taking and reporting the proof. If the court had been clothed with power to order the appellants to procure a transcript of the evidence from the stenographer, there would be force in the contention the amount to be received by the stenographer should have been fixed in the order; that the appellants should not have been left wholly in the power of the stenographer as to the amount to be paid. The sense of justice is not always strong enough to moderate and restrain the desire for gain; but the stenographer is not an officer of the court,-had no legal connection with the court, the master, or the case. The law has not fixed his compensation, or authorized the court to do so, and the order in its entirety must be reversed. Counsel for appellee says: "The practice before the master uniformly contemplates the reduction of the testimony to writing by a stenographer. The stenographers do not work for nothing. When a party to litigation calls witnesses and examines them at length, with knowledge that their testimony is to be taken by the stenographer, he must expect that, before a master can consider the evidence, it shall be presented to him in writing. The master cannot make up his report until the evidence is before him in written form." The duty of a master is to have the witnesses brought before him and examined in his presence. The testimony of the witnesses is presented to the master orally, and is thus before him for consideration. His duty is to reduce it to writing, or have it so reduced to writing, and report it to the court. It would seem, from the statements of counsel for appellee, it has become the practice of masters in Cook county to commit the duty of hearing the witnesses testify to a stenographer,-not in the presence and hearing of the master,-and of requiring the parties to produce a transcript of the testimony so taken for the consideration of the master, in order he may thereby be informed as to what has been testified to, and consider and weigh the testimony as disclosed by the transcript, and make his findings from such transcript, and use such transcript for his report of the testimony, and that the practice further is to impose upon suitors the burden of compensating the stenographer for doing work which it is the duty of the master to do, and for which the master also collects the full allowance authorized by the statute to be paid for such service. If such practice has obtained, it should no longer be tolerated. When the order of reference requires no more than that the master shall take and report the evidence, the evil of the practice is the illegal exaction of the sum of money demanded from suitors as for the compensation of the stenographer, which, if not submitted to, shall, as counsel for appellee contends, be enforced by the denial of a hearing in the courts. But the practice is fraught with another and not less serious evil when indulged in a case where, as here, the order of reference requires the master shall also make report of his conclusions of law and fact. In order to discharge the duty of arriving at conclusions as to the facts, the master should see the witnesses and hear them testify. The appearance of a witness; his demeanor and bearing on the witness stand; his replies, whether frank and open, or reluctant and evasive; his manner of expressing himself, whether moderate, dignified, and respectful, or extravagant, impertinent, and reckless, are, it was said in Railroad Co. v. Ogle, 92 Ill. 353, always of vital importance in determining the credit to be given to the testimony of the witness. We have frequently held an opportunity to see the witnesses and hear them testify furnished superior facilities for arriving at correct conclusions as to the credibility of the witnesses, and the weight and value of the testimony given by them, and upon that ground have, as a general rule, accepted findings based upon such a hearing as more reliable than conclusions to be drawn by us from mere transcripts of the testimony of the witnesses as preserved in the record for our inspection. In 17 Enc. Pl. & Prac. 1028, it is said: "One of the most important duties and powers of the referee is to hear the parties and such evidence as may be presented bearing upon the issues involved." The order entered by the court, on the motion of the appellee, that the master should not consider the testimony which had been taken before him in behalf of the appellants unless the appellants should procure and submit to the master a stenographer's transcript of the said testimony, should not have been entered, but the motion should have been denied. The action of the master in considering only the testimony of the appellee, and forming his conclusions therefrom, should not have been approved by the court, but the objections and exceptions in that respect presented to the report should have been sustained. It was the right of the master to demand compensation for taking and reporting the proof at the statutory rate of 15 cents per 100 words. For examining the questions of law and fact, and reporting his conclusions thereon, the master was entitled to such compensation as the court should deem just; that is, such amount as the court, upon consideration of such services, should judicially determine to be just and reasonable, and should order to be paid. The master cannot arbitrarily fix upon an amount to be paid him as his compensation for examining questions of fact and reporting his conclusions, but, before he is entitled to demand the parties, or either of them, shall compensate him in any sum for such services, it is his duty to have the court determine the amount he is justly entitled to receive for such services. In the determination of that question the parties are entitled to be heard. The hearing should be had after the master has considered the evidence, made his finding of law and fact, and completed his report, so that it is ready to be filed on payment of the amount the court finds should be paid for such services, for the reason an inspection of the report is necessary to enable the court to ascertain and determine as to the just compensation to be paid the master, and by whom it shall be paid. The course is desirable for the further reason, before the master has acted he is, in a sense, clothed with power to declare judgment on the rights and interests of the parties, and their condition and relation to the master is such they should not then be required to accede to or contest his demands for services to be rendered in the matter of deciding for or against them. The report in this case as to the fees and charges of the master is as follows: "Master's fee, this report, $50." This mode of reporting fees and charges can be easily made a cover for illegal and oppressive exactions. An itemized statement of services rendered, and the fees allowed therefor by the statute, should be made, and if services are rendered for which the fees are not fixed by the statute, but are left to be determined by the chancellor, the report should state such service, and the action of the court in the matter of the master's compensation therefor, and also should show whether such costs had been paid, and, if paid, by whom. It is urged it does not appear from the record, otherwise than from the statements in the exceptions to the report of the master, that the witnesses named in such exceptions gave testimony before the master, or that the master did not consider all the testimony produced by the appellants on the hearing before the master. The court, on the motion of the appellee, ordered that the appellants should, on or before a day named, submit to the master a stenographer's transcript of the evidence taken on behalf of said appellants, and that in default of compliance with such order the master should make up and return his report upon the evidence appearing from transcripts of stenographer's notes submitted to him. This order clearly established that the testimony of witnesses produced by appellants had been heard and taken down in shorthand. The master's report contains no testimony taken on behalf of appellants. The certificate attached by the master to his report states, in express terms, the report contained all the evidence "submitted" to him and on which he acted, and that such evidence was that only which had been produced by and on behalf of appellee. That the master did not regard the testimony of witnesses taken under the order of reference, but not transcribed into longhand, as "submitted," and that he excluded such testimony from his report, and from consideration the testimony which the appellants produced before him, but did not cause to be transcribed into longhand, is too clear to admit of doubt or require discussion. It is urged that the exceptions to the action and report of the master should have been supported by a showing of the testi mony on behalf of the appellants which the exceptions allege was erroneously excluded from the report. This testimony had been produced before the master. It was the duty of the master to have embraced it within his report, as a proper part of the record of the cause. It was omitted from the report, and excluded from consideration, under authority of an order which the appellee procured to be improperly entered. It was enough for the appellants to show that the master had thus omitted the testimony produced in their behalf. On such showing the report should have been disapproved, and the master ordered to make report of the testimony produced before him. The judgment of the appellate court and the decree of the circuit court are each reversed, and the cause will be remanded to the circuit court, with directions to deny the motion entered by appellee to require the appellants to procure and submit to the master transcripts of the testimony produced before the master by the appellants, and to take such further proceedings in the cause as to justice and equity shall appertain. Reversed and remanded, with directions. (176 Mass. 310) HAYWARD v. LEESON. SAME v. HOPEWELL. (Supreme Judicial Court of Massachusetts. Suffolk. June 15, 1900.) PROF CORPORATIONS-PROMOTERS — SECRET 1. Promoters of a corporation, subsequent to the creation thereof, and while they were the sole stockholders, voted to issue its corporate stock to themselves in payment for serv ices rendered in securing options on land, which they assigned to the corporation. The stock so issued equalled the estimated profits to be derived from such options. Thereafter the promoters invited the public to subscribe to the stock, without disclosing the facts as to such stock to the subscribers, or getting their consent to the payment of such remuneration. Held, they are guilty of a fraud, and the company can, without returning the lands acquired under the options, maintain an action for the recovery of such stock, or damages for the loss thereof. 2. Promoters of a corporation, who have in curred expenses and paid out money in procuring options for the benefit of the prospective corporation, are entitled to reimbursement therefor on creation of the corporation. 3. Persons who were promoters of a corpora tion, and who, while they were the sole stockholders, procured the issuance to themselves of shares of the capital stock of the corporation in payment of secret profits made by them from the sale of property owned by them to the corporation, may be compelled to account for the shares so received, with dividends thereon received by them, or the proceeds of a sale thereof by them, if sold, with interest from the cate of the sale, or for the fair market value of the stock at the time of its issuance, or, if it ad no market value at the time of issuance. for the reason that the corporation was not ret launched, then the value at the time a market value may be found to have been established. 4. A receiver of an insolvent foreign corporation cannot maintain an action in his own name against persons who were promoters of the corporation, to recover secret profits made by them out of the sale of property owned by them to the corporation; but such action should be brought in the name of the corporation, though the receiver was, by the order appointing him, directed to collect and take possession of the assets of the corporation, and by a subsequent order of the court directed to prosecute an action for the recovery of such secret profits, either in his own name, or in the name of the insolvent corporation, as he might be advised. 5. Where a receivership of an insolvent corporation was, by an order of the court, made to extend to a suit by the trustee in a trust deed on corporation property to foreclose the trust deed, as well as to a suit by creditors to recover secret profits made by promoters of the corporation, it was proper, after the performance of the decree directing foreclosure, to make an order directing that the trustee should not thereafter be responsible for any costs incurred in prosecuting the creditors' suit for secret profits, and limiting the right to participate in the benefits of such suit to those creditors who filed security for costs. 6. In a suit by an insolvent foreign corporation against residents of the state to recover secret profits made by defendants while promoters of the corporation, the question of whether or not persons at whose instance the suit is being prosecuted are creditors of the corporation is immaterial, since such question is to be determined by the court having jurisdiction of the insolvent corporation, and cannot be raised collaterally. Report from superior court, Suffolk county; James B. Richardson, Judge. Actions by one Hayward, as receiver of the East Tennessee Land Company, against one Leeson and one Hopewell. Findings of fact were made, and questions of law arising thereon were reserved. Decrees in favor of plaintiff ordered on substitution of insolvent corporation as party plaintiff. G. W. Easley, W. H. Russell, W. B. Winslow, and Lewis G. Farmer, for complainant. Alfred Hemenway and I. R. Clark, for defendants. LORING, J. These two cases were heard together in the superior court, certain findings on the material facts were made, which are set forth in a report, and the questions of law arising thereon were reserved for this court. The suits were begun by the receiver of the East Tennessee Land Company, an insolvent corporation, to recover from the defendants secret profits made by them as promoters of that company. By a confidential circular dated March 25, 1889, the Phoenix Land Company proposed to the defendants and eight other persons that they should associate themselves together as the Syndicate of Ten, to advance to the Phoenix Land Company from $15,000 to $30,000, which should be used in obtaining options on some 225,000 to 300,000 acres of land in three specified counties in the state of Tennessee. These lands were stated in the circular to be underlaid in part with iron and in part with 57 N.E.-42 coal, to be well wooded, to have a soil or fair agricultural value, and to have the most healthful average climate of the South, and therefore appropriate for a health resort for the South in summer and for the North in winter; that the price for which they could be obtained was about $800,000, to which should be added $100,000 for possible expenses, and that they were really worth $1,500,000, showing a profit of $600,000. It was proposed that options on these lands should be obtained in the name of the Phoenix Land Company, and when the options were obtained a thorough investigation should be made, and the opinion of an expert obtained as to their value; that the Phoenix Land Company and the Syndicate of Ten should then organize a corporation, and, through subscriptions to its capital stock made by the public and secured by means of a prospectus, the corporation would be able to, and should, buy the options at a price fixed by the two parties to the enterprise, the Phoenix Land Company, and the Syndicate of Ten, and the net profits, after paying all actual expenses incurred, should be divided between the two. The Phoenix Land Company was a corporation organized under the laws of the state of Tennessee on March 15, 1889,-just 10 days before the date of the circular mentioned above,-by Frederick Gates, his son, R. W. Gates, his two partners in the real-estate business at Chattanooga, A. W. Sidebottom and O. F. Jaynes, together with one Alphonso A. Hopkins, of Elmira, in the state of New York. These five men were all the incorporators, directors, or subscribers to stock in said corpora tion, and "it does not appear that any stock of said Phoenix Land Company was actually issued, or that it had any paid-up capital stock at any time, or that it owned any land." The defendants, together with eight other persons, accepted this proposal, and an agreement between the Syndicate of Ten and the Phoenix Land Company was completed May 6, 1889. This agreement is spoken of in the report as "Paper No. 31," and as the "Agreement of March 25, 1889," and it included a paper referred to in the report as the "Plan More in Detail." The plan laid out in this agreement was substantially carried into effect. It was departed from in this: that the parties organized the corporation, which was to purchase the options from them at an advance when they had obtained options on about one-third of the lands which they proposed the company should ultimately own, in place of waiting until options on all the lands had been secured. The certificate of incorporation of the new company was issued on May 25, 1889, and its name was the East Tennessee Land Company. The purchase price of the land on which the parties had then secured options was $322,694, of which the Phoenix Land Company had paid $6,008, leaving $316,CSG to be paid. On June 6th the incor porators of the Phoenix Land Company subscribed individually to shares in the East Tennessee Land Company to the amount of $250,000, par value. The members of the Syndicate of Ten also subscribed to shares to the same amount, and the Phoenix Land Company, in its corporate name, subscribed to shares to the amount of $200,000, par value. In addition, shares amounting to $10,000 were subscribed by one Mason, in whose name some of the options subsequently secured were taken. There were 13 incorporators of the East Tennessee Land Company. Gates and one of his associates were 2. Ten of the members of the Syndicate of Ten, together with the said Mason, made the 13. It appears that one of the original members of the Syndicate of Ten divided his interest in two, so that there were ultimately 11 members in the Syndicate of Ten; 2 of them having a half share each. On June 10, 1889, the first meeting of the stockholders of the East Tennessee Land Company was held, and all the incorporators and stockholders were present in person or by proxy. At this meeting it was voted that the corporation should make a contract with the Phoenix Land Company whereby, in consideration of the Phoenix Land Company's assigning all options then held or thereafter acquired by it, and of its agreeing to secure further options at the expense of the East Tennessee Land Company during the ensuing six months, the East Tennessee Land Company agreed (1) to pay all expenses of the Phoenix Land Company in procuring further options under the contract; (2) to pay all sums due as purchase money under the options assigned to it, whether then owned or thereafter acquired; and (3) to issue to the Phoenix Land Company paid-up shares in its capital stock to the amount of $700,000. This contract was executed on the next day, June 11, 1889. The stockholders also passed a resolution instructing the secretary, on this contract being executed by the Phoenix Land Company, to issue to it paid-up shares to the amount of $200,000, par value, and to issue such shares to the amount of $500,000, par value, to persons presenting orders therefor from the Phoenix Land Company, charging the same to the Phoenix Land Company. On or about July 3, 1889, Gates and his associates in the Phoenix Land Company presented orders from the Phoenix Land Company for shares to the amount of $250,000, and certificates therefor were issued to them. At the same time the defendants, with their associates in the Syndicate of Ten, presented orders for the issue to them of shares to the amount of $250,000, and certificates therefor were issued to them. The Phoenix Land Company did not originally take out certificates for the $200,000 of shares which were to be issued to it, but they were subsequently issued from time to time to persons to whom they were sold by it. In December, 1889, the East Tennessee Land Company issued a prospectus inviting subscriptions to the capital stock of the corporation. In this prospectus it is stated, among other things, that: "The capital stock of this company represents actual value, without inflation, but does not approximate the entire value of the properties on which it is based. It was the intention of the projectors and incorporators to shape this enterprise so that its stock should be as solid as that of a national bank. Over half a million dollars of its capital were subscribed before the company's organization, at par. Subscriptions for the remainder are now solicited." And no other reference was made to the fact that the $700,000 of paid-up shares in question had been subscribed for, and no statement was made as to the way in which those $700,000 of shares had been paid for and issued. "Large tracts of land were, in 1889, 1890, 1891, 1892, purchased by the East Tennessee Land Company, * * and during said years it had laid out and made streets on such lands purchased by it, erected buildings, and started manufacturing industries; so that, where there was a population of less than one hundred, and three or four poor buildings, on June 1, 1889, there was on June 1, 1893, a population of about four thousand, and several hundred buildings." "The amount of stock issued by the East Tennessee Land Company, in all, to subscribers and purchasers, was approximately two million dollars, par value, including the $700,000 issued" under the contract of June 11th. The East Tennessee Land Company also issued its mortgage bonds, dated October 1, 1890, to the amount of $1,000,000. On November 18, 1893, one Schumacher filed a bill in equity in the circuit court of the United States for the Southern division of the Eastern district of Tennessee, in behalf of himself and all other unsecured creditors of the East Tennessee Land Company, alleging that the company was insolvent, and praying that its property might be realized, and the proceeds distributed among its creditors. In this suit receivers were appointed to take possession of all the property of the corporation. The Central Trust Company of New York, the trustee named in the mortgage given to secure the bonds of the East Tennessee Land Company, filed a bill to foreclose that mortgage on March 11, 1894, the two causes were consolidated, and the receivership was extended to the consolidated cause. The consolidated cause was referred to a master. Upon the coming in of the master's report a decree was entered on February 27, 1897, establishing the validity of the mortgage, ascertaining the debts thereby secured and the other debts of the corporation, directing the property of the corporation to be sold, and decreeing the order of distribution of the proceeds derived therefrom. By this decree it was found that the debt of the East Tennessee Land Company at that time was as follows: (1) Mortgage debt, $1,164,836.58; (2) vendors' lien on company's land, $165,233.81; (3) secured debt, $202,409.09, and unsecured debt, $224,818.04; amounting to $1,757,297.52, and, in addition, $9,631.10 due on receiver's certificates issued to raise money to pay taxes. The report on which this case comes up from the superior court states that the gross sum realized by the sale of the property of the East Tennessee Land Company under the decree of February 27, 1897, was $125,372.50. On May 20, 1895, an order was made in the consolidated cause directing the receivers to institute certain proceedings, and, among others, the two suits now before this court. The prosecution of these suits was subsequently suspended by order of the court, but on July 1, 1897, an order was made directing the receiver to proceed with the prosecution thereof. Stripped of the surroundings which tend to obscure its real nature, the transaction in which the defendants took part was this: Gates and his four associates, and the defendants and their nine associates, believing that a tract of some 225,000 to 300,000 acres of land in Tennessee had natural resources which could be developed at a great profit, agreed to join themselves together to secure options on the land, and then organized a corporation which was to buy the options of them at a profit. This profit, after paying all actual expenses incurred in procuring the options and organizing the corporation, was to be divided equally between Gates and his associates, operating under the name of the Phoenix Land Company, and the defendants and their associates, operating as the Syndicate of Ten. In this joint adventure Gates and his associates contributed their information as to the land, and the defendants and their associates contributed the money ($15,000 to $30,000) to be advanced for the expenses of the enterprise, until the corporation to be organized was organized and was in funds, when these advances were to be repaid by it. It was stated in the agreement providing for this joint adventure that the profit which they would secure from the corporation for the transfer of these options would be some $700,000; the cost of the lands being estimated to be $900.000, including $100,000 for expenses, and the value of the lands to the corporation being stated to be $1,500, 000. If the $100,000 of expenses included in the $900,000 were repaid to them, the difference between the two (that is to say, the net profit to the promoters of the corporation) would be $700,000. It was also agreed that "at least five-sixths of its net profits shall be taken by each of these two contracting parties in the stock of the new corporation." The only particulars in which the promoters departed from this plan, in carrying it into effect, were that they organized the corporation when only one-third of the options contemplated had been secured, and that they then issued to themselves $700,000 of paid-up stock of the corporation, as the net profits which they were to make in the transaction. Nominally, this $700,000 of paidup stock was issued in payment for options then owned by the Phoenix Land Company, on which it had paid $6,000, and the agreement of that company to secure further options, during a period of six months, at the expense of the new corporation. Really, this $700,000 of paid-up stock was issued to the promoters as remuneration for their services as promoters, or, as it is termed in the report of the superior court, for the net profits which it was arranged in the agreement between the Phoenix Land Company and the Syndicate of Ten should be divided equally between the two. The twenty-first finding of the superior court is explicit on this point. It is, so far as material here, as follows: "The sum named, $700,000, was not arrived at by any appraisal or attempted appraisal or valuation of any property, options, or contracts, or title bonds, etc., which the Phoenix Land Company had. * Said large sum was named as a consideration that it might be enough to include the 'profits' mentioned or contemplated in said paper marked 'No. 31,' and especially in clause 3 of the Plan More in Detail; and the shares received by all the said syndicate members and some others on July 3d were then really understood to be the profits or 'net profits' mentioned in the ninth clause of said paper marked 'No. 31,' and in the third and sixth clauses of the Plan More in Detail, annexed thereto, which by that agreement were to be divided between the ten syndicate members and the Phoenix Land Company; and this, also, was known to all the then stockholders of the East Tennessee Land Company, to wit, the thirteen directors of the East Tennessee Land Company and the officers of the Phoenix Land Company." The paper referred to in the report as paper marked "No. 31," and the Plan More in Detail, annexed thereto, make up the agreement between Gates and his associates and the defendants and their associates, which was finally completed on May 6, 1889. The defendants rely in this connection upon two of the findings set forth in the report, namely: (1) That the vote authorizing the contract of June 11th was passed, "and the contract executed by which the East Tennessee Land Company agreed to pay said $700,000 for the lands, options, contracts, and title bonds of the Phoenix Land Company, with and upon the theory and belief, under advice of competent counsel practicing in Tennessee to that effect, that it would satisfy the laws of Tennessee, both as to the payment in of the capital of said corporation, and would. by orders of the Phoenix Land Company, be a proper way and method of settling for the shares of stock which each of the defendants and others subscribed for and got." And (2) "I do not find that the defendants, or |