This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
27 Stieglitz v. Settle, 175 Cal. 131, 165 Pac. 436.
28Ah Foe v. Bennett, 35 Or. 231, 58 Pac. 508.
29Ah Foe v. Bennett, 35 Or. 231, 58 Pac. 508.
30 Fisher v. Mclnerney, 137 Cal. 28, 92 Am. St. Rep. 68, 69 Pac. 622, 907.
31 Fisher v. Mclnerney, 137 Cal. 28, 92 Am. St. Rep. 68, 69 Pac. 622, 907.
32 Kock v. Burgess, - la. - , 166 N. W. 275.
33 Kock v. Burgess, - la. - , 166 N. W. 275.
34 Donahoe v. Cricket Club, 177 111. 351, 52 N. E. 351.
1 Alabama. King v. Livingston Mfg. Co., 192 Ala. 269, 68 So. 897.
Arkansas. G. W. Jones Lumber Co. v. Wisarkana Lumber Co., 123 Ark. 65,187 S. W. 1068.
California. Pacific Vinegar & Pickle Works v. Smith, 145 Cal. 352, 104 Am. St. Rep. 42, 78 Pac. 550.
Colorado. Steele v. Gold Fissure that of officers,2 such as the president,3 including officers who are stockholders as well,4 is compared to that of trustees. An officer who buys property for himself and who pays for it with property which belongs to the corporation, will be held as a trustee for the corporation.5
Gold Mining Co., 42 Colo. 529, 126 Am. St. Rep. 177, 95 Pac. 349.
Idaho. Riley v. Callahan Mining Co., 28 Ida. 525, 155 Pac. 665.
Iowa. Dawson v. National Life Ins. Co., 176 la. 362, 157 N. W. 929.
Michigan. Thoman v. Mills, 159 Mich. 402, 124 N. W. 33.
Minnesota. Minnesota Loan & Trust Co. v. Peteler Car Co., 132 Minn. 277, 156 N. W. 255.
Montana. Coombs v. Barker, 31 Mont. 526, 79 Pac. 1.
Nebraska. Jacquith v. Mason, 99 Neb. 509, 156 N. W. 1041.
New York. General Rubber Co. v. Benedict, 215 N. Y. 18, L. R. A. 1915F, 617, 109 N. E. 96.
Oregon. Patterson v. Portland Smelting Works, 35 Or. 96. 56 Pac. 407.
Pennsylvania. Porter v. Healy, 244 Pa. St. 427, 91 Atl. 428; Hechelman v. Geyer, 248 Pa. St. 430, 94 Atl. 188; Hechelman v. Geyer, 252 Pa. St. 123, 97 Atl. 193.
A director or officer of a private corporation may contract with the corporation if he discloses his interest, deals fairly with the corporation, and does not himself act for it in the matter in which his personal interest is adverse to that of the corporation, but leaves its interests in the hands of those directors and officers who are interested solely in the corporation.6 Thus he may make a valid contract of loan,7 sale,8 purchase,9 or employment;10 or a contract in payment of a prior debt due from the corporation to the director,11 or to indemnify him for becoming liable as accommodation indorser12 for the corporation. One who is a director and officer may purchase property which belongs to the corporation at a foreclosure sale, if he has not been guilty of any misconduct; and if the corporation has had ample time in which it could have obtained money to pay the mortgage debt if it had been solvent or had sufficient credit.13 A director may buy up claims against the corporation at a discount, and enforce them in full, if in his official capacity he is under no duty to pay the claim.14 So if a mining corporation has forfeited its claim and a stranger relocates it without any arrangement to resell to any one, a director of the mining corporation may subsequently in good faith purchase such claim.15 As such officers and directors occupy relations of trust and confidence to the stockholders and creditors of the corporation, their dealings with it are sharply scrutinized. "Any arrangement by which directors of a corporation become interested adversely to such corporation in contracts with it, or organize or take stock in companies or associations for the purpose of entering into contracts with the corporation, or become parties to any undertaking to secure to themselves a share in the profits of any transactions to which the corporation is also a party, will be looked upon with suspicion."16 Hence, if the officer or director represents the corporation in the matter in which he is adversely interested,17 as where, as directors, they buy from themselves,18 or sell to themselves,19 as individuals, the transaction is characterized as a "constructive fraud."20 A transfer of corporate property by majority stockholders to themselves at an undervaluation, is fraud for which such transaction may be set aside.21 So if a director's presence is necessary to make the requisite majority of the board, and he votes to lease the property of the corporation to another cor-
South Carolina. Black v. Simpson, 94 S. Car. 312, 77 S. E. 1023.
Texas. Scott v. Farmers' & Merchants' National Bank, 97 Tex. 31, 104 Am. St. Rep. 835, 75 S. W. 7.
Wisconsin. Timme v. Kopmeier, 162 Wis. 571, L. R. A. 1916D, 1114, 156 N. W. 961.
On this subject see generally, Directors' Right to Deal With Their Corporation in Illinois Law, by William B. Hale, 9 Illinois Law Review 551; Purchase of Shares of Corporation by a Director from a Shareholder, by H. L. Wilgus, 8 Michigan Law Review 267; Remedial Rights of Corporations Against Their Directors, by A. H. Fenn, 3 Yale Law Jour. Ill; The Duty and Liability of Bank Directors, by Albert S. Bolles, 12 Yale Law Jour. 287; Liability of Corporate Directors, by Frederick Dwight, 17 Yale Law Jour. 33; Duty of a Director Purchasing Shares of Stock, by Clarence D. Laylin, 27 Yale Law Jour. 731.
2G. W. Jones Lumber Co. v. Wis-arkana Lumber Co., 125 Ark. 65, 187 S. W. 1068.
3 Patterson v. Woolridge, 170 Ky. 748, 186 S. W. 639; Jacquith v. Mason, 99 Neb. 509, 156 N. W. 1041.
4McKeIlar v. Stanton, 104 S. Car. 248, 88 S. E. 52T.
5Bastin v. Givens, 170 Ky. 201, 185 S. W. 835.
6 England. Costa Rica Ry. v. For-wood , 1 Ch. 756.
California. Wise Realty Co. v. Stewart, 169 Cal. 176, 146 Pac. 534.
Colorado. Crymble v. Murvaney, 21 Colo. 203, 40 Pac. 499.
Iowa. Stetson v. Investment Co., 104 la. 393, 73 N. W. 869; Garrison Canning Co. v. Stanley, 133 la. 57, 110 N. W. 171.