Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/679

 CHAP. XI.] CORPORATION AND CREDITORS. [§ 659. in court to inquire into a transfer of assets made by his debtor corporation he must have obtained judgment against it. 1 § 658. On the principle that the funds of a corporation are held in trust for its creditors, is also based the only Ri s ht of ' J creditors to right of the latter to interfere with the management restrain of the corporate affairs. If the corporate funds are application, being dissipated or applied to purposes beyond the scope of the corporate objects in such a way as to imperil the solvency of the corporation and the lien of the creditors on its funds, a creditor can restrain the misapplication.* 2 This would seem to follow a fortiori from the rule that a creditor can follow corporate funds into the hands of any one receiving them with notice of their misapplication ; and the remedy of the creditor is to a»pply for an injunction and the appointment of a receiver. 3 § 659. In Kearns v. Leaf, and Aldebert v. Kearns, 4 two English cases decided together, a policy-holder in a joint- stock insurance company, the shareholders of which were not subject to personal liability, and whose funds, by provisions in the company's deed and in the plaintiff's policy, were liable for the sum insured, was granted an injunction restrain- ing the company from transferring its assets to another com- their claims. Chesapeake, O. & S. R. R. Co. v. Griest, 85 Ky. 619. It would seem to be simply a question of the honesty of the transaction. A judgment against the prior cor- poration, recovered on a claim for personal injuries occurring after the transferial of its property to a suc- ceeding corporation, cannot be en- forced against that property in possession of the succeeding corpo- ration. Gray v. National Steamship Co., 115 U. S. 116. 1 Tawas, etc., R. R. Co. v. Circuit Judge, 44 Mich. 479. See, also, Smith v. Railroad Co., 99 U. S. 398. 2 The English cases do not recog- nize as fully as the American the doctrine that corporate funds are held in trust for creditors. In Eng- land there has never been the same necessity for the doctrine, as Eng- lish companies are more apt to be of unlimited personal liability. Accordingly, the last proposition in the text may not be law in England. See Mills v. Northern R'y Co., L. R. 5 Ch. 621. 8 Conro v. Gray, 4 How. Pr. (N. Y.) 166. There the court said that it could appoint a receiver or require security for the due preser- vation and appropriation of the property. See Fisk v. Union Pacific R. R. Co., 10 Blatchf. 518 ; Innes v. Lansing, 7 Paige (N. Y.), 583; Whit- comb v. Fowle, 7 Abb. N. C. (N. Y.) 295; Irons v. Manufacturers' Nat. B'k, 6 Biss. 301; Lothrop v. Stedman, 13 Blatchf. 134. Compare Bank of St. Mary's v. St. John, 25 Ala. 506. 659
 * 1 Hem. & Mil. 681.