the deed. But if the administrator should collusively convey to a third person and take back a deed from him, and then himself sell, the purchaser would not probably be charged with notice unless he had actual notice.2

§ 206. The relation of principal and agent is a fiduciary one, and the same observations apply as to other relations of trust and confidence. Some have doubted whether it would not have been wiser to have prohibited all contracts between parties sustaining these relations to each other, and to have thus taken away all temptation to abuse the trust, rather than to investigate each case as it arises.3 But perhaps the entire freedom of trade and business, and the convenience of society, demand that there should be at least the possibility of dealing between persons bearing these relations, and thus there is no absolute prohibition. The principal may buy and sell of the agent, and he may make an agent the object of his bounty, but there must be the utmost good faith and frankness in the dealing. The principal is entitled to the best skill and judgment of his agent in the conduct of his affairs. If at the same time the agent is at liberty to purchase the property of his principal, there would be such a conflict between his duty and his interest, that there could be no safety in business. An agent, therefore, if he purchases property of his principal, must communicate fully and truly every fact in relation to such property within his

1 Lazarus v. Bryson, 3 Binn. 59; Ward v. Smith, 3 Sandf. 592; Smith v. Drake, 23 N. J. Eq. 302; Potter v. Pearson, 60 Me. 220.

2 Johnson v. Bennett, 39 Barb. 237.

8 Dunbar v. Tredennick, 2 B. & B. 319; Norris v. La Neve, 3 Atk. 38; Fairman v. Bavin, 29 Ill. 75.

4 Selsey v. Rhoades, 2 S. & S. 49; 1 Bligh, 1; Kerr v. Dungannon, 1 Dr. & W. 509, 541; Huguenin v. Baseley, 14 Ves. 273; Molony v. Kernan, 2 Dr. & W. 31; Harris v. Tremenheere, 15 Ves. 40; Winchelsea v. Garrety, 1 M. & K. 253; Benson v. Heatham, 1 Y. & C. N. R. 326; Neeley v. Anderson, 2 Strob. Eq. 262; Brooke v. Berry, 2 Gill, 83; Persch v. Quiggle, 57 Pa. St. 247.

knowledge; and he must also be known as the purchaser, for if he acts secretly the contract will certainly be held to be fraudulent; and so if he is employed to purchase for another and he purchases for himself, he will be held to be a trustee. No person whose duty to another is inconsistent with his taking an absolute title to himself will be permitted to purchase for himself. For no one can hold a benefit acquired by fraud or a breach of his duty.2 All the knowledge of the agent belongs to the principal for whom he acts, and if the agent use it for his own benefit, he will become a trustee for his principal. Therefore, whatever an agent may be employed to do, he cannot use his position nor the knowledge obtained by his employment, to obtain a bargain from his principal. Nor can he take advantage of his own negligence, as where an agent allowed his principal's property to be sold for taxes and bought it himself, he was held as a trustee, although the relation of principal and agent had ceased.

In

1 Lees v. Nuttall, 1 R. & M. 53; Taml. 282; Church v. Marine Ins. Co. 1 Mason, 341; Crowe v. Ballard, 3 Bro. Ch. 120; Barker v. Ins. Co. 2 Mason, 369; Massey v. Davies, 2 Ves. Jr. 318; Woodhouse v. Meredith, 1 J. & W. 204; Purcell v. Macnamara, 14 Ves. 91; Wott v. Grove, 2 Sch. & Lef. 492; Lowther v. Lowther, 13 Ves. 102; Green v. Winter, 1 Johns. Ch. 27; Morret v. Paske, 2 Atk. 53; Coles v. Trecothick, 9 Ves. 246; Parkist v. Alexander, 1 Johns. Ch. 394; Gray v. Mansfield, 1 Ves. 379; Belt, Suppl. 167; Fox v. Mackreth, 2 Bro. Ch. 400; 2 Cox, 320; 1 Lead. Ca. Eq. 92, and notes; Dennis v. McCoy, 32 Ill. 429; Safford v. Hinds, 39 Barb. 625; Squire's App. 70 Pa. St. 268.

2 Reed v. Warner, 5 Paige, 650; Sweet v. Jacocks, 6 Paige, 355; Lees v. Nuttall, 1 R. & M. 53; Torrey v. Bank of Orleans, 6 Paige, 650; Greenfield's Est. 2 Harris, 489; Sheriff v. Neal, 6 Watts, 534; Plumer v. Reed, 2 Wright, 46; Hoge v. Hoge, 1 Watts, 163; Swartz v. Swartz, 4 Barr, 353; Harrold v. Lane, 3 Pa. St. 268; Jenkins v. Eldredge, 3 Story, 181; Morris v. Nixon, 1 How. 118; Seichrist's App. 66 Pa. St. 237; Squire's App. 70 Pa. St. 268.

3 Gillett v. Peppercorne, 3 Beav. 78; Taylor v. Salmon, 2 Mee. & Comp. 139; 4 M. & C. 139; Voorhees v. Church, 8 Barb. 136; Van Epps v. Van Epps, 9 Paige, 237; Torrey v. Bank, &c., ib. 649; Cram v. Mitchell, 1 Sandf. 251; Dobson v. Racey, 3 Sandf. 61; Reed v. Norris, 2 M. & Cr. 361; Ringo v. Binns, 10 Pet. 269; Farnham v. Brooks, 9 Pick. 212.

Morris v. Joseph, 1 West Va. 256.

some cases he may innocently purchase of his principal, but if he conceals himself and acts through another, either in purchasing from, or selling to his principal, he may be held as a trustee, or the contract may be entirely avoided; or if he accepts any benefits in conducting the business of his principal, he will hold them in trust for him,2 or if he makes use of his position in any way to obtain a title to himself.3 If he takes a conveyance in his own name, he is a trustee ex maleficio.*

§ 207. The directors of corporations are trustees and agents of the shareholders and of the corporation, and the same rules are applied to the contracts of directors with the corporation, as are applied to the dealings of other parties holding a fiduciary relation to each other. The directors

1 Winn v. Dillon, 27 Miss. 494; Lewis v. Hillman, 3 H. L. Cas. 629; Parkist v. Alexander, 1 Johns. Ch. 394; Sweet v. Jacocks, 6 Paige, 364; Bank of Orleans v. Torrey, 7 Hill, 260; 9 Paige, 653; Myer's App. 2 Barr, 463; Rankin v. Porter, 7 Watts, 387; Piatt v. Oliver, 2 McLean, 267; 3 How. 353; Church v. Ins. Co. 1 Mason, 341; Teakle v. Barley, 2 Brock. 44; Oldham v. Jones, 5 B. Mon. 467; Banks v. Judah, 8 Coun. 146; Copeland v. Ins. Co. 6 Pick. 198; McGregor v. Gardner, 14 Io. 326; Clark v. Lee, ib. 425.

2 Bailey v. Watkins, Sug. Law of Prop. 726; Gaskell v. Chambers, 26 Bear. 360.

8 Smith v. Wright, 49 Ill. 403.

Squire's App. 70 Pa. St. 268.

5 Gaskell v. Chambers, 26 Beav. 360; Great Luxembourg R. Co. v. Magnay, 586; Ex parte Bennett, 18 Beav. 339; Cumberland Coal Co. v. Hoffman Steam Coal Co. 18 Md. 456; Cumberland Coal Co. v. Sherman, 30 Barb. 553; 25 Md. 117; Aberdeen R. Co. v. Blaikie, 1 McQueen, 461; Michoud v. Girod, 4 How. 544; Hodges v. New Eng. Screw Co. 1 R. I. 321; York & North Midland R. Co. v. Hudson, 16 Beav. 485; 19 Eng. L. & Eq. 365; Benson v. Heathorne, 6 Y. & C. C. C. 326; Verplanck v. Ins. Co. 1 Edw. Ch. 84; Percy v. Milladon, 3 La. 568; Robinson v. Smith, 3 Paige, 222; Murray v. Vanderbilt, 39 Barb. 237; Flint, &c. R. R. Co. v. Dewey, 14 Mich. 477; European & N. Am. Railw. Co. v. Poor, 59 Me. 277; Scott v. Depeyster, 1 Edw. Ch. 513; Butts v. Wood, 38 Barb. 188; Ashurst's App. 60 Pa. St. 290; Drury v. Cross, 7 Wall. 299; Sawyer v. Hoag, 17 Wall. 610; Land Credit Co v. Fermoy, L. R. 8 Eq. 12; Bank Com'rs v. Bank of Buffalo, 6 Paige, 503.

are intrusted with the management of the property of the corporation for the best interests of all the members, and the directors are bound to execute their trust; nor must they allow their private interests to interfere with the duties of the trust that they have assumed, nor assume a position tending to produce a conflict between their private interests and the discharge of their fiduciary duties. It is said that the contracts of trustees are of two classes. One class consists of contracts made by trustees with themselves, or with a board of trustees or directors of which they are members. These contracts are void from the fact that no man can contract with himself. If, therefore, a board of directors should convey all the property of a corporation to themselves, the conveyance would be void, without any inquiry into its fairness, or whether it was beneficial to the corporation or not. And the same rule applies if a board of directors convey the property of a corporation, or any part of it, to one of their number, he being one of the trustees negotiating a contract with himself.2. And the same rule was applied where the trustees of one corporation, being the trustees of another

1 It is a breach of trust for railroad directors to assume inconsistent obligations by becoming members of a company with whom they have made a contract to build and equip their road; and in such case no question will be allowed to be raised as to the fairness of the transaction, and no injury to the cestui que trust need be proved. Gilman C. & S. R. R. Co. v. Kelly, 77 Ill. 426. But where stockholders sanction a contract under which directors loan money to the corporation, and its bonds secured by mortgage are given, if the money is properly applied, the corporation is estopped from setting up that the bonds and mortgage are void by reason of the trust relations which directors sustain to it. Hotel Co. v. Wade, 97 U. S. 75. A director who receives paid-up shares from the promoters of the corporation for acting as director will hold as trustee, and may be required to pay the highest value of the shares at the election of the company. Nant-y-Glo & Blaina Iron Works Co. v. Grave, L. R. 12 Ch. 738.

2 Cumberland Coal Co. v. Sherman, 30 Barb. 563; Ogden v. Murray, 39 N. Y. 202; Bliss v. Matteson, 45 N. Y. 22; Buffalo, &c. R. R. Co. v. Lampson, 47 Barb. 533; Imperial Mer. Cred. Ass'n v. Coleman, L. R. 6 Ch. 565.

corporation, conveyed the property of the one corporation to another, although there was a decree of court. The other class of contracts is where a trustee contracts with the cestui que trust, or a third person. These contracts are not void; as where a director makes a purchase of property from the corporation itself, acting independently of its directors, the contract is not void; but the same rules apply that apply to other trustees purchasing of the cestui que trust: the burden is upon the trustee to vindicate the transaction from all suspicion.2 And so all advantages, all purchases, all sales, and all sums of money received by directors in dealing with the property of the corporation, are made and received by them as trustees of the corporation, and they must account for all such moneys, or advantages received by them by reason of their position as trustees.3

§ 208. Again, if the parents, relations, agents, or friends of young persons hold out inducements of marriage by representing the amount of property that will come to one or the other of the parties; or, if they hold out pecuniary considerations to induce the marriage, and if the marriage and a marriage settlement take place upon the faith of such representations and inducements, the persons making them will be bound to make them good: if the persons making the representations and holding out the inducements have the property referred to in their hands or under their control, a court of equity will construe them into trustees of such property for the parties to whom the inducements were held out; and the court will compel them to execute the trust by making good the representations or inducements, if they are of such a character that a party entering into a marriage might reasonably have

1 St. James Church v. Church of the Redeemer, 45 Barb. 356.

2 Ibid.; Beeson v. Beeson, 9 Pa. St. 280.

Gaskell ". Chambers, 26 Beav. 360; Bowers v. City of Toronto, 11 Moore, P. C. Cas. 463; Ex parte Hill, 32 L. J. Ch. 154.