munity from the power of the court at the suit of the state upon dissolution to withdraw them into the hands of a receiver.1

§ 847. The appointment not made as a punishment.The appointment of a receiver is no part of the penalty which the court may inflict upon the stockholders of the delinquent corporation upon forfeiture of corporate existence. A receiver can be appointed in such case only upon proper application of creditors or shareholders in an independent proceeding as in other cases. Otherwise the directors may proceed under the statute to conduct the business to settlement and distribution.2

1 People v. O'Brien, 111 N. Y. 1. See also, People v. Sturtevant, 9 N. Y. 263; Sixth Av. R. R. Co. v. Kerr, 72 Id. 330; Baltimore & R. Co. v. Carmon, (Md.), 20 A. 123; People v. Brooklyn, etc., R. R. Co., 89 N. Y. 84; N. O. S. F. & L. R. R. Co. v. Delamore, 114 U. S. 501; Memphis, etc., R. R. Co. v. Commrs., 112 U. S. 609, 619; Mumma v. Potomac, Co., 8 Pet. 281, 285. Compare People v. Washington, Ice Co., 18 Abb. Rep. 383; United States v. Church of Latter Day Saints, 136 U. S. 641.

2 Havemeyer v. Superior Court, 84 Cal. 327. In this case BEATTY, C. J., said: "Some means must be devised for winding up the corporation and distributing its assets according to the equitable rights of those interested. In the absence of any statute regulating the matter, a court of equity would have the undoubted right in a proper proceeding instituted by a creditor or a stockholder to appoint a receiver to administer the property. But in many of the states statutes have been passed expressly providing for the appointment of receivers or trustees exercising the same functions though sometimes called by other names. In all cases it is made their duty to collect the assets, pay the debts, and distribute the surplus pro rata to the stockholders. As this is precisely what a court of equity would have done in the absence of a statute, it is to be inferred that the motive for such legislation has been to accomplish some other object-some object, that is to say, for which express legislation was necessary. This inference is fully justified and amply borne out by reference to the different statutes. They seem to have been enacted with the object, in some instances, of abrogating the old law of forfeiture and reversion; in others of committing the administration to other courts than courts of equity; in others to provide general and uniform rules of procedure as to giving notice to creditors, etc., to take the place of rules of court and specific orders to be made by the chancellor in each particular case; in others to keep the matter out of the courts altogether, as by allowing the dissolved corporation to continue its existence for a term for purposes of liquidation, but for no other purpose. The whole mass of this legislation seems to be pervaded by the one idea of simplifying, expediting and cheapening the means of accomplishing the one object of transferring to the stock

§ 848. Common law jurisdiction where corporate managers have ceased or refused to act.-At common law, courts of equity upon proper application exercised jurisdiction to appoint a receiver to preserve a trust fund and execute a trust where there either was no trustee competent or authorized to act, or where the one designated or appointed refused to act under the appointment. In other words, "equity will not allow a trust to fail for want of a trustee." Applying this rule to a corporation whose managing agents have all resigned or abandoned the property, or disagreed to such an extent that the corporation is practically left without a head, the corporation itself not being dissolved-these facts only being shown-should a receiver be appointed where no other adequate remedy is given by statute?

True the corporation itself is the real trustee and not the agents, but as they are its soul and spirit, and are vested with all its powers, it may very properly be considered a case in which the strictly legal trustee, the corporation, is both unable and incompetent to execute the trust. The appointment of a receiver under such circumstances does not have the effect of dissolving the corporation; and the members may, unless there are other reasons rendering a contrary course proper, at any time adjust the internal difficulties of the corporation by appointing new managers or otherwise, and have their property restored to them. If they do not choose to do so there is no good reason or principle of law or equity against the court through the instrumentality of a receiver proceeding to adjust all the rights, interests and equities between shareholders and creditors, leaving the former at liberty to reorganize

There is

holders of a defunct corporation their full share of its surplus assets. from beginning to end, no suggestion of added penalties or punishment after

death."

the body and set the corporate enterprise on foot afterwards if they see fit. The right to administer relief in this form has been exercised in numerous instances.1

§ 849. Receiver not appointed where adequate legal remedy. -Of course an indispensable condition of administering this, as of all extraordinary relief, is that there is no adequate remedy at law.

Therefore, where the method provided by statute for reorganizing a corporation after an abandonment of its business will fully satisfy the necessities of the particular case, the appointment of a receiver will be refused where that is the sole ground of the application.2

§ 850. Appointment under New York statute.—The jurisdiction over corporations conferred by the New York statute has been extended, by construction, to the appointment of a receiver, in cases where the corporation has from any cause become disorganized by reason of the lack or loss of any managing or controlling body, or where the latter have ceased to exercise authority in the interest of the shareholders.3

1 In Featherstone v. Cooke, L. R. 16 Eq. 298, it appeared that disputes had arisen between its managing agents which caused a stoppage of the business, and great loss to the stockholders was imminent. The Vice Chancellor appointed a receiver but as soon as a meeting of the shareholders had been held and new officers appointed the receiver was discharged and the property restored to the corporation. See also Stevens v. Davidson, 18 Grat. 819; Evans v. Coventry, 5 D. G. M. & G. 911; Waterbury v. Merchants' Union Expr. Co., 50 Barb. 158; Belmont v. Erie Ry. Co., 52 Barb. 637; Lawrence v. Greenwich Fire Ins. Co., 1 Paige, 587.

2 American Loan & Tr. Co. v. T. C. & S. R. Co., 29 F. 416. But where the defendant corporation, in a bill filed by creditors alleging its insolvency and praying the appointment of a receiver, suffers the bill to be taken pro confessio, it is too late, nine months after the receiver has taken possession of the property and undertaken to carry on the business for the benefit of the creditors to object that plaintiff had an adequate remedy at law. Brown, Bonnell & Co. v. Lake Superior Iron Co., 134 U. S. 530; 10 S. Ct. 604.

3 In a case where the president owning six-sevenths of the capital stock had assigned the personal and a portion of the real estate of the corporation to dif

§ 851. An auxiliary not a principal remedy. Except in rare cases a suit will not be entertained which seeks as its primary and principal object the appointment of a receiver.1

And it is held in California that there is no such thing known to the practice as an independent proceeding to have a receiver appointed, and that the relief can only be granted as auxiliary to the main relief which the plaintiff seeks.

The same conclusion has been reached by the Supreme Court of Colorado.2

§ 852. Mere breaches of trust or mismanagement no ground for the appointment.-The infidelity or miscon

ferent persons in trust to pay his individual debts, the creditors of the corporation filed a bill alleging these facts and asking for the appointment of a receiver, the court held that such creditors having claims on the trust fund in the hands of the corporation and its principal officers for the payment of their debts had a right before proceeding to judgment and execution to file a bill against the corporation and the assignees of the president to prevent a misapplication of the same, and secure its appropriation to its legitimate uses; and that the court to accomplish this object might either appoint a receiver or require security for the due preservation and appropriation of the property. The statute of that state, in relation to proceedings against corporations within whose equity the bill was held to come, provides that a corporation which shall for one year suspend its ordinary and lawful business shall be deemed to have surrendered its franchises and shall be adjudged to be dissolved. Conro v. Gray, 4 How. Pr. Rep. 166. Where it appeared that the corporation was without any office or place of business, and that it had no officers to attend to its affairs, a receiver was appointed upon a bill by a stockholder to preserve the effects of the company for the benefit of the stockholders generally. Lawrence v. Greenwich Fire Ins. Co., 1 Paige, 587. But the courts of that state proceed with great caution in this class of cases, and the appointment of a receiver was denied where the bill only showed that there had been an illegal issue of shares and failed to show that the defendants were irresponsible. People v. Susquehanna R. R. Co., 7 Ab. Pr. N. S. 290.

1 French Bank Case, 53 Cal. 495. WALLACE, C. J., in delivering the opinion said: "There is, of course, no such thing as an action brought distinctively for the mere appointment of a receiver. Such an appointment when made is auxiliary to or in aid of the action brought. Its purpose is to preserve the property pending the litigation so that the relief awarded by the judgment, if any may be. 2 Jones Bank of Leadville (Colo.), 1 P. 272. See also Union Mut. L. Ins. Co. v. Un, Mills Plaster Co., 37 F. 286.

V.

duct of some or even all of the trustees or managers of a corporation affords no ground for taking away the rights of the shareholders who constitute it, either by dissolving it or by taking away its management and placing it in the hands of an officer of the court. In such cases the court will go no further than to enjoin or forbid the misconduct and compel an accounting.1

The reason usually assigned for refusing this form of relief in such cases is that to appoint a receiver would practically amount to a dissolution; but an equally good reason would seem to be that another remedy is more appropriate and works less hardship to the defendants.

On the same principle a creditor at large before judgment is not entitled to a receiver on a bill asking for a sequestration of the effects of the corporation on the ground of its insolvency, misconduct of its officers, and that they are suffering other creditors to obtain a preference.

In such case the creditor is not entitled to the 'extraordinary aid of equity in the enforcement of his demand, because he can, in theory at least, obtain full and adequate relief at law.2

And the condition of the creditor in that respect is not improved when in the same suit he seeks judgment on his demand.3

§ 853. Receiver may be appointed of a particular fund upon which creditors have a charge. If a corporation holds a fund in the nature of a trust fund to which cred

1 French Bank Case, 53 Cal. 495; Neal v. Hill, 16 Cal. 145; Howe v. Deuel, 43 Barb. 504; Belmont v. Erie Ry. Co., 52 Barb. 637; Waterbury v. Merchants' Union Expr. Co., 50 Barb. 137.

2 Galway v. United States Steam Sugar Refining Co., Abb. Pr. 211; Panuley v. Tenth Ward Bank, 3 Edw. Ch. 395.

3 French Bank Case, supra.