Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/815

 CHAP. XVII.] LEGAL RELATIONS AMONG CREDITORS. [§ 812. his indebtedness to the corporation the indebtedness of the latter to himself. He must pay in his calls, and then he will rank as a creditor, receiving his due proportion of the corporate assets. 1 Again, a person occupying the dual relationship of director and creditor, may not, at least if the corporation is insolvent, use the advantages of his position as director to procure the payment of his claims as creditor in preference to the claims of other creditors. As a director, he must, in good faith, discharge his full duty towards all the persons interested in the corporate enterprise ; and this forbids the favoring of any interest, as, for instance, his own. 2 It is held, however, that a shareholder may make use of whatever advantages his position as shareholder may give him, to secure the payment of debts due him from the corporation, even to the exclusion of other creditors who are not share- holders. 3 And at all events, the fact that a person occupies the status of shareholder or officer in a corporation, will not ordinarily prejudice his rights as a creditor, if he happens to be one. Thus, directors are not excluded from sharing as creditors, when they are such, pro rata with other creditors of the corporation. 4 § 812. The legal relations between creditors occupying no other relationship towards the corporation are sim- pler. One creditor may ordinarily sue the corpora- itors! r ° tion at his will without regard to the etfect which his suit may have on the payment of debts due other creditors. 5 And creditors of a railroad company may, in order to protect themselves, combine into an association and buy in the road ; provided there is no arrangement to prevent competition. i See § 729. 2 See § 759. 3 Whitwell v. Warner, 20 Vt. 444. See §§ 710, 711. But, according to the better opinion, a corporation can- not make a valid insolvent assign- ment with preferences. See § GC8. For the doctrine that corporate funds are trust funds for the pay- ment of debts of the corporation, see §§ 654-659 and § 702, etc. 4 Bristol Milling and M'f'g Co. v. Probasco, 64 Ind. 406. 5 In Robinson v. Bank of Darien, 18 Ga. 65, 108, it is said in substance, that where a judicial preference has been established by the superior legal diligence of any creditor, that preference will be observed as to legal assets, and execution creditors are entitled to preference; though perhaps, as to equitable assets where the judgment creditor must go into equity, the rule may be different, and creditors are equal and must share proportionately. 795