main purpose of a contract between corporate stockholders is to secure a passive directorate, subject to control of one stockholder or a group of stockholders, it is unlawful. 416 But "it is not illegal or against public policy for two or more stockholders owning the majority of the shares of stock to unite upon a course of corporate policy or action, or upon the officers whom they will elect. An ordinary agreement among a minority in number, but a majority in shares, for the purpose of obtaining control of the corporation by the election of particular persons as directors is not illegal. Shareholders have the right to combine their interests and voting powers to secure such control of the corporation, and the adoption of and adhesion by it to a specific policy and course of business. Agreements upon a sufficient consideration between them, of such intendment and effect, are valid and binding, if they do not contravene any express charter or statutory provision or contemplate any fraud, oppression, or wrong against other stockholders or other illegal object." 41 But a bargain to vote for corporate action in consideration of other private advantage than that which might accrue to the promisor from the benefit to the corporation from taking the action, is invalid.41d

§ 1737. Contracts of fiduciaries tending to impair fidelity. A bargain by officers of a corporation for personal advantage in return for entering into an agreement on behalf of the corporation with a third person is invalid. 42 A trustee's violation

41b Manson v. Curtis, 223 N. Y. 313, 119 N. E. 559, Ann. Cas. 1918 E. 247. 41c Manson v. Curtis, 223 N. Y. 313, 119 N. E. 559, Ann. Cas. 1918 E. 247, citing Venner v. Chicago City Ry. Co., 258 III. 523, 101 N. E. 949; Thompson v. Thompson Carnation Co., 279 Ill. 54, 116 N. E. 648, Ann. Cas. 1917 E. 591; Winsor v. Commonwealth Coal Co,, 63 Wash. 62, 114 Pac. 908, 33 L. R. A. (N. S.) 63.

41d In Palmbaum v. Magulsky, 217 Mass. 306, 104 N. E. 746, Ann. Cas. 1915 D. 799, an agreement by a stockholder for private pecuniary consideration to join in voting for a disposition

of the corporate assets was held illegal. In Rosenthal v. Light, 173 N. Y. S. 743, an undertaking by the defendant that a corporation which he should form (and did form), should buy goods from the plaintiff at a price named by him and should sell them at prices which he should fix was held illegal.

42 Western Union Tel. Co. v. Union Pac. R. Co., 1 McCrary, 418, 426; cf. S. C. 1 McCrary, 581; Standard Lumber Co. v. Butler Ice Co., 146 Fed. 359, 76 C. C. A. 639, 7 L. R. A. (N. S.) 467; Smythe's Estate v. Evans, 209 Ill. App. 376, 70 N. E. 906; Landes v. Hart, 131 N. Y. App. Div. 6, 115 N.

of his duties as such cannot support a promise, 43 and the promise of a fiduciary to do anything in violation of his duties is equally unlawful.44 This is true not only of a trustee but of an agent or attorney.45

A contract by an agent, even though acting as such without compensation, to receive without his principal's consent compensation from others for the performance of his agency is invalid. 46 And a contract with an agent which contemplates bribing the agents of others is itself invalid." Even though the industry in which an agent's employer was engaged was itself opposed to public policy a contract by the agent to disclose for private profit his employer's misbehavior is illegal. 48 So likewise is a contract by an attorney to exert influence on others in an unprofessional way." Similarly a contract between Y. S. 337. See also Moss v. Copelof, 231 Mass. 513, 121 N. E. 508.

43 Wilhelm's Appeals, 30 Pa. 478; Foote v. Emerson, 10 Vt. 338, 33 Am. Dec. 205. Cf. Citizens' State Bank v. Rosenberger, 40 S. Dak. 256, 167 N. W. 154.

44 Danielwitz v. Sheppard, 62 Cal. 339; Lamport v. Beeman, 34 Barb. 239.

45 Smalley v. Greene, 52 Ia. 241, 3 N. W. 78, 35 Am. Rep. 267.

Holcomb v. Weaver, 136 Mass. 265. A fortiori this is true if the agent is paid for his services by the principal. Harrington v. Victoria Graving Dock Co., 47 L. J. Q. B. 594; Page v. Moore, 235 Pa. 161, 83 Atl. 580. Similarly one who has bargained for corrupt profits to be paid by an agent cannot recover them. Talbott v. Luckett (Md.), 30 Atl. 565. See also Howard v. Murphy, 70 N. J. L. 141, 56 Atl. 143; Dake v. Patterson, 5 Hun, 558. The illegality of any agreement or conduct of an agent involving disloyalty most frequently arises in suits between the agent and his principal. See supra, §§ 1022, 1023, 1477.

Smith v. David B. Crockett Co., 85 Conn. 282, 82 Atl. 569, 39 L. R. A. (N. S.) 1148.

48 In Barry v. Mulhall, 162 N. Y. App. D. 749, 147 N. Y. S. 996, a contract, whereby the plaintiff undertook for half profits to sell for the defendant letters between a national association and numerous parties which the defendant, an employee of the association, had secured and retained, tending to show its corrupt political campaign to prevent tariff legislation, and furnishing material for a great journalistic sensation, was held invalid and the plaintiff was denied recovery of his share of the profits.

49 In Flack v. Warner, 278 Ill. 368, 116 N. E. 202, L. R. A. 1917 F. 464 (see also Warner v. Flack, 278 Ill. 303, 116 N. E. 197), it was held that contracts by which attorneys undertook to render legal services to clients in controlling and advising a third person to prevent her from disposing of her property, so as to disinherit the clients and to secure to them certain rights and interests in such person's property before her death, were invalid as contrary to public policy, as they necessarily tended to encourage improper attempts to control the exercise of the free judgment and will of the owner of the property and the right to dispose of it according to

a family physician and a surgeon whom the physician had called in to perform operations, by which the surgeon was to divide his fees with the physician, is against public policy as tending to impair fidelity to the patient; 50 and probably any contract for reward to influence by apparently disinterested advice the conduct of a third person is similarly obnoxious to public policy, even when neither party at the time bears a fiduciary relation to the person to be influenced. 51

§ 1738. Agreements, the performance of which involves a wrong to a third person.

An agreement which contemplates a wrong to a third person, or to undefined members of the public, whether trespass, breach of trust, or fraud, is illegal. Such is an agreement to print a book in violation of another's copyright; 52 or a contract to sell goods, known to be held by the seller in trust for a third person. Neither could be enforced by one who was cognizant of the facts.

A sale or agreement to sell any article which is so deleterious to public health as to be inimical to the public welfare, or is so deceptively labelled or prepared as to be likely to defraud persons subsequently induced to buy it, is invalid. 53 Whether an agreement to sell goods which to the buyer's knowledge the seller her own judgment, and to interfere with natural rights and interests of third parties, and offered an incentive to exert for a money consideration undue and improper influences contrary to sound morality.

50 McNair v. Parr, 177 Mich. 327, 143 N. W. 42.

51 See Alpers v. Hunt, 86 Calif. 78, 24 Pac. 846, 9 L. R. A. 483, 21 Am. St. 17; Bollman v. Loomis, 41 Conn. 581; DeBoer v. Harmsen, 131 Mich. 91, 90 N. W. 1036; Torpey v. Murray, 93 Minn. 482, 101 N. W. 609; Smith v. Rose, 192 Mo. App. 580, 184 S. W. 910; Ridgely v. Keene, 134 N. Y. App. D. 647, 119 N. Y. S. 451; Simon v. Garlitz (Tex. Civ. App.), 133 S. W. 461. Cf. Higgins v. Hill, 56 L. T. (N. S.) 426.

52 Nichols v. Ruggles, 3 Day, 145, 3 Am. Dec. 262. But in Edward Thompson Co. v. Pakulski, 220 Mass. 96, 107 N. E. 412, where the infringer of a copyright had made a settlement for the infringement, he was allowed to recover the price of the infringing work.

53 Church v. Proctor, 66 Fed. 240, 33 U. S. App. 1, 13 C. C. A. 426 (agreement to sell menhaden to be resold as mackerel); Materne v. Horwitz, 101 N. Y. 469, 5 N. E. 331 (agreement for the sale of falsely labelled sardines); Warshaw v. Elwood, 83 Conn. 430, 76 Atl. 531 (agreement to purchase inferior goods, falsely label them, sell them as "bankrupt stock" of superior goods, and divide the profits).

was under contract to sell to another would be illegal and unenforceable is not clear; 54 but a contract of employment which, as the parties know can be fulfilled only by violating an existing contract of employment with another has been held invalid. 55 So-called "endless chain" agreements also have been held unlawful, as likely to defraud guileless persons. Generally in these, in return for a promissory note, a license is given to make sales within a certain territory, and a privilege of making similar bargains with others who in turn shall have the same privilege, and so on. 56 Similarly the "Bohemian Oats" agreements, in which for an excessive price paid or promised, the seller of seed oats agrees to sell to others a specified number of bushels of the oats raised by the first buyer, have been held unlawful. 57

54 Sir Frederick Pollock apparently considers any agreement illegal which involves a breach of contract. Cf. Citizens' State Bank v. Rosenberger, 40 S. Dak. 256, 167 N. W. 154; Wald's Pollock, Contracts (3d ed.), 376.

55 Wanderers' Hockey Club v. Johnson (Brit. Col.), 25 Western Law Rep. 434. In Rhoades v. Malta Vita Pure Food Co., 149 Mich. 235, 112 N. W. 940, the plaintiff sued for a promised salary. It appeared that at the time of his employment by the defendant he was under an unexpired contract of employment with the Force Food Company, a rival in business, and that the purpose of the defendant in inducing the plaintiff to enter into its service was to further a plan to "put Force out of business." It was held that the plaintiff could not recover, because the contract on which he sued was illegal. It may perhaps be assumed that the same result would have been reached had the defendant for the purpose of embarrassing the Force Food Company induced a manufacturer to contract to sell machinery, which he was under previous contract to sell to the Force Food Company. See also Driver v. Smith, 89 N. J. Eq. 339, 104 Atl. 717.

56 Contracts of this type were held illegal in Couch v. Hutchinson, 2 Ala. App. 444, 57 So. 75; Saylor v. Crooker, 97 Kan. 624, 156 Pac. 737, Ann. Cas. 1918 D. 473; Hubbard v. Freiberger, 133 Mich. 139, 94 N. W. 727; Ozark Bank v. Hanks, 142 Mo. App. 110, 125 S. W. 221; Twentieth Century Co. v. Quilling, 130 Wis. 318, 110 N. W. 174.

57 Schmueckle v. Waters, 125 Ind. 265, 25 N. E. 281; Merrill v. Packer, 80 Ia. 542, 45 N. W. 1076; Shipley v. Reasoner, 80 Ia. 548, 45 N. W. 1077; McNamara v. Gargett, 68 Mich. 454, 36 N. W. 218, 13 Am. St. 355.

In Boston Piano, etc., Co. v. Seckinger, 198 Mich. 312, 164 N. W. 263, an agreement signed by the defendant for the purchase from the plaintiff of a piano and other articles necessary to put into operation a so-called advertising campaign, wherein the piano was to be given away to successful contestants, was held invalid, since the scheme furnished by the plaintiff as part of the contract of sale, involved deception on the part of the defendant to procure trade.

In Neville v. Dominion of Canada News Co., Ltd., [1915] 3 K. B. 556, the plaintiff was a director of a company

1739. Agreements in fraud of creditors.

A contract or transfer intended to defraud creditors can neither be rescinded nor enforced by legal proceedings on behalf of the fraudulent debtor.58 This is clear on principle at least where there is an actual and not merely a constructive intent to defraud. Therefore if a fraudulent grantor sues for the price he should not be allowed to recover, whether the parties intended a permanent transaction or the fictitious appearance of one. It is so held in some States. 59 But in many States such an action is allowed if the contract is on its face unobjectionable, and the plaintiff's case can be made out without exposing the fraud.60 Where the buyer or grantee under a