chasers with notice,75 but also against persons whose right was gratuitously acquired." But unless it is unconscientious for the holder of the legal title to retain it, he will not be deprived of it. It is for this reason fraud of a third party "inducing the purchase of goods will not give the purchaser a right to rescind the contract-if the seller is not a party to the fraud, the contract must stand." 77 1532. Double employment of agent. If a party enters into a contract through an agent who was also secretly acting for the other party, the contract is not only unenforceable specifically against the principal,78 but, on the ground of fraud if the other party knew of the double employment, and, it seems, of mutual mistake, if he did not, is subject unless ratified to a defence in any court; 79 and, for the same reason, if the agent enters into arrangements with third persons without the knowledge of his principal which give the agent an interest inconsistent with his duty to the principal, the latter may avoid the transaction.80 Lee v. Portwood, 41 Miss. 109; Porell v. Cavanaugh, 69 N. H. 364, 41 Atl. 860; Root v. French, 13 Wend. 570, 28 Am. Dec. 482; Paddon v. Taylor, 44 N. Y. 371; Sinclair v. Healy, 40 Pa. St. 417, 80 Am. Dec. 589; Dettra v. Kestner, 147 Pa. St. 566, 23 Atl. 889; Singer Mfg. Co. v. Sammons, 49 Wis. 316, 5 N. W. 788; Arnett v. Cloudas, 4 Dana, 299. 75 Shaw v. Railroad Co., 101 U. S. 557, 25 L. Ed. 892. 76 Mendenhall v. Treadway, 44 Ind. 131; Hogan v. Wixted, 138 Mass. 270; Gordon v. McCarty, 3 Whart. 407; Longenecker v. Church, 200 Pa. St. 567, 575. 77 Nash v. Minnesota Title Ins. Co., 163 Mass. 574, 581, 40 N. E. 1039, 28 L. R. A. 753. See supra, § 1518. 78 Hesse v. Briant, 6 De G. M. & G. 623; Fish v. Leser, 69 Ill. 394; McElroy v. Maxwell, 101 Mo. 294, 14 S. W. 1; Marsh v. Buchan, 46 N. J. Eq. 595, 22 Atl. 128. See also Bunn v. Keach, 214 Ill. 259, 264, 73 N. E. 419; Palmer v. 79 Findlay v. Pertz, 66 Fed. 427, 13 C. C. A. 559, 29 L. R. A. 188; Donovan v. Campion, 85 Fed. 71, 29 C. C. A. 30; Bunn v. Keach, 214 Ill. 259, 264, 73 N. E. 419; Young v. Iowa Toilers, etc., Association, 106 Ia. 447, 76 N. W. 822; Hunter Realty Co. v. Spencer, 21 Okl. 155, 95 Pac. 757, 17 L. R. A. (N. S.) 622; Wiruth v. Lashmett, 82 Neb. 375, 117 N. W. 887; Hoerling v. Lowry, 58 Wash. 426, 108 Pac. 1090; Truslow v. Parkersburg Bridge, etc., R. Co., 61 W. Va. 628, 57 S. E. 51. 80 Panama & S. Pacific Tel. Co. v. India Rubber, etc., Co., L. R. 10 Ch. App. 515; Smith v. Sorby, 3 Q. B. D. 552; Findlay v. Perts, 66 Fed. 427, 13 C. C. A. 559; Alger v. Anderson, 78 Fed. 729; Young v. Hughes, 32 N. J. Eq. 372; Ritter v. Lehigh Valley R. Co. (Pa.), 7 W. N. Cas. 122. And see Western Union Tel. Co. v. Union Pacific Ry. Co., 1 McCrary, 581; Baltimore Sugar An exception to the general rule that an agent cannot accept employment from both parties, and that a contract entered into under these circumstances is fraudulent, has been laid down in some cases. It is universally admitted that if an agent or broker has any discretion, or if the principal is entitled to rely on him for his skill and judgment, it is fraudulent to act in a double capacity; but if an agent is employed merely as broker for the purpose of bringing parties together, and has nothing to do with fixing the price or terms of the bargain in question, he may act for both principals, and bargain for compensation from both.81 The exception has been denied, however, in other jurisdictions.82 The questions whether the agent can recover compensation and whether the contract is enforceable between the parties must receive the same answer, for where the agent is acting improperly for both parties the transaction may be rescinded on the application of either.83 Other cases of fraudulent misconduct by an agent have been previously considered.84 § 1533. Contracts between a corporation and its officers. 85 Minn. 532, 32 N. W. 749; Knauss v. Gottfried, etc., Brewing Co., 142 N. Y. 70, 36 N. E. 867. Cf. Erland v. Gibbons, 176 N. Y. App. Div. 552, 163 N. Y. S. 582. In spite of the principle stated in the preceding section, it is settled "that directors may contract with agents or employés of their corporation, who are likewise directors, and that, though always subject to close scrutiny, and voidable for fraud or overreaching, such contracts are not ipso facto void; 8 that Co. v. Campbell, etc., Co., 83 Md. 36, 34 Atl. 369; Landis v. Saxton, 89 Mo. 375, 1 S. W. 359; Kelsey v. New England St. Ry. Co., 62 N. J. Eq. 742, 48 Atl. 1001; Yeoman v. Lasley, 40 Ohio St. 190. Cf. Yellow Poplar Lumber Co. v. Daniel, 109 Fed. 39, 48 C. C. A. 204. But in Merchants' Line v. Baltimore & O. R. Co., 222 N. Y. 344, 118 N. E. 788, it was held that the fact that the plaintiff had bribed an employee, thinking him an official of the defendant corporation, did not invalidate a contract entered into later with the real official, who knew nothing of the bribery. 81 Green v. Robertson, 64 Cal. 75, 28 Pac. 446; Ranney v. Donovan, 78 Mich. 318, 44 N. W. 276; Webb v. Paxton 36, 82 Jansen v. Williams, 36 Neb. 869, 55 N. W. 279, 20 L. R. A. 207; Porter v. Woodruff, 36 N. J. Eq. 174. 83 Fish v. Leser, 69 Ill. 394; New York Central Trust Co. v. Nat. Protection Ins. Co., 14 N. Y. 85; and cases cited supra, n. 78,79, see also supra § 1022. 84 Supra, § 1022. 85 Sotter v. Coatesville Boiler Works, 257 Pa. 411, 101 Atl. 744, 747, citing Union Pacific R. Co. v. Credit Mobilier of America, 135 Mass. 367, 376; Nye v. Storer, 168 Mass. 53, 55, 46 N. E. when for compensation, and the latter is fair and reasonable, these contracts will be sustained; 86 further, that a contract of this kind may be ratified and made valid by acquiescence of the stockholders; 87 finally, that where a board of directors votes excessive salaries to certain of its members, who are also officers or employés of the corporation, even though such action may subsequently be ratified at a stockholders' meeting, when called in question by a minority stockholder, the action of the board is subject to review by a court in equity, and, if the finding of the latter tribunal is that the salaries in question are exorbitant, it may determine the value of the services rendered by the officers or employés in question, and restrain the corporation from paying in excess thereof.88 But, of course, in such instances, ordinarily, there is no way of satisfactorily determining the value of services to be rendered in the future, when conditions, ex necessitate, may be essentially different from those in the past. Therefore, generally speaking, in cases of this character, a court of equity may deal only with the facts presently before it, and thus determine the reasonable compensation actually earned. Exceptional cases may arise, however, where, contemplating a continuance of an ascertained state of facts and guarding their decree accordingly, judicial tribunals may determine compensation to be paid in the future. "If courts may depart at will from the rule just stated, and 402. As to contracts made on behalf of one corporation with another by a director in both, see Globe Woolen Co. v. Utica Gas &c. Co., 224 N. Y. 483, 121 N. E. 378. 86 Citing Wainwright v. P. H. & F. M. Roots Co., 176 Ind. 682, 97 N. E. 8; Sotter v. Coatesville Boiler Works, 257 Pa. 411, 101 Atl. 744; Fillebrown v. Hayward, 190 Mass. 472, 478, 77 N. E. 45; Fraker v. A. G. Hyde & Sons, 135 N. Y. App. Div. 64, 119 N. Y. S. 879. 87 Sotter v. Coatesville Boiler Works, 257 Pa. 411, 101 Atl. 744, citing Kelley v. Newburyport & Amesbury Horse R. Co., 141 Mass. 496, 499, 6 N. E. 745. See also Thomas v. Brown ville &c. R. Co., 109 U. S. 522, 27 L. Ed. 1018, 3 Sup. Ct. Rep. 315. 88 Sotter v. Coatesville Boiler Works, 257 Pa. 411, 101 Atl. 744, citing Raynolds v. Diamond Mills Paper Co., 69 N. J. Eq. 299, 310, 60 Atl. 941 et seq.; Lillard v. Oil, Paint & Drug Co., 70 N. J. Eq. 197, 56 Atl. 254, 58 Atl. 188; Davis v. Thomas & Davis Co., 63 N. J. Eq. 572, 52 Atl. 717; Wayne Pike Co. v. Hammons, 129 Ind. 368, 379, 27 N. E. 487; Fillebrown v. Hayward, 190 Mass. 472, 478, 77 N. E. 45. The Pennsylvania court added: "This rule is fully recognized by us in Russell v. Patterson, 232 Pa. 113, 81 Atl. 136, 36 L. R. A. (N. S.) 199." substitute their judgments for the legally exercised discretion of the directors of private business corporations, in determining the question of future compensation to be paid to the latter's employés then there is no reasonable limit to the right of judicial interference with corporate management; but, fortunately, this is not the law." 89 § 1534. Fraud as to creditors. A bargain may be vitiated not only by fraud of one of the parties aimed against the other, but by the fraud of one or both aimed against the creditors of one of them. Such transactions generally relate to executed transfers, and the decisions on them, therefore, fall outside the scope of this book except in so far as they show by analogy the invalidity of an executory transaction. Where the property transferred or surrendered is a chose in action, the matter has been previously touched upon." It is possible, however, for an executory agreement to be fraudulent as against creditors, and without considering what may be the rights or remedies of creditors in attacking such an agreement, it may be said that as between the parties it is an illegal agreement.91 89 Sotter v. Coatesville Boiler Works, 257 Pa. 411, 101 Atl. 744. * See supra, § 397. 91 See infra, § 1739. Distinction between transfer of title and enforceability of contract.. 1539 Distinction between fraud, honest misrepresentation, and mistake.. 1540 1541 Remedies for mistake. 1542 Kinds of mistake-compromise. 1543 Mistake to justify rescission must relate to a fundamental assumption. 1544 1545 1546 Reformation of mistake in expression of contract.. 1547 Reasons and limits of reformation.... 1548 Reformation can only make a writing express what parties intended should Effect of parol evidence rule and Statute of Frauds on right of reformation of executed transactions.. 1552 Executory contracts in England.. 1553 Executory contracts which are not within the Statute of Frauds in the United 1554 Executory contracts which are within the Statute in the United States. Error in regard to an object to which the contract relates. 1559 Non-existence of goods sold. . . . . . 1560 A sale of specific goods is void if goods not in existence. |
