Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/774

 § 757.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIV. property into the hands of those who have wrongfully acquired it ; ' and of this rule, it is not only a necessary consequent, but, as it were, a necessary antecedent, that the directors being the trustees, will, for their wrongful disposal of this property, be personally liable to creditors. Whether a person acquiring trust funds will be liable to account to the bene- ficiary of the trust, will depend on the circumstances of their acquisition. But the trustee will always be liable to his beneficiary for their wrongful disposal. 2 Accordingly, the directors of a bank who, in order to sub- serve their personal interests, accept in payment for stock, securities not authorized to be taken, instead of cash, will be personally liable to note-holders and other creditors for the whole amount of the so-called paid-up capital. 3 Similarly, if the charter of a bank require a certain portion of the capital stock to be paid up in specie before the bank has authority to issue bank notes, and the stock is subscribed, but the specie is not paid, yet the directors nevertheless circulate bank notes, " if the bank fail or become insolvent, the bill-holders and creditors may proceed at once against the directors for a breach of trust in so acting contrary to their duty under the charter." 4 If a director of a bank withdraws a large amount of its funds, giving no security, and uses them in his own business, and in consequence thereof the bank becomes insolvent, he will be liable to account to the creditors of the bank for the funds so withdrawn. 5 But it would seem that directors are not liable held directors liable to refund to the creditors, dividends improperly re- ceived by themselves. 1 See §§ 656, 657. And see in par- ticular Union Nat. Bank v. Douglass, 1 McCrary, 86; Jones v. Arkansas Mechanical Co., 38 Ark. IT. 2 Theassignees of an insolventbank may recover damages from the di- rectors for a fraudulent sale by them to the bank of its own stock. Shultz v. Christ man, 6 Mo. App. 338. In Railway Co. v. Ailing, 99 U. S. 463, it is said that directors represent cred- itors. 754 3 Moses v. Ocoee Bank, 1 Lea (Tenn. ), 398. 4 Schley v. Dixon, 24 Ga. 273, 277. A receiver may in the interest of creditors sue directors for such in- juries as have accrued to the cred- itors nt universi, through the unlaw- ful management by the directors of the corporate affairs. Raymond v. Palmer, 35 La. Ann. 276. 5 Bank of St. Mary's v. St. John, 25 Ala. 566. See Brockway Mfg. Co., In re, 89 Me. 121.