Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/77

 CHAP. V.] PROMOTION OF A CORPORATION. [§84. According^, it becomes of importance to determine, as nearly as the nature of the case will permit, the point of time when any person begins to act as a promoter, and so presumably in the interests of a company to be organized. This can be deter- mined only from his acts and representations. Does he hold himself out generally in what he says and does as promoting the formation of a corporation ? and does he represent himself as acting and contracting on its behalf or for its ultimate bene- fit? It would seem that the character of promoter should be held to have been assumed at any time when these questions could have been answered generally in the affirmative. 1 § 84. The application of the foregoing principles is illustrated by McElhenny's Appeal. 2 McElhenny, not acting as a promo- ter, sold some property to persons who were getting up a com- pany, to which they in turn intended selling the property. He then united with the promoters, and they all together turned the property over to the corporation at a large advance. Af- terwards the corporation, discovering these facts, brought suit against McElhenny, or rather against his executors, as he had died in the mean time, to make his estate refund the profits he had made from the two sales of his property. The Supreme Court of Pennsylvania held, that the estate was entitled to re- tain the profits which McElhenny had made from his first sale to the promoters, but should pay back the profits he had de- sons occupying positions of mutual trust and confidence; see also Lun-. >gren v. Pennel, 10 Weekly Notes o ^asesJPaO^OT 1 ^ Se"eot.^L6uis7"etc., R. R. Co. v. Tiernan, 37 Kan. 606 ; South Joplin Land Co. v. Case, 104 Mo. 572. " On the one hand, it is plain that a fidu- ciary relation between a promoter and a company may exist long be- fore the actual formation of a com- pany by registration. On the other hand, it is obvious that something must be done beyond a purchase and a resale to constitute such a relation ; something must, it is submitted, be done by the promoter to impose upon him the duty of protecting the inter- est of those who ultimately form the company. He assumes this duty, if he assumes to act for them, or if he induces them to trust him, or to trust persons who are under his con- trol, and who are practically himself in disguise ; he also assumes this duty if he calls the company into ex- istence in order that it may buy what he has to sell ; but he does not assume such duty by negotiating with persons who have themselves assumed that duty, and who are in no way under his influence." 2 Lind- ley on Part., 585. See Albion Steel and Wire Co. v. Martin, 1 Ch. D. 580. 2 61 Pa. St. 188 ; Ace. South Jop- lin Land Co. v. Case, 104 Mo. 572. 57