tors of a corporation or a society,' agents, medical or religious advisers2-in fine to all those who occupy positions of trust and confidence towards others.3 238. Equity not only views gifts and contracts which are made or take place between parties occupying a confidential relation, with a jealous eye, but it goes further, and forbids any person standing in a fiduciary position, from making any profit, in any way, at the expense of the party whose interests he is bound to protect, without the fullest and most complete disclosure. This proposition leads us to an interesting class of cases of which the leading one may be said to be Tyrrell v. The Bank of London, in the House of Lords. In that case there was in existence a project to start a new bank in London, and among the projectors of the scheme was the appellant, a member of the bar, whose firm, it had been agreed, were to be employed as the solicitors of the company. The appellant, hearing that a certain lot of ground was for sale, suitable for the purposes of the bank, entered into an arrangement with a party who controlled the option to buy from the owners, whereby the appellant became interested in the option. He then induced his co-projectors to purchase a portion of the property at an advance, he (of course) making a certain profit by the transaction. After the arrangement was discovered, a bill was filed by the company for the purpose of obtaining relief; and it was held that the appellant was accountable to the company for the profit which he had made. This case is instructive as showing the exact measure of relief which a court of equity affords in such cases, and the grounds upon which that relief rests. The company (it was held) had not a mere right to rescind the bargain into which they had entered; nor, on the other hand, was the appellant held to be a trustee of any property other than that which he had actually bought and conveyed to the company. The decision, therefore, 1 But while there is, in one sense, a trust relation between stockholders and directors of a corporation, yet the sale of stock by a stockholder to a director is not so far connected with the subject of the trust or trust relation as to bring it under the rule applicable to dealings between parties in confidential relations. See Hill on Trustees, 247 (4th Am. was that the company were not obliged to repudiate the transaction altogether, but were entitled to take the lot, which had been conveyed to them, at the price which it had cost Tyrrell; in other words, that as to that particular property Tyrrell could make no gain at the company's expense. But it was further held that the appellant's liability to account stopped with that particular lot, and did not extend to other property which had been included in the purchase from the original owner.1 239. This rule is thoroughly established both in England and in the United States.2 The difficulty is in its application; for it is equally well established that there is no principle of equity which prohibits a man from buying a piece of property, and afterwards saying to those who subsequently unite with him in getting up a company: "I begin the transaction here-I have purchased land, no matter how, or from whom, or at what price -I will sell the land at so much." 993 The test seems to be, whether at the time of the acquisition of the property by the defendant, he was then acting as a projector or promotor of the company. If he was, he can make no profit at the company's expense by a purchase and resale. It was remarked in a former part of this treatise, that trustees could not, without leave of the court, buy at their own sales.* The same remark is applicable to all parties whose duty requires them to sell for the benefit of another. They cannot sell to themselves. It is repugnant to common honesty and justice that the same party should be both vendor and purchaser. If he attempts so to act, it is a fraud." See the argument of Sir Roundell Palmer, afterwards Lord Chancellor Selborne, and the manner in which that argument was answered by the court, 10 H. L. Cas., pp. 31, 45. 2 See Hitchens v. Congreve, 4 Russ. 574; Beck v. Kantorowicz, 3 K. & J. 230; Simons v. The Vulcan Oil Co., 11 P. F. Sm. 202; McElhenny's Appeal, Id. 192 (opinion of Sharswood, J.); Bailey v. Coal Co., 19 P. F. Sm. 340; Great Luxembourg Railway Co. v. Magnay, 25 Beav. 586; Collins v. Case, 23 Wis. 230; Lindley on Partnership, 481. 3 See Foss v. Harbottle, 2 Hare, 489; Densmore v. Densmore, 14 P. F. Sm. 49; 4 Ante, p. 106, 107, 148. See, also, Frank's Appeal, 9 P. F. Sm. 195; Campbell v. McLain, 1 Id. 200; Ogden v. Larrabee, 57 Ill. 389; Colgate v. Colgate, 8 C. E. Green, 372. 5 See Norris v. Tayloe, 49 Ill. 18; Greenwood v. Spring, 54 Barb. 375; North Baltimore Building Association v. Caldwell, 25 Maryl. 423; Carter v. Thompson, 41 Alab. 375; Harris v. Parker, Id. 604. SECTION IV. FRAUD AFFECTING THIRD PARTIES; GENERAL RULES AS TO FRAUD. 240. Subdivisions of frauds of this class; | 252. Statute not applicable to personal fraud upon creditors. 241. Statute 13 Elizabeth, c. 5. 242. Jurisdiction of equity in cases under the statute. 243. Conveyance must be for a good consideration, and bonâ fide. 244. Moral obligations; consideration of marriage. chattels. 253. Fraud on marital rights; Strathmore v. Bowes. 254. Ignorance of the husband as to the existence of property immaterial. 255. Circumstances which constitute fraud on marital rights. 256. Fraud on powers; Aleyn v. Belchier. 245. Voluntary transfers; conveyances by 257. Appointment must be made solely 251. Difference between the English and 260. Delay; bona fide purchasers for American rules. value. 240. The last class of frauds embraces those which do not operate to deceive either of the immediate parties to the transaction, but which affect injuriously the interests of third persons. Frauds of this class may be divided, as respects the injured parties, into (1). Frauds upon creditors; (2). Frauds upon purchasers; (3). Frauds upon marital rights; and (4). Frauds upon powers. The first of these subdivisions of fraud arises in this way: An almost universal incident to property when possessed absolutely by persons sui juris, is the power of alienation. Subject to some few restrictions-such as those imposed (in England) by the statutes of mortmain, and the like-a man may sell, exchange, or give away his lands and goods when and to whom he pleases. If, however, a man is in the position of a debtor, this absolute right of alienation is qualified and restrained by the principle that the power of disposition is not to be exercised for the purpose of defrauding his creditors, or defeating their lawful right to subject the estate of the debtor to the satisfaction of their claims. IIence almost all systems of jurisprudence discountenance alienations which are fraudulent as to creditors, and provide means whereby this species of wrong may be redressed. 241. Conveyances in fraud of creditors were, it seems, voidable at common law. However, whether it was that this was originally considered a doubtful question, or whether the frequency and variety of these fraudulent alienations were so great, that it was deemed proper to affirm the common law by positive. legislation; certain it is, that from very early times, statutes were passed for the purpose of protecting the rights of creditors against such covinous practices. The most celebrated of these statutes is that of 13 Eliz., c. 5.2 This statute, after reciting that "feoffments, gifts, grants, alienations, conveyances, bonds, suits, judgments, and executions have been contrived of malice, fraud, covin, collusion, etc., to delay, hinder, or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, etc.," proceeds to enact that every feoffment, etc. of lands, tenements, hereditaments, goods, and chattels, or any of them, by writing or otherwise, and all and every bond, suit, judgment, and execution, made for any intent and purpose before declared and expressed, shall be, as against that person, his heirs, successors, executors, etc., whose actions, suits, etc. are or might be in any wise disturbed, hindered, delayed, or defrauded, utterly void.3 242. Equity has concurrent jurisdiction with law over frauds under these statutes; and the same rules of construction are adopted in both courts.* Where property, which is legally 1 See notes to Twyne's Case, 1 Sm. Lead. Cas. 33; Cadogan v. Kennett, 2 Cowp. 432; Clements v. Moore, 6 Wall. 312; Clark v. Douglass, 12 P. F. Sm. 408. 2 The statute of 27 Eliz, c. 4, was (as is well known) passed to protect the rights of subsequent purchasers. See post, p. 245. 3 This statute has been substantially re-enacted and its provisions adopted in most of the United States; 2 Kent's Com. 440. 4 Note to Sexton v. Wheaton, 1 Am. Lead. Cas. 58, 59; Hopkirk v. Randolph, 2 Brock. 133. liable to be taken in execution has been fraudulently conveyed or encumbered, the jurisdiction is concurrent, as the creditor may either issue an execution at law, or file a bill in equity to have the conveyance set aside.1 Where, however, the property is such that it was never subject to execution at law, the only remedy is in chancery.2 243. Two general questions arise, under the statute of Elizabeth; first, what conveyances are voidable; and second, as against whom are they voidable. And, in the first place, it is the fraudulent intent which invalidates the conveyance. A transfer may be made for a valuable consideration-nay, the consideration may be a full and adequate one; but yet if it is effected with a fraudulent intent it will, nevertheless, be void.3 This fraudulent intent may be either express or implied.5 The most usual evidence of a fraudulent intent is found in the absence of consideration. Hence it has been laid down as a rule that a voluntary alienation of property is, in general, void as against creditors. This rule corresponds with the proviso in the statute of Elizabeth. The statute declares that all conveyances, made with an intent to hinder, delay, and defraud credit ors, shall be void as against the parties intended to be injured. It then goes on, in a subsequent section, to provide that this rule shall not apply to bona fide transfers for a good consideration. Two requisites, therefore, are necessary to the validity of a transfer; first, it must be made in good faith; and, secondly, it must be for a good consideration. The consideration will not avail if bona fides be wanting. The good faith will not save the conveyance if it be made without consideration. The term good consideration has been construed to mean a valuable consideration. A good consideration, in one sense of the term, 1 Am. Lead. Cas. 59. 2 Botsford v. Beers, 11 Conn. 370; Weed v. Pierce, 9 Cow. 722; 1 Am. Lead. Cas. 59; post, Part III., chapter on Creditors' Bills and Administration Suits. 3 Twyne's Case, 3 Co. Rep. 212; 1 Sm. Lead. Cas. 3; Holmes v. Penney, 33 K. & J. 99; Gragg v. Martin, 12 Allen, 498; Root v. Reynolds, 32 Verm. 139; 5 See notes to Ellison v. Ellison, 1 Lead. Cas. Eq. 284 (4th Eng. ed.). 5 See notes to Sexton v. Wheaton, 1 Am. Lead. Cas. 37; 2 Kent's Com. 441. Clements v. Moore, 6 Wal. 312. |