Court Opinion

ID: 3992316
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:51:50.774378+00
Date Added: 2024-06-11T07:44:25.349959
License: Public Domain

In my opinion, the majority has misconstrued the effect ofAtwood v. McKenzie-Waterhouse Co., 120 Wash. 214, 206 P. 978, and has wholly misapplied the salutary rule there laid down.
In that case, the defrauded stock subscriber purchased the stock from the insolvent corporation, paying to it one thousand dollars in cash and giving it a note for nine thousand dollars additional. The action *Page 638 
was brought for the express and only purpose of rescinding the stock subscription, recovering back the money paid, and securing the cancellation or return of the note. Both the money and the note had passed to the corporation and were assets in its hands. The plaintiff therefore sought only the return to her of the assets wrongfully taken from her by the corporation after it had become insolvent, and in the event of recovery, she would not thereby reduce the trust fund belonging to the creditors of the corporation by a single penny.
Here the corporation received nothing from this plaintiff except that which it paid out in his behalf, and its assets are not increased a single iota by the transaction. Before the transaction took place, the corporation was insolvent, and under our trust fund doctrine, all of its assets were then a trust fund belonging to its creditors pro rata. How can we, because of the fraud of the president of the corporation, visit his iniquity upon the heads of the innocent creditors, and decrease their trust fund by permitting this plaintiff to share therein, without violating one of the very foundation principles of justice?
We are not here dealing with the corporation or with its officers, and we are in no wise concerned with any possible benefit which the corporation or its officers conceived there might have been for them in the transaction. We are dealing here wholly with a fund which became a trust fund before these transactions took place. It is stipulated that the Palace Store Company was insolvent on October 8, 1929, and so remained thereafter; which date long preceded the transactions giving rise to this litigation.
We have always regarded the assets of an insolvent corporation as a sacred trust fund belonging to the creditors from the moment insolvency existed as a *Page 639 
fact; and in various cases, we have clearly recognized that it is with the fund only that we are concerned. See Terhune v. Weise,132 Wash. 208, 231 P. 954, 38 A.L.R. 94; Smith v. NationalBank of Commerce of Seattle, 142 Wash. 428, 253 P. 644. So, then, bearing in mind that the court is concerned only with the proper application of a trust fund, it appears that, if respondent Goodin, after the assets became a trust fund, transferred his money to the corporation, he just as certainly withdrew that money from the corporation, and not one penny of his became and remained a part of the trust fund.
The fraud of the corporation or its officers is wholly immaterial unless, by reason thereof, some part of Goodin's money was induced to flow into the trust fund. There is here no question of subsequent creditors; and all those who will be affected were creditors prior to the Goodin transaction, and were then, and still are, beneficiaries of the trust fund.
Therefore, in my judgment, our natural sympathy for respondent should not blind us to the rights of the creditors, and he should not be recompensed at their expense.
In my opinion, the judgment should be reversed and the action dismissed.
BEALS, J., concurs with TOLMAN, C.J. *Page 640