59 Me. 277 | Me. | 1871
A trustee is one in whom property is vested in trust for others. Every person is to be deemed a trustee to whom the business and interests of others are confided, and to whom the management of their affairs is intrusted. The general rule is that a trustee, so far as the trust extends, cam never become a purchaser of the property embraced within the trust save Avith the consent of all parties interested. The underlying principle is that no man can serirn two masters. He who is acting for others cannot be permitted to act adversely to his principals. The agent to sell cannot become a purchaser of that which he is the agent to sell, for his position as selling agent is adverse to and inconsistent with that of a purchaser. So, the agent to purchase, cannot at the same time occupy the position of a seller. It is not that in particular instances the sale or the purchase may not be reasonable. But to avoid temptation the agent to sell is disqualified from purchasing and the agent to .purchase from selling. In all such contracts the sales or the purchases may be set aside by him for Avhom such agent is acting. The cestui que trust may confirm all such sales or purchases if he deems it for his interest. The affirmance or disaffirmance rests with him and the trustee Avhen buying trust property from or selling it to himself, must assume the risk of hav
The rule of equity is liberal, embracing within its purview all fiduciary relations, as those of principal and agent, attorney and client, solicitors, executors, guardians, etc. .
The president and directors of a corporation must be held as occupying a fiduciary relation to the stockholders for and in behalf of whom they act. “ The relation between the directors of a corporation and its stockholders,” observes Johnson, J., in Butts v. Wood, 38 Barb. 188, “is that of trustee and cestui que trust.” “ The directors,” remarks Romilly, M. R., in the York & Midland Railway Co. v. Hudson, 19 Eng. L. & Eq. 365, “ are persons selected to manage the business of the company for the benefit of the shareholders’. It is an office of trust, which if they undertake it is their duty to perform fully and entirely.” Persons, who become directors and managers of a corporation, place themselves in the situation of trustees; and £he relation of trustees and eestuis que trust, is thereby created between them and the stockholders. Scott v. Depeyster, 1 Edw. Ch. 513; Verplanck v. Mercantile Ins. Co., 1 Edw. Ch. 85. All acts done by the directors officially should be for the .interests of the eestuis que trust. Holding a fiduciary relation they cannot be permitted to acquire interests adverse to such relation.
The bill alleges that “ at a meeting of the directors of said company (the E. & N. A. Railway Co.) holden on the 25th day of August, 1865, a contract previously made between said company and a certain firm under the name of Pierce & Blaisdell, and signed by said' defendant, as president of said company, and by said Pierce & Blaisdell, for the construction of said railroad, was approved, adopted, and confirmed. That said Pierce & Blaisdell did proceed under said contract in the construction of said railroad and received large sums of money under the same contract,” and “ that there was an agreement between said defendant while he was president and director as aforesaid, and said firm of Pierce & Blaisdell, or one of the members of said firm, that said defendant should receive a large sum of money for or on account of said eon-
To this portion of the bill the defendant has demurred, thereby admitting, for the purposes of the present argument, his interest in the contract of Pierce & Blaisdell with the corporation of which he was president and a director, made when he was acting as such and in the profits of which he was a participant while holding those positions.
As the agent to sell cannot purchase what he is to sell, nor the agent to purchase buy of himself, so the agent to contract cannot as agent contract with himself as principal. The interest of the parties to a contract, whether of purchase, a sale, or for work or labor, are adverse and inconsistent with each other. It is the duty of the directors of a corporation to act for the best interests of such corporation. If a director be a party to a contract entered into with himself, his duty as an officer is in conflict with his interests as an individual. This is equally so, whether he enters into the contract in its inception or subsequently acquires an ' interest in it. If he enters originally into the contract as director with himself as a party, it is not difficult to perceive who would have an advantage in the bargain. If he subsequently becomes a partner he place shim-self in a position, in which, when any questions arise as to its performance his interest as a party to the contract conflicts with his duty as an officer. The general rule is, that directors cannot legitimately acquire'an interest adverse to the’corporation, and that if they purchase any claim against the company it is in trust for the company.
In the Great Luxemburgh Railway Co. v. Magenay, 25 Beavan, 586, the Master of the Bolls says, “ I have, upon various occasions, stated what I considered to be the duties and functions of a director of a joint stock company. He is, in point of fact, not merely a director, but he also fills the character of a trustee for the shareholders, and he is, in regard to all matters entered into in their behalf, to be treated as an agent; therefore there'attaches to a director,
In Benson v. Heathern, 1 Y. & Coll. 326, the defendant being director of a joint stock company, established for the building, purchasing, hiring, and employment of steam vessels, purchases a vessel for ¿£1340, and after sells it to the company, as from a stranger, for ¿£1500, charging the company with commission at ¿£1 per cent, the broker’s earnest-money and the expenses of a bill of sale to himself, there being but one bill of sale. It was held that such a transaction could not stand in equity. In Flint & R. R. Co. v. Dewey, 14 Mich. 477, it appeared that the defendant, the secretary, and another director had been appointed a committee by the company for building and equipping the road. The committee entered into a preliminary contract with a certain party and on the same day that party assigned to the defendant secretary three-eighths of said agreement and four-tenths of a contract to be thereafter entered into; also, providing that they should be at three-eighths the expense of negotiating the bonds of the company which were to be
The demurrer admits every fact not. answered to which is set forth in the bill.
It is, then, for the defendant to show that the general principles' applicable to persons holding fiduciary relations are not to control in this particular case.
The demurrer, as the case stands, must be overruled, and the defendant must answer to that portion of the bill to which the de- . murrer relates. When this is done and the proof is taken, the case will be ready for hearing on bill, answer, and proof.
Demurrer overruled.