Court Opinion

ID: 3984617
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:40:53.160194+00
Date Added: 2024-06-11T07:44:09.863460
License: Public Domain

I concur.
The court will closely scrutinize any transaction in which a fiduciary steps from his role as such and seemingly acts for his own interest. When a corporation is in straits and he comes to its rescue, he is not acting in his own interest except insofar as that interest is embraced in the collective interest of all. Taking security for advancements, under such conditions, is consonant with a fiduciary relationship.
Also, under the Utah decisions, the corporation may prefer a creditor. That the creditor may be a director does not affect the principle in respect to preferences, but where the director prefers himself, it presents far stronger evidence that he has stepped out of his fiduciary capacity. In this case the voting by a director to secure himself for claims for past due advances or for services rendered on the general credit of the corporation, smacks very highly of an act inconsistent with a fiduciary relationship but the transaction would not be void, but voidable only. It cannot be voided by the corporation which voted to give the mortgage when that action has been ratified by the stockholders. In such *Page 533 
case they have approved and sanctioned the action of their fiduciaries. Other unsecured creditors might move to void it if proper grounds exist. While we have held that the assets of a corporation are not a trust fund for the benefit of creditors so as to prevent preferences, still the director owes a duty to preserve for the benefit of creditors the assets which stand for the debts. In that sense he stands as a fiduciary for creditors. Any failure to do that may be attacked by creditors, especially when the corporation is insolvent. The unsecured creditor may obtain a judgment and pursue the assets by a creditor's bill under proper circumstances. In this case, general creditors not included under the trust deed to the extent of $286.76 have failed to attack the transfer. It is doubtful whether they could ever successfully do so as regards those reasonable advancements or services furnished for legitimate corporate purposes made in good faith if the corporation was in straits even though the directors voted to secure their own advancements. The corporation deprived of its right to void the trust deed as security for past indebtedness by the action of its own directors and stockholders cannot borrow the right of the creditor whose claim was not secured by the trust deed, to take the place of the right which it surrendered by giving the deed with the sanction of the stockholders.
The main opinion states that "no creditor has appeared in opposition to the foreclosure except Hartley G. Dewey," etc. The record does not disclose that any of the creditors included in the $286.76 were served. Consequently there should be no implication that they were bound to appear or forfeit their rights. The creditors, covered by the trust deed, may conclude to see that the creditors not covered are taken care of so as to avoid all future actions on their part. The appellant expresses a willingness in its brief to protect the unsecured creditors if legally possible but is apprehensive of their willingness to participate under the trust deed. Ordinarily creditors do not object to being paid or secured. The appellant and his beneficiaries may risk being so inconsiderate *Page 534 
as to invite the unsecured creditors to partake of the security even under pain of their having first to exhaust the security. All of the assets of the corporation were apparently transferred to the trustee. Thus the freedom of the unsecured creditors to sue for their claims before exhausting the mortgage security which was so considerately preserved for them by the secured creditor is a very questionable blessing.