Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/675

CHAP. XI.] CORPORATION AND CREDITORS. [§ 655. constitution, a creditor cannot interfere in the corporate man- agement. § 654. It is not to be inferred, however, that the only rights of a general creditor are to sue for his debt, and, on recovery of a judgment, levy a fruitless execution Cor P° rate on the departed funds of an insolvent corporation. " trust He has many important rights, all more or less based creditors? on or related to the fundamental doctrine that the purposes for which corporate funds are set apart include the payment of the corporate indebtedness ; and that for this, among other purposes, these funds are held in trust. § 655. This doctrine was first formulated by Justice Story in "Wood v. Dummer, where the learned justice said: 1 "It appears to me very clear, upon general principles, as well as the legislative intention, that the capital stock of banks is to be deemed a pledge or trust fund for the payment of debts 1 S Mason, 308, 311. It seems best to leave the " trust fund" doctrine as stated in the text; but recent cases are tending to minimize if not to impugn it. "While, it is true, language has been frequently used to the effect that the assets of a corpo- ration are a trust fund held by a cor- poration for the benefit of creditors, this has not been to convey the idea that there is a direct and express trust attached to the property. . . . When a court of equity does take into its possession the assets of an insol- vent corporation, it will administer them on the theory that they in equity belong to the creditors and stockholders, rather than to the cor- poration itself. In other words, and that is the idea which underlies all these expressions in reference to 'trust' in connection with the prop- erty of a corporation, the corpora- tion is an entity, distinct from its stockholders as from its creditors. Solvent, it holds its property as any individual holds his, free from the touch of a creditor who has acquired no lien; free also from the touch of a stockholder who, though equitably interested in, has no legal right to, the property. Becoming insolvent, the equitable interest of the stock- holders in the property, together with their conditional liability to the creditors, place the property iu a condition of trust, first, for the credit- ors, and then for the stockholders. Whatever of trust there is arises from the peculiar and diverse equitable rights of the stockholders as against the corporation in its property, and their conditional liability to its cred- itors. It is rather a trust in the ad- ministration of the assets after pos- session by a court of equity than a trust attaching to the property, as such, for the direct benefit of either creditor or stockholder." Hollins v. Brierfield Coal, etc., Co., 150 U. S. 371, 382-3S3. See Worthen v. Grif- fith, 59 Ark. 562; Marvin v. Ander- son, 111 Wis. 387; Plow Co. v. Rude, GO Kas. 145; Kelly o. Clark, 21 Mont. 291; Schufeldtu. Smith, 131 Mo. 280; Corey v. Wadsworth, 118 Ala. 488. See, also, §§ 702a, 7026. 655