In Michoud v. Girod (1846) 45 U.S. 503, the beneficiary's heirs sought to set aside a transaction in which the trustee purchased the testator's entire estate: the Supreme Court declared the sale void as fraudulent "without any further inquiry." While the Court was not particularly interested in whether plaintiffs suffered a pecuniary loss, it was clear that the relief requested, recovery of the estate, would provide them a significant benefit.
Michoud v. Girod, was a case of actual fraud, a suit filed 36 years after the commission of the fraud was held not to be barred by laches.
There is no doubt that the title to one-half of the land recovered by Diana Shaw by the judgment in suit No. 150 remained in appellants.
It was said that condemnation of a trustee purchasing property which is the subject of his trust is applicable where the sale is "at public auction, bona fide, and for a fair price." It seems to me that this equally covers purchases on an exchange. This is true because purchases on an exchange of bonds of the precise kind and issue as the bonds held by a committee as trustee for depositors carries with it the same "temptation to abuse" and "danger of imposition inaccessible to the court" as would exist if the purchases had been made directly from depositors. Id., 4 How. at page 557, 11 L.Ed. 1076.
The Supreme Court said:
"The general rule stands upon our great moral obligation to refrain from placing ourselves in relations which ordinarily excite a conflict between self-interest and integrity. It restrains all agents, public and private; but the value of the prohibition is most felt, and its application is more frequent, in the private relations in which the vendor and purchaser may stand towards each other. The disability to purchase is a consequence of that relation between them which imposes on the one a duty to protect the interest of the other, from the faithful discharge of which duty his own personal interest may withdraw him. In this conflict of interest, the law wisely interposes. It acts not on the possibility, that, in some cases, the sense of that duty may prevail over the motives of self-interest, but it provides against the probability in many cases, and the danger in all cases, that the dictates of self-interest will exercise a predominant influence, and supersede that of duty. It therefore prohibits a party from purchasing on his own account that which his duty or trust requires him to sell on account of another, and from purchasing on account of another that which he sells on his own account. In effect, he is not allowed to unite the two opposite characters of buyer and seller, because his interests, when he is the seller or buyer on his own account, are directly conflicting with those of the person on whose account he buys or sells."
It was also said that:
"A person cannot legally purchase on his own account that which his duty or trust requires him to sell on account of another, nor purchase on account of another that which he sells on his own account. He is not allowed to unite the two opposite characters of buyer and seller."