statutes. The court, upon the application of a receiver, will determine the class to which a claim properly belongs, or make any order necessary to a settlement of conflicting claims for priority among the holders of liens.3 § 1001. Duties of receivers in case of insolvency.—The legislation in the various states providing for the appointment of receivers of insolvent corporations is based upon the just and reasonable policy of protecting those who would otherwise be without adequate remedy in the usual course of legal proceedings in case of the insolvency of the corporation. And the same reasons exist for the appointment, whether the insolvency has been caused by the misconduct and infidelity of the company's officers or from other causes. The statutory power thus conferred, with a few exceptions, does not extend to authorize the court to dissolve the corporation. The dissolution of the corporate organization is not usually the primary object of the exercise of jurisdiction in case of insolvency, but the protection of creditors corporation and appointment of a receiver has no right to demand them on the ground that his debt existed when the mortgage was executed, nor has he a lien under the mortgage. An attachment lien is superior to an equitable lien. Jones v. Bank of Leadville, 10 Colo. 464; 17 P. 272; Breene v. M. & M. Bank, Id. 280. 1 Atty.-Gen. v. Guar. Mut. L. Ins. Co., 5 N. Y. S. 84; People v. Remington, 45 Hun, 329. The claims of laborers for services to a corporation which has been declared to be insolvent are not entitled to precedence in payment over liens acquired by judgment, execution, and levy thereunder, or by distress for rent, which antedate the time which the court adjudges to be the time of the corporation's insolvency. Such time is when the court examines into the existing condition of the corporation's affairs. The court will not undertake to investigate the financial ability of the company at previous periods. Wright v. Wynockie Iron Co., 21 A. 862 (N. J.), (March, 1891.) 2 Atty.-Gen. v. Guar. Mut. L. Ins. Co. 5 N. Y. S. 84. 8 Emmons v. Davis & Dowd Pottery Co. (N. J.), 16 A. 158, holding also that it is not necessary that a dispute appear from the proceedings in court but may be shown by the petition of the receiver. 4 High on Receivers, § 313; supra, Ch. XXX. by the collection and preservation of the assets for the satisfaction of their demands. The court seeks not to destroy rights but to preserve them, and for the accomplishment of this end the annihilation of the franchise is unnecessary. That duty concerns the sovereignty, and where its performance become necessary a court of law is the appropriate tribunal. And the court may at any time, in the exercise of its discretion and in subserving the interests of the parties, discharge the receiver and restore the property and affairs of the corporation to its duly constituted management. When the insolvency proceedings are based upon the petition and affidavits of creditors they may in most states elect a suitable person as assignee whose authority and duties conform in every respect to those of a receiver so appointed and circumstanced. Specific provisions are usually made with respect both to what acts and circumstances constitute insolvency and the proceedings which shall ensue upon the filing of the petition. But the application must be made in good faith.3 § 1002. Collections by receiver.-When a receiver is ap 1 Featherstone v. Cooke, L. R. 16 Eq. 298; Fay v. Erie, etc., Bank, Har. Mich. 194; supra, § 886. 2 See appendix to Cal. Code of Civil Procedure, p. 79. Under a statute which provides that a receiver may be appointed when a corporation has been dissolved or" is in imminent danger of insolvency, or has forfeited its corporate rights, a complaint which alleges that the company is insolvent and unable to meet its liabilities and that its officers have misapplied the funds and are rapidly wasting the only means of the company for the payment of losses shows a condition of " imminent insolvency to such an extent as to warrant a court in appointing a receiver. Howard v. Whitman, 29 Ind. 557. 3 Where it appeared that the plaintiff was not the real party in interest but had brought the suit at the instigation of a rival express company the defendant which was also an express company over which in his complaint the appointment of a receiver was asked for the relief denied. Waterbury v. Merchants' Union Express Co., 50 Barb. 157. pointed by a court in bankrupt or insolvency proceedings, he represents all parties in interest. It is his duty to call upon the shareholders for unpaid subscriptions on shares in an amount sufficient to satisfy all the indebtedness or to the full extent of unpaid balances if necessary.1 They cannot complain if payment to the receiver is demanded at an earlier date than by the terms of their subscription payment was to be made to the corporation, because the receiver represents the creditors who would have a right to collect unpaid capital regardless of conditions.2 Upon refusal or neglect of a shareholder to pay the assessment made by the court through the receiver or assignee appointed by it, the latter has authority to collect the amount by suit for the benefit of creditors. The court having acquired jurisdiction to appoint a receiver may proceed to adjust all the equities among shareholders and make distribution to creditors. receiver of an insolvent national bank, in his own name or in the name of the bank, may enforce against the directors for the benefit of the stockholders, depositors and other creditors of the bank, any right or claim resting upon the non-performance or negligent per A See also Harmon v. Page, 62 Cal. 448. 1 Scoville v. Thayer, 105 U. S. 143. 2 Glenn v. Williams, 60 Md. 93, 116; 3 See Lane v. Nickerson, 99 Ill. 284; Glenn v. Dorsheimer, 23 F. 695; Burn's Appeal, 105 Pa. St. 49; Glenn v. Williams, 60 Md. 93, 116, 122; Wilber v. The Stockholders, 13 Phila. 479; s. c. 18 N. B. R. 178, 182; Karn v. Rorer Iron Co., 86 Va. 754; 11 S. E. 431; Hamilton v. Glenn, 85 Va. 901; 9 S. E. 129. It is held that though the debts secured by a deed of trust of an insolvent corporation are barred by limitation, they are not thereby extinguished, and the property of the corporation, including the unpaid subscriptions, having been conveyed to secure said debts, equity will aid in enforcing their payment. Hambleton v. Glenn, supra, and the mere fact that the creditor instituting a suit to sell an insolvent company's property has parted with his claim during its progress does not vitiate a sale ordered by the court in the exercise of its general jurisdiction. Karn v. Rorer Iron Co., supra. formance of their duties that the bank itself could have enforced.1 § 1003. Jurisdiction to wind up affairs of corporation.As a rule a court of equity will not interfere with the discretionary powers conferred upon the majority in a corporation and assume to decide whether a continuance of the enterprise be advisable or promises to be profitable as a commercial venture.2 A suit to wind up the business of a corporation will not as a rule be entertained outside of the state where the corporation is formed. The court must have jurisdiction over the parties, and have the power of distributing the assets of the company, in order to do justice in such a proceeding. The instances are rare in which courts have entertained jurisdiction in cases where the specific object sought was putting an end to the business in which a corporation is engaged and settling its affairs. unless such jurisdiction was given by statute. A court of chancery certainly has no common law jurisdiction to dissolve a corporation. But where the further 1 Movius v. Lee, 30 F. 298. 2 In an important case before him Lord CAIRNS said: "If it were shown to the court that the whole substratum of the partnership, the whole of the business which the company was incorporated to carry on, has become impossible, I apprehend the court might, either under the Act of Parliament or on general principles, order the company to be wound up. But what I am prepared to hold is this: that this court and the winding-up process of the court cannot be used as the means of evoking a judicial decision as to the probable success or non-success of a company as a commercial speculation." In re European Life Ass'n Soc., L. R. 9 Eq. 122; Redmond v. Engfield Co., 13 Abb. Pr. N. S. 332; Lafond v. Deems, 81 N. Y. 507. See In re Surbaban Hotel Co., L. R. 2 Ch. 737, 750; In re Joint-stock Coal Co., L. R. 8 Eq. 146; Pratt v. Jewett, 9 Gray, 34; See also, Salem Mill Dam Co. v. Ropes, 6 Pick. 23; Denike v. N. Y., etc., Lime Co., SO N. Y. 599; Bliven v. Peru Steel, etc., Co. 60 How. Pr. 280. 3 Wilkins v. Thorne, 60 Md. 253. Judgment against an insolvent corporation in the state of its organization, and return of execution unsatisfied, will not authorize a bill by the judgment creditor in another state, where no judgment has been recovered against it, to enforce payment of a subscription to its stock. Globe Rolling Mill Co. v. Ballou, 42 F. 749. 4 * Supra, § 842. prosecution of the business for which a corporation was chartered is impossible, neither the managing agents nor a majority of the members have a right to apply its funds or extend its operation to unauthorized purposes. The right of a shareholder to an injunction to prevent such diversion would exist in this as in other ultra vires transactions. And the court having acquired jurisdiction to grant preventive relief might retain it and administer full relief by decreeing a settlement of the corporate liabilities and distribution of the remaining assets, among the shareholders. But this would not have the effect of putting an end to corporate existence. If its term of existence had not already expired it would continue, whether it exercised any corporate powers or owned any property or not.1 § 1004. Where corporate enterprise has been abandoned. -Notwithstanding this rule courts have sometimes entertained jurisdiction of suits brought by shareholders for the sole purpose of having distribution of the assets by directors of corporations which have entirely ceased to do business either before or after the term of existence limited in its charter.2 § 1005. Calls made by a court of equity.-Where in case of insolvency a court of equity has acquired jurisdiction 1 Infra, § 1008. 2 In Cramer v. Bird, L. R., 6 Eq. 143 the corporation had entirely ceased to do business. Under these circumstances a shareholder filed a bill asking that the directors be compelled to make distribution of the assets and the prayer of the bill was granted. In this case Lord ROMILLY said: "I am of the opinion that there cannot be a plainer equity than this; that where the functions of a corporation have ceased, the managers of that corporation are bound to account for all moneys belonging to the corporation; and when such moneys are improperly retained, this court will make a decree in order that they may be divided among the various members." See also, Merchants', etc., Line v. Waganer, 71 Ala. 581; Baring v. Dix, 1 Cox, 213; Bailey v. Ford, 13 Sim. 5 485; Jennings v. Badeley, 3 K. & J. 78. Croft v. Lumpkin Chestatee Mining Co., 61 Ga. 465. |