to its property fails; nor because the price paid was speculative and excessive; nor because the vendor represented that the stock was worth its full face value; nor because the vendor, as an official of the corporation, had knowledge which enabled him to buy or sell at a profit;* nor because the vendor was rendered willing to sell by threats of a call.5 A director of a corporation stands in no fiduciary relation toward a shareholder, with respect to a contract between them for the sale of stock; and fraud will not be presumed from the mere silence of the former concerning facts affecting the value of the stock known to him by virtue of his official connection with the company."

1 State v. North Louisiana etc. R. R. Co. 34 La. An. 947.

2 Moffat v. Winslow, 7 Paige Ch. 124; Allen v. Pegram, 16 Iowa, 163. 3 Union National Bank v. Hunt, 76 Mo. 439.

4 Board of Commissioners v. Reynolds, 44 Ind. 509.

5 Grant v. Attrill, 11 Fed. Rep. 469.

6 Johnson v. Lafin. 5 Dill. 65, 83; Grant v. Attrill, 11 Fed. Rep. 469; Jones v. Alley (U. S. Cir. Ct. Ill. July, 1886); Carpenter v. Danforth, 52 Barb. 581; Heman v. Britton, 84 Mo. 657; S. C. 14 Mo. App. 109; Board of Commissioners v. Reynolds, 44 Ind. 509; Gilbert's Case, Law R. 5 Ch. 559. See further, as to fraudulent acts affecting sales of stock: Comins v. Coe, 117 Mass. 45; Hemppling v. Burr (1886), 59 Mich. 294; Johnson v. Kirby, 65 Cal. 482.

§ 355. Remedies of the party defrauded.—If the transferrer be guilty of such misrepresentations or concealments as would ordinarily entitle the purchaser of other kinds of personal property to have a sale set aside, the transferree of stock likewise will be discharged from his contract to purchase, or he may hold to his bargain and sue the transferrer for damages. He may bring an action for damages for deceit against the party answerable for the fraud, either at law, or in equity, the jurisdiction being concurrent in actions of this nature.3

BEACH ON RAILWAYS-36

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Relief by bill in equity to set the transaction aside, is by far the easier means of redress, for in the equitable proceedings actual deceit need not be proven. Innocent acts or misrepresentations may be shown as constituting constructive fraud;* and the vendor will sometimes be compelled to make his representations good. A purchaser wishing to repudiate the contract should tender back the stock received by him. If the purchaser has paid by note, he should not wait until action is brought to enforce its collection, for it will be no defense thereto that the purchase was induced by fraud. He should before trial disaffirm the contract and return the certificate of stock." A combination for the purpose of raising the price of stock by misrepresentations and fraudulent practices, may amount to a criminal conspiracy. 8

1 Taylor on Corporations (2d ed. 1889), § 792.

2 Wakeman v. Dalley, 51 N. Y. 27; Nelson v. Luling, 62 N. Y. 645; Miller v. Barber, 66 N. Y. 558; Newberg v. Garland, 31 Barb. 121.

3 Bradley v. Luce, 99 Ill. 234; Johnson v. Kirby, 65 Cal. 482; Stainbank v. Fernley, 9 Sim, 556; Peek v. Gurney, Law R. 5 H. L. 377; Hill v. Lane, Law R. 11 Eq. 215, doubting Ogilvie v. Currie, 37 Law J. Ch. 541; Campbell v. Fleming, 1 Ad. & E. 40.

4 Arkwright v. Newbold, 17 Ch. Div. 301.

5 Jones v. Bolles, 9 Wall. 364.

6 Francis v. New York etc. R. R. Co. 17 Abb. N. C. 1.

7 Gifford v. Carhill, 29 Cal. 589.

8 Regina v. Brown et al. 7 Cox C. C. 442; Regina v. Esdaile, 1 Fost. & F. 213; Cook on Stock & Stockh. § 357. But see United States v. Britton, 108 U. S. 199.

§ 356.

CHAPTER XV.

OF ILLEGAL SALES AND TRANSFERS.

Of transfers of stock in breach of trust-(a). By ordinary trustees. § 357. The same subject, continued.

The same subject, continued-The liability of the corporation herein.

§ 358.

§ 366.

§ 367.

§ 365. Of forged transfers of stock-The duty of the corporation herein. Of forged transfers of stock-The remedy of the real owner. Negligence as a bar to the real owner's remedy.

§ 368.

§ 369.

No title can be founded on forgery-The purchaser's remedy.
The corporation estopped to deny the title of a purchaser of new
certificates of stock originally transferred by forgery.

§ 370. Of speculative and wager contracts for the sale of stock.

356. Of transfers of stock in breach of trust -(a.) By ordinary trustees.-There is a distinction between the powers of an administrator or executor and those of an ordinary trustee, with respect to the sale of stock. The common duty of the former is administration or sale, while the duty of the latter is merely custody and management, unless the instrument creating the trust expressly confers the power to sell. The purchaser from one known to be a trustee, should look to the terms of the trust, for there is no implied power to sell, and a person

buying from a trustee or taking the stock by way of pledge deals with it at his peril,' although he may have had only constructive knowledge of the trusteeship. The trustee of shares cannot create an equitable title in priority to the title of his cestui que trust. Yet a bona fide purchaser for value, having neither actual nor constructive knowledge of the trust, will be protected, although the trustee acted in breach thereof (the American tendency being to place certificates of stock on a footing with negotiable paper). But a purchaser having actual knowledge that the trustee is selling or pledging the stock for his own private ends in breach of his trust, acquires no title by the transaction."

1 Jaudon v. National City Bank, 15 Wall. 165; S. C. 8 Blatchf. 430; Bohlen's Estate, 75 Pa. St. 312; Bayard v. Farmers' etc. Bank, 52 Pa. St. 232.

2 Jaudon v. National City Bank, 15 Wall. 165, 176; S. C. 8 Blatchf. 430; Walsh v. Stille, 2 Parsons' Select Cas. Eq. 270; Loring v. Brodie, 134 Mass. 453; Loring v. Salisbury Mills, 125 Mass. 138; Simmons v. Southwestern R. R. Co. 5 Rich. Eq. 270; Shaw v. Spencer, 100 Mass. 382; Sweeney v. Bank of Montreal, 5 Can. Law T. 503.

3 Shropshire Union etc. Co. v. Regina, Law R. 7 H. L. 496.

4 Stinson v. Thornton, 56 Ga 377; Cohen v. Grayun, 4 Md. Ch. 357; Salisbury Mills v. Townsend, 109 Mass. 115. Cf. Holbrook v. New Jersey Zinc Co. 57 N. Y. 616; Sprague v. Chicago Manuf. Co. 10 Blatchf. 173.

5 Duncan v. Jaudon, 15 Wall. 165; S. C. sub nom. Jaudon v. National City Bank, 8 Blatchf. 430; White v. Price, 29 Hun, 394; Simmons v. Southwestern R. R. Bank, 5 Rich. Eq. 279; Shaw v. Spencer, 100 Mass. 382; Walsh v. Stille (Pa. 1842), 2 Parsons' Select Cas. Eq. 17.

§ 357. The same subject, continued.-There are authorities which hold that, although the person dealing with the trustee may have actual knowledge of his fiduciary capacity, yet, if the name of the cestui que trust be not known, no investigation into the terms of the trust need be made; upon the ground that the only source of information in regard to the trust is the trustee himself, and that, if his intent were fraudulent, inquiry

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would lead to no result other than further deception. But 66 a more dangerous doctrine could not be laid down," for "it is impossible beforehand to come to the conclusion that a false answer would have been given, which would have precluded the necessity of further inquiry. A trustee cannot sell stock of one kind for the purpose of reinvesting in another;3 nor even for the purpose of investing it in real estate; and, although it is said that he may sell where there is danger of depreciation," yet he will not be held liable for not doing so, if he acted in good faith. If the instrument creating the trust confer the power to sell for any purpose, such as to change the investment, or to discharge liabilities, the purchaser has a right to assume that the trustee is acting in good faith and within the scope of his authority. But, if the terms of the trust confer only a power to sell, a pledgee of the stock will not be protected; for a power to sell does not include the power to pledge.9

1 Albert v. Baltimore, 2 Md. 159; Thompson v. Toland, 48 Cal. 99; Brewster v. Sime, 42 Cal. 139.

2 Shaw v. Spencer, 100 Mass. 382, quoting with approval Jones v. Williams, 24 Beav. 62. See, also, the article by Francis B. Patten, 18 Am. Law Rev. 975, 982.

3 Murray v. Feinour, 2 Md. Ch. 418.

4 Powlet v. Herbert, 1 Ves. 297.

5 Ward v. Kitchen, 30 N. J. Eq. 31.

6 Bowker v. Pierce, 130 Mass. 262.

7 Perry on Trusts (3d ed.), § 225; Lewin on Trusts (7th ed.), 417. Cf. Ashton v. Atlantic Bank, 85 Mass. 217.

8 Loring v. Brodie, 134 Mass. 453.

9 Merchants' Bank v. Livingston, 74 N. Y. 223; Cook on Stock & Stockh. § 326.

358. The same subject, continued-The liability of the corporation herein.--A company having notice of the fiduciary nature of a stockholder's title,