transferee, of actual insolvency, is essential | indebtedness not being thereby extinguished; to make the transfer void, yet the terms of and though the debtors of the bank were such a statute should not be held to embrace allowed to pay in eight annual instalments; sales in the ordinary and legitimate business and though it was not expressed on the face of such company, at times when it might be of the deed that the bank was not in failing held afterwards to have been on the verge of or insolvent circumstances. Held, also, that insolvency, and, therefore, in contemplation bonds given by the trustees to the attorney of it. For by such construction the whole of the bank and his successors in office were business of the company would be impeded. valid. Ark. Supreme Ct. 1842, Exp. ConThe statute should be deemed only in- way, 4 Ark. 302. tended to prevent injurious preferences, and contemplation of insolvency" must also mean something more than mere expectation of it; it must include provision against its results, as to the transferee, and that can only be where he is already a creditor, and the object is to take his debt out of the equal ratable distribution of assets. N. Y. Superior Ct. 1860, Heroy v. Kerr, 8 Bosw. 194; 21 How. Pr. 409. 30. A payment or transfer made by a corporation, even when actually insolvent, is not to be deemed void as made with intent to prefer a particular creditor, unless the intent, as well as the insolvency, is alleged and proved. N. Y. Ct. of Appeals, 1857, Curtis o. Leavitt, 15 N. Y. (1 Smith) 9, 109, 138, 198. As to assignments made by corporations in pursuance of Legal proceedings to wind up their affairs, see DISSOLUTION; INSOLVENCY; RECEIVER. 31. The power to prefer creditors. A corporation, unless restricted by its charter, or prevented by the operation of some bankrupt or insolvent law, may, by virtue of its general power to contract, make an assignment of its effects, entire or partial, with or without preferences, if made bona fide for the payment of its debts. Ark. Supreme Ct. 1853, Ringo v. Real Estate Bank, 8 Engl. 563; Md. Ct. of Appeals, 1834, State of Maryland v. Bank of Maryland, 6 Gill & J. 205 ; Pa. Supreme Ct. 1843, Dana v. Bank of United States, 5 Watts & S. 223. 32. A corporation, as well as a private individual, may make a bona fide assignment of all its property to trustees for the payment of its debts, and has a right to prefer one set of creditors, or a single creditor, to others, in all cases not affected by the bankrupt or insolvent laws. Such an assignment made by the Central Board of the Real Estate Bank of Arkansas-Held valid, though some of the trustees were indebted to the bank, their 33. It is competent for a banking corporation, in making an assignment, to prefer those holders of its notes who are willing to deposit them, and accept certificates drawing interest; but it cannot compel any creditor who chooses to run the risk of a failure of assets, to forego any part of his claim or demand against the assets of the bank. He may be postponed, but cannot be deprived of any claim on the surplus assets. Ark. Supreme Ct. 1853, Ringo v. Real Estate Bank, 8 Engl. 563. 34. The power to assign without preferences. A corporation may pledge its things. in action to trustees for the benefit of creditors. N. Y. Supreme Ct. 1863, Nelson v. Edwards, 40 Barb. 279; Clark v. Titcomb, 42 Barb. 122. 35. A corporation may assign its property to a trustee for the benefit of its creditors.* Tenn. Supreme Ct. 1843, Hopkins v. Gallatin Turnpike Co. 4 Humph. 403; N. Y. Supreme Ct. 1855; Hurlbut v. Carter, 21 Barb. 221. Compare supra, 6, 7. 36. A corporation may make an assignment of its property in trust for the payment of its debts, preserving to each creditor the right of sharing equally and ratably according to the amount of his claim. Miss. Superior Ct. of Chancery, 1843, Robins v. Embry, 1 Smedes & M. 207, 258; Montgomery v. Commercial Bank of Rodney, 1 Smedes & M. 632. 37. A corporation, whether trading or religious, may, at common law, assign its property in trust for the payment of its debts, unless restrained by its charter or by some other statute. And such an assignment may be made to persons ineligible under the charter to be general trustees of the corporation. N. Y. Ct. of Appeals, 1850, De Ruyter v. St. Peter's Church, 3 N. Y. (3 Comst.) 238. The right of corporations in Louisiana to make voluntary cessions of assets to creditors, and obtain benefit of insolvent laws, denied. Jeffries v. Belleville Iron Works Co. 18 La. Ann. 685. 38. That a corporation cannot make an assignment which, in its terms or effect, is contrary to the provisions of the charter-see Ringov. Real Estate Bank, 8 Engl. 563. 39. Where the particular mode in which the affairs of a certain class of corporations shall be wound up, in case of insolvency, is prescribed by statute, an assignment made manifestly with a view to evade the provisions of the statute cannot be sustained. Mich. Ch. 1838? Bank Commissioners v. Bank of Brest, Harring. Ch. 106. giving preferences, is valid. N. Y. Supreme Ct. Sp. T. 1857, Bowery Bank Case, 5 Abb. Pr. 415. 45. An assignment of all its property, by a mutual insurance company, created subsequent to the enactment of the Revised Statutes, for the equal benefit of all its creditors, is valid in New York. An insurance company is a moneyed corporation, and may therefore make an assignment without preferences, under 1 Rev. Stat. 591, § 9. N. Y. Supreme Ct. Sp. T. 1853, Hill v. Reed, 16 Barb. 280. 40. That the corporate power to alienate or assign the corporate property is not affect- 46. A corporation-e. g. an insurance comed by a provision in the charter that the pany-may make a general assignment for stockholders shall be individually liable for the benefit of creditors; though forbidden the corporate debts,-see Pope v. Brandon, 2 by the statute of the State-e. g. 1 N. Y. Stew. 401. Rev. Stat. 591, § 9-to give preferences 41. under statutes of Maryland. The among creditors. But a corporation cannot banking corporations of the State of Maryland transfer the powers of its officers as such, to may provide for the payment of their debts an assignee. The assignment transfers the by a transfer in trust of all the property of assets merely, not the franchise. Hence the the bank. Md. Ct. of Appeals, 1834, Union assignee of an insurance company receives no Bank of Tennessee v. Ellicott, 6 Gill & J. power to make assessments upon premium 363. notes transferred to him under the assign42. Funds belonging to the State of ment. N. Y. Supreme Ct. 1855, Hurlbut v. Maryland were deposited in the Bank of Carter, 21 Barb. 221. Maryland, under a resolution of the general assembly. The bank being in failing circum- manufacturing corporation, in contemplation stances, the president and directors transferred all its property to trustees for the equal benefit of all its creditors: Held, that the assignment was valid, and that the deed of trust protected the property in the hands of the trustees against the right of the State to that preference, in the payment of its debt, to which it would have been entitled had there been no valid transfer or existing lien. Md. Ct. of Appeals, 1834, Maryland v. Bank of Maryland, 6 Gill & J. 205. 43. — of Mississippi. That the right of a bank in failing circumstances, to make a general assignment for the benefit of creditors is not taken away by the statute of Mississippi of 1840 prohibiting banks from transferring, by indorsement or otherwise, any note, bill receivable, or other evidence of debt. See Montgomery v. Commercial Bank, 1 Smedes & M. 632; Grand Gulf R. R. & Banking Co. r. State, 10 Smedes & M. 428. 44. of New York. 47. In New York an assignment by a of insolvency, of all its property in trust for payment of all its debts ratably, is void; under 1 Rev. Stat. 603, § 4. N. Y. Supreme Ct. 1853, Harris v. Thompson, 15 Barb. 62. 48. of Ohio. That under statutes which provide that no bank shall make assignments in favor of creditors, and authorize a commissioner to take possession of assets in insolvency, and declare that all assignments shall be void as against the operation of the act, an assignment by a bank is not entirely void, but only so far as it conflicts with the action of the commissioners,— see Rossman v. McFarland, 9 Ohio St. 369. 49. That an assignment made by a corporation for the benefit of certain preferred creditors, of the general effects of the corporation, should not be held to include the capital stock,-see Ohio Life Ins. & Trust Co. v. Merchants' Ins. & Trust Co. 11 Humph. 1. 50. of Pennsylvania. Delivering to The provision of a creditor's bank, acting for itself and other 1 N. Y. Rev. Stat. 791-that no assignment creditors, notes and bills of exchange as &c. by any moneyed corporation, when in- collateral security, upon a condition: Held, solvent, giving preferences shall be valid not equivalent to an assignment for the implies that an assignment made without benefit of creditors, and not therefore void because unrecorded, as required in the case of such assignments by a State statute. See Griffin v. Rogers, 38 Pa. St. 382. cases. 51. Validity of assignments in particular An assignment of all the property and assets of a bank to trustees, for the benefit of creditors, executed by the president, and sealed with the seal of the bank, in pursuance of an ordinance of the board of directors, is valid; and the trustees may maintain a bill in equity against a part of the directors, who have obtained possession of the property of the bank, and refuse to deliver it to the trustees. That some of the trustees have not executed bonds, as required by the deed, is no objection to their right to maintain the bill, the assignment vesting the property in the trustees absolutely, or if on a condition, a condition subsequent. That a part only of the trustees have signed the deed, is no objection to the suit being maintained in the names of all, when they are all before the court, as the court could transfer the possession to those who had signed, holding it for the others to come in and execute the necessary bonds; and if they failed to do so in a reasonable time, remove them and appoint others. The remedy by an action of replevin is inadequate and incomplete. Ark. Supreme Ct. 1842, Exp. Conway, 4 Ark. 302. 52. A manufacturing company in embarrassed circumstances, made a general assignment of its effects to A, to secure him for his Habilities for the company as indorser and otherwise, with power to work up the stock on hand, and to make purchases of any materials necessary for that purpose, and to reimburse all expenses so incurred from the avails of the property assigned. Held, that such special power did not invalidate the assignment. Conn. Supreme Ct. 1840, Kendall v. New England Carpet Co. 13 Conn. 382. credited in his account with the company and B,-Held, that neither the company nor B could take exception to the account on this ground. Ib. 54. The president of a bank, by the authority of the directors, given before the time limited for closing the concerns of the bank, assigned certain notes to trustees, to whom the property of the bank had been transferred for the benefit of the stockholders. Held, that the assignment terminated the interest of the corporation in the notes, vested the legal interest in the trustees, and the beneficial interest in the stockholders. Me. Supreme Ct. 1848, Stevens v. Hill, 29 Me. 133. 55. A banking corporation, also authorized by its charter to construct and operate a railroad, having nearly completed the road, and exhausted its means, was compelled to make an assignment for the benefit of its creditors. The period for completing the road allowed by the charter of the company had nearly expired, the expiration of which, without the completion of the road, would cause a forfeiture of its charter. The road in its then unfinished condition was comparatively worthless, and its not being completed would be a total loss to the company of the amount expended, and would diminish the ability of the company to meet its debts. In respect to completing and operating the company's railroad,-Held, 1, that a provision in the deed of assignment, authorizing the assignees to borrow $250,000 to complete the road, and pledging the assets of the company and the profits of the road, for the payment of that sum when borrowed, before any other debts were paid, did not vitiate the assignment.* with its temporary control, to the assignees for the benefit of the creditors, and did not vitiate the instrument itself. 3. That a provision reserving power to the 2. That provisions in the assignment which conferred upon the trustees the power of 53. Where a manufacturing company, sub-managing and controlling the road, merely sequent to an assignment of its property to operated to assign the profits of the road, A, an indorser, to secure him for his liabilities contracted as such for the company, mortgaged the same property to B, and then C, a partner in the company, and agent for both the company and for A, under the assignment, applied $1,000 of the avails of the mortgaged property to the payment of other debts of the company,―it appearing that A, after the mortgages, had received funds of the company not embraced in the mortgages, to the amount of $4,000, which he had * For views adverse to this position, but not stated in the text because they were advanced in cases not involving assignments by corporations, see Dunham v. Waterman, 17 N. Y. 9; 6 Abb. Pr. 357; Van Nest v. Yoe, 1 Sandf. Ch. 4; 2 N. Y. Leg. Obs. 70; Hitchcock v. Cadmus, 2 Barb. 881; Jessup . Hulse, 21 N. Y. 168; Schlussel v. Willett, 34 Barb. 615; 12 Abb. Pr. 397; and S. C. sub nom, Schlussel v. Willett, 22 How. Pr. 15. directory to appoint new trustees to fill any | to a deed of assignment made by a corporation vacancies which might occur, did not vitiate is defective, or that no schedule was attached the assignment. 4. That a provision requiring the assignees "to pay all the necessary expenses of the president, directors and company of the bank in the management of the corporation," would not avoid the assignment; as it did not show a fraudulent intent to secure a benefit to the assignors, but a design to obtain a future accruing profit for the benefit of creditors. 5. The fact that such assignment made the assignees the joint agents of the bank and the creditors of the bank in managing the road, and in receiving and disbursing the profits, did not vitiate it. Miss. Superior Ct. of Chancery, 1843, Robins v. Embry, 1 Smedes & M. 207. 56. In respect to collecting the company's assets and paying its debts,—Held, 1. That the assignment was not rendered void by a provision allowing twelve months for the collection of the debts (which were numerous and due from persons widely scattered), before any distribution should be made. The time was not unreasonable, under the circumstances. 2. That it was not vitiated by a power conferred upon the assignees to compromise with the debtors in such a manner as, in the judgment of the assignees, should be "for the interest of the creditors." 3. That it was no objection to such assignment that the assignees were prohibited from paying any claim not first declared valid by the board of directors. 4. That it was no objection to the assignment that the assignees were required thereby to account periodically, to the board of directors. Ib. 57. An assignment by a banking and railroad corporation which showed upon its face an intention to postpone the creditors of the corporation, to use the effects of the bank for the completion of the railroad, pay the trustees enormous salaries, and make no dividend among the creditors of the bank until these objects were accomplished,-Held, void, under the circumstances, as fraudulent against creditors who had not become parties to it. Bodley v. Goodrich, 7 How. 277. Compare Arthur v. Commercial &c. Bank, 9 Smedes & M. 394; Fellows v. Commercial &c. Bank, 6 Rob, La. 246. 58. That the fact that the schedule attached at all, will not vitiate the assignment,-see Exp. Conway, 4 Ark. 302; Robins v. Embry, 1 Smedes & M. (Ch.) 207. 59. Rights of purchasers under assignments. That although the assignee of a corporation had notice of its insolvency, (which invalidated the transfer as to him, as against creditors of the corporation), yet a purchaser from him, in good faith and for value, without notice of the insolvency, obtains a valid title,-see Hoyt v. Shelden, 3 Bosw. 267. 60. That if a company formed by the illegal union of other companies, can be regarded as existing de facto, its transfer of notes to the component companies upon its dissolution by order of court, passes a good title,-see Farnsworth v. Drake, 11 Ind. 101. ASSOCIATIONS. [This title embraces some general rules applicable to unincorporated companies, resembling in number of members, form of organization &c. corporate bodies. These rules, though not properly a part of the law of corporations, are inserted because, and so far as, they throw light upon the subject by their analogies. The peculiar nature of those companies over which some part but not all of the law of corporations has been extended by statute, is treated under JOINT STOCK COMPANIES.] 1. Nature. How far joint associations not incorporated are considered in law as being merely partnerships-see Williams v. Bank of Michigan, 7 Wend. 542; Townsend v. Goewey, 19 Wend. 424; Crow v. Jackson, 5 Hill, 478; Wells v. Gates, 18 Barb. 554; Dennis v. Kennedy, 19 Id. 517; Babb v. Reed, 5 Rawle, 151; Atkins v. Hunt, 14 N. H. 205; Bullard r. Kinney, 10 Cal. 60. 2. How far they are distinguished from partnerships, and treated as resembling corporations.* Cox v. Bodfish, 35 Me. 302; The true principle is, and upon this view the apparent discordance in the cases may be nearly reconciled, that the ods of corporations so far as their rights between themselves are involved, and will enforce their articles of agreement (nothing illegal or unconscientious appearing) as between law allows associates to imitate the organization and meth the parties to them. But the public and creditors have a right to invoke the application of the law of partnership to the dealings of any trading association, unless such association has the shield of incorporation. Thus, if the controversy is jects as mode of acquiring membership, tenure of the property, division of profits, transfer of shares, voting, expulsion, dissolution, or the like, the courts may deal with the association by analogy to the law of corporations, so far as the compact between the members contemplates. But if the between members of the association, and relates to such sub Commonwealth v. Green, 4 Whart. 531, 598; | in them being shown), resort to a court of Livingston v. Lynch, 4 Johns. Ch. 573; Irvine justice to prevent them from being put in v. Forbes, 11 Barb. 587. 3. The general assembly of the Presbyterian Church, in Pennsylvania, is not a quasi corporation; because it has not the capacity to sue and be sued as an artificial person; and a quasi corporation is also established by law, but that assembly is not. Neither does that assembly bear the same relation to the corporation of the trustees to the assembly, as the shareholders do to a bank or joint-stock company, for the latter are an integral part of the corporation. The assembly is a segregated association, which, though it is the reproductive organ of corporate succession, is not itself a member of the body. Pa. Supreme Ct. 1839, Commonwealth v. Green, 4 Whart. 531, 598. 4. The open board of brokers, in the City of New York, is not a corporation, nor is it a joint-stock association, nor is it, as respects questions relating to the continuance or termination of membership in it, a partnership. It is a voluntary association of persons, who, for convenience, have associated to provide, at the common expense, a common place for the transaction of their individual business as brokers. N. Y. Common Pl. 1867, White v. Brownell, 3 Abb. Pr. 318. 5. Membership. The agreement which the members of such an association have made upon the subject of membership, and what shall be the terms on which it shall be acquired, and the grounds and proceedings upon which it shall be terminated, must determine the rights of parties on that subject. A court of justice must recognize and enforce these provisions of the compact. It cannot substitute another contract for the one which the parties have made. One who becomes a member of such an association, submits himself to its rules. If those rules provide for expulsion upon certain grounds, and direct a mode of proceeding before a committee or tribunal of the association to ascertain whether in a given case such grounds exist, a member cannot, when they are invoked against himself (nothing unreasonable or unconscientious question is between the association or its members and third parties, and relates to such points as in what name the association may sue, whether members are individually liable to the creditors for debts &c., a mere compact of association cannot vary the rights of strangers to it, but the associates must submit to the general rules of law applicable to the questions raised. force. An injunction against the tribunal of the association, or against an officer of the association charged with executing the decision of such tribunal, will not lie. Ib. Compare infra, 16. 6. In the case of an unincorporated association, persons become members of the association by originally subscribing to the articles, and whether certificates of stock were issued to them or not, they are proper parties plaintiff in an action for redress against any persons who have committed a breach of trust, or who have fraudulently concealed the property of the association, or injured or destroyed it by negligence or intentional fraud. And it does not follow that because the articles of association provide that the government and management of the concern shall be subject to rules and regulations adopted by a majority of the associates, therefore an individual member shall be debarred from resorting to a court of justice for redress, in case of fraudulent appropriation or wilful destruction of the joint property by other members. N. Y. Supreme Ct. 1854, Dennis v. Kennedy, 19 Barb. 517. 7. Member of an unincorporated association allowed to be examined as a witness against it. Ridgely v. Dobson, 3 Watts & S. 118; Lake v. Munford, 4 Smedes & M. 312. 8. Subscription to stock. Where, by the articles of an unincorporated joint-stock association, it was agreed that all the property of the company should be vested in trustees thereafter to be elected, and that the subscribers would pay to such trustees the amount of their respective subscriptions,-Held, that an. action to recover the amount subscribed by a member might be brought and maintained in the names of the trustees so elected. N. Y. Supreme Ct. 1843, Cross v. Jackson, 5 Hill, 478. 9. Transfer of shares. Articles of copartnership of an association provided that a partner might assign his shares by a certificate in writing, which being lodged with the clerk of the company, should entitle the assignee to all the privileges, and subject him to all the liabilities, of a partner. Held, that a valid assignment might be made without such certificate, notwithstanding the articles. Mass. Supreme Ct. 1827, Alvord v. Smith, 5 Pick. 232. |