HOUGH; Circuit Judge
(after stating the facts as above). The task presented by this appeal is to ascertain the relation of the parties to each other, and when the same was assumed; the law applicable to any relation compatible with the evidence is not doubtful. One kind of relation is fixed by the pleadings; and we agree with the trial court that plaintiffs, whether original or intervening, have not sued for damages caused by fraudulent representations, nor sought to rescind a contract. The “Syndicate agreement” is assumed or asserted to- be valid; plaintiffs intend to keep what they got under it, but that document made Megargel their trustee, who has, however, while otherwise executing his fiduciary duties, (1) deceived them in respect of the price to him of .the syndicate stock, and (2) made a secret profit out 'of such deception. Therefore the bill calls him to account for his stewardship.
[1] The action is not based on fraud, but on breach of duty; it is not described in the list Of remedies given in Heckscher v. Edenborn, 203 N. Y. at page 220, 96 N. E. 441, and is like Yale Gas, etc., Co. v. Wilcox, 64 Conn. 101, 29 Atl. 303, 25 L. R. A. 90, 42 Am. St. Rep. 159. (Eor a similar, but statutory, proceeding, see Omnium, etc., Ltd., v. Baines, [1914] 1 Ch. 332.) That breach of fiduciary duty may be and often is fraud is really immaterial in this form of action; *817but the form renders it imperative first to establish the fiduciary relation, and impose the duty before a breach can be relied on. Defendant admits that a time came when, as syndicate manager, he was plaintiffs fiduciary; but he dates such assumption of duty only from the day the syndicate was formed, and the business of “creating a market” for Gleurock stock began. What he did, or what happened before that time, is said to be something with which plaintiffs have no concern, nor right of inquiry.
[2] It being plain that in a wide sense this syndicate was an offshoot, if not a part, of the promotion or launching of the Glenrock Company, the accepted meaning'or standing of the words “promoter” and “syndicate” may be considered. Lord Justice Bowen more than 40 years ago said that “promoter” was a term, not of law, but of business, usefully summing up a number of operations familiar to the commercial world, generally those by which a corporation is brought into existence. Whaley, etc., Co. v. Green, 5 Q. B. Div. 109. Nor has it since gained any more accurate definition (Yale Gas, etc., Co. v. Wilcox, supra; Bigelow v. Old Dominion, etc., Co., 74 N. J. Eq. at page 501, 71 Atl. 153), and has been applied in Ihe western part of this country to mere speculators in mining claims (Snow v. Nelson [C. C.] 113 Fed. at page 355). Yet, loose as is the title, the duties of a fiduciary, agent, or trustee have been imposed upon its bearer. Dickerman v. Northern, etc., Co., 176 U. S. at page 204, 20 Sup. Ct. 311, 44 L. Ed. 423.
“Syndicate” is also a word of business and not of legal art. It signifies an organization “formed for some temporary purpose” (Palmer, Private Companies and Syndicates), and came into English use contemporaneously with “promoter.” Mr. Palmer" points out that such unions for speculation were frequently registered under the Companies Act of 1862, without share capital, in order to limit liability. Of the use of the word, and of registration, Erlanger v. New Sombrero, etc., Co., L. R. 3 App. Cas. 1218, is a well-known and rather early instance.
The “temporary purpose” of this syndicate was that common at present and in the United States — to pool securities, under an agreement to fake them at a price, if the public could not be persuaded to relieve the joint adventurers by paying a higher price. Between a man who forms or “promotes” such a business venture, and one who gets shareholders for a new corporation by any of the means shown in a long line of reported cases, wc perceive no legal difference whatever, and indeed identity of function between a syndicate former and a company promoter has been assumed in the most recent decisions. Heckscher v. Edenborn, supra; Sim v. Edenborn, 242 U. S. 131, 37 Sup. Ct. 36, 61 L. Ed. 199.
[3] Thus the question is reached : Did a fiduciary relation exist between subscriber and syndicate maker, between plaintiffs and Megargel, when (in legal contemplation) the latter on August 17, 1917, invited the former to come into his scheme? We have no doubt such relation arose instanter; of course, in one sense, it could not fully exist until there was a cestui as well as a trustee; but, if one asks another to trust him, he assumes the position of a trustee for many *818purposes by the act of asking. If, therefore, defendant on August 17th assumed a position of trust quoad possible subscribers now represented hy these appellants, what was he in duty bound to tell them? Undoubtedly that what his syndicate would buy he himself had for sale, and that was done; we think the wording of the agreement plain on this point.
[4,5] But was defendant bound to state either what he had agreed to pay for what he wished to sell, or the bald fact that he would profit.by the sale? This is the crux of the case, and here we differ with the learned trial court. If it was defendant’s duty to disclose, or if he was by law under a disability to take a secret profit, it was immaterial under this bill whelher he also represented orally or otherwise that he was putting the stock to the syndicate at what it cost him. It was also immaterial whether a subscriber carefully examined and drew inferences from the syndicate agreement or not; he signed it, and is bound by its terms, and by this action recognizes it as his agreement. What he complains of, and all he complains of, is Me-gargel’s lack of good faith, or breach of duty (in effect the same thing), in carrying out the agreement.
[S] That defendant did not disclose is admitted, but we may go further and hold, without analyzing the agreement phrase by phrase, that the document contains an apparatus of words which diverts attention from the thought of vendor's profit, and creates by suggestion the belief, so far as this particular lot of 100,000 shares is concerned, that defendant was coming into the syndicate on an equality with all others, but hoped to make money by other purchases of stock. Such a document especially invites application of the rule that a writing is to be interpreted in the sense in which the maker knew or had reason to know if would be understood by the party to whom he tendered it. Ryan v. Ohmer, 244 Fed. 34, 156 C. C. A. 459; Moran v. Standard Oil Co., 211 N. Y. 196, 105 N. E. 217. Therefore we hold that defendant ex industria concealed his expected profit at a time — i. e., August 17, 1917 — when he asked to be the trustee for every party plaintiff in this action.
[7] Thus defendant’s position is seen to be that one who says to his invitees, “I ask you to trust me to buy from myself with your money, and for your ultimate account, but presently for an entity of a syndicate which I shall manage, in the hope of'profit for all of us,” is under no duty to say more. This is a question of law, yet the law does not offer, and never has made, a list of the things promoters can do and cannot do. Every act complained of is to be tested by asking whether the relations between the promoter-, and the birth, formation, and floating of the venture he promotes, are such as to render- it contrary to good faith that the promoter should derive a secret profit from the promotion. This is Ford Justice Bowen’s formulation of the rule in Whaley, etc., Co. v. Green, supra, and it has not been improved on. It has been often said (e. g., per Pitney, then Chancellor, in Bigelow v. Old Dominion, etc., Co., supra, 74 N. J. Eq. at page 502, 71 Atl. 153) that fraud need not be shown “to disentitle the promoter to his secret profit,” and the reason- for it is that good faith often fails, where fraud is *819neither contemplated nor attempted; lack of good faith is often no more than something judicially deemed against public policy.
[8] But defendant, if he had no shares of Glenroclc on August 17th, had agreed to take and pay for them; wherefore it is urged that, even, admitting his agency or trusteeship, and a status equivalent to that of a promoter, he still had good right to sell his own property to his syndicate at any price he could get, if the identity of the vendor was stated. The right contended for exists, and, though often stated, never better than by James, L. J., in Cover’s Case, L. R. 1 Ch. Div. at page 187, and by Sbarswood, J., in Densmore Oil Co. v. Densmore, 64 Pa. 43, who agree that “in point of law” a man may sell his own property to an entity he himself forms, just as he may sell to another the right to become his partner; it being assumed that in the “original purchase there was no confidential relation” affecting the seller with a trust. In such a transaction the parties, it is said, “deal at arm’s length,” and the vendees “must exercise their owri judgment”; in other words, “caveat'emptor” applies.
This is all true, not because the thing sold belonged to the promoter, but because such ownership stood the test of good faith. The time of acquisition has been considered; and in Highway, etc., Co. v. Ellis, 7 Ont. L. R. 504 (a case much pressed on us by defendant), the court declined -to hold a promoter because it had not been shown that “at or before” the date of purchase the promoter had invited the public to come in.
[9] Whether the inquiry be, were these parties dealing at arm’s length? or was there a confidential relation imposed on this defendant at his date of purchase? the answer is unfavorable to defendant. They were certainly not dealing at arm’s length, for that phrase implies no lodging of discretion by one party in the other, and here Megargel had absolute discretion whether to buy from himself or not. As for the existence of a confidential relation at the time of purchase, it is to be remembered that the Collins-Megargel contract was made in contemplation of this syndicate, both were parts of the launching of the Glenroclc Company, and the creation of the company (and therefore of stock) was simultaneous with the syndicate agreement, whereof one object was to get the money wherewith to pay for the stock.
Time here, merely as time, is not of the essence, and we think it clearly shown that the object of the contract was to give a coating of legality to a preconceived intent (1) immediately to sell to the syndicate at a profit of 100 per cent., and (2) to conceal the profit from the syndicators. The profit plainly depended on successful concealment; the trusteeship was sought to get the profit. Under such facts, the whole transaction must be regarded as unitary, and defendant held as a fiduciary ab initio, because he agreed to take stock only to pass it along to himself as trustee. Since liability grows out of duties equitably imposed by a voluntarily assumed relation, it may be said generally that one who seeks or creates an agency or trusteeship or any fiduciary position, for the purpose and with the intent of secretly profiting therefrom, is not acting in good faith, and from the time he forms the intent occupies such a position “that any profits resulting *820from his dealings with” the concern whose agency he seeks must be accounted for. McKay’s Case, L. R. 2 Ch. Div. 1; and compare statement of general rule in United States v. Carter, 217 U. S. at page 306 (30 Sup. Ct. 515, 54 L. Ed. 769, 19 Ann. Cas. 594). If defendant’s fiduciary position be taken to date from the launching of the syndicate on August 17th, or even from date of subscriptions, we do not overlook the strong argument:, for appellants based on the language of the agreement, but have preferred the broader ground above stated.
[10-12] There remains the cuestión of estoppel urged against such of the present appellants as consented to go into the inchoate and futile second syndicate, after learning of defendant’s secret profit. Estoppel is mostly a question of intent (Dorrance v. Barber [C. C. A.] 262 Fed. at page 492), and cer tainly no intent to ratify their trustee’s breach has been shown in respect of these appellants. But on the holding now made, that these ap pellants were cestuis que trustent and were dealing with their trustee, it is plain law that a cestui who has been wronged by his trustee can only be held to have ratified when he not only knows the facts, but is informed of his rights under the law. In re Long Island, etc., Co., 92 App. Div. 1, 87 N. Y. Supp. 65. The present case falls far short of meeting this requirement.
So far as it affects the present appellants, the decree appealed from is reversed, and the cause remanded for further proceedings not inconsistent with this opinion. Appellants are entitled to an accounting, upon which the defendant musí be surcharged with $3.50 in respect of each share accounted for.
[13] But, since the contract has not been rescinded, we see no reason why'those appellants who withdrew their stock from the syndicate on paying a dollar a share over the syndicate price should not be held to their bargain. They agreed to contribute that dollar to the funds of the joint adventure, it was the price of escaping further loss or foregoing gain, as the case might be, and the sum so paid they cannot complain of. The reasons for granting an accounting in addition to those heretofore indica Led are that the general adventure of the syndicate ended by lapse of time and the account proffered by the defendants and in evidence before us is insufficient, even without any reference to the matter of secret profits. Marvin v. Brooks, 94 N. Y. 71.
The appealing plaintiffs and appealing interveners will each recover one bill of costs in this cour i,. No direction is given as to the costs of the District Court.