Appeal from the District Court of the United States for the Northern Division of the Southern District of California; Robert S. Bean, Judge.

Suit in equity by the United States against the California Midway Oil Company and others. Decree for defendants, and complainant appeals.

The United States brought a suit to enjoin waste oí tho oil contents of the northwest quarter of a section of land in Kern county, Cal., the legal title thereto being in the United States. On or about January 1, 1907, D. B. Mc-Murtry located the quarter section as an association claim, as attorney in fact for eight persons living in Chicago. In the fall oí 1908, as attorney in fact for such locators, McMurtry entered into a contract with Mrs. McLeod for the development of the quarter section, as well as tho adjoining northeast quarter, which he had also located as attorney in fact for other Chicago locators. Under the terms of the contract, Mrs. McLeod was to drill for oil on each tract, and if it proved to be oil-bearing she was to have one-half of each thereof. Subsequently the contract was modified, so that her portion of the land was to be the south 60 acres of each quarter section. Her interest became vested in the California Midway Oil Company, one of tho appellees herein. Shortly thereafter defects were discovered in the locations so made, and McMnrtry promised to remedy tho same. Later ho determined to relocate the land, and he called upon four persons, Thickens, Thorne, Powell, and Searls, who resided in New York, and who had there been associated with him in oil land and stock ventures, to secure for him four powers of attorney to locate associated mining claims of 160 acres each, and he stated to them that, if they would aid him, he would be able to recoup his losses and theirs. In pursuance of that request signatures of New York persons to four powers of attorney were obtained. One of those powers of attorney was that under which, on January 3, 1909, McMurtry relocated the quarter section in controversy hero. Those who signed it were for the most part employes of the four persons to whom McMurtry had made the request. All who signed were informed that they would not be required to expend any money. One or two of them were told that they might make some money out of it. Tho powers of attorney bore date of December 21, 1907, and they conferred power upon McMurtry to locate claims, to develop them, and to sell and dispose of them.

None of the signers knew McMurtry, nor had any communication with him. They all signed as a friendly act of accommodation to tho persons who asked them to sign. A few days after the relocation McMnrtry, as attorney in fact of the locators, agreed with the California Midway Oil Company that it should proceed with the development of the property so located. Under that agreement development was prosecuted to discovery. On May 37, 3909, Mc-Murtry as attorney in fact conveyed tho interest of the Now York locators in the entire north half of the section to McLeod, subject to the outstanding contract with the California Midway Oil Company, and McLeod agreed in writing that, if there should be discovery on either of tho quarter sections, he would make application for patent, and upon the issuance of receiver’s final receipt would convey to the locators thereof the north 100 acres of each quarter section. On December 3. 1909, McMurtry, as attorney in fact, assigned all right, title, and interest in his contracts of May 17, 3909,'and in his contracts with McLeod to O. L. Olafflin, who was McMurtry’s attorney, and on the following day Claffiin transferred the same back to McMnrtry, in his individual name. About May 30 McMurtry as attorney in fact for the New York locators made a sale of the west 40 acres of the north 300 acres of the northwest quarter to a corporation for $100,000, for which he received in cash $10,000, and a mortgage for tho remainder. Default was made in the payment of the remainder, and on November 22, 1912, that corporation conveyed the property to McMurtry in his individual name, and it so stands of record.

On August 4, 1910, a contract urns entered into between the New York locators, by McMurtry as their attorney in fact, and certain persons acting for the Associated Oil Company, reciting that they had powers of attorney from 16 named persons, that they had located the north half of section 32, and that they owned the same subject to the agreement of May 17, 1907, with McLeod; that the Thirty-Two Oil Company had an apparent interest in the property and MeMurtry had an interest in the said lands with the 16 persons who were the locators, and that MeMurtry was their attorney in fact, with the right to sell their interest in the property, and the contract provided that in consideration of $5,000 paid to MeMurtry by the agents of the Associated Oil Company he would place in escrow deeds executed by himself as attorney in fact for each 'and all of the lócators of their interest in the north 100 acres of each quarter section, except the west 40 acres of the northwest quarter, and deeds from McLeod and the Thirty-Two Oil Company and himself individually, conveying their interest in the property to said grantees; that he (MeMurtry) would proceed forthwith to obtain from the locators deeds in proper form to be recorded, also an acknowledgment that at the date of his agreement his powers of attorney were in full force and effect, also ratification of each of the locators of the execution of such deeds. The purchase price of the 160 acres in the north half of the section was $430,000, of which $255,000, with interest, was to be paid in production, and $85,000 in cash was to be deposited in escrow, and another $85,000, with interest, was to be paid within 6 months thereafter.

To carry out that agreement MeMurtry sent to each of the locators under whose power of attorney he had located the quarter section in controversy here the sum of $250, and received from each of them a receipt for that sum “in full payment for all my right, title, and interest in and to.all lands located by said L. B. MeMurtry on my behalf in Kern county, California, pursuant to a power of attorney made by myself and others to L. B. MeMurtry, bearing date the 19th day of December, 1907.” The payment to the New York locators and the presentation of a receipt'to be signed by them was the first communication that had come to them from MeMurtry since their execution of the power of attorney some three years before. Some of them had forgotten that they had signed the power of attorney. They all signed the receipts without making inquiry as to the acts of MeMurtry, and without any knowledge whatever of the source from which the money came, or the acts that had been done under the power of attorney. In August, 1911, MeMurtry organized a corporation known as the Pacific Oil Land Company, with a capital of 1,000,000 shares, of the par value of $1 each, and he subscribed for all of the shares except 3. On September 1, 1911, for himself and as attorney in fact for the New York locators, he transferred to that corporation his and their interest in the contract of August 4, 1910, together with the contract with McLeod covering the entire section. A short time thereafter MeMurtry caused to be issued 1,000 shares of the stock to each of 32 New York locators, under whose powers of attorney he had been locating lands, so that each of the New York locators of the land in controversy here received 1,000 shares of the 1,000,000 shares so subscribed by MeMurtry. It was explained to them that MeMurtry had organized the corporation for the purpose of handling the property located by him and that the shares issued to them represented their interest therein. He advised them to hold the stock as it would prove valuable. •

In December, 1913, they were informed by the secretary of the Pacific Oil Lands Qompany that the corporation had $20,000, which it wished to distribute among its stockholders, as a dividend, but that it would be necessary for them under the laws of California to send a written consent to the distribution. They accordingly signed such written consent, and each received a dividend of $20; also a statement of the Pacific Oil Lands Company’s first report to stockholders. In the spring of 1914 P. H. Searls called upon the locators of the land in controversy and offered to take up their stock in the Pacific Oil Lands Company and to pay them each $250. They accepted the offer and transferred their stock, so that out of the northwest quarter section so located in their name the New York locators each received in full of his interest therein in the aggregate the sum of $520. Each of the New York locators, except one who had died, testified as a witness for the government. Bashore said he was requested by Thickens to sign the power of attorney; that Thickens said it would mean a lot to him, as well as assist Mr. MeMurtry. “I did not hesitate to affix my signature, knowing that I would not be involved financially in any way, shape, or form; had no intention of acquiring lands for myself.” Walker also signed at the request of Thickens, as a favor to him “because he was my boss and employer.” Keenan testified that Thickens said: “I want you to give me your power of attorney, and I want Mr McMurtry to locate oil lands for us in California.” Metz testified that Thickens told him, he would probably make a lot of money in it. Naturally, he said, lie became interested and was willing to sign it. Komaine, Jr., testified that the matter was explained to him by Thickens, and that he there, upon signed the power of attorney. Walker said that Thickens told him that if he would give him a power of attorney to locate oil lands it would prove valuable. Mahr said that Thickens asked him to sign the power of attorney, and that he did so without reading if.; that he was told it was “a power of attorney to locate lands for you in California. At the time when the first $250 was paid to the locators, Thickens wrote to Walker, one of the locators: “Just a little money coming to you for your kindness in signing a paper for me three years ago.”

In explaining why 1,000 shares were issued to each of the locators, AicMwtry tesfified: “I don’t know that there was any particular rule worked out as to wliy 1,000 shares of stock were given to each of the locators. I thought that was what they were entitled fo hold. Yes; I determined the question as 1 did the amount of $250, which was paid to each of them in 1910 and 1911,"