the work is being done, in order to tell what to take and what to leave. It is also necessary, as a check upon the millers, to have assays of the ore hoisted to the surface and deposited in the ore-bins for transportation to the mills. Accordingly, numerous assays are daily made of specimens taken from the various drifts and levels in which work is being prosecuted, and in addition to these there is an assay of what is known as the car sample, which is obtained in the following manner: Each carload of ore— containing about a ton weight—when hoisted to the surface, is pushed by a carman along the track to the ore-bins, and, as it passes what is known as the sample-box, he takes from.the car and deposits in the box a handful of the ore. At the end of twenty-four hours the box is emptied, its contents thoroughly mixed, and about eight pounds taken out as a sample of the whole. This sample is taken to the assayer, who breaks up the larger pieces in a mortar, mixes the whole as thoroughly as he can, and takes out about a pound for assay. Before weighing the specimen or sample to be assayed it is thoroughly pulverized and dried, so as to get at the quantity of gold and silver in a ton of dry ore. The mode of making the assay is not described in the evidence, whether.by fluxing and melting in a crucible, or by other means; but it is not questioned that the methods employed were sufficient for the purpose of ascertaining the exact quantity of pure gold and. silver •contained in the final sample selected by the assayer. Besides these mine samples or car samples, as they are called, taken and assayed as a guide to the miners and a check upon the mills, there are also taken pulp or battery samples at the mills in the following manner: The ores selected for milling are dumped from the cars in which they are hoisted to the surface into large bins overhanging the railroad, from which they are drawn through apertures opened and closed by sliding gates directly into the cars, upon which they are transported to the mills. Here they are again dumped from the railway cars upon an iron grating called a grizzly, which allows the finer portions to pass through into an ore-chamber, adjacent to the batteries, and the coarser portions, after passing through the rock-breakers,'fall into the same receptacle, from which the ore is fed by the action of machinery into the batteries. In the batteries, by the fall of heavy stamps and the constant flow of a stream of water, the ore is reduced to a thin pulp, which, by the action of the stamps, is continually splashed against the perforated screens which inclose them, and through which the water passes, carrying in suspension the finely crushed particles of the ore. After leaving the batteries the pulp flows to and through a series of tanks, in which the sand and slimes are settled, preparatory to placing them in the amalgamating-pans. On the way from the batteries to the tanks, samples of the pulp are taken every hour, by passing a dipper under a spout, through which all the pulp flows. From the dipper the sample so obtained is transferred to a large can, conveniently placed, and this, at the end of twenty-four hours, is set on the boilers, for the purpose of evaporating the moisture. When dried the whole mass is thoroughly mixed, spread out in a thin layer, divided into squares, and three samples taken and put in paper bags—one for the assayer of the mine, one for the assayer of the mill, and one sealed up for future reference in case of discrepancy between the mine and mill assays. The settlement between the miller and. miner is usually based upon the mine assay of the mill sample, the miner expecting to receive in bullion a proper percentage of the gold and silver contained in the ore, as determined by this test. It has never been the custom on the Comstock for the miner to supervise the taking of the mill samples. Occasionally a man has been employed by some of the mining companies to watch the milling at custom mills, but usually no such precaution is taken, the car sample assays, which are daily compared with the pulp assays, being deemed a sufficient check on any misconduct or negligence of the miller, besides which there is the additional security afforded by the manner in which the ore is handled from the time it leaves the mouth of the shaft until it leaves the mill as tailings. Ores of all grades are dumped promiscuously into the bins; by their own gravity they are carried from the bins to the railway cars, and from the railway cars through the grizzlies and roclc-breakers to the ore-house, from which they are fed by machinery to the batteries. From the batteries they pass, in the form of a stream of muddy water, to the settling-tanks. In this process it seems impossible that there should be any sorting of ores with a view to sampling. On the contrary, the result must be a more and more thorough mixing. It seems equally impossible that any material quantity of the ore could be lost, or otherwise diverted, without detection. The samples taken in the mill from hour to hour are taken by the men employed about the batteries and pans, working on different shifts, and in the presence and view of various other employees, to whose observation any systematic attempt to debase the samples would necessarily be exposed. Before leaving the subject it may be well in this connection to state briefly the manner of treating the pulp after it leaves the batteries, according to the process of reduction commonly employed with what are known as the fr§e-milling ores of the Comstock lode—the process actually used in reducing the ores in question here. The pulp flows from the batteries to and through a series of sand-tanks, and from these through a similar series of slime-tanks. In the sand-tanks the coarser and heavier of the solid material is settled, but the evidence shows that there is mingled with the Comstock ores, and especially the Hale & Norcross ores, a large percentage of sticky clay, which composes that part of the pulp known as “ slimes,” in contradistinction to the sand which results from the crushing of the quartz rock. These slimes, it appears, do not readily settle, and, with the largest number of slime-tanks that can be placed in a mill, the overflow of the last tank will carry some solid material, and this material contains some gold and silver, the ownership of which is one of the questions in this case; for the evidence shows that, although the Nevada and Mexican mills were provided with a full complement of slime-tanks, yet for every 10 tons of ore crushed in the batteries one ton of solid material passed out of the mill into the slime ponds or reservoirs, where it was finally collected and claimed as the property of the mill-owners. That part of the pulp? both sand and slimes, which settles in the tanks is shoveled out upon the sand floor, from which, after mixing, it is transferred to the amalgamating-pans. In the amalgamating-pans it is rapidly stirred and ground, and at the same time treated with certain chemical agents, designed to free the gold and silver from combinations that prevent them from amalgamating with the quicksilver with which the pans are charged. In the process of amalgamation time, as well as proper chemical treatment and a proper allowance of quicksilver, is an essential element—that is to say, the longer the process is continued the larger is the proportion of gold and silver amalgamated. But there is a practical limitation to the time that can be economically given to the amalgamation of even high-grade ores, and this is more especially true of low-grade ores; for the additional percentage of the precious metals saved by continuing the process beyond a certain point amounts to less than the cost of running the pans, and this point is sooner reached in working low-grade ores than in the case of more valuable ores. By failing to continue the process a proper length of time—that is, to the point which is economically justified by the grade of the ore— a part of its legitimate value is lost in the residues or tailings of the mill. After the pulp has been worked in the am algamatingpans for the time which the amalgamator deems sufficient it is drawn off into another set of pans, called “ settlers,” where it is more slowly stirred for a time, completing the process of amalgamation, and allowing the quicksilver with the amalgamated metals to settle, preparatory to drawing off. This is done through iron pipes, connected with the bottom of the settlers, through which the amalgam runs into canvas bags. These bags are provided with iron collars, and are locked to an iron framework below the settlers, in such manner that their contents cannot be removed without cutting the bag, or unlocking and detaching it from the frame. The key is carried by the superintendent or foreman of the mill. The bulk of the quicksilver strains through these canvas bags, and is caught and used over again in the pans. What remains in the bags in combination with the .gold and silver is removed from time to time and placed in an iron box, where it remains until a sufficient quantity is collected to justify • retorting. It is then placed in a retort, and the remaining quicksilver expelled by heat. The resulting crude bullion is weighed, and sent to the mint or assay office, as directed by the mine-owner, to whom the returns are made with certificates of weight and fineness by the mint or assayer. Samples of the material remaining in the settlers, similar to the battery samples, are taken every day, one for the mill and one for the mine. A comparison of the assay of the battery sample with that of the settler sample shows how closely the ore is being worked, and is especially useful to the amalgamator as . an indication, of any imperfection of his process, and of the necessity of changing the treatment in case of undue loss. The mill process, however, does not completely end with the settlers, for the contents of those pans pass to the agitators, where they are slowly stirred, and where in a final clean-up some additional amalgam is collected for the mine-owner. There is a continual discharge of the agitator through an aperture near the top, and the material there discharged is.called tailings. Formerly the milling ended with the discharge of these tailings from the mill, for they were allowed to run off down the-canon, and were never reclaimed by miner or miller. It was discovered, however, in course of time, that a portion of these tailings could be saved by means of blanket sluices, and worked over at a profit. The blanket sluice consists of a double line of flat, wooden troughs, set at a proper grade or inclination, and lined with blankets, over which the mill tailings are allowed to flow, with the result that there is deposited upon the blankets a portion of the quicksilver that is always escaping from the mill, and a portion of the ore, known as sulphurets, ¡which is heavier and richer than the rest of the tailings, but resists amalgamation. The material so caught in the blanket sluices is called concentrates, and is from time to time swept into tanks where it is claimed as the property of the mill-owner. According to the most definite testimony in this case, about one ton of concentrates ought to result from the working of 30 tons of ore, but the quantity varies greatly, according to different estimates. At the Nevada and Mexican mills concentrates were collected in this manner while they were-working the Hale & Norcross ores, and were worked over in the annex-pans of those mills for the benefit of the mill-owners—defendants herein. Returning from this digression to the findings called in question by appellants, I shall first consider that in relation to the conspiracy to mine and send to the mills ores not worth the cost of mining and reduction. This-finding, like several of the others, is of no consequence-so far as it concerns the question of affirming, reversing, or modifying the judgment. For, as above stated, although the superior court finds that worthless ores were mined and milled to the loss and damage of the mining company, the amount of such damage is not found, and it does not enter into the judgment rendered against any of the defendants—the damages awarded by the several judgments consisting of but two items, viz: the excessive price paid for milling all the ores, rich and poor, and the bullion lost by imperfect milling. But, as it affects the motion for a new trial, and as indicadve of the views of the superior court as to some items of evidence which equally affect other questions, it is deserving of some attention. According to the testimony of Mr. Mackay—and there is nothing to the contrary—ore of a ear sample value below $14 per ton will not pay the cost of- mining and reduction, by which I understand him to mean .that such ore will pay the bare cost of mining in a going mine, added to the bare cost of milling, without allowing any profit to the miller, or compensation for the use of his mill. His meaning, in other words, is, that a mining company, with its mine already opened and in running order, and owning its own mill, could hoist and mill $14 ore without going behind. In any other sense his. testimony on this point is inconsistent with his testimony as to the usual disparity between the car sample assay and the battery sample ass ¡y, and the percentage of the latter that ought to be obtained by good milling. In order, however, that $14 ore may pay expenses, it must, according to Mr. Mackaj% contain about an equal value of gold and silver. Otherwise, owing to the heavy discount on silver, it will not pay. Now, the evidence in this case shows that the foreman of the Hale & Norcross mine was, in effect, instructed to mine and send to the mill ore assaying by car sample as low as $12, and it appears that the Hale & Norcross ores contained a much larger percentage of silver than of gold. In view of these facts, which show that the practice and the intention was to send to the mills all ores assaying by car sample as high as $12 per ton, and, in view of the understanding that the mills were to receive, not merely the bare cost of working the ores, but $2.50 in addition to the cost for the use of the mills, it cannot be said that the finding of a conspiracy to mine worthless ores is without any support in the evidence. I account for this finding, and for the fact that no damages were awarded by reason of it, in this way: The superior court held that in view of the contract or understanding that $7 per ton was to be paid for the milling, and the actual return in bullion of only about 75 per cent of the battery sample assay, the parties must have known that not only $14 ore but ore of even higher grade was being mined and reduced at a loss. In determining the question of damages, however, all losses were comprised under two heads, viz: Excessive price paid for milling and loss by imperfect milling. In order to determine these amounts the milling was reduced to actual cost, and the defendants were charged with 75 per cent of the car sample assay. This being done there remained no appreciable loss on the mining of low-grade ores, except upon the comparatively small quantity assaying less than $12, which the court was justified in finding was unintentionally and unavoidably deposited in the ore-bins before the mine assays could be returned. The calculation upon which I suppose the court to have proceeded would be as follows: 75 per cent of $14 is $10.50, or gold $5.25, and silver $5.25, which at 80 per cent equals $4.20, making a net yield of $9.45, of which $4.50 was allowed for milling and $4.95 for cost of mining. I do not think that this basis of calculation was entirely correct in view of other evidence in the case, but it was the basis upon which the court seems to have proceeded, and assuming its correctness, the finding in question and the conclusions of the court are rendered perfectly consistent. Upon the whole, I think the evidence sufficient to sustain this finding. The next—and by far the most important—exception to the decision of the superior court relates to the various findings to the effect that Haywood, Hobart* Levy and the other defendants worked the ores of the Hale & Norcross company by a fraudulent system of imperfect milling, by which a large portion of theiivalue was left in the slimes, tailings, and residues of the mills. The substance and effect of these findings is that 88,887 tons of ore were worked; that its value (meaning the total amount of gold and silver contained in it) was $3,505,361, as correctly shown by the car sample assays, and that if said ores had been honestly crushed and milled, and the gold and silver honestly and with reasonable care extracted and accounted for* the bullion yield would have been $2,616,491, whereas the' actual return made by the mills was only $1,826,-873, andthe difference between these two sums, $789,-618, is the main item of the damages going to make up the judgment. The principal, and most direct, evidence in support of this finding consists of the car sample assays, wdiieh it is contended is corroborated and confirmed by proof of certain irregular and suspicious transactions between the managers of the mills and the Carson mint, as well as some other circumstances of like complexion and import. The appellants contend that, even taking the car sample assay as a criterion of the amount of gold and silver in the ores mined and sent to the mills, the estimate of the superior court is erroneous and excessive to the extent of $34,427, and they sustain their contention by a citation of the pages and folios of the record, to which counsel for respondents have made no reply. If there is any mistake in the computations which apparently demonstrate the error alleged, it was the duty of counsel to have pointed it out. In the absence of any attempt to do so I should perhaps have been justified in assuming that the error was conceded. I have, however, gone over the figures as carefully as I could, and, while my computation does not exactly agree with that of counsel for appellants, it does agree substantially. The error of the court amounts to over $34,000, the larger portion of which is found in the first item of the account, where 1,259 tons and 1,590 pounds of ore delivered at the Vivian mill in December, 1887, of the car sample value of $72.12 per ton, is found to have amounted to $113,518.41, when its real value was only $90,856.41, an error of $23,000 in one item. But the appellants contend that the car sample assays do not, as found by the court, correctly show the true value of the ores, and in this connection they call attention to what they say is an inconsistency between the findings that the value of the ore was $3,505,361, and that it should have yielded $2,616,491 in bullion. I do not deem this an inconsistency. One sum stands for the total amount of gold and silver in the ores, and the other for the percentage (about 75 per cent), which, in the opinion of the court, it should have yielded under-proper treatment. This objection disposed of, I come to the pivotal question in the case: the value of the car sample assays as a criterion of the value of the ore. The testimony is without conflict that, according to the general custom and course of dealing between the miners on the Comstock lode and the managers and owners of custom mills, the battery samples are, and the car samples are not, regarded as the true index of the value of the ores; that all settlements between the miner and the miller are based upon the average assay of the battery samples, and that the car sample assays are for the guidance of the miners, and useful as a check upon the mills. There is also no conflict in the evidence that the car samples always run above the true value of the ore. This fact was clearly proved when the plaintiff closed his case in chief by the testimony of his own witness, Mr. John W. Maelcay, and it was much more fully and amply proved by a number of witnesses sworn on behalf of the defendants. The respondent’s counsel, of course, contend that there is evidence on this point to sustain the-finding of the superior court, and they cite certain passages from the testimony of Mr. Mackay and Mr. Holden in support of their argument, which 1 shall proceed to examine. Mr. Mackay, as I have stated, was the plaintiff’s own witness, and, being examined by them with reference to this matter, said: “We take car sample assays at the mine; that is, the samples of the assays taken on top. There is always a difference between the battery and the assays at the mine; that is, the samples of the assays taken on top; for various reasons there is a good deal of the assay that comes out on top that is covered up; we-cannot get a sample from the top as close as we can in a 500 ton battery, but you get a very fair sample. To answer your question, I can tell you, if I examine the books, what has been the difference between the mine samples and the battery samples. Without stating specifically, I should think about $10 per ton. The' top or car samples are the higher; generally they run pretty close; sometimes they run variable. It is a very difficult matter.” Being asked what the battery sample ought to be, if car samples properly taken showed an assay of $72.12 per ton, his answer was: “About $62, probably $10 difference.” In reply to another question, he said: “If the car sample was $42.62, that ought to pulp $32 or $33, or somewhere in that neighborhood.” In answer to a question whether the difference would be less in ore of a lower grade, he said: “ Sometimes, but they will average pretty much that; about from $8 to $10—sometimes not so much, sometimes a little more.” These clear, direct, and specific statements, made on his direct examination, xere confirmed by his crosséxamination. On his redirect examination, when testifying to the specific point that even battery samples are not always correct, owing to mistakes of the assayers—as illustrated by the fact that he had frequently obtained from ore more than TOO per cent of the battery assay— he added this statement: “If you take 50,000 or 100,000 tons of ore, taken out in a year or two years, and a car sample taken of all those, honestly and fairly taken, with the best methods known, the average of those car samples, some being too high, and some being too low, would pretty closely approximate the value of the ore; there is a difference, of course.” It is upon this passage of Mr. Mackay’s testimony, standing alone, and construed without reference to what he had previously stated, and upon one even less to the purpose from the evidence of Mr. Holden, that counsel build their whole argument in support of the proposition that there is a substantial conflict in the evidence in regard to the disparity between the average assay of the car samples and the real value of the ore. The most they can possibly claim, however, is that while their only witness as to this matter has, in explicit terms and in answer to direct questions calling his attention to the precise point, stated and illustrated by two examples the fact that the car samples always go about $10 above the battery samples, he has, when testifying with reference to another point, made a statement in more general terms which is entirely inconsistent. For, upon the construction which counsel for respondent insist upon giving to the language last quoted, Mr. Mackay’s answers are necessarily inconsistent. They cannot be reconciled, and counsel do not attempt to reconcile them, upon the theory that in Mr. Mackay’s opinion the car samples are correct and the battery samples are incorrect—both being fairly and honestty taken—for he, like all the other witnesses, testifies directly to the contrary. So far as returns of bullion are concerned, he relies upon the battery sample exclusively. The car sample is merely a check. When the discrepancy between the two becomes too great it is an indication that some thing is wrong in the working of the ore, which calls for investigation and correction. It indicates that there is some fault in the treatment; that there is not enough salt, or blues tone, or quicksilver in the pans, or not enough time allowed for amalgamation, or that there is some refractory combination in the ores which prevents amalgamation. The whole of his testimony from beginning to end, so far as it touches this point, teems with illustrations of his opinion that the battery assay, although fallacious in some instances, owing to mistakes of the assayer, or other causes, is, on an average and in the long run, the only true test of the value of the ores. But, really, the testimony of Mr. Mackay does not require a construction which makes it inconsistent with itself. In the passage relied on by counsel for respondent, he wras referring to the mistakes of assayers and the insufficiency of a few samples, even from the battery, and he intended to explain that, although assays were sometimes too high and sometimes too low, these mistakes would in the case of 50,000 or 100,000 tons of ore taken out in a year or two neutralize each other, and the average would afford a fair index of the value of the ore; or, in other words, would afford a basis from which, with the proper deduction, the real value could be estimated. His closing words, “ there is a difference, of course,” must refer to his previous testimony, in which he states precisely what the difference is. But, even if I were mistaken in this view of Mr. Mackay's testimony, which makes it entirely consistent in itself, and if there were no escape from the conclusion that within a few minutes he made two diametrically opposite statements as to a point upon which all the other witnesses are agreed, I should say unhesitatingly that this did not make a substantial conflict in the testimony in regard to a matter which, whatever the truth about it may be, presents no opportunities for concealment or deception. If it is not true that car samples give an exaggerated value to the ore there must have been many competent and trustworthy witnesses to the real truth, who could have been produced during the months that this cause was on trial. No such witness, however, was produced, unless it be true, as claimed by counsel, that Mr. Holden fills the gap. Mr. Holden was a witness called by the plaintiff in rebuttal for the purpose of proving the percentage of the precious metals that ought to be obtained by a proper system of working ores. As a general expert upon that point he undoubtedly possessed superior qualifications. He is more than usually intelligent and exact in his statements, and apparently perfectly fair. But his testimony was confined to the point stated. He had no experience of his own in mining or milling on the Comstock, and made no pretense of knowing the relative accuracy of car and battery samples. His opinion was that under proper treatment the ores of the Com-stock lode of the grade of those in question here should yield a bullion return of from 80 to 85 per cent of their real value. On redirect examination he made the following answer to a question: “In speaking about 80 or 85 per cent return, I said from a fair sample of the ore, a sample of ore taken in a correct, fair, accurate manner, at any stage. I do not care whether it is taken from the drift or any place, so long as you can get a fair, accurate sample of the ore, it should not change in character from where it is taken from the mine into the pulp.” It seems a waste of time to notice the claim that Mr. Holden has here testified that car samples are reliable. All that he says is that when you get a fair sample—a sample which truly indicates the value of the ore—it makes no difference if it is taken from the drift in which the ore is mined. The expression he uses may be said to imply that possibly a fair sample might be obtained in that way, but certainly he does not say so, and the whole tenor of his testimony, as well as of all the other witnesses, is opposed to such a notion. There, are reams of testimony in this record to the effect that the only way to sample ores is to take them out and mix them thoroughly, and that the more thorough the mixture the more reliable the sample; the more numerous and the larger the samples the closer the average; and there is nothing to the contrary. Mr. Holden himself, who is a large buyer of valuable ores, tells us what his own practice is. He has the ore spread out and thoroughly mixed. He then takes a large sample—5, 10, or 20 per cent