Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/74

 § 82.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. V. § 82. The relationship existing between the promoters and Legal rela- the corporation as subsequently organized is a fidu- tionsbe- ciary relationship, regulated by legal and equitable tween pro- J,. l ' ° Jo l moters and principles in many respects similar to those applica- mtioirsub- ble to the relationship of agency. 1 Strictly speaking, fortned Uy a promoter cannot be called the agent of the corpora- ^c°ret° ters ' ^ un wn i° n has n °t y e ^ Deeri organized. It is never- profits. theless true that if a person acts in such a way as to give rise to the reasonable presumption that he is acting in the interests of a corporation about to be formed, and other men act, relying on his acts and representations, believing him to be acting as he appears to be acting, such a person will be es- topped from denying that he was acting in the interests of the future corporation, when such a denial would injure others who have acted upon the faith of his acts and representations. Moreover, if the facts correspond to the appearances, which correspondence he will not be allowed to controvert, and he is really acting in the interests of the future corporation, his rela- tions thereto can be regulated only by rules similar to those pre- vailing in the law of agency. Therefore, speaking elliptically, he will be estopped from denying that he acted as the agent of the corporation. Accordingly, as against a person acting as promoter, the corporation is entitled to the full benefit of all acts done and contracts made by him while acting in that capacity; and the promoter, as between himself and the corpo- ration, is entitled to no secret profits; he may not purchase property for the corporation, and then sell the same to the cor- poration at an advance. 2 And if a promoter, in payment for 1 But not in every respect; for the corporation, in the nature of things, not having entrusted its property to the promoter, never having employed the promoter to act for it, and not being bound by his contracts unless it ratifies or voluntarily accepts the benefit of them after its incorpora- tion, could ordinarily bring no such action against a promoter for misfeas- ance as a corporation could bring against one of its officers. A promo- ter, to be sure, would be liable to the 54 corporation in damages for any fraud committed by him in contracting with it of a nature that would render one individual liable under ordinary circumstances to another. But usu- ally the only action maintainable by a corporation against its promoters is an action to make them disgorge secret profits. See generally Yale G. S. Co. v. Wilcox, 64 Conn. 101. 2 Simons v. Vulcan Oil Co., 61 Pa. St. 202; Short v. Stevenson, 63 Pa. St. 95; Chandler v. Bacon, 30 Fed. Rep.