informing him of the facts which affected their value. Stewart v. Harris, 69 Kansas, 498, 77 Pac. 277; Oliver v. Oliver, 118 Georgia, 362, 45 S. E. 232. The case before us is of the same general character. On the other hand there is the case of Board of Commissioners v. Reynolds, 44 Indiana, 509-515, where it was held (after referring to cases) that no relationship of a fiduciary nature exists between a director and a shareholder in a business corporation. Other cases are cited to that effect by counsel for defendant in error. These cases involved only the bare relationship between director and shareholder. It is here sought to make defendant responsible for his actions, not alone and simply in his character as a director, but because, in consideration of all the existing circumstances above detailed, it became the duty of the defendant, acting in good faith, to state the facts before making the purchase. That the defendant was a director of the corporation is but one of the facts upon which the liability is asserted, the existence of all the others in addition making such a combination as rendered it the plain duty of the defendant to speak. He was not only a director, but he owned three-fourths of the shares of its stock, and was, at the time of the purchase of the stock, administrator general of the company, with large powers, and engaged in the negotiations which finally led to the sale of the company's lands (together with all the other friar lands) to the Government at a price which very greatly enhanced the value of the stock. He was the chief negotiator for the sale of all the lands, and was acting substantially as the agent of the shareholders of his company by reason of his ownership of the shares of stock in the corporation and by the acquiescence of all the other shareholders, and the negotiations were for the sale of the whole of the property of the company. By reason of such ownership and agency, and his participation as such owner and agent in the negotiations then going on, no one knew as well as he the exact condition of such negotiations. No one knew as well as he the probability of the sale of the lands to the Government. No one knew as well as he the probable price that might be obtained on such sale. The lands were the only valuable asset owned by the company. Under these circumstances and before the negotiations for the sale were completed the defendant employs an agent to purchase the stock, and conceals from the plaintiff's agent his own identity and his knowledge of the state of the negotiations and their probable result, with which he was familiar as the agent of the shareholders and much of which knowledge he obtained while acting as such agent and by reason thereof. The inference is inevitable that at this time he had concluded to press the negotiations for a sale of the lands to a successful conclusion, else why would he desire to purchase more shares which, if no sale went through, were in his opinion, worthless, because of the failure of the Government to properly protect the lands in the hands of their then owners? The agent of the plaintiff was ignorant in regard to the state of the

negotiations for the sale of the land, which negotiations and their probable result were a most material fact affecting the value of the shares of stock of the company, and he would not have sold them at the price he did had he known the actual state of the negotiations as to the lands and that it was the defendant who was seeking to purchase the stock. Concealing his identity when procuring the purchase of the stock, by his agent, was in itself strong evidence of fraud on the part of the defendant. Why did he not ask Jones, who occupied an adjoining office, if he would sell? But by concealing his identity he could by such means the more easily avoid any questions relative to the negotiations for the sale of the lands and their probable result, and could also avoid any actual misrepresentations on that subject, which he evidently thought were necessary in his case to constitute a fraud. He kept up the concealment as long as he could, by giving the check of a third person for the purchase money. Evidence that he did so was objected to on the ground that it could not possibly even tend to prove that the prior consent to sell had been procured by the subsequent check given in payment. That was not its purpose. Of course, the giving of the check could not have induced the prior consent, but it was proper evidence as tending to show that the concealment of identity was not a mere inadvertent omission, an omission without any fraudulent or deceitful intent, but was a studied and intentional omission to be characterized as part of the deceitful machinations to obtain the purchase without giving any information whatever as to the state and probable result of the negotiations, to the vendor of the stock, and to in that way obtain the same at a lower price. After the purchase of the stock he continued his negotiations for the sale of the lands, and finally, he says, as administrator general of the company, under the special authority of the shareholders, and as attorney in fact he entered into the contract of sale December 21, 1903. The whole transaction gives conclusive evidence of the overwhelming influence defendant had in the course of the negotiations as owner of a majority of the stock and as agent for the other owners, and it is clear that the final consummation was in his hands at all times.If under all these facts he purchased the stock from the plaintiff, the law would indeed be impotent if the sale could not be set aside or the defendant cast in damages for his fraud.

The Supreme Court of the islands, in holding that there was no fraud in the purchase, said that the responsibility of the directors of a corporation to the individual stockholders did not extend beyond the corporate property actually under the control of the directors; that they did not owe any duty to the members in respect to their individual stock, which would prevent them from purchasing the same in the usual manner. While this may in general be true, we think it is not an accurate statement of the case, regard being had to the facts above mentioned.

It is said that by the code of commerce of the Philippine Islands

the directors are declared to be mandatories of the society, and that by article 1459 of the Spanish Civil Code they are prohibited from acquiring by purchase, even at public or judicial auction, the property the administration or sale of which may have been entrusted to them, and that this is the extent of the prohibition. This provision has no reference to the purchase for himself, under such facts as existed here, by an officer of a corporation, of stock in the corporation owned by another. The case before us seems a plain one for holding that, under the circumstances detailed, there was a legal obligation on the part of the defendant to make these disclosures. * * *

Other objections made by the defendant's counsel we have examined, but do not regard them as important. We therefore reverse the judgment of the Supreme Court, dismissing the complaint and affirm that of the Court of First Instance, and

It is so ordered.*

In Oliver v. Oliver (1903) 118 Ga. 362, 45 S. E. 232, held that where la president and director of a corporation purchases its stock from shareholders at $110 per share, studiously concealing the circumstance that negotiations for the sale of the company's properties are being consummated, which would make the stock worth $185 per share, the shareholders are entitled to a rescission of the sale of their stock. The court, speaking by Lamar, J. (now Mr. Justice Lamar) said: "No process of reasoning and no amount of argument can destroy the fact that the director is, in a most important and legitimate_sense, trustee for the stockholder. Jackson v. Ludeling, 21 Wall. 616; 2 Pom. Eq. Jur. (2d ed.) § 1090. Not a strict trustee, since he does not hold title to the shares; not even a strict trustee who is practically prohibited from dealing with his cestui que trust; but a quasi trustee as to the shareholder's interest in the shares. If the market or contract price of the stock should be different from the book value, he would be under no legal obligation to call special attention to that fact; for the stockholder is entitled to examine the books, and this source of information, at least theoretically, is equally accessible to both. It might be that the director is in possession of information which his duty to the company requires him to keep secret; and if so, he must not disclose the fact even to the shareholder; for his obligation to the company overrides that to an individual holder of the stock. But if the fact so known to the director cannot be published, it does not follow that he may use it to his own advantage, and to the disadvantage of one whom he also represents. The very fact that he cannot disclose prevents him from dealing with one who does not know, and to whom material information cannot be made known. If, however, the fact within the knowledge of the director is of a character calculated to affect the selling price, and can, without detriment to the interest of the company, be imparted to the shareholder, the 'director, before he buys, is bound to make a full disclosure. In a certain sense the information is a quasi asset of the company, and the shareholder is as much entitled to the advantage of that sort of an asset as to any other regularly entered on the list of the company's holdings. If the officer should purposely conceal from a stockholder information as to the existence of valuable property belonging to the company, and take advantage of this concealment, the sale would necessarily be set aside.” (pp. 367-8).

In Stewart v. Harris (1904) 69 Kansas 498, 77 Pac. 277, 66 L. R. A. 261, 105 Am. St. 178, Oliver v. Oliver, (1903) 118 Ga. 362, 45 S. E. 232, is followed and Atkinson, J., in repudiating Board of Commissioners v. Reynolds, 44 Ind. 509, said: "The rule laid down has met with much criticism. The posi

tion taken leaves the stockholders' interest in the corporation and all matters affecting its value wholly in the charge and keeping of the managing officers of the corporation, and leaves the stockholders their legitimate prey. We cannot give the sanction of our approval to the views there expressed." But see, contra, Crowell v. Jackson (1891) 53 N. J. L. 656, 23 Atl. 426.

See also note, 17 Harvard Law Rev. 58; and article by H. L. Wilgus in 8 Michigan Law Rev. 267.-Eds.

Guten.

CHAPTER VIII.

STOCKHOLDERS.

Section 1.-Right to Vote-The Voting Trust.

CAMDEN AND ATLANTIC R. R. Co. v. ELKINS.

1883. 37 N. J. Eq. 273.1

ON APPEAL from a decree advised by Vice-Chancellor Van Fleet, whose opinion is reported in Elkins v. Camden and Atlantic R. R. Co., 9 Stew. Eq. 467.

The opinion of the court was delivered by DEPUE, J.

The complainant's bill is purely an injunction bill. It prayed an injunction to restrain the directors from making any change in the by-laws, and forbidding the postponement of the election for directors. * * *

The appellants urge the retention of the appeal on the ground that the complainant is not a bona fide holder of stock of the corporation. They insist that he became the purchaser of the stock he holds with the money of rival companies, and that he holds it in the interest of those companies, and contemplates the use of it for the purpose of controlling the business of the corporation for the advantage of those other companies. They insist that therefore he has no standing in a court of equity to seek its aid in accomplishing his purposes.

The complainant appears, on the company's books, to be the owner of thirteen hundred and fifty shares of its capital stock, being more than a majority of its entire capital stock, and the stock he holds was regularly issued by the company and was regularly transferred to the complainant on the company's books. The statute makes the stock of a corporation personal property, and transferable on the books of the corporation. It vests in the stockholders the right to elect directors, who shall manage the business of the corporation for them. It secures to each stockholder the right to one vote, at every election of directors, for each share of the capital stock of the company held by him, and makes the books of the corporation plenary and conclusive evidence of the ownership of stock and of the right to vote in virtue of such ownership. The right to hold elections for the directors of a corporation, and to vote at such

1A portion of the opinion omitted.—Eds.