Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/75

 CHAP. V.] PROMOTION OF A CORPORATION. [§83. property belonging to him or in which he is pecuniarily inter- ested, receives from the corporation moneys which, as being secret profits, he is not entitled as against the corporation to retain, and distributes a portion of these profits among his co- promoters or associates, he will be liable to refund to the corpo- ration, not only the profits retained by himself, but also those A*- t*0* wr *- iece or property^dpe- Xtrtr* which he has thus distributed^ § 83. If, however, a person^nvning a piece ul comes a promoter in a scheme of incorporation, even when the ^ scheme relates to the development of this very piece of prop- erty, he may sell the property to the corporation, and have his price paid without regard to the original cost of the property to him ; 2 for, when he acquired the property, ex hypothese he did 538; Burbankv. Dennis, 101 Cal. 90; Land Co. v. Obenchain, 92 Va. 130; Park Co. v. Roberts, 92 Wis. 345; Exter v. Sawyer, 146 Mo. 302 ; Hick- ens v. Congreve, 1 R. & M. 150; Beck v. Kantorowicz, 3 K. & J. 230; New Sombrero Phospbate Co. v. Erlanger, L. R. 5 Cb. D. 73; aff'd, 3 App. Cas. 1218; Phospbate Sewage Co. v. Har- mont, L. R. 5 Cb. D. 394; Bagnal v. Carlton, L. R. 6 Cb. D. 371. See Dickerman v. Northern Trust Co., 176 U. S. 181. "Nothing is more common than for persons to acquire property, to form a company on pur- pose to buy it, and to conceal their own true position from the company they so form. Such a transaction can never stand." 2 Lindley on Part., 580. The same principles hold in transactions looking towards the formation of an ordinary partnership. See Fawcett v. Whitehouse, 1 R. & M. 132; and, in general, Tyrrell v. Bank of London, 10 H. L. C. 26. 1 Getty v. Devlin, 70 N. Y. 504; Semble, contra, Loudenslager v. Woodbury Heights Land Co., 58 N. J. Eq. 556, rev'g, 55 N. J. Eq. 78; S. C. 56 N. J. Eq. 411. 2 See Cover's Case, 1 Ch. D. 182, which discusses how far a person pro- moting the formation of a company to develop property belonging to him- self may act towards the company, in selling his property to them, as towards an outsider to whom he owes no special duties. The case did not decide the point under discussion in the text, i. e., that such a person could sell at profit and retain the profit, but merely that his having done so was no ground to sustain an application on the part of a share- holder for the removal of her name from the list of shareholders on the winding up of the company. The case was not considered to conflict with the cases cited in the last note. See James, L. J., in 5 Ch. D. 118. Dorris v. French, 4 Hun, 292, resem- bles Gover's Case, and decides the same point the same way. It was held in a recent English case that if a promoter sell bis own property to the corporation without declaring the fact that it is his, the corporation may rescind if in a position to do so, but cannot compel the promoter to pay over the difference between what he paid for the property at a time when he was not the promoter and what the corporation paid him for it. In re Cape Breton Co., 2 Ch. Div. 221; 55