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on the assets of the corporation in the hands, barrassment, to further proceed with its of the receiver.” The substance of this con- business; and the other that, as Thompson clusion is incorporated in points 3 and was a director of the company at the time 4 of the syllabus. In the opinion of the the contract was entered into, it was voidcourt, the contract was voidable on the part able at the election of the stockholders. It of the Blackwater Boom & Lumber Com- is not, therefore, the ordinary case of a pany, and the court, having succeeded to its wrongful prevention of the performance of rights in the administration of its affairs, a contract, nor is it a case of settlement of abrogated it by selling the property of said the equities or legal rights of the parties company free from the obligation of Thomp- upon the rescission of a contract. son's contract; but it held, nevertheless, as The principle of law underlying the first stated, that he is entitled to compensation, ground upon which the contract was deand the only question to determine is the clared to have terminated is announced in amount thereof.

People v. Globe Mut. L. Ins. Co. 91 N. Y. The termination of Thompson's contract, 174, 1 Am. & Eng. Corp. Cas. 586. This as decided on the former appeal, rests upon doctrine is that, where performance of a two grounds. The first is that the corpo- contract by a corporation is prevented by its ration was unable, because of financial em- | dissolution at the instance of the state or

Neither the insolvency of a corporation, nor justify the discharge of the receiver and the its failure to elect officers, operates as a disso- resumption of the corporate business. This falls lution, or as a virtual surrender of its charter. short of the civil death of the corporation until Taylor v. Holmes, 14 Fed. 498.

the final decree, and consequently the rule that The mere fact that a corporation has failed the death of the master terminates the servant's to pay its debts, and has ceased to carry on its contract does not apply to bar a corporate emlawful and ordinary business for such a length ployee's claim for damages for breach of his of time as, according to a statute of the state contract by the insolvency of the corporation. which created it, warrants its dissolution, does Spader v. Mural Decoration Mfg. Co. 47 N. J. not, per se, in the absence of an act of the leg- | Eq. 18, 20 Atl. 378. islature or the judgment of a court dissolving, The mere appointment and qualification of work a dissolution so as to prevent or abate a receiver of a national bank at the instance of ordinary legal proceedings against it by its the comptroller of the currency for failure to creditors. Ibid.

redeem its notes does not work a forfeiture of The resignation of all its officers does not, the franchise and a dissolution of the banking per se, operate to destroy the existence of a corporation, so as to bar a creditor from maincorporation. Officers and agents are necessary taining suit against the bank to establish the to manage the affairs of a corporation, but the validity of his claim. National Pahquioque corporation may exist so as to maintain suc- Bank v. First Nat. Bank, 36 Conn. 325, 4 Am. cession, and hold and preserve its franchises, Rep. 80. though its functions be for the time suspended The mere insolvency and the appointment of for want of means of action. Muscatine Turn a receiver of a corporation are not equivalent Verein v. Funck, 18 Iowa, 469.

to its dissolution, even though it is restrained It is a settled rule that, although the neglect by judicial order from transacting any more of a corporation to reappoint its officers may in business. City Ins. Co. v. Commercial Bank, 68 certain cases suspend its existence, it cannot be Ill. 348. thus extinguished to the injury of creditors. The appointment of a receiver to take and Brown v. Union Ins. Co. 3 La. Ann. 177.

distribute among creditors and stockholders all An exception to the rule that failure to elect the property of a corporation, while sometimes officers does not work a dissolution of a cor spoken of as a virtual dissolution, does not exporation appeared in Slee v. Bloom, 19 Johns. tinguish the franchise, terminate the legal es. 475, 10 Ani. Dec. 273. It was said that, as the istence, or render the corporation incapable of shareholders had done all they could to dissolve being sued at law or in equity. Folger v. Columthe company, the court would to give a creditor bian Jos. Co. 99 Mass. 267, 96 Am. Dec. 747. his remedy against a shareholder, and treat the The fact that a foreign building and loan asdissolution as effected. It was upon this ground sociation has been put in the hands of a receip. that the Louisiana supreme court distinguished er in its home state, and forbidden to continue the case in applying the general rule. Ibid. business, does not relieve it from liability to

The mere insolvency of a corporation, and an pay back his investment to a resident member, assignment of all its property to trustees for who has given due notice of his withdrawal as the benefit of creditors, followed by a suspen- required by the corporate by-laws, notwith. sion of its ordinary business, are not equivalent standing the association is unable to make colto a dissolution. New England Iron Co. y. Gilo lections, only after which, according to its bybert Eler. R. Co. 91 N. Y., 153.

laws, it is bound to pay. Southern Bldg. & L. A corporation is not dissolved by the mere

Asso. v. Price, 88 Md. 155, 42 L. R. A. 206, 41 bringing of a suit alleging insolvency, and ob

Atl. 53. taining the appointment of a receiver. Kinsman v. Fisk, 37 App. Div. 443, 56 N. Y. Supp. 33. VI. The earlier common-lawo doctrine concernInsolvency, suspension of business, and a re.

iny the effect of dissolution. ceivership, alone, do not extinguish corporate life in New Jersey. They may justuy the chan- "The text-books and cases decided are uni. cellor in declaring the charter forfeited and form in their language,--that the real estate void, but the assets may, on the other hand, held by the corporation at its civil death re. prove sufficient to pay creditors in full, and verts to the grantor and his heirs; that the

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power creating it, it may annul its con-, contract in such case cannot be considered tracts, and, in doing so, does not commit any to have been void ab initio. A long list of breach of the contract. The act of annul. cases turning upon this principle will be ment is deemed to be that of the state, and found in the note to the case above cited, as not of the corporation, and gives the con- reported in 1 Am. & Eng. Corp. Cas., holdtractor no right to claim damages as for a ing that the parties to an entire contract of breach of his contract. Whether, in such such a nature as indicates that they, in encase, the contractor is entitled to be reim- tering into it, must have contemplated the bursed for his outlay and expenses is not de possibility of its termination by act of the termined in that case, for the reason that law or of God, or by some cause beyond no such question was involved. The demand their power, are, upon the happening of such set up and denied was founded upon a con- event, relieved from its obligations, so far tract of employment as agent, and the dam- as it remains unexecuted, upon the theory ages claimed were for anticipated profits. that though, in form, it was an entire and Such termination of the contract does not indivisible contract, yet, as the parties must imply that it was not a valid contract, im- have had in view the contingency which renposing obligations and conferring rights up dered it impossible of further execution, or until the moment of the dissolution. The I gave right to terminate it, it was in fact

personal estate vests in the people, or, in Eng- The rule of the common law in respect of the land, in the Crown; and that the debts due to reversion to the grantor of real estate, vesting and from the corporation are totally extin- in the Crown of personal property, and exguished; so that neither the stockholders, nor tinguishment of debts and credits of corporathe directors or trustees, of the corporation can tions when they were dissolved, had its origin recover, or be charged with, them in their when corporations were either municipal, ecclenatural capacity." Commercial Bank v. Lock- siastical, or eleemosynary, and business corpowood, 2 Harr. (Del.) 8.

rations were unknown. There were no stockAt common law an absolute and unqualified holders or natural persons entitled to the asdissolution of a corporation by a decree of for- sets of dead corporations, and, as in the case of feiture or legislative repeal extinguishes all an individual dying without heirs, the persondebts due to or from it, puts an end to all its alty went to the King, and to prevent the realty rights or action and property, and it can no from escheating to the King it reverted to the longer sue or be sued, or do any lawful act. donor, upon the ground that, the grant being National Pahquioque Bank v. First Nat. Bank, made to a body corporate for public or charit. 36 Conn. 325, 4 Am. Rep. 80.

able uses, it was made only for life. Shayne v. The doctrine of the common law, that, upon Evening Post Pub. Co. 168 N. Y. 70, 55 L. R. the dissolution of a corporation, debts due to or A. 777, 85 Am. St. Rep. 654, 61 N. E. 115. from it are extinguished, results necessarily At common law every grant of land to a from the fact that, the corporation having ex- corporation was a grant for life of the body pired, whether by its own limitation, by sur- politic, conferring a power, of alienation, but render or abandonment of its members, or judg-coupled with a reservation of the reversion if ment of dissolution, there is no one in law to the land should not be aliened during the life sue or be sued. Hightower v. Thornton, 8 Ga. of the corporation. And as, by statute, the com486, 52 Am. Dec. 412.

mon law of England in all its parts, where not The elementary writers, both in England and inconsistent with constitutional and statutory in the United States, everywhere assert dis- law, was adopted and continued in force in tinctly that debts due to and from a corpora- South Carolina the legal title to the real estate tion are extinguished by its dissolution, unless of a private corporation (not a moneyed or prevented by the terms of the charter itself, or trading company) reverted upon its dissolution by aliunde legislation; that in the courts of to, and vested in, the grantor or his heirs, alboth countries this doctrine is too well settled though the conveyance to the corporation was to be overthrown or shaken; and that such in fee. St. Philip's Church v. Zion Presby. debts are so totally extinguished that the mem- Church, 23 s. C. 297. bers of the corporation cannot recover or be The common-law rule, whereby, upon the charged with them in their natural capacities. civil death of a corporation, all its unsold real Moultrie v. Smiley, 16 Ga. 289.

estate reverted to its grantor, all its personal Upon the dissolution or civil death of a cor- estate vested in the state, and all debts due to poration all its real estate, by the strict rule of or from it were extinguished, so that neither the common law, reverts to the original owners the stockholders, directors, nor trustees, could or their heirs, and all its personal estate vests recover or be charged with the debts in their in the Crown, in England, and the state here, natural capacity, was applied by the supreme and all debts due to or from it are, by operation court of Tennessee, to prevent a recovery upon of law, extinguished. Life Asso. of America v. a note secured by a deed of trust executed to Fassett, 102 ni. 315.

the Bank of Tennessee after the charter of that At common law dissolution implied that the corporation had expired. White v. Campbell, corporation had wholly ceased to exist for any 5 Humph. 38. purpose, so that suits brought by or against it The court there held both deed and note in. abated, and a judgment thereafter rendered operative and void, saying, in answer to the against it was a nullity; that its title to prop- argument that the maker fairly owed the debt, erty ceased to exist, and all legal remedies to and intended to secure the stockholders: “We enforce debts dne by or to it became extin- cannot recognize the existence of stockholders guished. Bowe v. Minnesota Milk Co. 44 Minn. of a defunct corporation, and we cannot ... 460, 47 N. W. 151.

go behind the note and deed to hunt for a dif

and in law a divisible contract, contrary to Taylor v. Caldwell, 3 Best & S. 826; Rhodes its form, and recovery is allowed for such v. Forwood, L. R. 1 App. Cas. 256 ; Thurnell part of the contract as has been performed, v. Balbernie, 2 Mees. & W. 786; Brogden v. but profits which would have arisen from Marriott, 2 Scott, 703; Worsley v. Wood, further and future performance are denied 6 T. R. 710; Davison v. Mure, 3 Dougl. 28; and refused. Mumma v. Potomac Co. 8 Pet. Milner v. Field, 5 Exch. 829; Morgan v. 286, 8 L. ed. 947; Fenton v. Clark, 11 Vt. Birnie, 9 Bing. 072; People v. Manning, 8 557; Fuller v. Brown, 11 Met. 440; Ryan Cow. 297, 18 Am. Dec. 451; Carpenter v. v. Dayton, 25 Conn. 188, 65 Am. Dec. 560; Sterens, 12 Wend. 589; Wolfe v. Howes, 24 Willington v. West Boylston, 4 Pick, 101; Barb. 174; Fahy v. North, 19 Barb. 341; Yerrington v. Greene, 7 R. I. 589, 84 Am. Spalding v. Rosa, 71 N. Y. 40, 27 Am. Rep. Dec. 578; Stewart v. Loring, 5 Allen, 306, 7; Sturges v. Vanderbilt, 73 N. Y. 390 ; 81 Am. Dec. 747; Knight v. Bean, 22 Me. Smith v. Brady, 17 N. Y. 173, 72 Am. Dec. 531; Merrill v. Suffolk Bank, 31 Me. 57, 50 442; Walker v. Tucker, 70 Ill. 527; Orr v. Am. Dec. 649; Read v. Frankfort Bank, 23 Ward, 73 III. 318; Hercules Mut. Life Assur. Me. 321; Farrow v. Wilson, L. R. 4 C. P. Soc. v. Brinker, 77 N. Y. 435. By far the 744; Tasker v. Shepherd, 6 Hurlst. & N. greater number of these cases involve con575; Charnley v. Winstanley, 5 East, 266; 'tracts for compensation to agents and serve ferent payee and a different cestui que trust, corporations in England. The sound doctrine from that mentioned in the instrument." Ibid. now is, as shown by statutes and judicial deci.

On the dissolution of a Tennessee corporation sions, that the capital and debts of banking and its real estate reverts back to the original otber moneyed corporations constitute a trust grantor or his heirs. Acklin v. Paschal, 48 fund and pledge for the payment of creditors Tex. 147, Citing White v. Campbell, 5 Humph. and stoc! holders; and a court of equity will 38.

lay hold of the fund, and see that it is duly At common law, upon the death or dissolu-colleited and applied. tion of a corporation its real property reverted And in Hightower v. Thornton, 8 Ga. 486, to the donors, and its personal property escheat 52 Anı. Dec. 412, Lumpkin, J., quotes Chanceled to the King, while the debts due to and from lor Kent approvingly as having given his proit were thereby extinguished, and all actions fessional opinion, which was read on the argupending for or against it abated. Wallamet ment of Nevitt v. Bank of Port Gibson, 6 Falls Canal & Lock Co. v. Kittridge, 5 Sawy. 44. Sniedes & M. 513, in which "he asserts that

The doctrine of the common law as to the there is not an instance in the English law in effect of the dissolution of a corporation upon which the funds of an insolvent or forfeited its real and personal property, debts and cred- moneyen institution have been permitted to be its, had its origin when corporations were either abandoned, and creditors denied redress and municipal or ecclesiastical, and were dissolved payment out of them; and he adds that, to ior abuse or nonuse of their powers. Their real permit the odious and obsolete doctrine of anestate, which usually was acquired as a dona cient date, before moneyed institutions were intion to public or pious uses, was held to revert, troduced, to be now applied to the dissolution upon the cessation of the use, to the donors, of a bank, perhaps by its own mismanagement and their personal property to escheat to the and abuse, so that all its assets were to be conKing for want of owners. In these cases there sidered as dispersed to the wind, without any were no stockholders who were entitled, equita- owner or power any where to collect and justly bly or otherwise, to the assets of dead corpo- apply them, would be a disgrace to any civilrations, and, as in the case of a natural person ized state.”

Of the doctrine of the common law as stated King; but, to prevent the real estate from es in the text-books, Campbell, J., of the United cheating to the Crown, it was held to revert to States Supreme Court, remarked that “the conthe donor, upon the theory that it was made sequences are visited without any discriminaover to the corporation only for its life. Ibid. tion; the losses are imposed upon those who are

not blameworthy, and the benefits are accumuVII. Comment and criticism concerning it. lated upon those who without desert.

dying without heirs

, the personalty went to the

are

Bacon v. Robertson, 18 How. 480, 15 L. ed. According to the old settled law of the land, 499. says Kent (Com. $ 33, p. 307), where there is According to common-law principles the debts no special statute provision to the contrary, of a corporation either to it or from it are exupon the civil death of a corporation all its real tinguished by its dissolution ; nor are its memestate, remaining unsold, reverts back to the bers liabie in their individual characters for original grantor and his heirs. The debts due any part of its debts. Its lands revert to the donto and from the corporation are all extin

Its personalty goes to the commonwealth. guisted. Neither the stockholders, nor the "If these things be so (and there is no readirectors or trustees of the corporation, can re sonable doubt about it), they are grossly uncover those debts, or be charged with them in just,” said Tucker, P., for the Virginia court their natural capacity. All the personal estate of appeals, in 1836. "It cannot be just that the of the corporation vests in the people as suc members of a joint-stock company should forceeding to this right and prerogative of the feit their property to the commonwealth by the Crown at common law.

expiration of their charter. It cannot be just It is observed, in the appended note to the that the land which they have purchased and 10th edition, the rule of the common law has paid for should revert to the grantor, who has in fact become obsolete and odious. It has never already received value for it. It cannot be just been applied to insolvent or dissolved moneyed that those who are indebted to the corporation

ors.

ants, in which no demand for money laid out, sufficient to pay its debts. Everyone who and expended in preparation for, and execu- deals with such a corporation does so in tion of, the contract was made or could have view of the trust fund its capital provides, been set up. Hence in none of them is that and the security that fund is intended to question passed upon. The doctrine of the afford. The stockholders who provide the case of People v. Globe Mut. L. Ins. Co. 91 N. fund invite confidence because of it, that Y. 174, is examined, and repudiated as un- through such confidence their venture may sound, and at variance with the principles be profitable to them. The mere statement of law in Rosenbaum v. United States Credit of this situation makes conspicuous the inSystem Co. 61 N. J. L. 543, 40 Atl. 591. justice of any course of reasoning which Speaking for the court, Chancellor McGill will return to the stockholders their capital said: “It appears to us that the material before satisfaction of all losses induced by fact that the corporation defendant is a faith in it shall be made. The state cre. stock company, and that its capital stands ates corporations, and requires of them the as a trust fund for the payment of its debts, provision of such a trust fund, and, when it is lost sight of. Such a company may be destroys their corporate existence, natural come insolvent, and its charter may be for justice requires that it shall provide for disfeited, when its assets may be more than I tribution of the fund, so that no part of it

(a bank, for instance) should be absolved from to creditors first and stockholders afterwards. their engagements; and still less that, by a for Von Glahn v. De Rosset, 81 N. C. 467. feiture of its charter, those to whom it is in And finally (1897) the doctrine was emphat. debted should lose their just demands." Rider ically repudiated, and the decision in Fox v. v. Nelson & A. Union Factory, 7 Leigh, 154, 30 Horah, 36 N. C. (1 Ired. Eq.) 358, 36 Am. Dec. Am. Dec. 495.

48, supra, expressly overruled; and it was ques. The doctrine that the debts of a corporation tioned whether the common law ever really both to and from it are extinguished by its dis- sanctioned a rule so plainly “not founded upon solution is odious. A majority of the American justice and reason, nor approved by experistates have, by enlightened legislation, inter ence.' Wilson v. Leary, 120 N. C. 90, 38 L. R. posed to prevent, to ward off, the iniquitous A. 240, 58 Am. St. Rep. 778, 26 S. E. 630. consequence of this common-law rule, the ex The case of Fox v. Horab, 36 N. C. (1 Ired. istence of which is a disgrace to a civilized Eq.) 358, 36 Am. Dec. 48, was fully analyzed, state. Such is the rule, however, but a court explained, distinguished, and circumscribed in is not called upon to extend it one jot or tittle Moultrie v. Smiley, 16 Ga. 289. beyond the reason which gave it birth. Thorn Mr. Cook (2 Corp. 5th ed. 8 641), adverting ton v. Lane, 11 Ga. 459.

to the alleged common-law doctrine that, upon When a corporation is dissolved by having the dissolution of a corporation, all its assets lived out its term, and there is no saving belonged to the state, and all its debts were can. statute, following the rule of the common law celed, and its acceptance in text-books and deci.. its real estate reverts to the grantor, its per sions for more than a century, says that, neversonal property goes to the state, and its choses theless, the courts uniformly refused to apply in action, debts, etc., are extinguished. Fox v. it, and resorted to various devices and fictions Horah, 36 N. C. (1. Ired. Eq.) 358, 36 Am. to avoid doing so; and finally, in 1899, an EngDec. 48.

lish court, in the case of Re Higginson (1899) Judge Thompson (5 Thomp. Corp. $ 6720) 1 Q. B. 325, denied that such doctrine ever was referred to this decision as being “in accordance the common law, and showed that in the 17th with the barbarous rule of the common law ;" | and 18th centuries many corporations were and said it was “probably the last case of its dissolved, and in no single case was such doc. kind."

trine ever applied. But its doctrine was reiterated and applied The authorities for the proposition that, on more than twenty years later (1863) in the the dissolution of a corporation, aggregate debts case of Valloy v. Mallett, 59 N. C. (6 Jones, due to or from it are extinguished, says Wright, Eq.) 345.

J., of the English Queen's bench, in the case to Later, however (1879), the court virtually which Mr. Cook referred, are by no means clear repudiated the doctrine. Speaking of these de or satisfactory. In 1 Bl. Com. 484, and in 2 cisions, it said that they were made, and their Kyd, Corporations, 516, and in Grant, Corpo. conclusions were reached, after full discussion rations, 303, such a proposition is stated, but and careful consideration by able jurists, and

in terms which suggest that no more is meant its reluctance to disturb them after so long

than that after the dissolution the individuals

who were inembers or officers of the corporaan acquiescence by the profession could be over

tion cannot sue or be sued in respect of its come only by the clearest convictions of their

rights or obligations; and this is all that is error. But, it was added, they rested upon

established by the cases there cited. The Amerstrictly legal principles, well settled by au

ican decision in the case of Bank of Vincennes thority, and carried to logical results; and a

v. State, 1 Blackf. 267, 12 Am. Dec. 234, relies remedy existed in calling in to exercise, in be.

on these authorities as supporting the general half of creditors and others interested, the proposition, but it does not advert to this qualiequitable jurisdiction of the court. And, re

fication, or add new references to authority, and garding the debts and other property of the dis the authorities cited do not in any way support solved corporation as the property of its cred the proposition, except as qualified. Grant is itors, a court of equity would reach forth and explicit in the same case, but does not refer to gather up and collect the assets though there any authority which, so far as I can see, has were no legal owner, and would distribute them any bearing on the matter. Nor do the old au

shall be returned to those who offer it as se the other party the right to recover what curity for the action of others, until the he has already expended toward the perlatter shall have all the protection against formance of it and the profits which he loss in their undertaking that it is capable would have realized by performance. Re of affording."

Wiltshire Iron Co. L. R. 3 Ch. 443, holds Other cases more analogous to the one that where a sale of personal property has now under consideration hold that the effect been made by a corporation which is disof the dissolution of a corporation upon un solved before delivery of the property, the expired or executory contracts is to excuse purchaser has a valid claim for damages further performance and render them nuga-for the breach of the contract, payable out tory as to so much as remains unperformed, of the assets of the company. In Spader v. but to entitle the obligee to damages for the Mural Decoration Mfg. Co. 47 N. J. Eq. 18, breach of the contract to be paid out of the 20 Atl. 378, it is held that where a person assets of the dissolved corporation. 10 Cyc. was employed by a corporation for a term of Law & Proc. p. 1312. Thus, in Schleider v. years for a fixed salary, and before the exDielman, 44 La. Ann. 463, 10 So. 934, the piration of the term the corporation became court held the dissolution of the corpora- insolvent, and a receiver was appointed to tion to be a breach of the contract, giving wind up its affairs, the employee was enthorities as to the effect of dissolution of mu The idea that the property of insolvent cornicipal and other corporations add anything de- | porations is held by them in trust for creditors, cisive to the question. In the 17th and 18th -is a trust estate in their hands,-and to be centuries corporations aggregate constituted by administered by chancery as such, is said to charter or letters patent were numerous, and have originated in a dictum of Story, J., in questions frequently occurred as to the effect Wood v. Dummer, 3 Mason, 308, Fed. Cas. No. upon their rights and obligations of dissolu- 17,944, and to have no existence at common tion, revival, and reincorporation with or with law. It has not been adopted in England, but is out change of name or constitution. I cannot distinctly a creature of some courts in this find that in any case the rights or obligations country, and is styled the "American doctrine." of a corporation were held to be affected by a O'Bear Jewelry Co. v. Volfer, 106 Ala. 205, 28 technical dissolution. Nor, on the other hand, L. R. A. 707, 04 Am. St. Rep. 31, 17 So. 525, can I find a case in which such a question has The trust-fund doctrine is usually stated in been decided where the corporation had not the decisions in terms quite broad and general. been revived, or some provision made by statute Thus :or charter with reference to its obligations. The property of an insolvent trading corpo. Re Higginson [1899] 1 Q. B. 325.

ration while under the control of its officers There is in the opinion of Lumpkin, J., in being a trust fund in their hands for the beneMoultrie v. Smiley, 16 Ga. 289, a very full and fit of its creditors, a court of equity, which learned examination into the origin, reason for, never allows a trust to fail for want of a trusextent and limitations of the rule that debts tee, will see to the execution of the trust, aldue to and from a corporation are extinguished though by the dissolution of the corporation the by its dissolution. It is too long to give here in legal title to its property has been changed. extenso, and cannot, without sacrifice, be ab Curran V. Arkansas, 15 How. 304, 14 L. ed. stracted. The reader will do well to supplement | 703. this note by perusing it.

In contrast to the rule of the common law, the

rule in equity was that while, upon dissolution, VIII. The trust-fund, or American," doctrine. a corporation ceased to exist, yet its property

was impressed with a trust in favor of its The trust-fund doctrine, called frequently the creditors and stockholders beneficiaries, “American" doctrine, was formulated by Mr.

whose interests equity would protect by apJustice Story.

pointing a trustee if necessary to execute the "It appears to me," said that jurist in Wood trust. Bowev. Minnesota Milk Co. 44 Minn. v. Dummer, 3 Mason, 308, Fed. Cas. No. 17,944, | 460, 47 N. W. 151. “very clear upon general principles, as well as When a corporation is dissolved, discontinues the legislative intention, that the capital stock its business, makes a general assignment, or of banks is to be deemed a pledge or trust fund does any other act indicating positive insol. for the payment of the debts contracted by the vency, its property thereafter is affected by an bank,

To me

this point appears so equitable lien or trust for the benefit of all its plain upon principles of law, as well as common creditors, and these may individually be resense, that I cannot be brought into any doubt strained by injunctions against appropriating that the charters of our banks make the capital the corporate assets to the payment of their stock a trust fund for the payment of all the claims. M'Claren v. Union Roller Mills & Elevadebts of the corporation."

tor Co. 95 Tenn. 696, 35 S. W. 88. And, in conformity with these views, he held It is well settled that the property of a corthat the capital stock of a bank is a trust fund poration is a trust fund in the hands of its for creditors, and, upon the division of it, the directors for the benefit of creditors and stockstockholders take it subject to all the equities holders,--that is, to the extent of preventing attached to it. They are privies to the trust, the directors from dealing with it to their own and receive it cum onere. Ibid.

advantage, or in disregard of the rights of the And, on the dissolution of a banking corpora creditors and stockholders. Goodin v. Cincin. tion, the bill bolders and the stockholders have nati & W. Canal Co. 18 Ohio St. 169, 98 Am. each equitable claims, but those of bill holders Dec. 95. possess a prior exclusive equity. Ibid.

In the view of equity the property of a dis

as

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