Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/677

 CHAP. XI.] CORPORATION AND CREDITORS. [§ 656. payment as upon the payment of any other debt due the company." ' § 656. If the corporate funds are trust funds for the dis- charge of the corporate indebtedness, it follows on Creditors well-grounded principles of equity jurisprudence, may follow that the beneficiaries of the trust, shareholders or creditors, can claim such funds in the hands of any one who has not in good faith given value for them without notice of a violation of the trust. 2 And, moreover, every one receiving corporate funds knowing them to be such, is affected with notice of the purposes for which they are held in trust. That corporate funds may be tracked by creditors into the hands of any person to whom they have been transferred without con- 1 Accord, Bartlett v. Drew, 57 N. Y. 587; Hastings v. Drew, 76 N. Y. 9; County of Morgan v. Allen, 103 U. S. 498; Richardson v. Green, 133 U. S. 30; Coleman v. Howe, 154 111. 458; Singer v. Hutchinson, 183 111. 606; Corey v. Wads worth, 99 Ala. 68; Bruner v. Brown, 139 Ind. 600; South Bend, etc., Co. v. Ins. Co., 4 S. Dak. 173; Adamant Mfg. Co. v. Wallace, 16 Wash. 614; Thompson v. Reno Sav's Bk., 19 Nev. 103; Bucku. Ross, 68 Conn. 29; Marshall Foundry Co. v. Killian, 99 N. C. 501; Bell's App., 115 Pa. St. 88; Lee v. Imbrie, 13 Oreg. 510; Lane's App., 105 Pa. St. 491; Thompson-Houston Elec. Co. v. Murray, 60 N. J. L. 20; Van Pelt v. Gardner, 54 Neb. 702; and cases in succeeding notes. The doctrine is sometimes embod- ied in a statute. " No association or any member thereof, shall during the time it shall continue its banking operations withdraw or permit to be withdrawn, either in the form of dividends or otherwise, any portion of its capital. If losses have at any time been sustained by any such as- sociation, equal to or exceeding its undivided profits then on hand, no dividend shall be made; and no divi- 42 dend shall ever be made by any as- sociation, while it continues its banking operations, to an amount greater than its net profits then on hand, deducting therefrom its losses and bad debts." U. S. Rev. Stat., § 5204. The trust fund doctrine was disapproved. O' Bear Jewelry Co. u. Volfer, 106 Ala. 205; Corey v. Wads- worth, 118 Ala. 488. The point held, was that the mere insolvency of a corporation does not engraft a trust upon its property in favor of credit- ors, ib. ; and Barret & Co. v. Pollak & Co., 108 Ala. 390; Pollak & Co. v. Muscogee Mfg. Co.. ib. 467. But compare Age-Herald Co. o. Potter, 109 Ala. 675. 2 Cole v. Millerton Iron Co., 133 N. Y. 164. The property of a corpora- tion " is so far regarded as in the nature of trust property that it can be recovered by the company from any person who has obtained it from the directors with notice that they are acting beyond their powers." 2 Liudley on Part., 593. See Bryson o. AVurwich, etc., Canal Co., 4 De G. M. & G. 711; Ernst v. Croysdill, 2 De G. F. & J. 175; Hardy v. Metro- politan Land, etc., Co., L. R. 7 Ch. 427. 657