Wardell v. Union Pac. Railroad

Supreme Court of the United States · 1881 · Corporations

103 U.S. 651 (1881)

Updated August 22, 2026

Corporationscorporate fiduciary dutydirector self-dealingconflict of interestfraud on the corporationrailroad corporationsvoidable contractsagency principles

Facts

In 1868, the Union Pacific Railroad Company's executive committee directed the making of a 15-year contract allowing Wardell and Godfrey to prospect for coal, lease the company's coal lands, sell coal to the railroad at specified prices, and receive a freight drawback. The contract was highly favorable to the contractors even though the directors knew the coal deposits' extent and accessibility and had information that coal could be delivered at about two dollars per ton. Evidence showed that a majority of the executive committee had previously agreed to share in the contract's benefits, planned to do so through a corporation to which the contract would be assigned, and later formed the Wyoming Coal and Mining Company and took stock in it. Wardell eventually assigned the contract to that company, and after later disputes and seizure of the mines by the railroad, he sued in his own name.

Issue

Whether Wardell could enforce or obtain an accounting based on the July 16, 1868 contract when the railroad directors who authorized it had arranged to share in its benefits through a separate corporation. More broadly, the question was whether such a contract was valid against the railroad company.

Rule

A person cannot act for himself and at the same time, with respect to the same matter, as the agent of another whose interests conflict. Directors and others in a fiduciary relation who are empowered to act for a corporation may not authorize contracts on its behalf and then personally participate, directly or indirectly, in the benefits; arrangements using a new corporation to secure such advantage at the corporation's expense are unlawful and will be condemned when properly challenged.

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Denver, the executive committee of High Plains Transit Company approved a 12-year gravel supply contract with Nora Benton. Before the vote, three of the five committee members had secretly agreed with Benton that they would organize Front Range Aggregates, take most of its stock, and have Benton assign the contract to that company so they could share in the profits.

If Front Range Aggregates sues High Plains Transit to enforce the contract after the conflict is discovered, what is the strongest argument for High Plains Transit under the governing rule?

Explanation. The controlling rule is that fiduciaries empowered to act for a corporation cannot authorize a contract on its behalf and then personally share, directly or indirectly, in the benefits. Using a newly formed corporation as the vehicle for that participation does not cleanse the conflict; it confirms the unlawful device. The defect is not cured by the directors' absence from the face of the contract.