The defendant East Side Railway Company is a corporation organized by G. A. and James Steel for the purpose of building and operating certain lines of railway and street railway in and about Portland, Or. G. A. Steel became its president and James Steel its vice president, treasurer, and general manager. Each of them was a director of the corporation, the only other difect- or being John B. Cleland, who was also-its secretary, and who held hut one share of the stock of the corporation, and that only to qualify him as director. Indeed, it appears that at all the times herein mentioned the two Steels were the real owners of all of the stock of the railway company, 100 shares of which, however, were hypothe-cated by them as security for an indebtedness to the Bank of British Columbia, and for that purpose stood in the name of George Good as trustee, whose prosy, however, James Steel held. It appears that the company built at least some of the lines of railway for which it was organized, and acquired various rights of way, rolling stock, power house, and other necessary and appurtenant property. Under *411resolution of its board of directors, 250 bonds of tlie par value of $1,000 each were authorized to be issued, secured by a mortgage on its property, executed to the Security Savings & Trust Company of Portland as trustee, for the benefit of the holders of the bonds. One hundred and twenty-five only of those bonds were issued, and they were issued and delivered to G. A. and James Steel, who pledged them to the German Savings & .Loan Society of San Francisco, Cal., as security for money borrowed by them from that bank at different times, and aggregating about §83,000. The case shows that this money was used by the Steels in and about the building up and operation of the lines of railway mentioned, and that, more money being needed for that purpose, the directors of the company adopted a resolution providing for the issuance of 300 bonds of the par value of §1,000 each, to be secured by a mortgage upon all of the property of the company to the Security Savings & Trust Company of Portland as trustee, to be used in replacing the bonds of the first issue so far .as necessary, and the remainder in securing additional money. In pursuance of that resolution, 300 bonds, numbered, respectively, from 1 to 300, both inclusive, were issued on March 1, 1893, secured by a mortgage on all of the property of the company to the Savings & Trust Company as trustee. These bonds were certified by the trustee, and delivered to the railway company. Of them, 125, numbered from 1 to 125, both inclusive, were delivered to James and G. A. Steel in lieu of the 125 bonds of the first issue thereupon surrendered and canceled, and bonds numbered from 131 to 153, both inclusive, were, also for value, delivered to James and G. A. Steel, and bonds numbered 12G to 130, both inclusive, were, for value, delivered to Eva P. Steel, who thereafter authorized James and G. A. Steel to pledge them to the German Savings & Loan So ciely of San Francisco, as hereinafter stated. The findings of the court-below are to the effect that the remaining bonds of the last-mentioned issue, numbered from 154 to 300, both Inclusive, “were by the East Side Railway Company delivered to James Steel and G. A. Steel, with authority and for the sole purpose of permitting the pledge of the same as security for the loan of $80,000 made in their names for the benefit of the East Side Railway Company.” P»y each of the 300 bonds the railway company promised to pay to the bearer, or, in case the bond should be registered, then to the registered owner thereof, the sum of $1,000 in United Slates gold coin of the then standard weight and fineness, at the office of the trustee in the city of Portland on the 1st day of March, 1023, together with interest thereon at the rate of 6 per cent, per annum, payable semiannually, in like gold coin, on the 1st days of March and September in each year, on the presentation and surrender of the respective interest coupons annexed to the bonds, and to pay the same at the office of the Security Savings Sc Trust Company in Portland. The mortgage securing the bonds was duly recorded in the office of the county recorder of the county in which the property was situated. In addition to the then existing indebtedness of $83,000 due from the Si eels to the German Savings & Loan Society, that banking institution agreed to, and did, on April 1, 1893, loan them $80,000. *412The old indebtedness was on that day evidenced by a new note executed by G-. Á. and James Steel for 183,000, with interest thereon at the rate of 7 per cent, per annum, payable monthly; and for the ádditional loan of |80,000, at like interest, they also executed' their promissory note, bearing the same rate of interest. As security for the payment of these notes, both of which were made payable in San Francisco, Cal., the Steels, by instruments in writing, pledged all of the 300 bonds issued by the East Side Railway Company. The findings of the court below are to the effect that the intention of the parties was that the bonds numbered from 1 to 153, both inclusive, should be given and held as security for the $83,000 note, and that the bonds numbered from 154 to 300, both inclusive, should be given and held as security for the $80,000 note, but that by mutual mistake of the parties the reverse occurred. Each of the contracts of pledge appointed the Savings & Loan Society attorney in fact of the pledgor, with power of substitution, and the pledgee was thereby instructed, directed, and authorized to sell at any time, with or without notice, at its option, and without any demand upon the debtor for payment or increase of security, the whole or any part of the security, and to sell the same either at public or private sale, at its discretion, and to deliver the same to the purchaser or purchasers thereof; but the findings are to the effect that there was no express authority given by the East Side Railway Company to the Steels to insert those provisions in the contract of the pledge. In November, 1893, the railway company was indebted to the Northwest General Electric Company in the sum of $37,639.95 for goods, wares, and machinery sold and delivered, for which, on the 9th day of. that month, the railway company executed to the electric company its promissory note for the sum mentioned, with interest; and on the same day the railway company executed to the Commercial National Bank of Portland, Or., its promissory note for $29,289.37, with interest, for money theretofore loaned by that bank to it. On the same day the railway company executed to the electric company a mortgage upon all of its property for the security of the two last-mentioned notes and for the purpose of securing payment to the electric company of “any and all sums of money which might thereafter become due to it from the said railway company, not exceeding $25,000 in all, for apparatus, machinery, equipment, materials, and supplies” which the electric company might thereafter furnish to the railway company. The railway company was also indebted to various other persons and firms in various sums of money, upon some of which claims suits were thereafter brought, and the property of the railway company attached. Thereupon, and on the 8th day of December, 1893, the electric company commenced the present suit for the foreclosure of the second mortgage upon the property in question, namely, the mortgage executed November 9, 1893, making parties defendant thereto the East Side Railway Company and the unsecured creditors mentioned, but not making a party thereto the first mortgagee, namely, the Security Savings & Trust Company of Portland. Upon the commencement of the suit the court appointed a receiver of all of the property of the defendant *413railway company, who qualified as such receiver, and took possession of Ike "property,' and continued to bold and operate it. Being without means to defray the expense of doing so, the receiver was, by an order of the court, authorized to issue receiver’s certificates for the necessary money, which was done from time to time, and which were made a lien upon the property paramount to the lien of the mortgage. For some time the Steels paid the interest upon the eighty-three and the eighty thousand dollar notes, respectively, executed by them to the German Savings & Loan Society, and received a surrender of the appropriate interest coupons attached to the respective bonds. After a while they became unable to pay the interest, and the German Savings & Loan Society wanted the payment of both principal and interest. The Steels were making efforts in several directions to raise the money. Among others, they asked, in duly, 1897, the banking corporation of Morris & Whitehead, of Portland, to purchase the bonds of the East Side Railway Company; and at the time they furnished them a detailed statement of the company’s affairs, its earnings, expanses, and business plans. The company’s properly was still in the hands of the receiver appointed in the suit instituted by the electric company to foreclose-the second mortgage upon it. One of the Steels suggested to Morris the purchase by his firm of the electric company’s mortgage. Morris looked the property over, and talked favorably in respect to tin-proposition made to him by the Steels, but, without consummating any arrangement with them. Morris & Whitehead, on March 31, 1898, purchased of the electric company its mortgage, and were thereupon substituted as parties complainant in the suit.- In the meantime the Steels, continuing to be unable to pay the principal or interest due on the eighty-three and eighty thousand dollar notes, respectively, entered into an agreement in writing on the 7th day of May, 1897, with the Savings & Loan Society, whereby the rate of interest upon those notes was raised to 8⅞ per cent, per annum in consideration of the extension of the time of payment thereof. Time ran on, and the Steels were still unable to pay either principal or interest, and the Savings & Loan Society became desirous of collecting the amount of its loans. What it did was this: It assigned, on April 26, 1898, the two overdue notes and the bonds securing the same to one Albert Meyer. On the next day Meyer caused to he mailed to the Steels, the East Side Railway Company, and Us various creditors a demand of payment of the notes, and notice of public sale of Hie bonds to take place at 11 o’clock a. m. of the 11th day of May, 1898, at the main entrance to the Merchants’ Exchange Building on the south side of California street, between Montgomery and Leidesdorff streets, in the city and county of San Francisco, Gal., to the highest bidder for cash in United States gold coin. The notice of sale was also published in a San Francisco paper of general circulation 13 times consecutively, commencing April 27, and ending May 11. 1898, and was posted in three public places in the city of San Francisco, and was also personally served by the Portland agent of the Savings & Loan Society, B. Goldsmith, together with a demand for the payment of the principal and interest *414due on the notes, on the Steels, the railway company, and its various creditors. No payment having been made, the bonds were sold at public auction, at the time and place stated in the notice, to Morris & Whitehead, who were the highest and only bidders therefor, for |173,589. G. A., James, and Eva P. Steel were personally present at the sale. The purchasers thereupon gave Meyer their check for $10,000 “to bind the bargain,” and on the same or succeeding day paid him the balance of the purchase price, to wit, $163,589, by check drawn by Wells, Fargo <& Co. in favor of F. S. Morris, and by him indorsed to Meyer. Meyer paid the German Savings & Loan Society by his own check on the London & Paris American Bank, which was collected a day or two after the sale. The money represented by the Wells, Fargo & Co.’s check was obtained upon a short loan from Wells, Fargo & Co. to Morris & Whitehead, for which the bonds were pledged as security; and that loan was paid “a day or two after the sale,” with money borrowed by Morris <& Whitehead from the German Savings & Loan Society upon the security of the bonds, in pursuance of an arrangement made some days before the sale. Meyer, to whom the bonds and notes had been transferred by the Gemían Savings & Loan Society, transferred them on the day of the sale to Morris & Whitehead, the purchasers thereof, and reassigned the notes to the Savings & Loan Society, which, on the following day, to wit, May 12th, assigned the notes to Morris & Whitehead in consideration of the payment of $4,970.10, whicli sum was still due on the notes under the contract of May 7, 1897, providing for the increased rate of interest, after deducting- the price for which the bonds were sold. In the meantime the German Savings & Loan Society and the Security Savings & Trust Company had been made defendants to the original bill filed herein for the foreclosure of the second mortgage upon the property in question, but neither of them had answered therein, and neither of them, nor the successor of the Security Savings & Trust Company, hereinafter mentioned, ever did answer or otherwise plead to the original bill. After the purchase of the bonds by Morris & Whitehead, they caused, under and by virtue of a provision in the mortgage securing those bonds, the removal of the Security Savings & Trust Company as trustee thereunder, and the appointment in its stead of A. L. Maxwell as such trustee, who was substituted as defendant to the original bill in place of the Security Savings & Trust Company, and who, as such trustee, made demand for the payment of the interest upon the bonds which was in default, and, payment thereof being refused, he elected to declare the principal of the bonds due, and gave due notice of such election, having been theretofore requested so to do by Morris & Whitehead and the German Bank, together with the request that he proceed to enforce payment thereof. Thereupon Maxwell filed in the suit a cross bill for the foreclosure of the first mortgage, making all of the former parties to the suit parties thereto, together with the various other parties. Neither G. A. nor James Steel was made a party to either bill, and they have not become parties to the suit in any way.
*415The principal question in Oiyi-yy, <vv k>h ¡'o Ihh validity oí the ' }o of the bauds made in ⅛⅛ .Francisco. TI a cot ”t below held it ■ a.'.«Hd except to a limited£i ^>nt, saying, in its opinion:
> 1 "ilie Owmini i .'.⅞®1 ⅛ ^^^Kccieiy was not seeking- i/ > realize upon its v*vurities, but io effect' it the title of. Uie bonds lúilil by it to Mor-⅜⅛ & Whitehead. The be so called, was xioi a cash sale, as advertised, except as to which, when the amount involved is eon-Vifiered, appears to be too s^HWKnm to have operated as an inducement for what was done. The debt of the Steels,"except as to $4,©TO, ws, 0 simply transferred to Morris & Whitehead. I am satisfied that the solvency 5 of these bankers was not an inducement for the transfer. The security for the debt was he bonds. The German Savings & Loan Society was merely playing into the hands of Morris & Whitehead, and, if the former has no pecuniary share in the title derived from the sale, yet its conduct has all the con sequences of such an interest to the debtors whose property was sold. But whether the pledgee may buy at his own sale is not considered. It is enough [ 0 defeat the sale that it was contrived between the seller and buyer in order to get the pledgor’s title at a sacrifice of his interest, with that result. *) am of the opinion that the purchasers of -these bonds are duly entitled to a ctecree for the amount of the debts for which the bonds were pledged and inleivst and costs, and this conclusion is based upon the fact that the sale to Morris fc Whitehead was prearranged between the parties, that it was contrived between them as a means of acquiring the property pledged, and that it is immatoria l whether the German Savings & Loan Society have any interest in the sale or not. In reaching this conclusion I assume, from the earning capacity of ¡he railway as shown by what appears in the case, that the bonds have a vitlu* greatly in excess of the price bid for them at the sale. If this is so, it is ruu-onscionable that the mortgagors, or, what is the same thing, the other creditors, shall lose this excess by the expedient of this sale, while some ip5,000 of tht; ociginal debt remains unsatisfied in the hands of the purchasers at the naT„ If it shall turn our that the price bid is substantially all that the bond:', ar-e vorth, then the considerations upon which this decree is based will fail. Tm (hat case the sale could not have prejudiced the mortgagors and other credit 01s, but in that case the purchasers at the sale will not be prejudiced by the decree. In any event, they will have their debt and interest, whether that is íUxíl'cient to absorb the property or not; and it is all they are equitably entitled to have.”
We are unable to concur in these views of the court below. We find nothing in the record justifying the conclusion that Morris <& Whitehead, in purchasing the bonds in question, were in any way acting for the German Savings & Loan Society, or th it the savings and loan society had any interest whatever in that purchase. Those of the officers of that bank who testified in the cause testified explicitly that the bank had no such interest; and the', circumstances of the case, so far from impeaching or tending to inmoach that testimony, in our opinion strongly corroborate it. The ''bank had been trying for a long time to collect the loans. The borrowers had been unable to pay either principal or interest. Both of'them, as well as the railway company, all of wbose stock, as bus been said, they really owned, were insolvent, and hard pressed for noney. All of the property of the railway company was in the Lands of a receiver appointed by the court, who, for lack of means io operate it, had been compelled to issue, under the orders of tin court, receiver's certificates, which were made prior liens to 1lie mqrigage. Under such circumstances, what more natural than that ¡;he savings and loan society should be anxious to realize upon its loans, and to aid any one worthy of confidence found willing to buy tie bonds? Mor*416ris & Whitehead, a Portland banlanf corporation, had examined the property of the‘railway company, ai 1 no doubt satisfied itself that by judicious management the prop. Jfcjjuld be made. ‡& pay- It was a corporation of good financial ^H>g> ac-SOZuing to the evidence in the case, and one to which Wells, Fargo & Co. was willing to and did loan $163,589^^^»^ purpose of enabling rc to buy the bonds in question. It m; *P||||tid probably is, true that the bank of Wells» Fargo & Co. was ooo‘ot§ that its loan would be repaid withi n a few days by money1 w W ⅛⅛ Morris & Whitehead by. the savings and loan society. lV^or see no^linS illegal or wrong in that, if it be true. The sa>’ Itnd loan society had the legal and moral right to make such lo&n to Morris & Whitehead; and that ⅜ was to its interest to do so seems clear, for they paid on account of the purchase of the bonds |3 0,000 out of their own funds, and,: as the amount of that purchase was $4,970.10 less than the amount due upon the Steel notes, they had to and did, in order to acquire the notes as well as the bonds, pay to the Savings & Loan Society the*, additional $4,970.10. The result of the transaction, therefore, was that the 'Savings & Loan Society collected $14,970.10 in money on the eighty-three and eighty thousand dollar notes of the Steels, and got for the balance the note of a responsible banking firm, secured by precisely the same bonds. In all of this we see nothing to ¡indicate any contrivance between the savings and loan society and' Morris & Whitehead to acquire the pledgor’s title to the bonds at a sacrifice of their interest, nor, indeed, anything in any manner illegal or unconscionable. Although the contracts of hypothecation expressly authorized the savings and loan society to sell the bomjls without demand of payment and without notice, and to' make such sale either publicly or privately, personal demand of payment of the amount due upon the notes was made, and public and personal; notice was given to all the parties interested of the sale of the b.onds, and at that public sale the principal officers of the railway cbmpany and the real owners of all of its stock, as well as the makers of the notes and Eva P. Steel, were personally present to protect their interests. They could have done so by paying the amount due upon the notes, or by finding some one who would pay more for the fr >nds than they sold for. But nothing of the sort was done, and it i s evident from the record that the Steels and the railway company were wholly unable to pay the money due to the savings and loan ‘society. The contracts of hypothecation, as has been said, expressly authorized the sale of the bonds either at public or private sale. Tt is contended on the part of the appellees that, in so far as concerns the bonds numbered 154 to 300, both inclusive, claimed to havejs been the property of the railway company, such provision in the instrument of hypothecation was unauthorized; but the findings of,' the court below are to the effect that the railway company delivered to James and G-. A. Steel those bonds for the very purpose oí pledging them as security for a loan of $80,000 to be made in theii; names for the benefit of the railway company. The general authority to make such pledge carried with it the pon^r to do all things necessary or appropriate to the exercise of the power *417expressly gi^tci There nv, , ,> limitations Ruposed upon them, wad in oxee’"'-'.. tli-e contrae !’ hypothecation'in the form usual ⅛ such casas itu,»- ,/ere i n'l - within their- implied powers. Yechem, Ag. §⅛ ell, la 1 .y v. Beard, 8 How. 451, 12 L. Ed. 1151; Huntley v. ⅞⅛,⅞⅜⅛, Si ⅝ A 101; Craighead v. Peterson, 72 N. Y. 279. But, apfli ¡_ íV*i i )*v. authority cor ■ >d hy the contracts of hypothecation, He ¡aw g. ve the pledge hie power to sell the bonds pledged as st> arit mu; e the circumstme es disclosed by the record in this case. Th » j uee, as has been wi ⅝ were made payable in California, and therefore the law of California in respect to the matter governs. Andrews v. Pond, 13 Pet. 78. ,?0 L. Ed. 61; Dygert v. Trust Co., 37 C. C. A. 389, 94 Fed. 913; Lee v. Belleck, 33 N. Y. 615; Tillotson v. Tillotson, 34 Conn. 355, 307; Cf. Code Cal. §§ 2987, 3000-3002, 3010. Sections 3000-3002, 3005, and 996 of the Civil Code of California are as follows:
“Sec. 8000. When performance of the act for which a pledge ¾: Aven is due, in whole or in part, the pledgee may collect what is <ltie to him ,⅛ a sale of property pledged, subject to the rules and exceptions hereinafter 'prescribed.
“See. 3001. Before property pledged can be sold, and after performance of the act for which it is security is due, the pledgee mast demand performance thereof from the debtor, If the debtor can be found.
“Sec. 3002. A pledgee must give actual notice to the pledgor of the ,'i'Hto mid. place at which the properly pledged will be sold, at such a reasonable time before the sale as will enable the pledgor lo attend.”
“Sec. 3005. The sale by a pledgee, of property pledged, must be made by I>ublic auction, in the maimer and upon the notice to the public usual at the place of sale, in respect to auction sales of similar property; and must be for the highest obtainable price.
“Sec. 3000. A pledgee cannot sell any evidence of debt pledged to him, except the obligations of government, states, or corporations; but he may collect the same when due.”
The record in the ease shows that these provisions of the California Code were complied with on the part of the savings and loan society.
In respect to the mutual mistake stated in the findings to have been made by the parties .in pledging bonds numbered 154 to 300, both inclusive, as security for the 883,000 note, instead of the $80,000 note, it is sufficient to say that all of the bonds were alike in all respects, and under the terms of the mortgage were entitled equally to its security, and were, therefore, of the same value, as was evidenced by the sale in question, at which, although each bond was offered for sale separately and altogether, there was no difference made between the bonds in the bidding. In such case the identity of the bonds becomes immaterial. Atkins v. Gamble, 42 Cal. 86; Thompson v. Toland, 48 Cal. 116; Krouse v. Woodward, 110 Cal. 643, 42 Pac. 1085. The pledge of bonds numbered 154 to 300, both inclusive, was certainly valid to the extent of $80,000 and interest, as provided for; and as the sale disclosed no difference in the value of the bonds, and the whole of the 300 brought less by $4,970.10 than the aggregate amount due upon the two notes, it' is obvious that bonds 154 to G00. both inclusive, brought less at the sale than the amount for which they were properly pledged. We are of opinion that the record shows Morris & Whitehead to he the legal and *418equitable owners of Abe whole of the 300 bonds in suit. as they were secured by a first mortgage upon all of the property of the defendant railway company, that they -ire entitled to a decree for the full amount of the'"’ face value of the bonds, together with the interest due thereon, a nd to a decree of f oreclosure and sale of the mortgaged property a‘s against all of the defendants to the cross bill, subject to such r eceiver’s certificates as ha:re proper precedence over the mortgage lien.
The judgment is reversed, and thCprause remanded to the court below, with directions to enter a decree in accordance with the views here expressed