ten by Baker to Reed on May 9, 1904, during the pendency of the negotiations for the transfer from Simpson to Baker, or to Norton, of the legal title to the contract (the italics are ours):

"I had a talk with Mr. Simpson in S. F. about the tide lands which he holds in trust for me. I asked him if he would take my note in settlement of the advances he has made, together with the interest accrued thereon. The first two or three payments I made myself. Mr. Simpson's books, however, will show the status of the account. There is one more payment due next March to complete the contract with the state. Mr. S. stated that you held his general power of attorney and would assign the certificate back to me or my or der. I wish you would compile a statement of the account I owe to Mr. Simpson, and send same, together with note for the account, due one year after date, which plan Mr. S. consented to and will doubtless advise you to that effect. I may be away several months, and I may have occasion to use the item, or to dispose of it, and so I think it had better be put in the shape indicated. My address will be as below. I believe there is an item to my credit also of a certain sum for right of way across the tract sold to the N. P."

We agree with the court below that:

"There was a condition of mind between Baker and Simpson, express or otherwise, which was that Baker should have block 430. When the relation of the parties, the value of the land, and all of the circumstances as disclosed by the evidence, are analyzed and applied, together with the suppression of the ownership of defendant Baker, the conclusion is inevitable."

The rule is laid down by the text-writers, and adhered to in many authoritative decisions, that if an agent or trustee, in the sale of property of his principal, purchases it himself, or any interest therein, either directly or through the instrumentality of a third person, without the knowledge or consent of the principal, the sale is voidable, and may be set aside at the option of the principal. Mechem on Agency, §§ 455, 461; Michoud v. Girod, 4 How. 503, 11 L. Ed. 1076; Gardner v. Ogden, 22 N. Y. 327, 78 Am. Dec. 192; Grumley v. Webb, 44 Mo. 444, 100 Am. Dec. 304; Mills v. Goodsell, 5 Conn. 475, 13 Am. Dec. 90; Bain v. Brown, 56 N. Y. 288.

The rule is one calculated to promote fair dealing between an agent or trustee and his principal. It is but one of the many safeguards which the law has thrown around those occupying positions of trust and confidence. It prohibits an agent or trustee from becoming a party to a transaction in which he may be in a position to injure his principal. As stated by Judge Manning in People v. Township Board of Overyssel, 11 Mich. 222, 225:

"So careful is the law in guarding against the abuse of fiduciary relations that it will not permit an agent to act for himself and his principal in the same transaction, as to buy of himself, as agent, the property of his principal, or the like. All such transactions are void, as it respects his principal, unless ratified by him with a full knowledge of all the circumstances."

The leading case in the United States upon this subject is Michoud v. Girod, 4 How. 503, 11 L. Ed. 1076. In that case a piece of property had been sold at a fair price at a legally conducted judicial sale. The purchasers within a short time reconveyed it to the executors individually. It was decided that the purchasers at the sale were purely nominal. The Supreme Court said:

"The morality and policy of the law, as it is administered in courts of equity, induce us to add that these purchases were fraudulent and void, and may be

declared to be so, without further inquiry, upon the ground that they were made by the intervention of persons who were nominal buyers of the property for the purpose of conveying it to the executors. Such a transaction carries fraud upon the face of it. The rule of equity in every jurisdiction

*

with which we are acquainted is that a purchase by a trustee or agent of the particular property of which he has the sale, or in which he represents another, whether he has an interest in it or not-per inter positam personamcarries fraud on the face of it."

In Boynton v. Brastow, 53 Me. 362, real estate had been sold by executors and subsequently purchased by one of them at the price for which it had been sold. The court said:

"It is enough, however, for us to know that the property was redeeded to one of the trustees for the same consideration for which it was sold, before his duties as trustee were ended. Equity will not permit a trustee thus to deal with a trust property, except for the benefit of the cestui que trust. Sound policy requires all the skill and efforts of a trustee to be used for the benefit of the cestui que trust, and to secure this end his private interest must not be allowed to come in conflict with his duty. If a trustee should be allowed to sell the trust's estate, and then immediately buy it back for his own benefit, his private interest would be in direct conflict with his duty. To enable him to buy cheap, he must sell cheap. Instead of making known its good qualities, and its real value, and the true state of the title, he would be influenced to disparage the estate, by concealing, as far as he could, everything which would enhance its value, and to avoid clearing up any clouds that might hang over the title."

In Robertson v. Chapman, 152 U. S. 673, 14 Sup. Ct. 741, 38 L. Ed. 592, the facts were as follows: One Polk had been appointed as agent of the plaintiff, Robertson, for the purpose of selling certain real property to M. O'Donohoe. O'Donohoe was unable to complete the payments under his contract of purchase, and before the deed was delivered to O'Donohoe, and while the same was in the hands of Polk, the agent, to be delivered upon payment of the balance of the purchase price of the land, Polk took over the O'Donohoe contract and completed title in himself. Robertson subsequently brought suit against Polk and his partner, Chapman, to set aside the transaction, on the theory that Polk could not properly have taken title to the property. Mr. Justice Harlan, delivering the opinion of the Supreme Court of the United States, said:

"If an agent to sell effects a sale to himself, under the cover of the name of another person, he becomes, in respect to the property, a trustee for the principal, and at the election of the latter, seasonably made, will be compelled to surrender it, or, if he has disposed of it to a bona fide purchaser, to account, not only for its real value, but for any profit realized by him on such resale."

The court found that Polk had not been guilty of dereliction of duty; that while there was some evidence tending to show that he desired, from the outset, to acquire an interest in the property, it did not appear that he intended to practice any deception upon the plaintiff. The court also found that Polk had not intended to conceal the fact of his purchase of the property. It accordingly was held that the rule quoted was not applicable to the facts of that case. The court said:

"A real bona fide sale of the property, through the agency of Polk, and upon the terms prescribed by the plaintiff, and which sale was substantially completed between vendor and vendee, intervened between Polk's acceptance of

the position of agent and his purchase of the property from the plaintiff's vendee. Upon this ground, the decree below can be sustained, without impairing, in any degree, the rule that an agent will not be permitted to become the purchaser, without the knowledge or consent of his principal, of property committed to him for sale."

The defendants earnestly contend that the facts of the present case bring it within the rule laid down in Robertson v. Chapman. It is obvious that that rule is inapplicable here. Baker's deceit, as we have seen, is well established. Furthermore, no real bona fide sale of the contract for the purchase of the tide lands had intervened between Baker's appointment as receiver of the bank, and his purchase of the

contract.

[4] 4. In answer to the contention of the defendants that the present suit is barred by laches, little need be said. We have searched the record in vain for testimony, even of the slightest, tending in the remotest degree to show either actual knowledge, or any channel leading to knowledge, on the part of the plaintiff, or his predecessors in office, or the Comptroller of the Currency of the United States, respecting the purchase by Baker of the contract covering the tide lands during the term of his receivership. During Baker's 14 years' ownership of this property, never once has it appeared in his name. Although Baker himself testified that, when he negotiated with Simpson for the transfer of the legal title to the contract of purchase, to himself, all outstanding claims against him had been satisfied and he was practically out of debt, nevertheless the title to the contract was placed in the name of Norton, his New York attorney, where it remained until the organization of the Seattle Water Front Realty Company. Although the owner of practically all of the stock of that company from the date of its organization down to the present time, Baker has never appeared in any of its activities as an officer thereof, or in any other capacity. Every avenue by which the transactions affecting the transfer of real property generally become known in the business world has been guardedly closed; every act tending to show the relationship of Baker to the tide lands has been zealously guarded.

"In general, length of time is no bar to a trust clearly established to have once existed; and where fraud is imputed and proved, length of time ought not to exclude relief. Prevost v. Gratz, 6 Wheat. 481 [5 L. Ed. 311]. Generally speaking, when a party has been guilty of such laches in prosecuting his equitable title as would bar him if his title were solely at law, he will be barred in equity, from a wise consideration of the paramount importance of quieting men's titles, and upon the principle that ‘expedit reipublicæ ut sit finis litium'; although the statutes of limitation do not apply to any equitable demand, courts of equity adopt them, or at least generally take the same limitations for their guide, in cases analogous to those in which the statutes apply at law. 10 Ves. 467; 1 Cox, Ch. 149. Still, within what time a constructive trust will be barred must depend upon the circumstances of the case. Boone v. Chiles, 10 Pet. 177, 9 L. Ed. 388. There is no rule in equity which excludes the consideration of circumstances, and, in a case of actual fraud, we believe no case can be found in the books in which a court of equity has refused to give relief within the lifetime of either of the parties upon whom the fraud is proved, or within 30 years after it has been discovered or becomes known to the party whose rights are affected by it." Michaud v. Girod, 4 How. 502, 560, 11 L. Ed. 1076.

5. The court below decreed that the plaintiff, as receiver, pay to the clerk of the court, for the Seattle Water Front Realty Company, the sum of $10,977.13, being the amount of the payments, with interest, made by the defendants to the state of Washington under the contract for the purchase of the tide lands, upon the harbor lease, and for taxes. The defendants assert that they should not be compelled to reconvey the tide lands to the plaintiff, as receiver, for the reason that the testimony in the case shows that the receiver has no funds in his hands, and that there are no assets of the bank except the claim asserted in this suit. But such defense is not available to the defendants on this appeal. This court will presume that the money will be paid into the court below for the defendants, as directed by the decree, and that a reconveyance of the tide lands will not be demanded until such sum has been paid into the court below. The decree of the court below is affirmed.

NOTE.

Effect of Ultra Vires Acts of National Bank.

I. IN GENERAL.

(U.S.) Plaintiff's testator deposited with a firm of brokers certain bonds as margins for purchases of stocks, and the brokers, without his knowledge, deiivered them to a bank under a standing agreement, previously made, that, if the brokers became indebted to the bank, it might at any time, in its discretion, sell any collateral held by it to secure such debt. On the day of the pledge, but not in pursuance of any agreement made at the time of receiving the bonds, the bank, on the faith of the bonds, certified and subsequently paid certain checks drawn by the brokers. The bank took the bonds in good faith, without notice of the testator's title. Held, that the bonds were a valid security for the debt created by the certified checks, notwithstanding that the certification was in violation of Rev. St. § 5208 (Comp. St. 1913, § 9770), which makes it unlawful for any national bank to certify any check unless the person drawing the same has on deposit sufficient money to meet it; and plaintiff could not recover the bonds without first paying the debt.-Thompson v. St. Nicholas Nat. Bank, 146 U. S. 240, 13 Sup. Ct. 66, 36 L. Ed. 956, affirming 113 N. Y. 325, 21 N. E. 57.

(U.S.) The fact that a contract made by a national bank to receive and collect securities and reinvest the proceeds for the owner contained provisions which were ultra vires does not relieve the bank of the legal obligation to return the securities or account to the owner for their value.-Emmerling v. First Nat. Bank, 97 Fed. 739, 38 C. C. A. 399.

(U.S.) The fact that a national bank purchased shares of its own stock ultra vires does not render its subsequent sale of such stock to another unlawful, or the stock void in the hands of the purchaser; nor does it constitute any defense to an action by a receiver of the bank against such purchaser to recover an assessment made after the bank's insolvency.-Lantry v. Wallace, 97 Fed. 865, 38 C. C. A. 510, affirmed 21 Sup. Ct. 878, 182 U. S. 536, 45 L. Ed. 1218.

(U. S.) An act of a national bank, void because ultra vires, cannot be made good by estoppel.-Merchants' Bank of Valdosta v. Baird, 160 Fed. 642, 90 C. C. A. 338, 17 L. R. A. (N. S.) 526.

(U. S.) W., having expressly authorized mortgaging of his interest in a dredge to secure money to build it and to carry out a dredging contract, also knew a national bank was financing the building, and the amount necessary exceeded $60,000. Held that W. or his assignee could not object to a chattel mortgage executed to the bank for advancements in excess of one-tenth of its capital stock, in violation of Rev. St. U. S. § 5200 (U. S. Comp. St. 1901, p. 3494); there being no penalty imposed on a national bank for violation of such

section, unless it be a forfeiture of its charter, as provided by section 5239.The Seattle, 170 Fed. 284, 95 C. C. A. 480.

(U.S.) A sale of corporate stock to a national bank, though ultra vires between the parties, passed the title to the bank, and it could transfer the same to a purchaser in the absence of a prior repudiation of the transaction by either of the original parties.-Barron v. McKinnon, 196 Fed. 933, 116 C. C. A. 483.

(U.S.) A national bank cannot receive money equitably belonging to another without accounting for the same, even though it was received as an incident of a contract made by the bank, which was ultra vires and not enforceable.-Equitable Trust Co. of New York v. National Bank of Commerce in St. Louis, 211 Fed. 688.

(Ga.) A national bank cannot authorize or ratify an act absolutely ultra vires, committed by its agents or officers-Hansford v. National Bank of Tifton, 73 S. E. 405; Roberts v. Same, Id. 407.

(Mass.) Under Rev. St. U. S. § 5136 (U. S. Comp. St. 1913, § 9661), a contract made by a national bank to sell stock in another corporation, title to which had not been acquired on foreclosure of a pledge, was ultra vires and unenforceable.-Hotchkin v. Third Nat. Bank of Syracuse, N. Y., 106 N. E. 974. (Mich.) A mortgage taken by a national bank upon real estate, in violation of the national banking act, is not invalid.-Fifth Nat. Bank v. Pierce, 75 N. W. 1058, 117 Mich. 376.

(Neb.) Where notes secured by mortgage on land have been assigned to a national bank, and by it to a bona fide purchaser, the latter is entitled to enforce the security, even though the bank could not have done so, as in case the assignment to it was for other than a debt previously contracted.—Richards v. Kountze, 4 Neb. 200.

(Neb.) An owner of mortgaged property cannot sue to enjoin sale under foreclosure, on the ground that defendant national bank had taken an assignment of the decree as a speculation, in contravention of the national banking act.-Buchanan v. Saunders County Nat. Bank, 94 N. W. 631, 4 Neb. (Unof.)

410.

(N. Y.) Where a national bank warranted to another bank payment of a loan made to an individual in order that the national bank might obtain from the amount loaned a sum in which the individual was indebted to it, conceding that the guaranty was ultra vires, it was liable thereon to the amount actually received by it under the transaction. Judgment 105 N. Y. Supp. 1105, 119 App. Div. 889, reversed.-Appleton v. Citizens' Cent. Nat. Bank of New York, 83 N. E. 470, 190 N. Y. 417.

(N. Y.) A national bank may enforce a real estate mortgage assigned to an employé for its benefit, though it is subject to liability to the federal government for exceeding its powers.-Slade v. Bennett, 118 N. Y. Supp. 278, 133 App. Div. 666.

(N. Y.) The president of a national bank who largely controlled its policies purchased stock in violation of his duty so as to make him liable to the bank for the resulting loss. The national Treasury Department after an examination required the bank to immediately dispose of the stock which could not then be done without loss, whereupon, pursuant to an arrangement with the department, the president and his son executed a bond to the bank, prepared by the Treasury Department conditioned to be void if within two years the bank should sell the stocks and realize therefrom, their cost, whereupon the Treasury Department withdrew its demand for the immediate sale of the stock. Held, that the execution of the bond was not an agreement by the bank not to sell the stocks for two years whatever might be their market fluctuations, thereby making the bank to speculate in stocks, so as to be ultra vires on the part of the bank, especially when considered as a covenant as prescribed in Code Civ. Proc. § 1915, providing that a bond in a penal sum containing a condition to the effect that it is to be void upon the performance of any act has the same effect for the purpose of maintaining an action thereon as if it contained a covenant to perform the act specified in the condition.-First Nat. Bank v. Jenkins, 130 N. Y. Supp. 947, 73 Misc. Rep. 277.

(Tex.) A purchaser of drafts with bills of lading covering corn shipped to plaintiff for sale on commission sent the drafts to defendant, a national bank,