deal on equal terms.1 And the same rule applies where the purchaser relies on the report of an assayer as to the value and quantity of ore taken from a mine, for even if the analysis should be incorrect as to the quantity and quality of the mineral, the purchaser, in relying on the same, had constituted the assayer his agent for the purpose of assaying the ore, and in the absence of fraud or collusion he would be bound by the contract.2 But the rule allowing a vendor to "puff" his property, and appreciate its value, only applies where the purchaser has a full opportunity of inspection and examination of the property, and if it is so situated that he cannot personally examine the same, or if the vendor was an expert as to the matters upon which he had expressed an opinion, he would not, in such case, be permitted such latitude of commendation.3

§ 105. Effect of fiduciary relation. Any transaction between persons occupying a fiduciary relation, even in the absence of fraud, whereby the confidence growing out of

1 See Bispham's Prin. of Eq., § 207, p. 264; Picard v. McCormick, 11 Mich. 68, Kost v. Bender, 25 Mich. 515. See as to misrepresentations of fact, Tyler v. Block, 13 How. 230; Bennett v. Judson, 21 N. Y. 238; Manning v. Albee, 11 Allen, 532; Kent v. Freehold S. & B. Co., Law Rep. 4 Eq. 588; Smith v. Reese R. Min. Co., L. R. 2 Eq. 264.

2 Blanchard & Weeks Ld. Cas., p. 384 et sub.; Weist v. Myers & Grant, 71 Pa. St. 95. "Weist, without inspection, bought from Hickcox and Coryell, the owners, silver mines, upon their representation that they would yield a certain amount; the contract to be void if Weist should not approve the report of a selected assayer. After the report, Weist paid a large part of the purchase-money; on working the mines by Weist, the product was only one-third of the representations: Held, that Weist was liable for the remainder of the purchase-money, unless the misrepresentation was intentional." B. & W. L. C. 384, et sub.

3 Gatly v. Holcomb, 44 Ark. 216; Bisp. Prin. Eq., § 207, p. 264; Adams v. Soule, 33 Vt. 549. Mere inspection by purchaser will not prevent relief, where there is also misstatements, not investigated, as where it was represented that pits contained extensive ore beds, not examined. Green v. Turner, 86 Fed. Rep. 837.

the existing relation is exerted to obtain an advantage of the confiding party, will be set aside and the person availing himself of his position to obtain advantage, will be deprived of all benefit received. This rule applies as well to trustee and cestui que trust,2 as to all other persons Occupying a fiduciary or quasi fiduciary relation, and equity not only views all transactions between persons occupying such relations with a jealous eye, but it prevents such parties from realizing any profit accruing by reason of such relations, without the fullest and most complete disclosure.1 This rule, however, does not apply to promoters of companies, or affect sales of property made by them to the

1 Tate v. Williamson, L. R. 2 Ch. 61, per Lord Chelmsford (a leading case). "There Tate, a young man of twenty-three, who was the owner of a moiety of a freehold estate, and who was largely indebted, wrote to his great-uncle for advice and assistance in regard to the payment of his debts. His great-uncle sent a nephew, Williamson, to see Tate upon the subject, and Williamson made an offer to purchase Tate's moiety of the estate for £7,000, which was verbally accepted. Before any agreement was signed Williamson obtained a valuation by a surveyor, estimating the value of the mines under the tract at £20,000. The sale was completed without this information having been communicated to Tate. A bill was subsequently filed by Tate to set the sale aside, and a decree in his favor was made by Vice-Chancellor Wood, which was affirmed by Lord Chelmsford." Bispham's Prin. of Eq., Sec. 232, pp.

294, 295.

2 Bailey v. Watkins, 6 Bligh. N. R. 275 n.; Bainb. on Mines, 180; B. & W. L. C. 400. As to purchases from infants, see Becker v. Hastings, 15 Mich. 47.

3 Bisp. Prin. of Eq., § 232, p. 300. A cotenant who purchases outstanding title, held trustee of same for cotenants. Mills v. Hart, 24 Colo. 505; Cecil v. Clark, 44 W. Va. 659. But tenant must contribute pro rata of purchase price. Hodgson v. Fowler, 24 Colo. 278.

4 Tyrrell v. Bank of London, 10 H. L. Cas. 26; Bisp. Prin. of Eq. § 232, p. 301. Transactions between directors and stockholders are not within this rule. Carpenter v. Danforth, 52 Barb. 581. A relocation of a claim upon the public land, by an agent, to defeat the locator's rights, will inure to benefit of original claimant. Haws v. Vict. Co., 160 U. S. 303; Largely v. Bartlett, 18 Mont. 265; Argentine Co. v. Benedict, 18 Utah, 183; 20 Am. & Eng. Enc. Law (2 Ed.), 703.

association, before the formation of the company. Persons already owning property, may enter into an association and sell to their associates, at any agreed price, without disclosing the profit realized, or without being guilty of any breach of trust or confidence, in the absence of fraud or false representations. But as soon as the company is formed a confidential relation springs up, and none of the members can purchase property for the company, and realize a profit thereby, without a full disclosure of the facts to the company, together with an accounting.2

§ 106. Continued· ·Agent cannot make secret profit. The rule that parties occupying fiduciary relations are not permitted to make a profit by reason of the confidence reposed in them applies to parties occupying the position of principal and agent, and the agent is not permitted to reap any advantage or profit by reason of his position as such, without a full and complete disclosure to his principal.3

66

1 Densmore Oil Co. v. Densmore, 64 Pa. St. 43; B. & W. L. C. 370; 14 P. F. S. 49; McElhaney v. Hubert Oil Co., 11 P. F. S. 49; Sydney Iron Ore Co. v. Bird, 33 Ch. D. 85. But see Short v. Stevenson (53 Pa. St. 95). 'Stevenson being in negotiation for oil land, proposed to form a company to purchase, representing that the land could be bought for $12,000, and induced Short to take and pay for a share in it at $1,000. Stevenson bought the land for $6,000, without disclosing to his associates the price which he gave: Held, that on these facts Short could recover the whole amount he had advanced." M. M. D. 119; Pittsburg Min. Co. v. Sproule, 74 Wis. 307; Alger Prom. Cor., § 57, p. 61; Ladywell Min. Co. v. Brooks, 35 Ch. D. 411.

2 Densmore Oil Co. v. Densmore, supra; New Sombrero Phosphate Co. v. Erlanger, L. R. 5 Ch. D. 73; 3 App. Cas. 1218-1236-1242; McAleer v. McMurray, 8 P. F. S. 126; Simons v. Vulcan Oil Co., 11 P. F. S. 202; s. c 61 Pa. St. 202; McElhany's App., 11 Id. 192; Short v. Stevenson, 13 P. F. S. 95; Bailey v. Coal Co., 19 Id. 340; Collins v. Case, 23 Wis. 230; Lindley on Partnership, 481; Fox v. Mackreth, 1 Lead. Cas. Eq. 161 (4 Eng. Ed.); South Joplin Land Co. v. Case, 104 Mo. 572; Nanty Iron Co. v. Grove, 12 Ch. D. 738; Emma Silver Min. Co. v. Lewis, 4 C P. D. 396.

3 Tyrr 1 v. Bank of London, 10 II. L. Cas. 26; Bisp. Prin. of Eq.,

The agent's knowledge belongs to the principal and he should give him the benefit of all information possessed by him in regard to the latter's property. If he conceals the amount offered for property in his hands for sale and purchases the property from the principal in his own name at a less sum, and then transfers the same for an increased amount, the principal is entitled to the profit realized from such a sale, and he would not be denied an accounting from the agent, even though he should have partially assented to the fraud practiced. In the organization of companies, if property is purchased with the company's money, or if the purchasers act in the capacity of agents of the company, they are not permitted to make a profit from their purchase, without a full disclosure to their principal, and the company would be entitled to any profit realized. But if the purchasers did not act as agents of the company, or if they should disclose the amount paid for the property and refuse to sell except for an advanced sum, this is perfectly consistent with honesty and fair dealing and they would have a right to retain the profit, if the company, with a full knowledge of the facts, should

§ 232, p. 300; Union M. Co. v. Rocky M. Bank, 2 Colo. 248, 565; L. C. 1 Id. 531. "A person employed on behalf of himself and his copartners in negotiating the terms of a lease, is not entitled to stipulate clandestinely with the lessors for any private advantage to himself. When therefore a sum of £12,000 was paid in pursuance of such a stipulation, the party receiving it was declared to hold it in trust for the partnership." Fawcett v. Whitehouse, 1 R. & M. 132. M. M. D., 124; Emma Sil. Min. Co. v. Grant, 11 Ch. D. 918; McElheney's App., 61 Pa. St. 188; In re Westmoreland Slate Co., 2 Ch. 612.

1 Bisp. Prin. of Eq., supra; Bell v. Bell, 3 W. Va. 183.

2"An agent for sale of (oil) lands learning of an increased price to be got therefor, cannot make a valid bargain with his principal and become the purchaser himself, without disclosing such fact.” Bell v. Bell, 3 W. Va. 183. M. M. D. 118.

3 Simons v. Vulcan Oil Co., 61 Pa. St. 202.

• Ante, idem.

take the property at the advanced sum;1 and if the principal should participate with the agent in a fraud upon a third party, he could not for this

reason, avoid the pay

ment of the agent's compensation, but would himself be held to a full compliance with his contract with the agent, although they had defrauded some third party.2

§ 107. Same False prospectuses of projected companies. — In advertising the proposed advantages of projected companies by means of prospectuses, the promoters are bound to state all facts within their knowledge, and not to omit the statement of any material facts that would be likely to influence the public to take shares in the company.3 The prospectus and advertisement of the promoters of the company constitute the contract of the company with the shareholders and for a misrepresentation in any material fact, or for a failure to state material facts in the prospectus, the contract could be avoided by the shareholder. And the shareholder could

1 Simons v. Vulcan Oil Co., supra. As to how far company is affected by fraud of its organizers, see Hoffman S. C. Co. ». Cumberland C. & I. Co., 16 Rep. M. 456.

2 Hardy v. Stonebraker, 31 Wis. 640. Since there is no joint tenancy between surface and mineral owner, the latter can buy the surface owner's title at tax sale and no trust results. Hutchinson v. Cline, 199 Pa. St. 564; 49 Atl. Rep. 312.

3 Bispham's Prin. of Eq., § 208, p. 266; Hollows v. Ferril, L. R. 3 Ch. 475. "A prospectus of an oil company stated that the company had purchased their land from the original owner:' Held, that this was not a term of art to be explained by experts, but implied that no profits were added to the price paid by the company on account of an intermediate buyer, etc., and excluded the idea of a purchase at speculative prices." Simons v. Vulcan Oil Co., 61 Pa. St. 202. M. D. 119.

M.

4 Smith's case, L. R. 2 Ch. 609; Swift v. Winterbotham, L. R. 8 Q. B. 244; Paddock v. Fletcher, 42 Vern. 389; McClellan v. Scott, 24 Wis. 81; Bagshaw v. Seymour, 4 C. B. (N. S.) 873; Edgington v. Fitzmaurice, 29 Ch. D. 459. But the rule is different if the stock is bought in open