Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/772

 § 756.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIV. § 756. Responsi- bility of directors to credit- tors. ner to promote the fraud of another agent of the company, he would be liable to the persons injured, as by so doing he would make the fraud his own ; * and for issuing false certifi- cates of stock, officers of a corporation have been held liable to assignees of the certificates who purchased them in good faith.* Coming now to the relations between directors and creditors of the corporation — relations, that is, be- tween directors and persons whose claims against the corporation have already arisen — we shall find the rules heretofore stated not always applicable. To the extent of creditors' interests, corporate funds are held in trust for creditors as well as shareholders. Consequently, directors having in their charge funds on which creditors have valid claims and equitable liens, but in the management of which creditors have ordinarily no voice, hold a position of trust towards creditors as well as shareholders ; and owe it accordingly to creditors to protect their interests, as they owe it to shareholders to protect the interests of the latter. 3 The only claim of creditors is to be paid what is due them, and their main right is that the corporate funds shall not be wasted, embezzled, or managed with reckless improvidence, and that those funds shall not, to the injury of the creditors, be applied to purposes manifestly beyond the objects of incor- poration. It is, moreover, a duty owed by directors to cred- itors to use reasonable care to keep the corporation solvent, a duty qualified by the duty of directors towards shareholders to use the corporate funds for the purposes of the corporate 1 Salmon r. Richardson, 30 Conn. 300; Morgan v. Skiddy, 62 N. Y. 319; Clarke v. Dickson, 5 Jur. X. S. 1029. Subordinate officers concerned may be liable as well as their superi- ors. Cullen r. Thomson, 6 L. T. N. S. 870. 2 Bruff v. Mali, 36 X. Y. 200; see, also, Shotwell v. Mali, 38 Barb. 445; Cazeaux v. Mali, 25 Barb. 578; § 696; but compare Peck v. Gurney, L. R. 6 H. L. 377. 3 Thomas v. Sweet, 37 Kan. 183; Seale v. Baker, 70 Tex. 283; com- 752 pare Heywood v. Lincoln Lumber Co., (54 Wis. 639; Sturges v. Knapp, 31 Vt. 1, 53; Baxter v. Moses, 77 Me. 465; Hurlbut v. Marshall, 62 Wis. 590. The managers and treas- urer of a savings bank, when charged with malfeasance by its receiver, are to be regarded as trustees for depos- itors, and the statute of limitations applying to legal actions does not apply. Williams v McKay, 40 N. J. Eq. 189; Williams v. Reilly, 41 N. J. Eq. 137.