The relation of trust and confidence between officers or directors on the one hand, and stockholders on the other, exists only with reference to the management and control of the corporation.1 Thus if one director buys corporate stock from another,2 or directors buy stock from stockholders,3 they are not bound to disclose material facts acquired in their official capacity which affect the value of the stock. If full disclosure of all material facts is made, such a purchase can not be set aside because of the fact that it was advantageous to the officer or director.4

Additional facts may make it the duty of a director to make full disclosure.5 It is the duty of a manager who is entering into a contract with a stockholder with reference to corporate stock to make a full disclosure of all material facts.6 If, in addition to nondisclosure, the president of a corporation who professes to assist a stockholder in the sale of his stock, buys it himself through a third person and conceals his identity, such conduct amounts to fraud.7

11llinois. Perry v. Pearson, 135 111. 218, 25 N. E. 636; Hooker v. Midland Steel Co., 215 111. 444, 106 Am. St. Rep. 170, 74 N. E. 445.

Michigan. Walsh v. Goulden, 130 Mich. 531, 90 N. W. 406.

Minnesota. Klein v. Funk, 82 Minn. 3, 84 N. W. 460.

Tennessee. Deaderick v. Wilson, 67 Tenn. (8 Baxt.) 108.

Utah. Haarstick v. Fox, 9 Utah 110, 33 Pac. 251.

West Virginia. Poole v. Camden, 79 W. Va. 310, L. R. A. 1917E, 988, 92 S. E. 454.

2 Perry v. Pearson, 135 111. 218, 25 N. E. 636.

3 Arizona. Steinfeld v. Neilsen, 15 Ariz. 424, 139 Pac. 879 [overruling, on second hearing in error, Steinfeld v. Nielsen, 12 Ariz. 381, 100 Pac. 1094].

Illinois. Hooker v. Midland Steel Co., 215 111. 444, 106 Am. St. Rep. 170, 74 N. E. 445; Bawden v. Taylor, 254 111. 464, 98 N. E. 941.

Louisiana. In re Shreveport National Bank, 118 La. 664, 43 So. 270.

Michigan. Walsh v. Goulden, 130 Mich. 531, 90 N. W. 406.

Utah. Haarstick v. Fox, 9 Utah 110, 33 Pac. 251.

Washington. 0'Neile v. Ternes, 32 Wash. 528, 73 Pac. 692; Haverland v. Lane, 89 Wash. 557, 154 Pac. 1118.

West Virginia. Poole v. Camden, 79 W. Va. 310, L. R. A. 1917E, 988, 92 S. E. 454.

Contra, Oliver v. Oliver, 118 Ga. 362, 45 S. E. 232; Dawson v. National Life Ins. Co., 176 la. 362, L. R. A. 1916E, 878, 157 N. W. 929; Stewart v. Harris, 69 Kan. 498, 105 Am. St. Rep. 178, 66 L. R. A. 261, 2 Am. & Eng. Ann. Cas. 873, 77 Pac. 277.

4 Shaw v. Cole Mfg. Co., 132 Tenn. 210, L. R. A. 1916B, 706, 177 S. W. 479.

5Strong v. Repide, 213 U. S. 419, 53 L. ed. 853; Huston v. Harrington, 58 Wash. 51, 107 Pac. 874; Poole v. Camden, 79 W. Va. 310, L. R. A. 1917E, 988, 92 S. E. 454.

6 Huston v. Harrington, 58 Wash. 51, 107 Pac. 874.

7 Fisher v. Budlong, 10 R. I. 525.

A, who was the director of a corporation which owned realty in the Philippine Islands, owned three-fourths of the stock and was the sole manager. A knew that the United States Government, which was acquiring realty held by such title, had agreed to make a more favorable offer for such land than its previous offers. A purchased the stock of another stockholder without disclosing such facts, and without disclosing his identity. It was held that such other stockholder could have such transaction set aside.8 In a contract by which the directors of a corporation arrange for the sale of the corporate property by providing for a sale of all of the stock of the corporation through the purchaser of such corporate property, the directors must make full disclosure of the facts to the other stockholders, and if the transaction is such that the directors receive a very large sum for their own stock and a much less sum for the stock of the other stockholders, they may be held liable to the other stockholders for the difference between the amount which the other stockholders received and the amount which they would have received if the facts had been disclosed to them.9

A director is liable to the stockholders of a corporation if he offers new stock in such corporation when such corporation is in fact insolvent, without disclosing its financial condition to such stockholders.10 If a director11 or managing officer12 is asked officially for information as to the condition of the corporation by one from whom he is purchasing stock in such corporation, and he makes a partial disclosure of such facts, he must make a full, accurate and complete disclosure of all material facts which affect the value of the stock.13

8Strong v. Repide, 213 U. S. 419, 53 L. ed. 853; see also Jacquith v. Mason, 99 Neb. 509, 156 N. W. 1041.

9Dawson v. National Life Ins. Co., 176 la. 362, L. R. A. 1916E, 878, 157 N. W. 929.

10King v. Livingston Mfg. Co., 192 Ala. 269, 68 So. 897.

11Poole v. Camden, 79 W. Va. 310, L. R. A. 1917E, 988, 92 S. E. 454.

12Poole v. Camden, 79 W. Va. 310, L. R. A. 1917E, 988, 92 S. E. 454.

13 "Conceding the so-called majority rule to be the correct one, we think, upon the principles of the cases just referred to, recognizing the exceptions, that where a stockholder who, as in this case, is first sought by a secret agent of a director, with a proposition to buy his stock, and the stockholder goes to such director to obtain full information respecting the value of his .stock and the condition of the corporation, its plans and prospects, the reason for a recent reduction of dividends, and all other information affecting or tending to affect the value of his stock, such director can not withhold any information within his knowledge, or in any way mislead or deceive rather than as void or illegal.6 Thus if no statute makes it unlawful, a contract between a city official and a city may be avoided, but recovery can be had on a quantum meruit,7 or the proper officers of the municipality may, if they choose, ratify such contract.8