87 Wis. 363 | Wis. | 1894
The order of the circuit court is questioned upon this appeal only in respect of its direction to the sheriff of Milwaukee county to turn over to the receiver the moneys which he had raised by execution sales of the property of the insolvent corporation defendant, the Lap-pen Furniture Company. All other parts of the order are unquestioned upon this appeal.
Assuming what is charged to be true, it seems quite clearly to show a proper case for the sequestration of the property and effects of the insolvent corporation, said, prima facie at least, that the appellant bank and the other creditors named are not justly entitled to the entire fund in the sheriff’s hands, to the exclusion of other creditors of the insolvent corporation.
The law applicable to the question is well settled. The corporation, being only a fictitious body, can act only through agents called “ directors.” The directors manage the business for the stockholders. For this purpose they hold and manage the business and corporate property as trustees for the stockholders. But when insolvency of the corporation happens then the duty and function of the directors are changed. Then they become trustees for the creditors of the corporation of all the corporate property and rights. They are trustees for all the creditors, and are bound to preserve and administer all the corporate
It is believed that the decisions are uniform, except as to the last proposition. Upon the question whether an insolvent corporation has the power to prefer some of its creditors there is a conflict of decisions. Upon that question eminent courts are found arrayed on either side. In 27 Am. law Bev., on page 846, is a strong article against the existence of such power, by Judge Seymour D. Thompson, of the St. Louis court of appeals. In a note, Judge Thompson has collected many of the cases upon either side of the question, showing how widely the courts have differed. But in this state it is no longer an open question. It is settled for this state by the opinion by the present chief justice in Haywood v. Lincoln L. Co. 64 Wis. 639, and First Nat. Bank v. Knowles, 67 Wis. 373. See, also, Lyons-Thomas Hardware Co. v. Perry Stove Mfg. Co. 86 Tex. 143.
It is within the function of the circuit court to supervise and compel the directors of insolvent corporations to perform their duties as trustees for the corporate creditors in the administration of the corporate property. To that end, in a proper case, by sequestration it will lay hold of the corporate estate, and administer it by its receiver. A proper case for the intervention of the court arises whenever execution on a judgment against a domestic corporation has been returned unsatisfied. Then the court, in an action for that purpose by the execution plaintiff, will sequester the property and effects of the corporation, and put it into the hands of a receiver, to wind up its affairs and distribute its assets among its creditors. E. S. secs. 3216-3228. To make the sequestration effectual, it will
But the appellant contends that the moneys in the sheriff’s hands, made upon its executions, were not subject to sequestration as the property of the corporation, because, it claims, the title to those moneys was in it (the appellant) and not in the corporation. Probably the appointment of a receiver can affect only such property as is owned by the insolvent at the time of the appointment. And cases are cited which hold that moneys made on execution, while still in the hands of the sheriff, are the property of the creditor. This may be the law, as between the debtor and the creditor, in an ordinary case; but it is not controlling here, because, for the purposes of this motion and appeal, it is assumed to be true that the moneys which are in the sheriff’s hands are the fruit of an illegal combination between the directors of the insolvent corporation and the appellant for the purpose of giving to the appellant an illegal preference over its other creditors. This is a fraud upon the rights of the other creditors. Fraud taints whatever it touches. No right can grow out of a transaction which fraud has touched. So, upon the present showing, it is held that these moneys were properly directed to be turned over to the receiver as a part of the assets of the corporation.
But this does not, of necessity, supersede or displace the appellant’s right to the fund. If it has a valid lien, that lien will follow' the fund into the hands of the receiver, and the fund will be administered accordingly. The order is
By the Court.— The order of the circuit court is affirmed.