New-York tribune., 1876-10-05
RESPONSIBILITIES or TRUSTEES.

RESPONSIBILITIES OF IEINIEES.
NEw-YoRK. Oct 4, 1876
To lcSsS BRAYToS IVES, Vice IreSdcH EecI York Stock
Exchange; RUFUS IATCn Russell SAGE. CAMMAE e
CO., WHITE. NORRIS t% co., T.. y. GALLArDET SAMUEL
BooCocK & CO., :. 81 MILLS {. Co., TowAR & LARNED,
and A. s PEABODY.
GENTLEMEN: In response to yOur inquiry for
Information respecting the nature and cXtcnt OF the
duties and liabilities OF directors corporations commit
ted to their charge and the remedies shareholders in
those duties violated submit the following:
When person is elected TO aad accepts dictatorship
In an Incorporated company, he becomes trustee for
the shareholders and creditors and IL his duty per-
form the trust fully and entirely. He stands in 1lu-
cary relation the company and is bound to admins
its affairs with prudence and discretion, IN further
of the Objects and purposes for which it created
II has often been adjudcatcd that while standing
this ducary relation he has right TO make profit
To himself of that employment, and should
not acquire TO himself interest adverse to that duty
IItas right to put himself in position which his
private interests conflict with his duty TO the company
and IT, in his transactions willie acting in his capacity
director he makes any contract from the execution OF
which ho will derive profit, tnat profit belongs
10 the company, and the courts Will compel
him TO account for 1t; he can have no
pccuniary interest In any contract between "a com
pany Of which he Is director and third person cor
pOratiOn.
In recent case III wall blOl tnc Sunlelic court
rho United States in speaking OF the conduct OF
directors, say "They had right to enter into par
ticipae in combination the Object OF which & di
vest the company OF ITS property and obtain It for them
selves at a sacrifice at the lowest price possible
Thcyhdd riqh 10 Seek their frod at The expense Of
the compauB its Sioctholders ereH is bcHdhoiders
such course was forbidden by their relation the
pany. They could not rghtfuiy place themselves in
position which their interests became adverse those
Of either the stockholders or bOndhOldcrs"
In a before the Supreme Court Of Ohio in 1868
Godin agt. Gin. aud Whitewater Canal Company-,1S )
ohio state r., 1861 the conduct Of directors In making
contract sale with another company in which they
were stockhoder, reviewed and commented upon
The court say: The ycndcr aud purchaser in
same interest As directors of TIE canal company it was
ne duty OF Mr. Lord and his associates to obtain the
highest price for tho property while stockholders Of
TIE railroad company It their interest 10 get II ~
low possible. IL In effect, sale by the railroad
company itself There no adverse interest or al
yer, try parties. and ;ho form. Nothing
i- better settled in equity than that such transac
ton the part Of trustee does not bind the
cc,t qae trust Il Is equal, we'll settled that the prop
crty OF corporation IL trust fund In the hands of IT'S
directors Tor he benefit its creditors aud stockhod
crs.
II 1t was desired intended To make such purchase
the property would bind the stockholders aud crc
itors of the Caua Company. GH OF them should have
cltlor consulted brought out That would have
been the fair way 20 accomplish the object. To under
take by getting control OF the COMPANY aud then under
prrtesc acting Gs and trustees f0r dH the stock
holders ami creditors deliberately TO fampc under foot
the rights Of the minority, Is rather sharp practice, and
one which Oi equity viii never tolerate. drec
tor whose personal interest, are adverse to those 4 the
corporation has no right 90 be - act director As
soon "a. hc uds that BE- has personal interests which are
IN conflict with those OF the company, he ought TO resign
No matter n majority Of the stockholders. ~ well ai
l.m-ci have personal interests IN conflict with those O
tho company lie does not represent thrm persons.
or represent their BrrsoaG Interest He represents them
a s-khoiarrs and their interest, dS sch H. Il trustee
r the company and whcucyc. h0 = against as Inter
c,ts-no matter how much hr thcrcby benefits lorogn
utcr,ts of The lugdull so, ahol efs or Do" many OF
the Individual -,orAhod.rs ari with hun Ii, s guilty of
A breach Of trust, aud court Of equity VIII
set hl- acts a-i1e, A. the instance ot stock
holders or creditor. who are damLIhed thereby. Any
act u the directory by which tncJ Intentionally diminish
The value OF the -tocA property OF tc company II a
breach oi trust for which any OF the Stockholders or
stcditor. may justly complain. although all tue other
,torkho.dcrs aud CREDITOR, b'uchcd IA some other
way more than they arr inquired as 'uch.
TIE Court Of Appeal. OF TN, state in Coleman aet.
Second A,onuc Railroad Company, J-th NcWiolk, 4O-,
asserts v i'm equal po.tiycncss the sam doctrine
The principles We have stated do not councnance The
idea ,ha TIE courts will n,crrre with the powers and
iniir, OF directors In tho management of the informal
an,s OF the company when the act complained of arises
tom IN error OF Judgment aud does not anpnnt 10 a
brcnc of trust unless the director has acted under an
interest which is adverse to This duty.
A. to the remedy There Il bat iiit" enbanaSSment q"
dinn;tv When tho directors are guilty Of breach i
rst The corporation may prosecute is action on the
cauty or law side ~ the court ~ may b' appropriate
under tho special facts In some instances tine c"nf''
have .rt side End declared void the acts complained o.
and In others have held the directors liable personally IN
damages IL often happens. however. th"t the MIos''
,,,pd door, continue To be- dire tors a, the company
and ilsr o bring suit In those cases the court" All 10"
storkhodcr 10 bnns tIe action IN brhalt of himself
and all the other shareholders against the company ana
the directors guilty Of tho breach Of trust We remain
very respectfully ours, hobhhI '"""I''
4. j. NANDkRFOEL,
HENRY j. Bennett