81 N.J. Eq. 344 | New York Court of Chancery | 1913
I am unable to doubt the accuracy of the conclusion stated by me tentatively at the final hearing as follows: “My present view is that a company holding a property in trust for purposes of sale would have no right, power or authority to pay commissions to a member of its board for finding a purchaser.”
It is now urged, in support of the right, that the contract for the payment oE commissions was made by a majority of the board of directors with one of its members, and that any open and fair contract so made may be enforced against the corporation. In support of this contention, the text of 10 Cyc. (at pp. 781, 794) are cited. The text cited (at p. 791T) is as follows:
“Directors are not disabled from entering into contracts with the corporation, provided there are enough directors on the other side of the contract to make a quorum, and provided the contract is open, fair, and honest.”
The text at page 781 is to the same effect.
The text above quoted is not a correct statement of the law of this state.
The relation of a trustee to his cestui que trust touching trust property is essentially the same. As against the will of the cestui que trust the trustee cannot contract with himself touching the trust property. Staats v. Bergen, 17 N. J. Eq. (2 C. E. Gr.) 554.
Under the trust which was assumed by defendant corporation it became the duty of that corporation to find an advantageous purchaser of the property of its cestui que trust. As that corporation could only act through its board, that duty necessarily belonged to the board and to each member of the board. In finding a purchaser for the trust property a member of the board did no more than perform his plain duty as a director — a duty which. he owed alike to the corporation and to the cestui que trust of the corporation which he was representing. The corporation and
Another question arises from the peculiar circumstances connected with the transactions already referred to. The defendant corporation paid to its director, out of the funds of the cestui que trust, a compensation for disclosing a purchaser for the trust property. At that time it was believed by all the members of the board, except the director to whom the payment was made, that the purchaser of the property was a stranger. It has since been ascertained that the real purchaser was the director to whom the compensation was paid. That director is a party defendant and has been already ordered to account to the cestui que trust for all profits flowing to him from the purchase. The item here under consideration may be appropriately classed as one of the items of profits made by the director through his purchase of the property. For this item both the director and the corporation are liable to the cestui que trust; for the other items for -which the account is to be taken only the director is liable, as the sale of the property was made by the corporation in good faith without knowledge of the fact that the director was the purchaser. Under these circumstances, the joint liability of the director and the corporation for the money paid to the director for disclosing a purchaser falls within the rule defined in McCartin v. Traphagen, 43 N. J. Eq. (16 Stew.) 323, 334, for the corporation re
I will sign a decree in accordance with the views stated by me at the conclusion of the hearing.