Commercial National Bank v. Burch

Citations

• 141 Ill. 519
• 31 N.E. 420

Syllabus

<p>1. Corporation—power of president and secretary to make an assignment to a creditor. The board of directors of an insolvent corporation passed this resolution: “The president and secretary of this company are authorized to hereafter execute judgment notes, chattel mortgages, bills of sale, or other instruments in their judgment necessary to the financial interests of the company:” Held, that under this resolution the president and secretary of the corporation had the power to make an assignment of its book accounts to a creditor holding the company’s judgment notes.</p> <p>2. Same—power to purchase its stock. The purchase of its own stock by a corporation by the exchange of its property of equal value, though made in good faith and without any element of fraud about it, there not being anything in the apparent condition of the company to interfere with the making of the exchange, will not be allowed when it injuriously affects a creditor of the company, even though the fact of the indebtedness was not known to the stockholders.</p> <p>3. Same—capital stock held in trust'by the directors —relations of shareholders. The capital stock of an incorporated company is a fund set apart for the payment of its debts, and the directors of the company hold it in trust for that purpose, and the shareholders of the corporation are conclusively charged with notice of the trust character which attaches to its capital stock. As to it they can not occupy the status of innocent purchasers, and when they have in their hands any of this trust fund, they hold it cum onere subject to all equities which attach to it.</p> <p>4. Chose in action—equities against original assignee follow as to subsequent assignees. Each successive assignee of a chose in action takes it subject to equities existing between the original assign and his immediate assignee. So where an insolvent corporation gave its. note in payment for shares of its stock in fraud of its creditors, and secured its payment by th