Court Opinion

ID: 6654192
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:56:35.596136+00
Date Added: 2024-06-11T15:59:49.248163
License: Public Domain

Pound, C.
Williams, as receiver of the Lincoln School Supply Company, a corporation, brought suit against Turner and three others, alleging that, after the corporation had be*576come insolvent and had ceased to do business, the defendants, who were directors of the corpora,tion, and had sole possession and control of its assets and property, attempted to wind up its affairs, and in so doing fraudulently, and in violation of their duty as directors, set over and assigned to certain preferred creditors assets and property of the corporation, particularly described, to the value of .$4,388.16, out of assets aggregating $6,109.16, the said defendants being- at that time personally liable as sureties upon the indebtedness so preferred. The debts of the corporation at the time are set out, and, as alleged, amounted to $6,690. A demurrer was sustained in the lower court-, and error is prosecuted from-such ruling.
v The proposition that an insolvent corporation can not prefer a debt on which its officers and directors are bound as sureties is now thoroughly established in this state/ National Wall Paper Co. v. Columbia Nat. Bank, 63 Nebr., 234. The ground of this rule would seem to be that directors occupy a fiduciary position, and that the law will not permit them to take advantage of that position to the prejudice of other creditors.'* But if the creditor into Avhose hands property of the corporation comes by virtue of such unlawful preference is to be held liable to restore it, as in the case cited, it is manifest that, if the creditors so elect, directors who turn over the property and assets of an insolvent corporation to third persons for the purpose of preferring claims upon which such directors are personally liable as sureties must be liable for such breach of trust, apd should be required to account for the property and assets so disposed of.'1 Their liability in such case to a proper representative of the creditors, who, in equity, aré entitled to such property and assets, can not well be disputed."*It is insisted, however, that in this case the receiver does not represent all the creditors and can not enforce the liability. A question is thus raised on which there is some confusion and conflict of judicial opinion, largely in consequence of the varying provisions of statutes in the several states. The sole statutory authority *577for appointing a receiver of. a corporation in this state is derived from section 266, Code of Civil Procedure, authorizing such appointment “where receivers have heretofore been appointed by the usages of courts of equity.” One of the cases coming under this head is a suit by a judgment creditor of a corporation in the nature of a creditors’ bill to reach equitable assets. High, Receivers [3d ed.], sec. 399; 5 Thompson, Corporations, sec. 6838. Another case occurs when a corporation ceases to do business and its assets are in danger of being lost and dissipated to the prejudice of creditors. 5 Thompson, Corporations, sec. 6838. Compare, also, Ponca Mill Co. v. Mikesell, 55 Nebr., 98. The order appointing plaintiff: receiver of the corporation here in question, which is made a part of the petition, discloses a suit based on both these grounds and makes it evident that the receiver was appointed in a general creditors’ suit, for the benefit of all creditors, and in which all creditors may become parties, if not such already. Hence we think the plaintiff is representative of all the creditors, not merely of the corporation, and not merely of the particular creditor or creditors at whose instance he was appointed. 5 Thompson, Corporations, sec. 6945. Taking this view of the nature of his office, we must conclude that he may hold the defendants to account for their breach of trust. 5 Thompson, Corporations, sec. 6947. We have examined a large number of decisions on these several propositions, but do not believe that any useful purpose would be subserved by discussing or citing them here. The statements of the learned author to whom Ave have referred are amply supported by authority, and Ave consider them elementary. The order by which the plaintiff was appointed is a clear direction to bring this suit. He is made receiver “of the property, effects, credits and rights of action of every character” of the corporation, and is directed to bring such actions as may be necessary “to enforce the payment of such debts and rights of action and for the recovery of the assets of such company.” ' The liability of the directors for their breach of trust is an asset as to the *578creditors, and the fund to be realized therefrom is best made available to creditors by collection at suit of the receiver and distribution by him in the creditors’ suit in which he was appointed. He might properly have been appointed to bring this very proceeding, and we do not doubt that it is contemplated by and within the scope of the directions in the order of appointment.
We recommend that the judgment be reversed and the cause remanded for further proceedings.
Sedgwick and Oldham, CO., concur.
By the Court: For the reasons set forth, in the foregoing opinion the judgment of the district court is reversed, and the cause is remanded for further proceedings.
Reversed and remanded.