Thomle v. Soundview Pulp Co., 181 Wash. 1, 42 P.2d 19 (1935).

           THOMLE v. SOUNDVIEW PULP CO.                3
 Mar. 1935          Opinion Per STEINERT, J.

the manager of the syndicate, and to obtain a full
disclosure and accounting of the acts and doings of the
manager. Other persons intervened in the capacity of
stockholders, and sought the same relief as that demanded
by plaintiffs in their original complaint.

Trial before the court resulted in a decree enjoining
the consolidation and merger, declaring the assets of
the corporation to be held in trust for the benefit of its
stockholders and the unit-holders of the syndicate,
appointing a trustee to take charge of the corporate
assets for a limited purpose and period, and retaining
jurisdiction of the cause with the view of controlling
the ultimate liquidation and distribution of the assets,
but denying all other relief prayed for.

Soundview Pulp Company and certain of its officers
and trustees appealed from the affirmative provisions
of the decree, and gave a supersedeas bond in accordance
with an order of the court, which stayed the enforcement
of the decree in all respects save as to the
provisions relative to consolidation and merger.
Plaintiffs, as respondents, cross-appealed because of the
court's refusal to appoint a receiver and to require the
reconveyance of certain properties.

This controversy affects not only financial investments
totaling over four million dollars, but also the
very life and welfare of a large industry employing
many hundreds of people. The record is voluminous;
the details are extensive and ramifying. A clear
understanding of the case will necessitate a rather
extended statement of the facts. Condensing them as
much as an intelligible conception of the case will
permit, they are as follows:

Pierce, Fair & Company, a California corporation,
underwrote a seven-hundred-thousand dollar bond issue
for Clear Lake Lumber Company for the construction
of a sawmill at Clear Lake, Washington. The

 4    THOMLE v. SOUNDVIEW PULP CO.
                Opinion Per STEINERT, J.          181 Wash.

bonds were secured by a mortgage covering the mill
and also the capital stock of Puget Sound Cascade
Railway Company and certain timber in the Mr. Baker
district. Due to default in the third interest coupons
and the pressure of the current creditors of the lumber
company, Pierce, Fair & Company concluded that quick
and decisive action was necessary in order to protect
the outstanding bonds. It accordingly bought back
the bonds from the investors, reimbursing the holders
for the full amounts paid by them. It then foreclosed
the mortgage and became the owner of the properties
covered thereby. The sawmill then remained idle for
about a year, during which time Pierce, Fair & Company
advanced approximately three hundred thousand
dollars to preserve the property.

Up to this point, the facts narrated have no material
bearing on the issues. They are offered simply as a
perspective to what follows.

At, and prior to, the time that Pierce, Fair & Company
came into ownership of the Clear Lake Lumber
Company properties, Mr. Ossian Anderson and a
group of his associates were the owners of Fidalgo
Pulp & Paper Co., San Juan Pulp & Paper Co., and
an option on the Hartford & Eastern Railroad. Mr.
Anderson proposed to Mr. Fair, of Pierce, Fair &
Company, that these properties be merged with the
Clear Lake Lumber Co. properties owned by Pierce,
Fair & Company, and that a new corporation known
as Puget Sound Pulp & Timber Company be organized.
The proposal was ultimately accepted, and the
new corporation was formed. Pierce, Fair & Company
took approximately one-third of the capital stock
of the new corporation for the properties that it had
turned in. During the next three years, Pierce, Fair
& Company paid in approximately a million dollars
more for additional stock in the corporation.

           THOMLE v. SOUNDVIEW PULP CO.                5
 Mar. 1935          Opinion Per STEINERT, J.

The negotiations leading up to the merger contemplated
the construction at Everett of a one-hundred-fifty
ton, high-grade bleached sulphite pulp mill, at an
estimated cost of three and a half million dollars. The
capital for the new project was to be recruited through
a syndicate, which investors having substantial sums
of money would be invited to join. The proposed
method of financing was adopted and followed.

Up to this point, the facts are still introductory, and
of themselves present no ground of controversy.

We have now arrived at the point where the transactions
affect the respondents. The time is laid as of
August 1, 1929. On that date, Pierce, Fair & Company,
in San Francisco, California, prepared a written document
termed "Puget Sound Pulp & Timber Co. Syndicate
Agreement," and circulated copies thereof among
prospective investors. Inasmuch as this instrument
lies at the foundation of the present controversy, it
merits specific attention and analysis.

By way of introduction, it recited that a syndicate
was being formed for the purpose of purchasing
$4,500,000 of First Mortgage & Collateral Trust Convertible
6% Gold Bonds, together with forty-five hundred
shares of preferred stock and forty-five hundred
shares of common stock, both without nominal or par
value, of Puget Sound Pulp & Timber Co., for the
aggregate price of $4,185,000; that the interests in the
syndicate would consist of 4,185 units of the principal
amount of $1,000 each. It appears that the nine thousand
shares of capital stock were donated to the syndicate
by Pierce, Fair & Company. Hence, it would
follow from the figures above that the bonds were
being purchased by the syndicate as a whole at ninety-three.
Pierce, Fair & Company was not to receive any
profit to itself from the sale of the bonds.

Proceeding from this introductory recital, the

 6    THOMLE v. SOUNDVIEW PULP CO.
                Opinion Per STEINERT, J.          181 Wash.

syndicate agreement contained eleven numbered paragraphs
setting forth and explaining in detail, and in
language that was clear and easily understandable, the
terms and conditions of the agreement, as follows:
(1) Pierce, Fair & Company was to be the manager of
the syndicate; (2) no interest in the syndicate was to
be transferable, except by way of pledge, without the
written consent of the manager; (3) the purpose of
the syndicate was to acquire the above-described bonds
and stock of Puget Sound Pulp & Timber Co., and to
sell or otherwise dispose of all or any part of such
securities; (4) upon payment of the price of the units,
receipts were to be issued to the purchasers. The
members of the syndicate were not to be partners with
or for one another, nor with or for the manager; (5)
the syndicate was to expire August 15, 1933, unless
the manager should, in its discretion, extend the term
for a period of not to exceed four years. Within thirty
days after the termination of the syndicate, the manager
was to make final distribution of the net assets
and profits; (6) this paragraph, quoted, in part, verbatim,
is as follows:

"The Manager shall have entire control of the
business and affairs of the Syndicate and may conduct the
same in such manner as it deems advisable. The
Members irrevocably grant to the Manager full power and
authority, for account of the Syndicate, to do any and
all acts and enter into and execute any and all
agreements or other instruments necessary, proper
or expedient, in the judgment of the Manager, to
carry out and perform this agreement, including
the right to sell at public or private sale from
time to time, in the discretion of the Manager, any
and all of the securities owned by the Syndicate,
or to exchange any of such securities for other
securities, and generally, as such Manager, to
transact the business of the Syndicate in such manner
as in its discretion it may deem for the best interests

               THOMLE v. SOUNDVIEW PULP CO.                7
 Mar. 1935          Opinion Per STEINERT, J.

of the Syndicate. The Manager may have transferred
on the books of the Corporation [Puget Sound Pulp &
Timber Co.] to its individual name, or the names of
any other persons selected by it, any and all stock
owned by the Syndicate . . . The Manager shall
have full power to vote as the holder of such stock, or
to cause the holder of any such stock, held for the
account of the Syndicate, to vote for the sale by the
Corporation of any or all of its properties, or for the
consolidation of the Corporation with any other corporation,
or for the reorganization or dissolution of
the Corporation, the determination of any such matters
being left to the sole judgment and discretion of
the Manager. . . . The Manager shall have the
right, in its own name or otherwise, but for the account
of the Syndicate, to do all such things and take all such
action as may be necessary in its discretion to sell,
merge or consolidate the properties of the Corporation
with those of any other person, firm or corporation, or
to reorganize, recapitalize or refinance the Corporation,
and for such purpose the Manager shall have the
right to exchange any or all securities owned by the
Syndicate for securities of any other corporation into
which it may be merged or consolidated or to which its
properties may be sold, or for the securities of a reorganized
or recapitalized corporation. The Manager
may transact, in its own name or in any other, all
business of the syndicate with third persons. The
enumeration of particular or specific powers in this
agreement shall not be construed to limit the general
power and discretion to be conferred upon and reserved
to the Manager in order to fully authorize it
to do any and all things in its discretion deemed by it
proper, necessary or expedient to carry out the purposes
of this agreement, it being the intention hereof
that the powers of the Manager expressed herein are
to be given the most liberal construction."

(7) The manager was to have authority to employ depositaries,
legal counsel, agents and other assistants,
and was to be reimbursed by the syndicate and its members
for all commissions, taxes, counsel fees or other

 8    THOMLE v. SOUNDVIEW PULP CO.
                Opinion Per STEINERT, J.          181 Wash.

expenses incurred by it; (8) the proceeds of the securities
acquired by the syndicate, whether from dividends,
sale or otherwise, were to be distributed by the
manager (a) to the payment of expenses, (b) to the
payment to the members of an amount equal to interest
at the rate of six per cent per annum upon their
respective investments, (c) to the payment to the members
of the principal of their investment, and (d) the
balance, if any, to be distributed, seventy-five per cent
to the members and twenty-five per cent to the manager;
(9) for purposes of distribution, the manager
was authorized to fix a valuation on the securities, the
same to be final and conclusive; any apportionment or
determination by the manager of any profits or losses
were, likewise, to be final and conclusive. The manager
was in no event to be held liable to the members
for any matter except for the want of good faith or
for wilful misconduct; (10) all moneys, securities or
other property of the syndicate were to be deposited
with Bank of California, N. A., as depositary, but
without limiting the power of the manager to sell or
otherwise dispose of the same, or to invest them in
such manner as it might determine; and (11) the agreement,
so far as each member was concerned, was to be
in counterpart, one part when signed was to be returned
to the manager and the other part retained by
the member. All of the counterparts when returned
were to be taken together as constituting the syndicate
agreement.

Respondents in due time became members of the
syndicate, Thomle purchasing one unit, Heiberg two units,
and Altenburg one unit. There were, all told, 4,185
units held by 746 different individuals.

The $4,185,000 produced by the formation of the
syndicate and the sale of the units was advanced to Puget
Sound Pulp & Timber Co. as the construction of the

               THOMLE v. SOUNDVIEW PULP CO.                9
 Mar. 1935          Opinion Per STEINERT, J.

Everett mill progressed, and, in the meantime, the
unused portions of the funds were loaned on call,
thereby bringing an additional increment to that company.

Unfortunately for everyone connected with this case
and contrary to all expectations, the operations of the
Everett mill have not been a financial success. The
zodiac of its existence has not been auspicious. It
appears to have been born at the autumnal equinox, and
to have moved rapidly to the winter solstice. No
sooner had it manifested an infant virility before it
became enveloped in the tentacles of the "great depression
of 1929," that Sea of Sargasso into which
many an industrial craft has drifted and become
stranded.

We need not depict the contributing influences in
detail. It is sufficient to say generally that an utterly
demoralized pulp market and the strictures occasioned
through lack of operating capital ultimately produced
a situation varying between gloom and desperation.
These conditions, operating directly upon the affairs
of Puget Sound Pulp & Timber Co., produced a spinal
reflex upon the affairs of the syndicate. Susceptive
danger to the business of the company meant jeopardy
to the bonds held by the syndicate. The situation demanded
extreme care, and upon the manager of the
syndicate, on whom full power had been conferred by
its members, lay the legal and moral duty of protecting
the interests of the unit-holders to the extent of its
best judgment and ability.

In 1930, the company had sustained a net loss of
$46,000. On August 15, 1931, it paid only one-half of
the interest on the bonds, and gave the syndicate manager
its unsecured note for $67,500 for the other one-half.
In 1931, the company lost $418,000, inclusive of
interest obligations and depreciation, and ceased its

 10    THOMLE v. SOUNDVIEW PULP CO.
                Opinion Per STEINERT, J.          181 Wash.

lumber operations at Clear Lake. It defaulted in its
bond interest due February 15, 1932. The members
of the syndicate were notified of these facts, and of
the further fact that it would undoubtedly be necessary
for both bondholders and stockholders to make
sacrifices.

Shortly after February, 1932, Pierce, Fair & Company,
the syndicate manager, called together a group
of seven of the major participants in the syndicate,
representing $390,000 of the total investment, to act
as an advisory committee under the existing emergency.
The committee engaged itself in an endeavor
to forestall possible disaster with some businesslike
solution, and finally formulated and proposed a plan
of reorganization whereby all the assets of Puget
Sound Pulp & Timber Co. would be transferred to a
new company. Under this plan, the syndicate was to
surrender the bonds and stock of the old company
and take in exchange therefor the total issue of stock
of the new company's class A preferred stock.

The members of the syndicate were notified of the
details of the plan by letters dated April 10, 1932,
calling a meeting of the members on May 10, 1932, for the
consideration of the plan, and enclosing therewith a
written form of approval. Over thirty-six hundred
units favored the plan, and there was no negative vote
nor any objection thereto. It will be observed that this
plan contemplated the exchange of bonds for stock.
Reinforced with this expression of sentiment, the syndicate
manager endeavored to carry out the plan of reorganization,
but owing to increasing losses of the company
and the attitude of common creditors, its efforts
were unsuccessful, and the plan had to be abandoned.

Continuing its efforts to effect a satisfactory
solution of the difficulty and with the aid and approval of
the advisory committee, the syndicate manager then

           THOMLE v. SOUNDVIEW PULP CO.                11
 Mar. 1935          Opinion Per STEINERT, J.

evolved what is herein termed a "partitioning plan."
Under this plan, the properties of Puget Sound Pulp &
Timber Co. were to be segregated into two divisions,
northern and southern, and conveyances were to be
made to the syndicate, or its nominee, of the properties
in the southern division, comprising the Everett plant,
the Hartford & Eastern Railroad with the timber
contiguous thereto, and the Mitchell Bay Limerock
Quarry, with all taxes and insurance on the properties
paid, and the payment of the $67,500 note above mentioned
guaranteed, together with other items. The
syndicate, in turn, was to surrender the bonds theretofore
held by it.

By letters dated June 18, 1932, the manager notified
the members of the syndicate of the details of this plan,
and also of the fact that Pierce, Fair & Company was
then donating and transferring to the syndicate all of
the stock held by the latter company in Puget Sound
Pulp & Timber Co., being 36,050 shares of common
stock and 36,050 shares of preferred stock. A ballot
by which the members of the syndicate might register
their approval was enclosed with the letter. A favorable
response from 3,262 units out of a total of 4,185
units was received. There was no dissenting vote cast,
nor was any objection made. The partitioning plan
was accordingly consummated in all its details, and
the properties in the southern division were conveyed
to Soundview Pulp Company. Thereafter, thirty additional
units registered approval of the plan.

It was at this point that appellant Soundview Pulp
Company came into existence, as a part of the adoption
of the partitioning plan. On July 15, 1932, its articles
of incorporation were filed. It had common stock, divided
into 4,185 shares, each being of the par value of
ten dollars, so that each share had a representative
value equivalent to each syndicate unit. The entire

 12    THOMLE v. SOUNDVIEW PULP CO.
                Opinion Per STEINERT, J.      181 Wash.

issue was subscribed for and taken by Pierce, Fair &
Company as manager of the syndicate. The corporation
was authorized to do a general business, and particularly
to own, hold, lease and operate pulp mills,
sawmills, railroads and logging operations, and to sell
its assets for stock in other corporations when deemed
expedient by its trustees and authorized by a two-thirds
vote or consent of its stockholders.

Pursuant to the partitioning plan, the southern
properties, above referred to, were conveyed to Soundview
Pulp Company, and the $4,500,000 trust mortgage was
in turn released. The Soundview Pulp Company then
leased the Everett mill to Puget Sound Pulp & Timber
Co., the lease being terrainable on three months'
notice. These facts were communicated to the members
of the syndicate by its manager in a letter dated
August 18, 1932. Pursuant to the terms of the partitioning
plan, the manager collected the $67,500
secured note of Puget Sound Pulp & Timber Co.

At this time, it is well to observe that, prior to the
partitioning plan, the syndicate owned and held (a)
$4,500,000 of Puget Sound Pulp & Timber Co.'s bonds,
(b) 4,150 shares of its common stock, (c) 4,150 shares
of its preferred stock, and (d) the company's unsecured
note for $67,500; and that, after the consummation
of the partitioning plan, the syndicate became
the owner of and held (a) all of the stock of Soundview
Pulp Company, (b) twenty-five per cent of the
stock of Puget Sound Pulp & Timber Co., and (c) the
proceeds of the $67,500 note.

Between June 18, 1932, and March 10, 1933, the depression
had grown progressively worse, and the
affairs of Puget Sound Pulp & Timber Co. were
causing the manager of the syndicate and the advisory
committee increasing alarm. As already stated, the
mill at Everett was being operated by Puget Sound

               THOMLE v. SOUNDVIEW PULP CO.                13
 Mar. 1935          Opinion Per STEINERT, J.

Pulp & Timber Co. under an indefinite lease from
Soundview Pulp Company. There was strong likelihood,
however, that, at any time, the mill would have
to be taken back and operated by Soundview Pulp
Company or the syndicate. It was, therefore, necessary
to safeguard jealously any cash on hand belonging
to the syndicate, for use in that eventuality. With the
view of securing as much ready cash as possible, the
syndicate, acting through its manager, sold its stock
holdings in Puget Sound Pulp & Timber Co. for
550, thus giving it a total cash reserve of about one
hundred thousand dollars.

In March, 1933, Mr. Ossian Anderson, of the Puget
Sound Pulp & Timber Co., sought to buy from the syndicate
the southern properties, including the Everett
mill, for $1,400,000 cash. It will be noted that this
amount was considerably less than what had been
originally invested in the mill alone; and that, had it
been accepted, the syndicate members would have received
only about thirty cents per dollar of their original
investment. The offer and its consideration by
the syndicate manager indicate the terrific shrinkage
and loss that had taken place in the capital investment.
Mr. Anderson tried over a period of four months to
raise the money by loan from the Reconstruction
Finance Corporation or elsewhere, but was unsuccessful,
and hence, nothing came of the offer.

In the meantime, the Big Four Inn property, which
was controlled by Hartford & Eastern Railroad, and
on which the latter paid the United States government
an annual ground rental, had been a further source of
worry and expense, and without any revenue, to the
syndicate. The manager of the syndicate and the advisory
committee decided to abandon that property.
The appellant Dickey offered to pay the rental charges,
the insurance and watchman charges, and, if he could

 14    THOMLE v. SOUNDVIEW PULP CO.
                Opinion Per STEINERT, J.           181 Wash.

sell the property for a sum in excess of what he had
expended, to return the difference to the company. The
syndicate manager having decided to abandon the
property, Mr. Dickey was given a bill of sale thereof
by the railroad company. Although Mr. Dickey has
paid out about two thousand dollars on the property,
he has never been able to make any sale of it.

During this same period, the railroad company itself
had steadily lost money, its operations were unprofitable,
and a considerable expenditure for repairs was
in the offing. The railroad company being without
credit, application was made to the Interstate Commerce
Commission for leave to abandon operation.
Subsequently, the railroad was abandoned, so far as
operation was concerned.

This brings us down to about July 12, 1933. The
affairs and conditions of the Everett mill, which was
still being operated by Puget Sound Pulp & Timber
Co. under the lease, had not improved. Uncertainty,
disappointment, discontent and gloom had approached
the point of despair and desperation. The only thing
left, so far as the reasonably immediate future was
concerned, was the possibility that market prices on
pulp might rise in the fall of 1933, concerning which
there was some prospect.

About this time, there came from without a suggestion
and proposal, which, in the judgment of the manager
and the advisory committee, was the best and
only solution of the whole problem. The endeavor to
effect the terms of that proposal precipitated the
present action, and although that endeavor in itself is no
longer important here, as we shall presently see, it
nevertheless gave rise to such violent opposition on
the part of a few of the syndicate members as to convert
the whole matter from expedient administration
into convulsive litigation.

               THOMLE v. SOUNDVIEW PULP CO.               15
 Mar. 1935          Opinion Per STEINERT, J.

Mr. E. M. Mills, president of Rainier Pulp & Paper
Co., located at Shelton, and also president of Olympic
Forest Products Co., located at Port Angeles, both of
which corporations owned and operated pulp mills
similar to the Everett mill, proposed to the syndicate
manager that the three corporations be consolidated
and merged. Briefly and in general, the plan proposed
involved the formation of a merger company,
with an authorized capital stock of seven hundred and
fifty thousand shares. The three merging corporations
were to turn in all their assets, with some reservations
on the part of the Rainier and the Olympic
companies, and in exchange to receive stock in
the new company according to the value of their
assets and in the following amounts: To Rainier
Pulp & Paper Co., 200,000 shares; to Soundview Pulp
Company, 171,585 shares; and to Olympic Forest
Products Co., 125,000 shares. The liabilities of each
of the companies were to be assumed by the new company,
and in turn the Rainier and Olympic companies
were each to loan to the new company substantial portions
of their net working capital reserved from the
merger.

Following a number of conferences by the
representatives of the three corporations, the proposal
and a tentative acceptance were put into final form.
Contemporaneously with the progress of the proposed
plan, the syndicate manager decided to terminate the
syndicate, under the terms of the syndicate agreement.
Accordingly, on July 12, 1933, Pierce, Fair & Company,
the manager, notified the syndicate members by letter
that the syndicate would be terminated on July 31,
1933, and that Pierce, Fair & Company would, as a
corporation, dissolve. The letter further advised the
members that the manager would turn over to Soundview
Pulp Company the funds held by it, approximating

 16    THOMLE v. SOUNDVIEW PULP CO.
                Opinion Per STEINERT, J.      181 Wash.

ninety thousand dollars; and that the outstanding
4,185 shares of common stock of that company, held
by the syndicate, would be transferred and delivered
to Bank of California, N. A., the depositary of the
syndicate units, to be in turn delivered by the bank
to the various syndicate members upon their surrender
of their unit deposit certificates or receipts.

A confirmatory letter dated September 15, 1933, followed,
accompanying which was a notice to the syndicate
members that a special meeting of stockholders
of Soundview Pulp Company would be held October
3, 1933, for the purpose of ratifying the plan. The
meeting was held, 2,712 shares being represented in
person or by proxy. None of the respondents were
present or represented at the meeting. All acts respecting
the proposed consolidation and merger were
unanimously approved. Thereafter, the trustees of
Soundview Pulp Company held a number of meetings,
at which various steps were taken to perfect the
merger.

Finally, on December 5, 1933, a stockholders' meeting
was held pursuant to call and notice thereof. At that
meeting, the holders of 3,068 shares of stock and units
together, out of a total of 4,185 shares and units, were
represented in person or by proxy. After a full discussion
of all the details affecting the proposed merger,
a vote was taken; and of the 3,068 shares and units
represented, 3,057 voted to approve the merger and
eleven voted against it.

At this point, it may be well to consider the alignment
of the respective unit holders. At the time of
the meeting of December 5, 1933, the holders of 2,633
units, out of a total of 4,185, had exchanged their units
for stock. Between that time and February 27, 1934,
698 additional units were likewise exchanged for stock.
Of the remaining 854 units, the holders of 419 sent in

               THOMLE v. SOUNDVIEW PULP CO.               17
 Mar. 1935          Opinion Per STEINERT, J.

their proxies to be voted at the meeting in favor of
the merger. This makes a total of 3,780 favorable
units. Four hundred and twelve units were not represented
at the meeting at all, nor did their holders register
any protest. This leaves twenty-three units. Of
these, the interveners herein, holding six units, were
opposed to the merger, but in their brief they ask that
the present action be dismissed. Their position, legally
speaking, accords with the conclusions expressed
herein. A holder of three units was opposed to the
consolidation, and at the trial appeared as a witness
for respondents, but did not become a party to the
action. A holder of ten units, who had not taken
stock in exchange, but who participated at several
stockholders' meetings, also appeared as a witness
for respondents, but did not intervene.

This leaves only the respondents, who together held
four units, for which stock had not been taken in exchange.
Respondents Heiberg and Altenburg, holding
three units, did not vote at the stockholders' meeting,
nor did they register any protest or objection. It now
appears that, at the time that the amended complaint
was filed, on which this action was tried, Altenburg
was dead, and no substitution of parties was ever
made. It further appears that respondent Heiberg
has, since the appeal was taken, transferred his two
units to one Fred Shaneman, who has appeared separately
by his attorney and now aligns himself with
the appellants. The tabulation thus reduces itself to
one unit, held by respondent Thomle. Although she
has never exchanged her unit for stock, she nevertheless
appeared, through her brother as proxy, at the
stockholders' meeting of December 5, 1933, and protested
against the consolidation. This action was instituted
December 9, 1933, four days after the last

 18    THOMLE v. SOUNDVIEW PULP CO.
                Opinion Per STEINERT, J.          181 Wash.

stockholders' meeting. This completes our statement
of the case.

The complaint, and the amended complaint to an
even greater extent, charged the manager of the syndicate
and the defendants named in the pleadings with
fraud, connivance, conspiracy and mismanagement,
having for their object the dissipation of the syndicate
assets and "to freeze out and deprive these plaintiffs
and minority stockholders of their property without
due process of law." Meeting these charges, the trial
court stated in its memorandum opinion: "I find that
the syndicate manager acted for what it deemed the
best interests of the unit holders." Paragraph I of
the decree reads as follows:

"That in the management of the affairs of the Puget
Sound Pulp & Timber Company Syndicate, Pierce,
Fair & Co., as syndicate manager, were not guilty of
any fraud or intentional wrong-doing; and in the management
of the affairs of said Soundview Pulp Company,
a Washington corporation, the trustees, officers
and managing agents thereof have not been guilty of
any fraud or intentional wrong-doing. Said corporation
is not insolvent."

It was evidently the trial court's theory, as disclosed
in the decree, that the proposed merger was

". . . illegal and not in the best interests of said
Soundview Pulp Company, a corporation, or of the
persons or parties beneficially interested in the
property and assets held by the corporation,"
and that such assets should therefore be taken over
and held by a trustee for the benefit of the stockholders
of the corporation and the remaining unit-holders of
the syndicate, although the court had previously
expressed the view that it had a horror of receiverships
or anything that savored of a receivership, a view in
which counsel concurred.

With reference to the charges of fraud, we will say,

               THOMLE v. SOUNDVIEW PULP CO.               19
 Mar. 1935          Opinion Per STEINERT, J.

after a considerate reading of the record, that, in our
opinion, the charges were wholly groundless; and that,
to the contrary, the syndicate manager, the advisory
committee, and the officers and trustees of Soundview
Pulp Company, evidenced a meticulous concern for
the interests of the syndicate members and a remarkable
degree of patience and effort in trying to work
out the best solution of a most difficult and
discouraging problem. We therefore consider this case wholly
apart from any charge or suggestion of fraud.

Appellants' assignments of error may be grouped
under three heads: (1) Error in permitting the
amended complaint to be filed and proceeding to trial
upon the issues presented thereby; (2) error in enjoining
the proposed consolidation and merger; and
(3) error in decreeing that Soundview Pulp Company
held its assets in trust for certificate unit-holders, and
in appointing a trustee to take possession of the pulp
mill, with the possibility of proceeding to liquidation.
Respondents' assignments of error upon their cross-appeal
are directed, generally, (1) to the refusal of
the court to require a reconveyance of the Big Four
Inn property by appellant Dickey; and (2) to the refusal
of the court to appoint a receiver to wind up the
affairs of the syndicate and to liquidate its assets.

We take up first appellants' assignments of error.

In view of our conclusion upon the merits of the case,
the first group of assignments becomes immaterial.

[1] The second group presents what is now but a
moot question, although at the time of the trial it was
the moving and principal question in the case. It has
already been stated that the court in its decree enjoined
the proposed consolidation and merger of the
three corporations, and that, to that extent, the decree
was not permitted to be superseded. Hence, the
merger, which was set for a specific time now long past,

 20    THOMLE v. SOUNDVIEW PULP CO.
                Opinion Per STEINERT, J.           181 Wash.

has been effectually jettisoned. But above and beyond
that, by subsequent record made in this court, it
definitely and decisively appears that, because of, and
subsequent to, the decree herein, Rainier Pulp & Paper
Co. and Olympic Forest Products Co. have elected to
withdraw, and have withdrawn, from any further consideration
of consolidation and merger with Soundview
Pulp Company, and the briefs of counsel proceed
upon the theory that such is the indisputable fact. The
matter of consolidation and merger is therefore eliminated
from further consideration.

We have, then, only the third group of assignments.

These relate to the status of the assets now held by
Soundview Pulp Company. Stated definitively, the
question is whether, under the terms of the syndicate
agreement and the acts of the manager, the syndicate
members are now the owners in common of the
physical assets included in the southern division of
properties and now standing in the name of Soundview Pulp
Company, or whether they merely own the stock of
that company.

[2] It is contended by respondents that the
syndicate here involved is a common law trust, and should
be dealt with as such. This, however, presents no
problem for adjudication here, because no attack has been
made upon the syndicate as an entity. The position
of the respondents is, and must be, grounded upon the
existence and validity of the syndicate agreement. In
any event, only the state could complain of the exercise
by the syndicate of powers contrary to the laws of
this state. Haynes v. Central Business Property Co,
140 Wash. 596, 249 Pac. 1057.

The discussion by counsel of the nature and effect
of the syndicate agreement and the status of the
syndicate's assets takes a wide and divergent range. There
seems to be no point or place at which the opposing

           THOMLE v. SOUNDVIEW PULP CO.                21
 Mar. 1935          Opinion Per STEINERT, J.

sides come to intimate grips. We have spent much
time in following their various leads concerning the
creation, conduct and termination of the trust. The
briefs contain considerable argument concerning the
rules relating to principal and agent, express trusts,
resulting trusts, and trusts ex maleficio.

As may be expected, business trusts, commonly referred
to as "Massachusetts trusts," come in for much
dissertation. We shall not tempt counsel by any dogmatic
statement concerning the genus or nature of
business trusts, nor attempt to classify them as belonging
within the category of corporations, or partnerships,
or of pure trusts. All will admit that they
are sui generis. Whatever they are, they have been a
prolific source of both discussion and litigation.
some states, they have flourished under a favorable
jurisprudence. In others, they have withered or become
abortive by reason of the interceptive effect of
revenue and regulatory statutes. In this state, they
have received, at most, but doubtful welcome. To the
many texts and cases upon the subject may be added
the following interesting and instructive monographs
and comments by students of the subject: 21 Yale Law
Journal 311; 37 Yale Law Journal 1103; 23 Columbia
Law Review 423; and 29 Michigan Law Review 1053.

So far as this case is concerned, however, it presents,
in our opinion, simply a question of contract augmented
by a question of agency, to be determined by
the rules pertaining to those subjects.

[3] The intention of the parties to a contract, when
clearly expressed in the instrument, must govern.
Loutzenhizer v. Peck, 89 Wash. 435, 154 Pac. 814;
Brunswick-Balke-Collender Co. v. Seattle Brewing
Malting Co.,. 98 Wash. 12, 167 Pac. 58. Where the contract
is unambiguous, the intention of the parties must
be derived from such construction as can reasonably

 22    THOMLE v. SOUNDVIEW PULP CO.
                Opinion Per STEINERT, J.          181 Wash.

be given to the language used and to all the circumstances
surrounding the transaction, including the
situation of the parties, the subject matter, and the
subsequent acts of the parties under it. Northwestern
Lumber Co. v. Bloom, 135 Wash. 195, 237 Pac. 295;
Burkheimer v. Seattle, 162 Wash. 645, 299 Pac. 381.

Viewing the syndicate arrangement as an
agreement, rather than as a juridical entity, we have this
situation: The syndicate members, including the
respondents, entered into a contract with *each other*, as
well as with the syndicate manager, by the terms of
which specified sums of money were pooled to be
invested by the manager, with the hope and expectation
of ultimate profit. Deliberately, the parties thereto
adopted a plan or arrangement which was considered
the best means for effectuating their intention and
object.

The manager was given broad and almost unlimited
powers, with the added provision that such powers were
to be accorded the most liberal construction. The
manager was to have entire control of the business and
affairs of the syndicate, with the unqualified authority
to enter into any and all agreements deemed by it
expedient to carry out its terms; to sell or exchange any
of its securities; to vote the stock held by it, whether
for the sale of the properties of Puget Sound Pulp &
Timber Co., or for the consolidation of that
corporation or its properties with any other corporation or its
properties, or for its reorganization or dissolution; and
to exchange the securities owned by the syndicate for
the securities of any other corporation. The only
limitation placed upon the syndicate manager was the
exercise of good faith and the absence of wilful
misconduct.

Undoubtedly these powers thus granted were sweeping
in their significance and effect, but each of the

               THOMLE v. SOUNDVIEW PULP CO.               23
 Mar. 1935          Opinion Per STEINERT, J.

syndicate members entered into the agreement fully apprised
of its legal consequence. Each had the right
to refrain from entering into the agreement, but he
also had the right, if he aid enter into it, to expect
and demand that all the others would likewise be bound
thereby. Each, therefore, bound himself to a correlative
duty. As the case now stands, all those who have
manifested any interest in the matter whatever, except,
at most, two respondents, holding two units, have
indicated their intention and desire to stand by the
contract and to accept the results of the manager's
discretion and acts.

The respondents alone, or rather one of them holding
one unit, would now have a receiver appointed, with
all the risk incident to such proceeding. The very
theory upon which that respondent proceeds runs
counter to her conception of the agreement. According
to her contention, the individual members of the
syndicate, and not the Soundview Pulp Company, became
the owners in common of the assets of the latter
company at the time that the partitioning plan was
effected. If that were true, then, to the extent that
such owners permitted that corporation to conduct the
business and affairs of the syndicate, they would have
assumed liability for the acts of such corporation, a
result which no doubt they would be the first to disclaim,
resting their disclaimer on the provisions of the
instrument which prescribed that no member was to
be a partner with or agent for any other member, or
with or for the manager.

Upon the contractual phase of the matter, we are
convinced, and hold, that the syndicate agreement was
plenary and controlling upon the syndicate members.

[4] Proceeding now to the agency phase of the
matter, we shall focus our attention upon the point
immediately and most seriously in issue; that is, whether

 24    THOMLE v. SOUNDVIEW PULP CO.
                Opinion Per STEINERT, J.          181 Wash.

the manager had the right to convert the units into
stock. It must be remembered, as both sides seem to
concede, that the syndicate members were not to be
considered as agents for each other, or for the manager,
but that the manager was the agent of the syndicate
members. Again, we note that the authority
conferred by the members of the syndicate upon the
manager was fully and unambiguously declared in the
agreement.

The interpretation of authorization is governed. by
the general principles of interpretation relating to
contract. Restatement of the Law of Agency, SS 32.
Hence, if the authority is expressly conferred, the
express provisions control. If the express provisions
of the contract be broadened by the peculiarly
enveloping circumstances of the case, then the authorization
must be interpreted in the light of all the accompanying
circumstances, including, among others: (a) The
situation of the parties, their relations to one another,
and the business in which they are engaged; (b) the
general usages of business, the usages of trade, and
employment of the kind to which the authorization
relates; (c) facts of which the agent has notice respecting
the objects which the principal desires to accomplish;
(d) the nature of the subject matter, the conditions
under which the act is to be performed, and the
legality or illegality of the act. Restatement of the
Law of Agency, SS 34.

Whether we view the matter solely from the express
provisions of the contract or whether we consider, in
connection therewith, all the attendant circumstances,
we have no hesitancy in declaring not only that the
discretion of the manager in respect of the exchange
was legally and soundly exercised, but that common
sense, fair dealing among all the members of the
syndicate, their inseparable connection with each other,

               THOMLE v. SOUNDVIEW PULP CO.                25
 Mar. 1935          Opinion Per STEINERT, J.

and the anomalous situation that would be presented
if 4,185 units, represented by 746 individuals, content
and malcontent, were put in charge of an industry
having the proportions of the one here involved, warranted,
and from every practical and logical standpoint
necessitated, the metamorphosis of syndicate
units into stock certificates. We hold that the syndicate
manager had the authority to make the exchange,
and that its discretion was soundly and properly
exercised in making the transfer.

[5] We now take up respondents' assignments of
error. The refusal of the court to compel a reconveyance
of the Big Four Inn from Mr. Dickey, we
think, was fully justified. The record shows that the
property was not only an empty bag, but a bag with
a hole in it. The inn meant nothing as an asset; its
proportions were large as a liability. Though in form
the transaction by which the inn was disposed of was
by bill of sale, it was in fact an abandonment of the
property. We agree with the trial court that the manager
exercised a wise and sound discretion in getting
rid of it.

As to the matter of a receivership, what we have
already said seems to us to be a sufficient answer to
respondents' contention. We need only to add a brief
reference to a case arising upon a somewhat similar
state of facts and decided by this court many years
ago. Frost v. Puget Sound Realty Associates, 57 Wash. 629,
107 Pac. 1029. In that case, the corporation
floated a series of income profit-sharing bonds,
the proceeds of which were to be invested in business
properties to the extent of seven hundred and forty
thousand dollars. Due to the panic of 1907, the company
met with serious losses, and consequently, was
unable to pay dividends. Some fifty investors, representing
about fifteen thousand dollars in bonds, began

 26    THOMLE v. SOUNDVIEW PULP CO.
                Opinion Per STEINERT, J.           181 Wash.

an action to secure the appointment of a receiver.
Thereupon, two hundred and forty-two investors, representing
over two hundred thousand dollars in bonds,
intervened for the purpose of resisting such appointment.
In reversing the trial court, this court held
that, assuming that a trust had been created of which
the corporation was a trustee, still the appointment
of a receiver would not be authorized, under the existing
facts. The court said:

"Not only have the respondents subscribed for the
bonds, but some twenty-seven hundred others have
likewise subscribed, and have also invested their money
in the common venture. They and the appellant corporation
have thereby acquired valuable rights, and
under such circumstances it would seem that the participating
respondents should now be estopped from
questioning the validity of their contractual relations

And further:

"Only a small number of the investors ask or desire
a receivership. . . . On the other hand, the
interveners, who represent over $200,000 par value of these
bonds, earnestly desire that the appellant may continue
in charge, insisting that less expense will be thereby
incurred, and that the investors' interests will be thus
best subserved. This fact, while not controlling,
should be taken into consideration in connection with
other questions discussed, in passing upon the
application for a receiver. All other investors have
remained inactive, or have at least refrained from joining
in this consolidated action. Considering this attitude
of the bondholders, the fact that the present but
temporary difficulties of this corporation have been caused
largely by the panic of 1907, aided by the activities of
a discharged employee, the further fact that the
evidence shows the appellant corporation is doing all in
its power to conserve and protect the interests of the
investors, and that it is not insolvent, it would seem
that no greater hardship could be imposed upon

      STATE EX REL. WASHINGTON ETC. CO. v. MURRAY.      27
 Mar. 1935          Statement of Case.

investors, bondholders or stockholders than a receivership."

This same language, both in premise and in conclusion,
might well be written of the case before us.

Reversed, with instructions to dismiss the action.

BEALS, MITCHELL, HOLCOMB, and BLAKE, JJ., concur.