Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/49

 CHAP, in.] ANALYSIS OF A CORPORATION. [§ 48. between these two classes of persons. Trust relations exist also between the directors and the creditors of the corporation, on account of the inability of the creditors to protect their inter- ests in the funds which the directors manage. § 45. Possibly it may also be said that shareholders, to the extent of their unpaid subscriptions to the capital stock, are affected with duties towards creditors, which constitute trust relations between them ; for unpaid subscriptions, just as much as those paid in, are held to form part of the corporate funds, of the trust funds, to be devoted to the objects of incorporation ; objects which include the payment of liabilities contracted in their pursuit. Yet this proposition is questionable, and there is a decision to the contrary. 1 § 46. The reason last stated points to the third element often present when a trust relation exists, to wit, possession by one person of property of which another is the legal or equitable owner, or in respect of which the other has rights. This element occasions a trust relationship when one person has wrongfully taken the property of another ; and the same element may be regarded as occasioning a trust relationship between bailor and bailee in respect of the property bailed ; and thus a person may be held as trustee for another in certain respects, or in respect of certain property, while in other respects he owes the latter no special duty. §47. In short, the circumstances ordinarily occasioning a trust relationship are : First, actual or presumptive inadequacy of the legal rules applicable to transactions of the same kind with the transaction occasioning the relation in question, to bring about what the law regards as just or expedient ; an in- adequacy which may be due either to status or the peculiar circumstances of the case ; secondly, confidence invited by one person, and by another actually reposed, in the discretion, hon- esty, and ability of the former ; and thirdly, possession, right- ful or wrongful, of property belonging to another, or in respect to which the other has rights. 2 § 48. Thus far a corporation has been regarded solely as a 1 Morrison v. Savage, 56 Md. 142. 2 It appears at a glance that the term trust relation is vague and un- suitable, except for the roughest clas- sification. 29