Court Opinion

ID: 3431871
Source: CourtListenerOpinion
Date Created: 2016-07-05 20:00:45.194024+00
Date Added: 2024-06-11T14:03:44.717551
License: Public Domain

The very earnest argument made by defendants in support of petition for rehearing has had the consideration of the court in re-examination of applicable equitable principles and authorities.
That the policyholder is a creditor from the date of his policy, see In re Assignment of Rea, 82 Iowa 231, 238; Nichols v.Harsh, 202 Iowa 117; Gallagher v. Asphalt Co. of Am., 65 N.J. Eq. 258
(55 A. 259, 260); Herrick v. Wardwell, 58 Ohio St. 294
(50 N.E. 903, 906); Graeber v. Sides, 151 N.C. 596 (66 S.E. 600);Carr v. Davis, 64 W. Va. 522 (63 S.E. 326, 328); Brown v.Hitchcock, 36 Ohio St. 667, 678; 27 Corpus Juris 472, 473; Fryev. Chicago, R.I.  P.R. Co., 157 Minn. 52 (195 N.W. 629).
That the corporation, at the time of the withdrawal of funds, did not measure up to the statutory requirement for solvency, see Code of 1897, Sections 1714, 1731; Chicago Life Ins. Co. v.Auditor of Public Accounts, 101 Ill. 82; and cases post.
That the relationship of defendants to the corporation and to the holders of policies then outstanding, and in contemplation of solicitation and procurement in the intended continued prosecution of the business, was, in essence, fiduciary, and that defendants' withdrawal of corporate funds and their appropriation thereof to the payment of the price of their stock was, in the eye of equity, fraudulent as to existing and prospective policyholders, see Oliver v. Brennan, 292 Fed. 197, 201; same *Page 223 
case on appeal, 299 Fed. 106, 109; Couse v. Columbia Powder Mfg.Co. (N.J. Ch.), 33 A. 297, 299; 14a Corpus Juris 905;Consolidated Tank Line Co. v. Kansas City Varnish Co., 45 Fed. 7;Atlanta  Walworth B.  C. Assn. v. Smith, 141 Wis. 377
(123 N.W. 106, 108); Corey v. Wadsworth, 99 Ala. 68 (11 So. 350, 23 L.R.A. 618, 42 Am. St. 29); Johnson v. Canfield-Swigart Co., 292 Ill. 101
(126 N.E. 608); McIver v. Young Hdw. Co., 144 N.C. 478
(57 S.E. 169); 14a Corpus Juris 885, 896, 905; Bosworth v. Allen,168 N.Y. 157 (61 N.E. 163); Gilbert v. Finch, 173 N.Y. 455
(66 N.E. 133); 2 Cook on Corporations (6th Ed.) 2083, 2087, Section 682;Gantenbein v. Bowles, 103 Or. 277 (203 P. 614); 7 Ruling Case Law 760; Olney v. Conanicut Land Co., 16 R.I. 597 (18 A. 181, 27 Am. St. 767, 5 L.R.A. 361); In re Shotwell, 43 Minn. 389
(45 N.W. 842, 844); 3 Words  Phrases 2947; Bradley v. Converse, 4 Clif. (U.S.) 375; Dickinson v. Stevenson, 142 Iowa 567, 570;Jackson v. Ludeling, 21 Wall. (U.S.) 616, 624. See quotation from this case in Dawson v. National Life Ins. Co., 176 Iowa 362, 385:
"`Managers and officers of a company where capital is contributed in shares are, in a very legitimate sense, trustees alike for its stockholders and its creditors, though they may not be trustees technically and in form. They accordingly have no right to seek their own profit at the expense of the company, its shareholders, or even its bondholders.'"
See, also, Hibernia Bank  Tr. Co. v. Succession of Cancienne,140 La. 969 (74 So. 267, 269, L.R.A. 1917D 402; Barhydt  Co. v.Perry, 57 Iowa 416, 419; Paulk v. Cooke, 39 Conn. 566; O'Neill v.Kilduff, 81 Conn. 116 (70 A. 640, 642); Savage v. Murphy,34 N.Y. 508 (90 Am. Dec. 733); Spuck v. Logan  Uhl, 97 Md. 152
(54 A. 989, 99 Am. St. 427); Rudy v. Austin, 56 Ark. 73
(19 S.W. 111, 35 Am. St. 85); Lander v. Ziehr, 150 Mo. 403 (51 S.W. 742, 73 Am. St. 456); Crowley v. Brower, 201 Iowa 257; Brundage v.Cheneworth, 101 Iowa 256. For a very complete and persuasive discussion of fiduciary relationships, the reasons underlying the establishment of their existence, and their effect, see Dawson v.National Life Ins. Co., 176 Iowa 362.
Petition for rehearing overruled. *Page 224