decided that a director may buy of a stockholder his [*522] shares without any such obligation to disclose important facts as would rest upon an agent dealing with his principal. The director, it was said, was not trustee for the sale of the shareholder's stock. This stock was not the subject of trust between them, nor had the trust relation between them any connection with the vendor's stock, except so far as the good or bad management of the general affairs of the corporation by its directors indirectly affects the value of its stock. A like decision has been made in Indiana.2 4. Where directors or managing officers perpetrate frauds on the associates by allowing advantages to one or more over the rest, the proper remedy is usually found in compelling the favored stockholder to surrender what he has thereby fraudulently gained. Thus, where under a secret arrangement made prior to his subscription a stockholder is permitted by the directors to surrender his stock and withdraw what he has paid upon it, this being in fraud of the other stockholders, they or any of them may, by bill in equity, have the money thus withdrawn refunded.' So an agreement by which a subscription is to be colorable merely, to induce others to subscribe, is fraudulent and void, and the subscription may be enforced.' 5. It has been decided in Alabama that if the managers of a bank allow the stockholders to withdraw its funds to the amount of their subscriptions, and to use them without security, such conduct is a fraud upon the creditors of the bank and renders the directors liable in equity for the amount withdrawn. It would no doubt also be a fraud on any stockholder not privy to the unlawful arrangement. So, where the president of a bank makes loans of the bank funds to irresponsible persons without security, having a private interest of his own to advance thereby, the bank may charge him personally with the loans and recover 1 Carpenter . Danforth, 52 Barb. 581. · Tippecanoe Co. v. Reynolds, 44 Ind. 509. So in Tenn. Deaderick ⚫. Wilson, 8 Bax. 108. Melvin v. Lamar Ins. Co., 80 Ill. 446. A secret arrangement with one subscriber, that in certain contingencies he need not pay his subscription, being in fraud of the others, is void and cannot constitute a defense to the subscription. Foy v. Blackstone, 31 Ill. 538. See New London Inst. 0. Prescott, 40 N. H. 330. 4 New Albany, &c., R. R. Co. v. Fields, 10 Ind. 187. 5 Bank of St. Mary's v. St. John, 25 Ala. 566. [*323] *the amount in a suit at law. So, for any fraudulent sale of the corporate property by the directors, they may be called to account by stockholders.' Trustees. The case of a trustee is the representative illustration of those in which the law demands the utmost good faith because of confidential relations. However the trustee may be appointed-whether by the party itself, by some donor for his benefit, or by judicial action—he is chosen because of the confi dence felt and the trust reposed; and while the office continues the beneficiary has usually no choice but to leave his interests where they have been confided, unless such dishonesty or unfitness is disclosed as will justify proceedings to have the trustee removed. Under these circumstances the law imposes upon the trustee the obligation of perfect fidelity to the trust and integrity in its performance; and he must discharge the trust without suffering his own interest in any manner to distract his attention. It is a fundamental rule that a trustee shall not deal in the trust fund for his own interest. The cestui que trust may or may not be a person in law sui juris; if he is, there is no absolute impediment to dealings between himself and the trustee in respect to the trust property, or to the trustee's duties; and if for the time being, by fair understanding between them, the character of trustee is laid aside, and they deal with each other as strangers might, it is not impossible for their bargains to be upheld. But in all such cases the trustee will be likely to be pos sessed of decided advantages in the negotiations, not only because he will most probably have more complete information than the other will possess, but also because it will be difficult, if not impossible, for the cestui que trust to relieve himself entirely from the influence of the trustee, so as to deal with him on an equal footing. Such cases, therefore, must always afford unusual facilities for deception and fraud. It has been said that to sustain a purchase by trustee [*524] from *cestui que trust "the trustee must have acted in entire good faith. He must show that he made to the 1 First Nat. Bk. of Sturgis e. Reed, 36 Mich. 263, citing Austin e. Daniels, 4 Denio, 299; Commercial Bank v. Ten Eyck, 48 N. Y. 305. Gray e. Steamship Co., 3 Hun, 383; Crook v. Jewett, 12 How. Pr. 19; cestui que trust the fullest disclosure of all he knew in regard to the subject-matter, and that the price he paid was adequate."' Presumptions are against such dealings, and if the trustee ventures upon them, he takes upon himself the burden of showing that he dealt fairly, and after putting the other party on a footing of equality in respect to the property. But where the trustee himself makes sale of the trust property under the authority vested in him as such - whether the sale be made under judicial direction or otherwise-if he becomes the purchaser himself, either directly or through a third person, the purchase is by construction of law fraudulent, and no showing of good faith or of the payment of a full consideration can sustain it, against the objection of the cestui que trust, so long as the property remains in his hands or in the hands of any one who takes it with knowledge or notice of the facts. The rule in such cases is, Spencer and Newbold's Appeal, 80 Penn. St. 317. See Gibson v. Jeyes, 6 Ves. 266, where a rule nearly the same is laid down; Todd v. Grove, 33 Md. 188. Coles . Trecothick, 9 Ves. 234; McCants . Bee, 1 McCord Eq. 383; Pugh . Bell, 1 J. J. Marsh. 399; Richardson v. Spencer, 18 B. Mon. 450; Schwarz v. Wendell, Wal. Ch. 267; Farnam v. Brooks, 9 Pick. 212; Brown . Cowell, 116 Mass. 461; Jones v. Smith, 33 Miss. 215; Sallee c. Chandler, 26 Mo. 124; Marshall v. Stephens, 8 Humph 159; Graves v. Waterman, 63 N. Y. 657; Parshall's Appeal, 65 Penn. St. 224; Lathrop v. Pollard, 6 Cal. 424. All contracts made by the trustee in which he is personally interested are voidable at the election of the beneficiary. Munson v. Syracuse, &c., R. R. Co., 103 N. Y. 58. Lowther v. Lowther, 13 Ves. 95; Morse v. Royal, 12 Ves. 355; Whelpdale v. Cookson, 1 Ves. Sr. 9; Campbell v. Walker, 5 Ves. 678; Ex parte Lacey, 6 Ves. 625; Ex parte Hughes, 6 Ves. 617; Ex parte James, 8 Ves. 337; Coles v. Trecothick, 9 Ves. 234; 3 Ex parte Bennett, 10 Ves. 381; Fox v. Mackreth, 2 Bro. C. C. 400; Downes v. Grazebrook, 3 Meriv. 200; Michaud v. Girod, 4 How. 503; Campbell v. Penn. L. Ins Co., 2 Whart. 53; Boyd v. Hawkins, 2 Dev. Eq. 329; Davis v. Simpson, 5 Harr. & J. 147; Perry v. Dixon, 4 Dessaus. Eq. 504, n. ; Butlers v. Haskill, 2 Dessaus. Eq. 651; Brackenridge v. Holland, 2 Blackf. 377; Wade v. Pettibone, 11 Ohio, 57; Mills v. Goodsell, 5 Conn. 475; Lovell v. Briggs, 2 N. H. 218; Currier v. Green, 2 N. H. 225; Farnam v. Brooks, 9 Pick. 212; Saeger v. Wilson, 4 Watts & S. 501; Davoue v. Fanning, 2 Johns. Ch. 252; Rogers v. Rogers, 3 Wend. 503; Torrey v. Bank of Orleans, 9 Paige, 649; Terwilliger v. Brown, 44 N. Y. 237; Beaubien v. Poupard, Har. Ch. 206; Dwight o. Blackmar, 2 Mich. 330; Moore v. Mandlebaum, 8 Mich. 433; Sheldon v. Rice, 30 Mich. 296; Nor. Balt. Ass'n v. Caldwell, 25 Md. 420; Brothers v. Brothers, 7 Ired. Eq. 150; Freeman v. Hardwood, 49 Me. 195; Ogden v. Larrabee, 57 Ill. 389; Hammond v. Stanton, 4 R. I. 65. See Carson v. Marshall, 37 N. J. Eq. 213. [*525] that the cestui que trust, *when the facts come to his knowledge, may either affirm the sale or repudiate it, and if he chooses the latter course, he may call upon the trustee to restore the property, or if that has become impossible, to account for whatever benefit he has received from the purchase. Long acquiescence in the sale, however, with full knowledge of the facts, may of itself amount to an affirmance.' If a trustee has occasion to make purchases for the purposes of the trust, he can no more buy of himself than he could sell to himself. The same reasons apply to both cases." The above rules apply to executors and administrators, guardians, assignees in bankruptcy or insolvency, partners, agents for the sale of property, and all other persons occupying similar relations. Wherever the reason of the rule applies, there the rule is in full force. It therefore applies to the case of an agent empowered to sell property for his principal; he cannot become purchaser directly nor by indirection through another." "This is a rule of public policy, necessary to preserve honesty and fidelity in the administration of trusts, and is too well settled to be departed from." So a trustee is liable as for a fraud if he knowingly sells trust property for less than it would bring in the market, even though such a sale is within a minimum fixed by his in 'Marsh o. Whitmore, 21 Wall. 178; Miles v. Wheeler, 43 Ill. 124. See Campau v. Van Dyke, 15 Mich. 371. 2 If a partner sells his own goods to the partnership without the knowledge of his associates, he must ac count to them for the profits. Bentley v. Craven, 18 Beav. 75. See Kimber v. Barber, L. R. 8 Ch. App. 56. Brooke v. Berry, 2 Gill, 83; Dobson v. Racey, 8 N. Y. 216; Ames v. Port Huron, &c., Co., 11 Mich. 139; Kerfoot v. Hyman, 52 Ill. 512. At least, without the principal's knowl edge and assent. Ruckman v. Bergholz, 37 N. J. L. 437; Peckham Iron Co. v. Harper, 41 Ohio St. 100; Adams . Sayre, 70 Ala. 318. And a mere formal surrender of the agency before buying is not enough. Fountain, &c., Co. v. Phelps, 95 Ind. 271. + Story on Agency, §§ 210, 211; Dwight . Blackmar, 2 Mich. 330; Porter v. Woodruff, 36 N. J. Eq. 174. A trustee in a mortgage cannot indirectly buy in the property for the benefit of one bondholder, a bank of which he is cashier. People v. Merch. Bank, 35 Hun, 97. See Toole . McKiernan, 48 N. Y. Sup. Ct. 163. 5 Fisher's Appeal, 34 Penn. St. 29, 31; Moseley's Admr. v. Buck. 3 Munf. 232; Farnam v. Brooks, 9 Pick. 212; Casey v. Casey, 14 Ill. 112; Moore Mandlebaum, 8 Mich. 433; Hunter Hunter, 50 Mo. 445; Condit v. Blackwell, 22 N. J. Eq. 481; Norris v. Taylor, 49 Ill. 18. Price v. Keyes, 62 N. Y. 378; Mer Where the influence of a confidential relation has once existed, it will not be presumed that it passes away immediately on the relation terminating; and dealings within a short time thereafter will be scrutinized closely, and may be set aside as fraudulent, especially if no independent advice was taken before entering into them.' *Principal and Agent. In pointing out what may be [*526] wrongs by trustees, the ground of agency has to a certain extent been covered. The agent owes to his principal the like fidelity which the trustee owes to the cestui que trust. There is this important difference in the cases; that as the supervision of trusts belongs to equity, wrongs by trustees must generally be redressed in that court, while wrongs by agents will be redressed at law, unless the case is such that some peculiar relief which only equity can give is required. Thus, if an agent employed to investigate a title by one proposing to buy, should take advantage of the information thereby acquired to purchase for himself, the principal might doubtless call him to account, either by suit in equity to take the benefit of the purchase, or by suit at law for recovery of damages.' The principal and agent also assume towards each other certain duties of due care. The agent must not be negligent in the performance of his trust, and the principal must not negligently ryman v. David, 31 Ill. 404; Greenfield Sav. Bank v. Simons, 133 Mass. 415. He cannot derive a profit from the estate for himself. Coltrane v. Worrell, 30 Gratt. 434; Baugh v. Walker, 77 Va. 99. 'Revett v. Harvey, 1 Sim. & Stu. 502; Hatch v. Hatch, 9 Ves. 292. A guardian will not be suffered to acquire advantages for himself in dealings with the ward soon after the relation has terminated. Schoul. Dom. Rel. 515, 516; 3 Redf. on Wills, 2d Ed. 443; Story Eq. Juris. §§ 316320. Nor to procure from the ward conveyances for third persons; his influence being supposed still too great for equal dealing. Ranken v. Patton, 65 Mo. 378, 413. 2 See Reid v. Stanley, 6 Watts & S. 369; Kimber o. Barber, L. R. 8 Ch. App. 56. See McMahon v. McGraw, 26 Wis. 614; Ely . Hanford, 65 Ill. 267; Moore . Mandlebaum, 8 Mich. 433. He cannot buy for himself a tax title on the principal's property. Bowman v. Officer, 53 la. 640. Nor, knowing that the principal desires to renew a lease, can he lease the prop erty himself. Davis . Hamlin, 108 Ill. 39. Nor can he appropriate any of his principal's property. Weaver v. Fisher, 110 Ill. 146. Nor deal in the business of the agency for his own benefit. Whitesides v. Cook, 20 Ill. App. 574. |