Opinion ID: 1126567
Heading Depth: 1
Heading Rank: 1

Heading: the trusteeship of mr. ellis

Text: At common law, in the absence of statute, when a corporation was effectively dissolved its existence as a legal entity ceased. Dissolution terminated its power to sue or be sued in its corporate name, and extinguished all debts due to or from it. [3] To abrogate this rule of the common law, statutes have been enacted in all jurisdictions pertaining to this subject of litigation by and against a dissolved corporation. [4] These statutes take various forms but all are remedial in purpose, removing the common law incapacity of a dissolved corporation to sue or be sued. Some statutes extend the life of the corporation permitting it to serve as a named party litigant. [5] Others, such as ours here in Hawaii, HRS § 416-123, treat the existence of the corporation as terminated upon dissolution but nonetheless allow suits to be brought or continued. These statutes resulted from a demand by stockholders and creditors for equitable relief and embodied the trust fund theory by authorizing the directors at the time of dissolution to serve as trustees. [6] In this capacity the former directors are proper and necessary parties to legal proceedings aimed at winding up the affairs of the dissolved corporation. State ex rel. McDowell v. Libby, supra at 43, 175 S.W.2d 171. Although captioned trustee by these statutes, a more accurate characterization for a former director is that of statutory liquidator. [7] His function is simply to liquidate the assets possessed as expeditiously as sound business judgment permits. [8] To this end the equally amorphous word title is found in HRS § 416-124, supra, and in similar statutes. The word title in this context is loosely used. The property of a dissolved corporation actually belongs to those persons who were stockholders at the time of its dissolution, but the right to possession passes to the former directors by force of the statutory provision making them statutory liquidators to settle the corporate affairs. Jones v. Peck, 63 Cal. App. 397, 401-402, 218 P. 1030, 1032 (1923). [9] In substance therefore, Mr. Ellis as statutory liquidator possesses the property of the former stockholders of the Kula Development Corporation with the power to dispose of so much thereof as is necessary to pay creditors who have a lien upon it for their own security. [10]