LEGAL PHASES OF COOPERATIVE ASSOCIATIONS 35 
ever their enforcement is seasonably resisted. Directors of corporations, and 
all persons who stand in a fiduciary relation to other parties, and are clothed 
with power to act for them, are subject to this rule; they are not permitted to 
occupy a position which will conflict with the interest of parties they represent 
and are bound to protect. They can not, as agents or trustees, enter into or 
authorize contracts on behalf of those for whom they are appointed to act, and 
then personally participate in the benefits. 86 
Another court has declared : 
It is a thoroughly well-settled equitable rule that anyone acting in a fiduciary 
relation shall not be permitted to make use of that relation to benefit his own 
personal interest. This rule is strict in its requirements and in its operation. 
It extends to all transactions where the individual's personal interests may be 
brought into conflict with his acts in the fiduciary capacity, and it works 
independently of the question whether there was fraud or whether there was 
good intention. 87 
At common law any transaction entered into by a director or officer 
of an association with anyone, which might conflict with his duty 
to the association, is voidable. For instance, an agreement by a 
director or officer of a cooperative association to keep another person 
in the employ of the association will not be enforced because the 
members are entitled to have the judgment of the director or officer 
"exercised with a sole regard to the interests of the company." 88 
Again, it has been held that directors can not engage in a rival busi- 
ness to the detriment of the corporation. 89 Directors and officers of 
any corporation, cooperative or otherwise, may be compelled to 
account thereto for any gifts, gratuities, or bonuses received by them 
from persons with whom the association is or may be having busi- 
ness relations. 90 The object of this rule, like the others akin thereto, 
is to enable corporations to have the " judicial judgment " of their 
directors free from any suggestion of bias other than the welfare 
of the corporation. 
CONTRACTS WITH DIRECTORS 
The form of cooperative marketing act which has been enacted in 
many States 91 usually contains the following or similar language 
relative to directors of associations contracting therewith : 
No director, during the term of his office, shall be a party to a contract for 
profit with the association differing in any way from the business relations 
accorded regular members or holders of common stock of the associations, or 
to any other kind of contract differing from terms generally current in that 
district. 
By reason of this provision, any contract of the prohibited type 
entered into by a director with an association which was formed 
under a statute containing this provision is invalid. The prohibition 
is primarily against the director. If a contract of the type pro- 
hibited is entered into by a director and is carried out, it would 
seem that he would be liable to account to the association, its receiver, 
or its members for any profits or gains resulting therefrom. 92 Any 
86 Warden v. Railroad Co., 103 U. S. 651. 
87 Mallory v. Mallory Wheeler Co., 61 Conn. 131, 23 A. 708, 710. 
8S West v. Camden, 135 U. S. 507 ; see also Timme v. Kopmeier, 162 Wis. 571, 156 N. W. 
961 ; L. R. A. 1919, 1114. 
88 Coleman v. Hanger, 210 Ky. 309, 275 S. W. 784. 
90 Keely v. Black, 90 N. J. Eq. 439, 107 A. 825; Keystone Guard v. Beaman, 264, Pa. 
397, 107 A. 835 ; Holland Furniture Co. v. Knooihuizen. 197 Mich. 241, 163 N. W. 884. 
91 See sec. 12 of the Bingham Cooperative Marketing Act of Kentucky, p. 121 of appendix. 
82 Rutland Electric Light Co. v. Bates, 68 Vt. 579, 35 A. 480 ; Thompson v. Greeley, 
107 Mo. 577, 17 S. W. 962 ; Wardell v. Railroad Co., 103 U S. 651. 
