Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/778

 § 7(30.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIV. be allowed to plead their own ignorance of the corporate in- solvency. 1 Moreover, when a corporation has been adjudged bankrupt or has become insolvent, if its officers buy up claims against it at a discount, in a settlement of their own statutory liability (as shareholders), they will not be allowed more than they actually paid for such claims. 3 § 760. In Drury v. Cross, 3 a sale was made of the entire property of a railroad company, at a price far below its value, under a scheme between the directors and the purchasers, by which the former escaped liability on certain endorsements made by them for the corporation. At the suit of other cred- itors the sale was set aside, and the purchasers were held as trustees for the complaining creditors for the full value of the property purchased, less a sum which the purchasers had actu- ally paid for a lien claim, which they had bought at a large discount. Interest on the balance from the time of the pur- chase to the date of the final decree was also added. So, in Corey v. Wadswortli, 118 Ala. 488; Anderson v. Bullock County Bank, 122 Ala. 275. It is held that the mere fact that a debt of the corporation is guaranteed by certain directors, does not invalidate a pi'eference given as to that debt. Blair v. Illinois Steel Co., 159 111. 350; Henderson v. Indiana T. Co., 143 Ind. 561; Levering v. Bimel, 146 Ind. 545; Symonds v. Lewis, 94 Me. 401; com- pare Allen v. Hotel Co., 95 Tenn. 480, contra, Tillson v. Downing, 45 Neb. 549. Directors may include themselves among preferred credit- ors, but the burden is on them to show that the transaction is fair. Schufeldt v. Smith, 131 Mo. 280; Butler v. Land Co., 139 Mo. 467; State ex rel. Grimm v. Rubber Mfg. Co., 149 Mo. 181; Mueller v. Fire Clay Co., 183 Pa. St. 450; Cowan v. Plate Glass Co., 184 Pa. St. 1; Creighton & Birch v. Stanton M'f'g Co., 191 Pa. St. 231. A majority of the directors cannot prefer a creditor corporation in which they are stockholders by conveying all the assets of the insol- vent corporation to it. German Nat. Bank v. First Nat. Bank, 55 Neb. 86. 1 Corbett v. Woodward, 5 Sawyer, 403; Clay v. Towle, 78 Me. 86; Bou- ney v. Tilley, 109 Cal. 346; Lowry Banking Co. v. Empire, etc., Co., 91 Ga. 624; Clark v. Colton, 91 Md. 195. But see Hayes v. Beardsley, 136 N. Y. 299; Finch M'f'g Co. v. Sterling, 187 Pa. St. 596. In Tool Co. v. Howe, 157 U. S. 313, a mortgage was held valid, which was sanctioned by the share- holders, and was given to directors to induce a continuance of credit, the corporation being a going con- cern, though not possessed of assets equal to its indebtedness; there be- ing no intention to defraud other creditors. 2 Bulkley v. Whitcomb, 121 N. Y. 107; Holland v. Heyman, 00 Ga. 174; Lingle v. National Ins. Co., 45 Mo. 109. But see Craig's Appeal, 92 Pa. St. 396. 8 7 Wall. 299.