Evening bulletin. [volume] (Honolulu [Oahu, Hawaii]) 1895-1912, 1902-06-01

g will. Whether or not the corporate
e existence reverts back TO the signing
of the articles, It is not necessary 10
determine, since IL is clear that the
b defendants could not, at that time and
;. under the facts Of this case making a
: contract with themselves. divest them.
3 selves Of the fduciary relations as.
; sumed as promoters.
Relation Of Defendants.
q What duties were imposed on the
defendants by the relation they assum.
ed and occupied towards the plaintiffs
and the other stockholders >aRd, SNthe
company? The Law IS wen establish.
ed that ii a trustee. agent or promurt
propose to contract with any PERSON
with whom he stands in .a'reTation Of
trust and confidence, the. utmost good
faith is required. n is not enough
that they do not affirmatiyely misrcp.
resent; they must not conceal; they
must speak and speak fully to every
material fact known to them or the
contract will not be allowed TO stand"
Perry on Trusts. Sec. IFS.
where persons undertake the pro.
motion Of a company for the purpose
Of purchasing certain existing proper.
~, under an agreement with the own.
er and proposed vendor OF such prop.
erty. by which they receive certain
compensation ror promoting the com
pany they are bound to disclose to
those whom they induce to become
members of the company, what their
compensation is to be. Inc conceal.
ment Of such an agreement Is a fraud
ON the company. II amounts to an
agreement. by the vendor, with an
agent OF an intended purchaser. to
give him a bribe to betray the interest
of his principal. II the promoters OF
company conceal such an agree.
ment from those whom they induce to
+ join II, aud the company proves abor.
= tive, they will not be allowed in the
winding up of the company compepsa.
tiUn for their services, either upon or
after the formation Of the company"
ThompsOn's Commentaries on the law
Of corporations, Sec. i5C.
Again in the following section the
same distinguished author says: Per.
sons who purchase property and then
organize a company to purchase ii from
them. stand in a fiduciary position TO.
wards such company, and must faith.
, fully state to the company all mate.
. rial facts relating to tine property.
/ which would influence the company in
/ deciding on the desirability OF pun
chasing. In such cases the owners Of
property who desire to create a com.
i pany for the purpose OF purchasing IL
from them are bound. II they wish to
make a contraA which will stand. TO
nominate independent directors, and
disclose to them the actual facts. The
principle upon which courts of equity
proceed in these cases is very famil
lar one. The promoters oil a compa
ny, like its directors. Is deemed to
sustain towards the members of the
. cOmapny the relation OF trustee to.
wards his Ccstui que trust This be.
ing so, he will not be permitted to
speculate out Of that relation, or to
Is bound to disclose to them fully all
material facts touching his relation to
them. including the amount which he
IS to get for his services as promoter.
usually called promotion money"
Sec. ij7.
Acts in Dual Capacity.
Whether the vendor becomes a pro.
motcr, he is concerned in the sale OF
the property as vendor; and being
promoter, he is concerned in its pur.
chase as the agent Of his company. lie
acts in dual capacity. His duties arc
tworold and conflicting. As vendor he
owes it to himself to sell as high. and
as promoter he owes 1t to the company
to buy as low. as possible. His per
Torrance of those duties is frequently
attended with disgracGful perfdy. He
is true to himself In securing the high.
est price for the property. but Is false
TO his company by deceiving IL as to
the worth OF its intended purchase, and
by lulling its shareholders into unsus.
picious reliance that their interests
will be looked after and guarded eth
or by himself or by corporate officials.
whom he has either already corrupted
or intends to circumvent or seduce."
IL Cases in which the vendor
Is promoter and sells to the com.
pany at large undiscloscd profit.
are the cases in which the doc.
trine that promoters are corporate fidu-
Charles is applied oftenest and with thu
most vigor and effect" &c Am. L. Rev.
p. G73
The doctrine Of the above authors.
y, ties ought to be recognized as settled
law. Its application to varying states
OF facts. resembling in some instances
those of this case. Is illustrated in the
- following cases: