chase of certain real estate, entered into an agreement with the appellant Tyrrell, who was acting as solicitor for the respondent bank then in process of organization, that Read and Tyrrell should be jointly interested in the former's contract of purchase. Tyrrell then, as solicitor of the bank, acting under the instructions of its board of directors to whom he did not disclose his interest in the transaction, entered into ostensible negotiations with Read which resulted in the sale to the bank for the sum of £65,000 of a portion of the property in which Tyrrell had obtained a half interest. It was claimed that Tyrrell's share of the profits of the transaction amounted to £6,000 together with a half interest in unsold property worth £8,000. The master of the rolls held that Tyrrell was a trustee for his client of all the interest acquired by him in the property and that the respondent bank was entitled to the clear profit that Tyrrell derived from the transaction. The House of Lords, however, held that Tyrrell was a trustee for his client of only that particular property which it afterward purchased, and that the bank was entitled to recover from Tyrrell only the difference between what it paid for his share of the property and the cost of that share to him. The cost to Tyrrell of his share was, however, ascertained by deducting from the sum which he paid for his interest in the entire property, the value of his share of that part of the property which was not sold to the bank and which still remained in his and Tyrrell's hands. § 266. The same subject.-Allowance as compensation for services. A promoter should, on an accounting for his secret profits, be allowed credit for his legitimate expenses on the promotion. Reasonable compensation for the promoter's services has in some cases also been allowed, but the better rule seems to be that a promoter who has violated the obligations of his fiduciary relation by committing a fraud upon the corporation, is not entitled to compensation for services.8 § 267. Unlawful commissions, bribes, etc. The measure of the corporation's recovery from a promoter who improperly accepts a commission, bribe or gratuity from a person selling property to the corporation or making contracts with it, is obviously the amount of the unlawful commission, bribe or gratuity received by the promoter. The same rule applies to a promoter who unlawfully takes from the corporation as compensation for his services, or without consideration, any moneys, securities or other things of value.10 § 268. Measure of recovery upon rescission. The measure of the corporation's recovery in case of the rescission of a purchase made by it, is, generally speaking, the amount of the purchase price. It was claimed in Cortes Co. v. Thannhauser 11 that the defendant vendors should also be held liable for the amount of the expenses incurred in the organization of the corporation and in its administration, including the services of its officers and agents -the argument being that these expenses were the direct result of the fraud committed by the vendors' agent. The court held that the agency was merely an agency to sell the property, and that if the purchasers chose to incur unnecessary expenses with a view to capitalizing their investment and managing it through the instrumentality of a corporate organization, that was not the affair of the defendants, and that the losses incident thereto were not the direct and immediate consequences of any acts of the 8. See ante, §§ 85, 164. 9. Emery v. Parrott, 107 Mass. 95; Emma Silver Mining Co. v. Grant, L. R. 11 Ch. Div. 918; McKay's Case, L. R. 2 Ch. Div. 1; Lydney & Wigpool Iron Ore Co. v. Bird, L. R. 33 Ch. Div. 85, 24 Am. & Eng. Corp. Cas. 23. 10. Hayward v. Leeson, 176 Mass. 310, 57 N. E. 656, 49 L. R. A. 725. 11. 45 Fed. Rep. 730, 739–740. agent for which the vendors were accountable. It appears from the reasoning of the court that a different conclusion might have been reached had the defendant vendors themselves promoted the plaintiff corporation. § 269. Measure of damages in case of false representations. The measure of the corporation's damages in case the promoter by false representations induces it to purchase his own property, is not the same in all jurisdictions. It is held in some jurisdictions that the measure of damages is, just as in an action upon a warranty, the difference between the value of the property as it was in fact, and its value as it would have been had the representations been true.12 Other jurisdictions fix the measure of damages at the difference between the price which the corporation paid for the property and the actual value thereof.13 The measure of damages may also vary according to the particular nature of the misrepresentation complained of. In Gluckstein v. Barnes,14 the promoters, while admitting that they were deriving a profit upon the resale of certain property to the corporation, understated the amount of this profit. The 12. Old Dominion Copper, etc., Co. v. Bigelow, 188 Mass. 315, 320321, 74 N. E. 653, 108 Am. St. Rep. 479; Lagunas Nitrate Co. v. Lagunas Syndicate, 1899, 2 Ch. Div. 392; Burrowes v. Lock, 10 Ves. Jr. 470, 475, and cases cited; Peek v. Gurney, L. R. 6 H. L. 377, 390; Alexandra Oil & Development Co. v. Cook, 10 Ont. W. R. 781, affirmed, 11 Ont. W. R. 1054, and see post, § 277. 13. Sigafus v. Porter, 179 U. S. 116, 21 Sup. Ct. 34, 45 L. Ed. 113, reversing, 84 Fed. Rep. 430, 28 C. C. A. 443, 51 U. S. App. 693; Strattons Independence, Ltd., v. Dines, 135 Fed. Rep. 449, 459, 68 C. C. A. 161, affirming, 126 Fed. Rep. 968. Petition for writ of certiorari denied, 197 U. S. 623, 25 Sup. Ct. 800, 49 L. Ed. 911. See also ante, § 102, note 53, and post, § 277. 14. 1900, App. Cas. 240, affirming, In re Olympia, Ltd., 1898, 2 Ch. Div. 153; see Old Dominion Copper, etc., Co. v. Bigelow, 188 Mass. 315, 320321, 74 N. E. 653, 108 Am. St. Rep. 479; Kilgore v. Bruce, 166 Mass. 136, 44 N. E. 108; Alexandra Oil & Development Co. v. Cook, 10 Ont. W. R. 781, affirmed, 11 Ont. W. R. measure of their liability was held to be the difference between the price which they represented that they had paid for the property, and its actual cost to them. In Economy Powder Co. v. Boyer,15 a promoter who had obtained subscriptions by falsely stating that he was receiving his shares at the same price as the other subscribers, was, in an action by the corporation, compelled to pay the difference between the price he had paid for his shares, and the price which he represented that he was paying therefor. In O'Sullivan v. Clarkson,16 promoters who had represented that the liabilities of one of the constituent companies taken over by the new corporation did not exceed a sum named, were compelled to indemnify the consolidated company against the payment of any debts of the constituent company in excess of the sum so stated. § 270. Measure of value of shares. It often becomes necessary, in fixing the amount of the promoter's liability, to determine the value of shares taken by him. It frequently happens that these shares are so taken before the corporation has acquired any property, and before the shares can be said to have any value. The date at which the value of the shares is to be fixed must, in such case, be carried forward to a time when the corporation has been fully organized and the value of its shares in some measure fixed.17 Some cases hold that the corporation may recover the highest value of the shares at any time while they are owned by the promoter.18 15. 2 Berks (Pa.) 131. But compare § 215, ante. 16. 9 Ont. W. R. 46. 17. Hayward v. Leeson, 176 Mass. 310, 322-323, 57 N. E. 656, 49 L. R. A. 725; East Tennessee Land Co. v. Leeson, 183 Mass. 37, 66 N. E. 427. 18. Eden V. Ridsdales Railway Lamp & Lighting Co., L. R. 23 Q. B. Div. 368; Nant-Y-Glo & Blaina Ironworks Co. v. Grave, L. R. 12 Ch. Div. 738; McKay's Case, L. R. 2 Ch. Div. 1. Cf. Shaw v. Holland, 1900, 2 Ch. Div. 305. The value of the shares taken by the promoter may be proved by the price at which other shares were allotted to subscribers,19 or by the price at which shares were afterwards sold in the open market.20 The fact that a small number of shares were sold at a certain price does not, however, necessarily prove that a large number of shares could have been disposed of at the same price.21 The promoter will not ordinarily be held liable for the par value of the shares in the absence of some evidence fixing that sum as their value.22 The promoter may, in case of the insolvency of the corporation, become liable to the creditors for the par value of the shares issued to him without consideration.23 If the shares were prop 19. Chandler v. Bacon, 30 Fed. Rep. 538, 540; London Trust Co. v. Mackenzie, 62 L. J. Ch. 9. S. 870, 877; Weston's Case, L. R. 10 Ch. Div. 579; Mitcalfe's Case, L. R. 13 Ch. Div. 169. See also cases cited under note 22, infra. 20. See cases cited under note 18, supra, and see Bigelow v. Old Dominion Copper, etc., Co., 74 N. J. Eq. 457, 499, 71 Atl. 153. 21. Shaw v. Holland, 1900, 2 Ch. Div. 305. 22. St. Louis F. S. & W. R. Co. v. Tiernan, 37 Kan. 606, 635, 15 Pac. 544, 560; Arnold v. Searing, 78 N. J. Eq. 146, 163, 78 Atl. 762, 769; Carling's Case, L. R. 1 Ch. Div. 115, 126-127; McKay's Case, L. R. 2 Ch. Div. 1, 6, 8, and see ante, § 165. For cases in which there was evidence that the shares were worth par, see Bigelow v. Old Dominion Copper, etc., Co., 74 N. J. Eq. 457, 499, 71 Atl. 153; Wills v. Nehalem Coal Co., 52 Or. 70, 96 Pac. 528; First Avenue Land Co. v. Hilde- 23. Bigelow V. Old Dominion Copper, etc., Co., 74 N. J. Eq. 457, 503, 71 Atl. 153; See v. Heppenheimer, 69 N. J. Eq. 36, 73, 78, 61 Atl. 843; same case on demurrer, 55 N. J. Eq. 240, 36 Atl. 966, affirmed, sub nom. Naumberg v. See, 56 N. J. Eq. 453, 41 Atl. 1116; Arnold v. Searing, 78 N. J. Eq. 146, 163, 78 Atl. 762, 769. |