CHAP. XII.] SHAREHOLDERS AND OFFICERS. [§ 698. depress the selling price of the shares by a system of false accounts and concealments, in order that they may purchase shares at less than the real value, and they do purchase the shares of a holder at less than the shares are worth, the holder may have the sale set aside with an accounting for dividends received by them, or may hold the agents for the difference between the value of the shares and what they paid. 1 Where, however, the defendant with other directors of a corporation, made an assessment on its stock, upon which but a small pro- portion was paid, and threatened to make further assessments for the purposes of the corporation, a course of action which induced the plaintiff to sell his shares to the defendant, it was held that there was no such fraud in the matter as would war- rant setting the sale aside. 2 § 698. The trust relation between shareholders and directors extends only to matters relating to the manage- , . . . . J , ° A ,. ° Limits to ment of the corporate business. Accordingly, rules the trust applicable to transactions between a trustee and his tween cestui que trust do not extend to a purchase of holders and shares made by a director from a shareholder, and directors. in the absence of actual fraudulent misrepresentations, such a sale will be upheld, provided the director does not inten- tionally and fraudulently divert or prevent the vendor from making inquiries into the condition of the corporate affairs. 3 This rule, regarding the purchase of shares by an officer, was applied under the following circumstances : The defend- ant, who was the president and a director of a railroad company, knowing by reason of his official position that the true value of its stock was largely in excess of the selling price, purchased the shares of a non-official shareholder for less than their real value. The court held that the defendant was under no duty to disclose to the shareholder matters affecting the value of the shares, which were not matters of general But an assignee of shares cannot sue the transfer agent for improp- erly refusing to register him; but must sue the corporation. Denny v. Manhattan Co., 2 Denio (N. Y. ), 115. 1 Walsham v. Stainton, 1 De G. J. & S. 678. 2 Grant v. Attrill, 11 Fed. Rep. 469. 3 Carpenter v. Danforth, 52 Barb. 581; Deaderick v. Wilson, 8 Bax. (Tenn.) 108; Commissioners of Tip- pecanoe County v. Reynolds, 44 Ind. 509; Krumbhaar v. Griffiths, 151 Pa. St. 223. 691
