# Corey v. Wadsworth

> Supreme Court of Alabama · November 15, 1897 · 118 Ala. 488

URL: https://www.frixlaw.com/law-library/cases/6517590

## Case

- **Full name:** Corey v. Wadsworth
- **Court:** Supreme Court of Alabama
- **Decided:** November 15, 1897
- **Citations:** 118 Ala. 488
- **Precedential status:** Published
- **Opinion:** Opinion of the court by McClellan
- **Judges:** McClellan
- **Cited by:** 13 later opinions in the Frix Law Library

## Citator (automated)

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## Opinion text

McCLELLAN, C. J.
-One of the main questions in this case is whether an insolvent and failing corporation can make a valid transfer of property to one of its directors in payment of a debt owing from the corporation to him, thus preferring 'him to other creditors in the payment of its debts, or, perhaps more accurately, whether directors of such corporation can prefer themselves in the payment of corporate debts. ' The writer not only has very affirmative views favorable to the validity of such a transfer on abstract principles, but he is further quite convinced that the point has been to all intents and purposes so decided by this court. We are, of course, aware that many courts have held the contrary view, and some of the text writers have strongly condemned the doctrine we believe to be absolutely sound; some of them, indeed, resorting largely to invective and epithet in denunciation of the idea that a corporation may pay a just debt to an honest creditor though he be a director in preference to the just debts of other honest creditors who are strangers to the corporation. We have no epithets to apply to such courts and writers, nor to the rule they declare. Many of them are able expounders of the law, and all of them are doubtless actuated only by a purpose to ascertain and expound the true principle in this connection. And they may be right, and we wrong; but we do not think so, and we shall endeavor to give the reasons for the faith that is in us.
We are utterly, unable to conceive upon any just and sound principle or consideration the least shadow of difference or distinction between the debt of a director and the debt of a stranger against a corporation, upon which could be predicated one rule in respect of a preference by t'he corporation in the payment of the former and another rule in respect of such preference in the payment of the latter. Take the case we have here, as- *494 turning for the discussion of the point immediately under consideration that the transaction involves no actual fraud. The corporation is a going concern, and its managers do not contemplate its failure. But it is in debt and needs money to continue its business and to pay its maturing obligations. It borrows the money from a director directly or through a pledge of his credit. At the same time it incurs debts to strangers for supplies necessary in its business. The money borrowed from the director is used for corporate purposes. It is paid out to other creditors, or is applied to liquidate corporate expenses. So also the supplies constituting the consideration of the debts to strangers are applied to the authorized uses of the corporation and enure to its advantage. There is nothing covinous in the creation of either class of debts. Neither the advancing director nor the supplying stranger has any intention or expectation of receiving any undue or illegal benefit from the transaction he thus has with the corporation. It may weil he that the director, being a stockholder, anticipates that the aid he gives the corporation in his individual capacity will redound to his advantage ultimately in the increased value of, or in dividends upon, his stock. But as all debts must be paid before the stockholder can be benefited by such a transaction, the intention and expectation of the advancing director involves and presupposes the payment of all corporated indebtedness. It follows obviously that in lending his money or credit to the corporation the director can have no purpose or intent inimical to existing or future creditors, hut to the contrary the primar;,’ effect of the aid he thus gives the company is of affirmative benefit to its creditors. The stranger creditor, to the contrary, does expect a direct profit to himself by the transaction in which he becomes its creditor. If 'he lends it money, he expects and contracts for interest — and even this remuneration does not enure to the director who pledges his credit. If he sells his wares to it, he expects and contracts for a profit upon them. Of course all this is perfectly legitimate. But it shows that so far as the expectation of benefit goes the director who pledges his credit, as did the respondent here, stands in a less selfish attitude toward the cor *495 puration and its creditors than does tlie stranger aa ho sells property to it on credit. And at least Ave may say that the director creditor and the stranger creditor —the respondent and the complainant in this case— stand in the creation of their debts equally untainted of AATorg done or intended; and, regarded from the point of A'ieAV of the inception of their claims, are equally and to like extent entitled to the favorable consideration of the courts and the just protection of the laAV.
It is equally clear that the corporation itself and its other creditors are, to say the least, as much benefitted by the money it borroAvs on the individual credit of the directors as by the wares it purchases on time from the stranger. As Ave luwe seen, both the money so boiroAA'ed and the property so purchased become assets of the corporation, enable it to prosecute its business, to pay its creditors and to meet its expenses. There is, in other Avords, nothing in the uses to Avhicli the money borrowed and the property purchased are applied or intended to be applied Avhicli differentiates the attitude and rights before the courts and the Iuav of the director who pledges his credit from the attitude and rights of tlie stranger creditor. In the effects and results of their respective transactions as Avell as in the purposes and bitents which actuated each to the thing he did is found no scintilla of evil, and nothing of wrong or injury to the corporation or its creditors which Avould entitle the one to more consideration than the other, which Avould. accord to one rights denied to the other, or Avhicli Avould admit of a preference in the payment of the debt of the one and condemn as fraudulent a preference in the payment of the debt of the other.
A step further in unfolding this question and case: The expectations of the officers and managers of the corporation, entertained at the time of borroAving the money on the faith of the director, as to keeping the corporation a going concern and continuing indefinitely to carry on its business are disappointed. They find that notwithstanding the personal efforts of the director in pledging his credit to raise money for the business and creditors of the concern, the corporation cannot keep its head above Avater, but must discontinue its business, uease, to be a going concern and apply its assets to the *496 payment of its liabilities. Among these liabilities they find the debt dne its director for money borrowed, and a debt due a stranger for property purchased. The assets are sufficient to pay one in full and a percentage only the wisdom of the legislature to accomplish; for,' to quote the language of Judge Caldwell, in Gould v. Railroad Co., the right to make preferences ‘is too firmly imbedded in our system of .jurisprudence to be overthrown by judicial decision, and it can no more be overthrown by the courts in its application to corporations than to individuals.’- — Gould v. Railway Co., 52 Fed. Rep. 684. That was a case that arose in this State, and was controlled by the laws of this State, and, after an examination of the authorities, the court held that an insolvent corporation of this State may prefer its creditors, whether they be officers of the corporation or strangers.. ‘The doctrine established by the best considered cases, and by the Supreme Court of the United States,’ says Judge Caldwell, in his opinion in that case, ‘is that the mere fact that creditors of a corporation are directors and stockholders does not prevent their taking security to themselves as iudividuals to secure a l>ona fide loan of money previously made to such corporation, and used by it in conducting its legitimate business.’” — Worthen v. Griffith, 59 Ark. 562, 578 .
The same position has been taken by the circuit court of appeals of the sixth circuit. In Brown v. Grand Rapids Parlor Furniture Co., 58 Fed. Rep. 286, the court, by Taft, Circuit Judge, say: “We now come to a question vdiether the fact that Harry and W. J. Long, -directors, were interested as guarantors and indorsers upon most of the notes secured by the mortgages, and were directors and stockholders in the corporation, and *522 as such voted to give the mortages, renders the mortgages invalid.
“Several cases have been cited, some of them decisions of circuit courts of the United States, in which it has been held that, while it is lawful for a corporation to prefer creditors, it is not equitable or permissible for directors of a corporation to prefer themselves, even if they are bona 'fide creditors, because they are trustees. It may be conceded that the trust relation justifies and requires courts of equity to subject preferences by an insolvent corporation of its own directors to the closest scrutiny, and places the burden upon the preferred director of showing, beyond question, that he had a bona fide debt against the corporation; but we do not see why, if a corporation may prefer one creditor over others, it may not prefer a director who is a bona ficle creditor. Preferences are not based on any equitable principle. They go by favor, and as an individual may prefer, among his creditors, his friends and relatives, so a corporation may prefer its friends.”
The Supreme Court of Michigan is fully committed to the same doctrine. In Bank v. Salt & Lumber Co., 90 Mich. 345, 350 , opinion by Montgomery, J., it is said: “Nor is it the law of this State that, as soon as a corporation becomes insolvent, the directors of the corporation become 'trustees for all the creditors alike, in such sense as to prevent their giving valid security by way of preference to one of tbe stockholders or directors. We are aware that the decisions in the various States are not uniform as to the question, and that a number of very eminent text-writers have deprecated a state of the law which admits of such preferences. But, to adopt the language of Dillon, J., in Buell v. Buckingham, 16 Iowa, 284 , this condition of the law ‘may constitute a good legislative reason for giving priority to outside creditors, but the legislature must furnish the remedy.’
“In the case referred to it was held that being an officer of the corporation did not deprive Buell of the right to enter into competition with the other creditors, and run a race of diligence with them.
“The rule in this State has, we think, been established since the case of Town v. Bank, 2 Doug. 530 , that a corporation may, in the absense of legislative restriction, *523 deal with, its property precisely as an individual may, and may prefer one creditor over another; and hence that the assets do not become a trust fund, for pro rata distribution among all its creditors. * * This is the substance of the rule stated in both Town v. Bank and Turnbull v. Lumber Co. And in the later case of Kendall v. Bishop, 76 Mich. 634 , a mortgage had been given to secure the directors of the corporation, and to secure paper upon which they were indorsers. The question under consideration was fully discussed in the briefs of counsel, and it was $aicl by Mr. Justice Campbell:
“ ‘There seems to be no reason why one honest creditor should be on a worse footing than another, and we do not find in our law any such distinction.’ ” See also Lucas v. Friant, 69 N. W. Rep. 735 .
The Supreme Court of Mississippi in effect indorses the doctrine that director creditors of an insolvent corporation may prefer themselves in payment of their claims by a transfer of corporate property. — Sells & Co. v. Rosedale Co., 72 Miss. 590 .
In Gould v. Little Rock Ry. Co., 52 Fed. Rep. 680, 684, it is said by Caldavsll, Judge, after repudiating the '“trust fund” doctrine: “It is next contended that the
deed of trust is void because it was executed to secure debts due to persons who were directors of the corporation, and large holders of its stock and mortgage bonds. The money was actually adAmnced by the directors in good faith for the benefit of the company, and Avas used by the company for legitimate corporate purposes. It Aras not loaned or advanced for the purpose of obtaining any advantage over the corporation or its other stockholders or creditors, but to conserve and protect the best interests of all persons interested in the property. It is obvious that the directors ay ho made these advances did not do so from choice, or because they esteemed it a safe or profitable investment in itself. They made the advances because the corporation stood in pressing need of the money, and its failure to get it was likely to result injuriously to all its creditors and stockholders. The inducement to make the loan was to protect and give value to their oavu large interests as creditors and stockholders of the corporation; but all other creditors and stockholders, in proportion to their interests, were *524 equally protected and benefited by the loan. Upon these facts, the deed of trust executed by the direction of the stockholders and board of directors to secure the advances previously made by these four directors to the company is a valid security. The advances constituted a valid debt against the corporation, which it was legally liable to pay, and could have been compelled to pay by suit. Where a corporation is legally liable to pay a debt, it may undoubtedly give a security for its payment. The use of its property to pay or secure a dona fide debt is not an unlawful use or diversion of its property, no matter what official relation the creditor sustains to the corporation. The corporation is under the same obligation to pay a dona fide debt due to one of its directors ancl stockholders that it is to pay a debt due to a stranger, and a security given for a debt due to a director and stockholder is as valid as a security given to any other creditor. The doctrine established by the best considered cases and bjr decisions of the Supreme Court of the United States is that the mere fact that creditors of a corporation are directors and stockholders does not prevent their taking security to themselves as individuals to secure a dona fide loan of money previously made to such corporation, and used by it in conducting its legitimate corporate business. Among the States maintaining this doctrine may be mentioned Vermont, Massachusetts, Connecticut, New York, New Jersey, Pennsylvania, Virginia, Illinois, Minnesota and Iowa.
“And to the same effect, see Duncomb v. Railroad Co., 84 N. Y. 190 , 88 N. Y. 1 ; Harts v. Brown, 77 Ill. 226; Reichwald v. Hotel Co., 106 Ill. 439 ; Stratton v. Allen, 16 N. J. Eq. 229; Wilkinson v. Bauerle, 41 N. J. Eq. 635, 7 Atl. Rep. 514 ; Bank v. Whittle, 78 Va. 737 ; Ashhurst’s Appeal, 60 Pa. St. 314; Whitwell v. Warner, 20 Vt. 425 ; Gordon v. Preston, 1 Watts, 386 ; Sargent v. Webster, 13 Metc. (Mass.) 497; Kitchen v. Railway Co., 69 Mo. 224 ; Oil Co. v. Marbury, 91 U. S. 587 .
“An exhaustive and luminous discussion of this question is found in the opinion of the Supreme Court of Minnesota, delivered by Judge Mitchell, in the case of Hospes v. Car Co., 50 N. W. Rep. 1117 . The reasoning of the learned judge who delivered the opinion of the *525 court in that case makes it extremely clear that an insolvent corporation may prefer its creditors, whether they be officers of the corporation, or strangers; and that there is no foundation for the doctrine that the insolvency of a corporation has the effect to convert its assets into a 'trust fund,’ in the technical sense of that term, and its officers into mere trustees charged with the duty of distributing its assets ratably among its creditors.”
Tbe view we have been elaborating is fully supported also by the English courts. It is there held that the assets of an insolvent corporation are not a trust fund for creditors, that its directors are not trustees for creditors, and that, of consequence, stranger creditors cannot avoid the disposition of its assets by directors in the preferential payment of their own just claims. In In re Wincham Shipbuilding, Boiler & Salt Co., 9 L. R. Ch. Div. 322, the facts were that assets of the corporation were used by the directors in paying a corporate debt for which they were personally liable. The transaction was attacked by stranger creditors on the ground that the directors were trustees for them, and as such could not thus contract for their own benefit to the detriment of the complainants. Vice Chancellor Bacon, agreed with them and granted relief, but on appeal the learned Jessel, Master of the Rolls, reversed the decree, and sustained the transaction, saying: “The Vice Chancellor decided the question on this ground, that the directors were trustees of all their powers. So, no doubt, they were. But it is further said that they exercised their powers in breach of trust and for their own benefit, and, therefore, that the act which they did was nugatory. But it appears to me that the question is, for whom were they trustees? It does not appear that the Vice-Chancellor considered this point; but it makes all the difference whether they were trustees for the persons who were injured by what had been done in this case, namely, the other creditors of the company. It has always been held that the directors are trustees for the shareholders, that is, for the company. They are the managing partners of the company, and if they abuse Ifheir powers, which they hold in trust for the company, '.to the damage of the company, for their own benefit, *526 they are liable to make good the breach of trust to their vcsiuis que trust like any other trustees. But directors are not trustees for the creditors of the company. The creditors have certain rights against a company and its members, but they have no greater rights against the directors than against any other members of the company, creditors have certain rights against the directors than against anjr other members of the company.
“That being so, there was nothing to'impose a duty on the directors not to pay a debt of the company, for which they were themselves liable, in priority to other debts, unless sect. 164 of the Act of 1862 applied, which it certainly does not in the present case. The payment to the bank was not a fraudulent preference; it was made in the ordinary course of business. It was a good payment, and could not be recovered back; therefore, the directors, although they derived a collateral advantage to themselves, did not injure their cestuis que trust. The payment was not any breach of duty to the only persons for whom they were trustees.”
The reasoning of these authorities cannot, in our opinion, be answered. Certainly the naked assertions of some courts that the law is otherwise is not even a pretense of refutation. Surely also such logic is not met by invective. And the conclusions which they reach, the principles which they establish are not only .logical and the legitimate and necessary consequence of the most familiar and elementary doctrines of the law", long recognized, but they are also in the highest decree, just and right.
The application of these principles to the case at bar leads to this result: The transfer of property by the Decatur Building Supply Company to Corey in payment of debts the company owed him, or to indemnify him against liability as indorser for the company is not rendered fraudulent and void by the facts that the corporation was insolvent, and that he was a stockholder, director and president of the corporation, and as such participated in the transaction by which his claims were thus preferred to those of complainant and other stranger creditors.
The case of Corey v. Wadsworth ( 99 Ala. 68 ) was directly, and the cases of Gibson v. Trowbridge Co. ( 96 *527 Ala. 357 ) and Goodyear Rubber Co. v. Scott ( 96 Ala. 439 ) were in effect overruled by the subsequent case of O’Bear Jewelry Co. v. Volfer, 106 Ala. 205 , which has been several times reaffirmed by this court. — Barrett & Co. v. Pollak & Co., 108 Ala. 390 ; Pollak Co. v. Muscogee Manufacturing Co., 108 Ala. 467 . The later case of Mary Lee Coal & Ry. Co. v. Know & Co., ( 110 Ala. 632 ), is irreconcilable with the three cases last above named, and with the foregoing opinion in the case at bar. On the point under consideration, it must be overruled.
But, as we shall presently see, the sale to and purchase by Corey of the property of the corporation was c ovino us and vicious wholly apart from the consideration of his personal and official relations to the company. The decree of the chancellor was, however, based equally upon those relations and upon actual fraud, and the foregoing will stand as the opinion of the court upon one of the two grounds on which his conclusion was rested, and also as supplying the reasons for our conclusion in the case of F. Anderson et al. v. Bullock County Bank et al., which we now hand down.
Noav as to the other question in the present case, namely: Whether the respondent Corey was under an honest liability for or held an honest debt against the Decatur Building Supply Co. commensurate in amount Avith the Aralue of the property he took from the company in case of his liability or in payment of his debt, one or both, Ave reach the conclusion, the onus being on him, that he has failed to shoAV, Avith that clearness and fullness which the laAv requires, that he received from the corporation in payment of honest debts due from the corporation to himself, or to others for Avhich he was bound as surety or guarantor, property, which reckoned at its fair Aralue, Avas only sufficient to reimburse him or to saAre him harmless. In reaching this conclusion we concede the integrity of the bank’s claim for six thousand dollars against the Supply Company as to which he Avas guarantor or surety. But it is clear upon the AA'hole evidence that he received property of considerably greater value than six thousand dollars, so that, all other questions out of the Avay, the .transaction could not be allowed to stand. He seems to have appreciated this, and insists that the company owed him directly *528 about eight hundred dollars, which constituted in part the consideration for the property he received. We do not find that the company owed him this eight hundred dollars. In the first place he was very laggard in bringing forward this claim at all; so much so, indeed, that it has earmarks of afterthought. Then, his testimony as to the precise amount of the claim and the manner of its accrual is quite unsatisfactory. He, indeed, makes no pretense of an accurate statement in either respect, but in his testimony constantly, refers to the books of the company to the effect that they correctly set forth the amount and upon what account the corporation incurred the debt, etc., etc. When the books, thus vouched for by him, are looked to they not only do no t show that the company owed ’him this or any other sum, but to the contrary, when taken in connection with his own evidence, they affirmatively show that he was at the time of the transfer of this property to him heavily indebted to the company himself. We suppose it will not be controverted that a creditor who is also in less amount the debtor of an insolvent, cannot take property in payment except to the amount of his claim as reduced by deducting therefrom his indebtedness to the insolvent. As applied here, this rule would have allowed Corey to take property of the value of $6,000, for which he was bound to the bank, less the amount he individually and directly owed the insolvent corporation. That he took largely more than this there can be no doubt. It is true that he testifies in a general way that the property was worth less than the amount of his just claims against the company, and that it sold for less. But these conclusions of his are manifestly based upon the unfounded assumption that the company owed him about $800, independently of the bank matter, and they take no account of the fact, as we find it to be, that instead of the Supply Company owing him that sum, he was indebted to it for himself and on account of Hoy, two or three, or more thousands of dollars. Then, too, it is shown very satisfactorily that a great deal of the property he received was not estimated at its real value. For instance, he took several car loads of material— sash, blinds, doors, lumber, etc., etc. — as it came into the company’s possession about the time of the sale to *529 him, at ten per cent, off the costs at the factory, the Bupply Company paying the transportation charges. And when added to aJl these considerations, attention is had to the fact, which is inferable from the evidence and which the chancellor found, that the goods received by him were to a large extent ordered by the Supply Company at his instance, his brother-in-law being general manager and he president of the company, from complainants in this case for the purpose of applying them to his alleged claims against the insolvent corporation, we are driven to the conclusion that the whole transaction ivas tainted with actual fraud, and that the effect of it was not to pay a bona fide debt with property of equal value, but to give a large bonus'to Corey over and beyond the amount of his just claims against the corporation. And upon this view the decree of the chancery court must be affirmed.
Affirmed.
(Note: The following opinion was written by Hon. Thomas W. Coleman, at the time a justice of this court. At his suggestion the case was passed over to the present court. The opinion has been again read and considered in consultation, and, though it has never been adopted or concurred in by any of the judges, it is printed here at Judge Coleman’s request:
The present bill is purely and simply a creditor’s bill, seeking to subject the assets of the insolvent corporation which, according to the averments of the bill, were sold and transferred to Lorenzo Corey, in fraud of creditors. That complainants were creditors of the Decatur Building Supply Co., a corporation, at the time of the sale and transfer of the assets to Corey is not controverted. That Corey was a stockholder, a director and president of the corporation at the time of the transfer to him, and that Hoy, the general manager, was his brother-in-law, are admitted facts. A few days prior to the 2Gth of July, 1888, the president, general manager and other officers discussed the pecuniary condition of the corporation and the necessity of making a general assignment for the benefit of its creditors, and this course was then agreed upon. Corey employed and paid *530 attorneys to prepare the deed for a general assignment, and the assignment was executed on July 26th, 1888. At the time of the execution of the general assignment, its indebtedness was twenty-six thousand dollars, and general creditors, other than those who are officers of the corporation, realized only fifteen per cent, of their demands, from the property assigned. There is no contention that the assignee failed to discharge his duty, or that less than their value was realized from the assets conveyed to the assignee. On and from the 19th of July to and including a part of the 26th of July, 1888, many thousands of dollars worth of its available assets, (salable property) and some choses in action, were sold and transferred and delivered to Lorenzo Corey, and by him appropriated to his own use, are facts averred In the bill and fully sustained by the proof. The complainants base their right to relief upon two propositions : First, that if in point of fact, Corey was bound for certain debts of the corporation as a guarantor, and that if Corey was a creditor of the insolvent corporation, being a stockholder, director and its president, and exercising a controlling influence, the law7' will not permit him to indemnify himself against liability as a guarantor, and to prefer himself as a creditor to all the other creditors by the purchase of the assets of the corporation in payment of his demands and liability, he at the time knowing its insolvent condition, and that it must necessarily cease to do business in a few days. Second, that the demands claimed by Corey to be due him were not bona fide, and that the transaction of the purchase of the assets was a scheme concocted at the instance o'f Corey to protect him and other officers of the corporation who were co-guarantors, and to wreck the corporation for his owm benefit; that in the transaction actual fraud existed, and that under either aspect, Corey should be held a trustee in invitum, and made to account for the assets thus appropriated. The defense relied upon is, that Corey was liable as a guarantor to the Exchange Bank of Decatur for a debt of the Decatur Building Supply Company, the debtor and defendant corporation, for six thousand dollars, and that the corporation was indebted to him individually in large sums of money, advanced and loaned by him, and that he paid *531 by checks on the Exchange Bank, payable to the Decatur Building Supply Co., six thousand dollars, with the understanding and agreement, that it was to be applied to and in payment of the debt of the corporation due the bank, for which he and other officers were bound as guarantors, and that the remainder of the property purchased by him was in satisfaction of bona fide debts due him from the Building Supply Company, and that the transaction was free from fraud. It was proven that Corey was also a stockholder and director in the Exchange Bank of Decatur; otherwise, it does not appear that the Exchange Bank had any knowledge of the understanding as to the means provided for the payment of this debt. A further statement of the facts can be-found in the report of the case in 99 Ala. 68 .
The pleading and evidence show that Lorenzo Corey,, a stockholder, director and president of the Building-Supply Company, a corporation, with a knowledge that, it was insolvent, upon the eve of and in contemplation of a general assignment, appropriated, under the form of a purchase, largely more than half of its available assets to the payment of a debt for which he and other officers were personally bound as guarantors and in payment of debts claimed to be due him individually, thereby securing such an advantage and preference over other creditors, so that he sustained but little if any loss, while the other creditors did not realize more than fifteen per cent, of their claims. The question is, can the purchase by a director and president be sustained in a court of equity against the claims of the other creditors? Under well settled principles, such a transaction, the debts being bona fide, would not necessarily be fraudulent and void, if made between inviduals, although the debtor might have been hopelessly insolvent at the time, provided the assets were sold for a fair price and the debtor received no benefit from the transaction. Can the same rule be applied in favor of officers in control of corporations, after the corporations' have become insolvent and ceased to do business, without doing violence to well established rules necessary to prevent undue advantage and injustice?
The direct question was settled by this court after full discussion in the case of Gibson v. Trowbridge Co., ( 96 *532 Ala. 357 ), in which the court used this language: “The corporation, however, became insolvent, and he (Gibson) being a director, could not purchase its stock in trade and close its operations, and thereby make himself a preferred creditor.”
In the case of Goodyear Rubber Co. v. Scott, in 96 Ala. 439 , this court declared, that an insolvent corporation could prefer some of its creditors, but that a director or member of the governing board, of an insolvent corporation was without authority to make himself a preferred creditor. In this case Scott was a guarantor or indorser of the insolvent corporation.
The direct question was again presented by demurrer to the bill in the case at bar on a former appeal ( 99 Ala. 68 ); and after thorough consideration, the conclusion was reached by the court as then constituted, that a director or governing member of the board of an insolvent corporation was not authorized to prefer himself to general creditors. True, .the learned Chief Justice, who wrote the opinion, contended that the “trust fund” doctrine was the “sounder rule,” a doctrine which has not been accepted by this court, and upon Avhich the equitable principle, that a director or governing member of the board cannot prefer himself to other creditors does not depend. In the subsequent case of Mary Lee Coal & Railway Co. ( 110 Ala. 632 ), a case held under consultation for a long time, and reconsidered pending an application for a rehearing, we used the following language: “The rule that a director of an insolvent corporation cannot prefer himself, directly or indirectly, over other creditors is, but the application of a very familiar principle to the directors and stockholders of a corporation. No insolvent person Avho is a debtor is permitted to dispose of the property by which a benefit is reserved to himself,- to the prejudice of his creditors. * * * * In one sense, corporations are entities; but corporations and the stockholders are' not separate and distinct entities for all purposes and in all respects. A corporation is a collective body composed of different persons. Railroad Co. v. Nicholas, 98 Ala. 124 ; 12 South. 723 ; Mor. Corp., §227. Whatever is of benefit to the corporation, as a collective body, is a benefit to the stockholders *533 or persons of which it is composed. Corporations are controlled by, and act through, a board of directors or stockholders. When, therefore, an insolvent corporation, acting by its governing body, which, by reason of their relations to the corporation, may know its condition and have advantages superior to other creditors, sells or transfers its assets or any portion of them on such terms or conditions as to place the property beyond the reach of its creditors, and thereby protect the members, or any of them, from loss, and yet secure a benefit to those who effect the sale and transfer, whether consummated directly or through another corporation of which they are the owners and beneficiaries, such sale or transfer is in violation of the rule which prevails as to persons, and is void as to such persons making the sale, and who are thus benefited. The rule is as much a necessity to prevent fraud, injustice and undue advantage on the part of the directors and stockholders of corporations as to similar transactions between individuals. A person cannot be a debtor to and creditor of himself, but, by reason of the fact that the same persons may be the directors and stockholders of separate corporations, one of which may become the debtor of the other, and thus, though not in name and form, in fact, stockholders often sustain the relation of debtor and creditor to themselves. In arriving at the bona fieles of transactions and motives of parties thus situated, for the prevention of fraud and undue advantage, and the administration of justice, courts should not regard corporations as separate, distinct entities, from the owners and stockholders, and sanction as valid transactions which, if done by individuals under the same circumstances, would be set aside and annulled. We would not apply, however, to corporations, whether solvent or insolvent, which have not been dissolved or ceased to do business as a going concern, a different rule than that applied to individuals acting as such in this respect, and disable them from paying some creditors at the expense of others under any and all circumstan ces. — Goodyear Rubber Co. v. George D. Scott Co., 96 Ala. 439 ; 11 South. 370 .”
These decisions declare the law to be, that the mere insolvency of a corporation does not convert its assets *534 into a trust fund for its creditors; but by reason of the nature of a corporation, and the relation its governing officers bear to it, any disposition of its property after insolvency by its officers, by which they are preferred, or a benefit is reserved to themselves, over the other creditors, will be set aside as fraudulent and void at the instance of creditors. This is the conclusion reached by the great weight of authority. All the courts holding to this view do not proceed upon the same grounds. It is t'he logical conclusion from the “trust fund” doctrine; and the courts maintaining that rule, for the most part, declare their conclusion from it. Other courts, which do not accept the “trust fund” doctrine, as this court has done, reach the same conclusion, upon other grounds. Beach v. Miller, 130 Ill. 162 , 17 Am. St. Rep. 291 , and extended notes; Sweeny v. Sugar Ref. Co., 30 W. Va. 443 , 8 Am. St. Rep. 88 ; LaGrange Butter Tub Co. v. Nat. Bank of Commerce, 122 Mo. 154 , ( 43 Am. St. Rep. 558 ); Rouse v. Merchants Nat. Bank, 46 Ohio St. 493 , ( 15 Am. St. Rep. 644 , and note); First Nat. Bank v. Knowles, 67 Wis. 373 ; Haywood v. Lincoln, 64 Wis. 639 ; Ballin v. Merchants Bank, 89 Wis. 278 , ( 46 Am. St. Rep. 834 , reviewing the Wisconsin cases).
These authorities refer to many others. It is true that other courts hold to a different view and declare that an insolvent corporation may prefer any creditor; even a director or president to other creditors. — Garrett v. Burlington Power Co., 70 Iowa, 697 , ( 59 Am. Rep. 461 , and notes); Worthen v. Griffith, 59 Ark. 562 , ( 43 Am. St. Rep. 50 , and notes). The principle upon which these latter cases proceed is, that a corporation is a legal unit, in every respect as much so as an individual, and that the same rules of law must be applied to both alike. The argument, we are of opinion, proceeds from a false premise. A corporation is composed of several persons, and not of one person. It cannot act by itself, but only by agents. When t'he corporation increases in wealth, the enhancement redounds to the benefit of those who compose it. When it loses money, it is their loss. The persons who compose it are affected with the same infirmities of human nature, after the incorporation, as before. In all business transactions done in the .name of the corporation, those engaged in accomplish *535 ing these business transactions, as its managing and governing officers, are subject to the same selfish influences which would operate upon them acting in their individual names, for their personal interest. These officers are in a position to know the real condition of a corporation, an advantage not attainable by creditors generally. The maxim that the law favors the diligent, can have no just application to parties having such advantages. When an insolvent debtor prefers one creditor to another, it is of no pecuniary advantage to the debtor; and even in such cases, if he secures a.benefit to himself, the preference will be set1 aside. If this be sound law and good morals, certainly when an insolvent corporation sells to those who make up and constitute the corporation, the same legal and moral rule is violated. Why is it that a partnership is prohibited from preferring one of its own members to the other creditors, and the same principle is not applicable to corporations dealing with its own members and officers? When a person is solvent having no creditors he can dispose of his property to whom and on such terms as he sees proper, and reserve to himself any benefit he may desire; but when he is insolvent, a different rule arises. On account of the limited liability of corporations the rule should at least be as strictly enforced against the beneficiaries as against persons. There is but one sound and practical way of dealing with insolvent corporations so as to prevent an unfair' and unjust advantage by its officers and for protection of the creditors in their just rights, and that is, “to treat the officers and stockholders as the proprietors,” or, as Morawetz says, always keep in mind that a corporation is an association of persons, and to apply the same rules to them as are applied to partnerships and individuals, so far as to prohibit them from acquiring the assets in preference to its general creditors.
Mr. Thompson, in his comprehensive work on Corporations, 'has collected and cited a great many authorities which treat of the rights of creditors to the assets of. insolvent corporations, and in section 1569 declares the “trust fund” doctrine to be “nothing more than a rule which the law applies to every other debtor.” He says: “In considering the power of corporations with reference to their capital and shares, it is necessary to *536 note a fundamental distinction between the English and American cases. In 1824 the fertile brain of Mr. Justice Story, invented the doctrine that the capital stock of a corporation is a trust fund for the payment of its creditors; and that the creditors have an equitable lien or charge upon it superior to that of the stockholders. This has become the settled doctrine of American courts. If this doctrine means anything more than that the creditors of a corporation must be paid before its property can be distributed among its shareholders, then there would be no difference in this respect between the English and American decisions; for this is the rule which obtains in the Avinding up of partnerships ; the partnership creditors must be paid before the indiAddual partners can divide the social assets among themselves. And, indeed, treating the shareholders as proprietors — and this is the only practical judicial conception of their status' — this rule is nothing more than that Avhich the law applies to every other debtor; he cannot keep and enjoy his property leaving his debts unpaid.” A great many authorities are cited to this text.
Upon the doctrine that an insolvent corporation can prefer its OAvn directors, he uses the following language:
Yol. 5, §6496. “The Avriter Avishes to weigh his words carefully, and not to speak disrespectfully of the judicial courts; but he feels that he does not characterize this doctrine in the language Avhich it deserves, unless he calls it an infamous doctrine which is not supported by any underlying principles of justice. It gives added weight to calamity which the public suffer through the fact of nearly every form of industry passing into the hands of limited liability corporations. The infamy is intensified where the directors are allowed to appropriate the property of the corporation in payment of debts due from the corporation to themselves, leaving its other creditors hopelessly without remedy.”
Yol. 5, §6498. “It is to be regretted that some of the American courts have carried the right of an insolvent corporation to prefer creditors to the extent of holding that it may not only prefer creditors Avho are its own shareholders, but may prefer such as are its OAvn directors. This infamous doctrine has been pushed to the extent of allowing the directors and shareholders of a *537 corporation to prefer themselves at the expense of the creditors at large, although the director or shareholder may have voted for the proposition. A conception which proceeds upon a similar level is that the fact that the directors had falsely represented to the public by means of the letter heads on which they conducted the business correspondence of their company, that it had a certain capital, does not estop them from preferring themselves before the general creditors of the company, whom they have thus deceived in giving credit to it. It cannot escape attention that this doctrine offers a new inducement to the incorporation of every species of business, because it gives the members of corporations an advantage over their creditors which the members of a partnership do not possess. A partnership cannot distribute its assets to its partners in preference to its creditors; but under this miserable doctrine, if it becomes incorporated, it can do so.”
Yol. 5, §6499. “It would not be profitable to quote the mouthings of judges upon this question; but it is strange that judges can be found so destitute of a sense of justice as to announce the following proposition: ‘There is nothing, either in law or equity, which forbids a member, or even a director, of a corporation from contracting with it, and like any other individual, he has a right to prescribe his own terms, which the corporation is at liberty to accept or reject; and when the contract is concluded, he stands in the same relation to the other creditors of the corporation as any other individual would under the same circumstances. When the question of priority arises it must depend on the bona fides of the transaction, fraud or no fraud. If by greater diligence and without fraud, he has fairly gained an advantage over the other creditors, he is entitled to retain it.} Undoubtedly the directors have a right to contract with the corporation while it is a going concern, provided they do it fairly; but in general, they are the only ones whose knowledge of the internal affairs of the corporation will enable them to predict in any state of .circumstances, whether it can continue a going concern or must suspend and go into liquidation ; and to say that when they avail themselves of this knowledge, as against outside creditors, who have, and from the nature of the case can generally have, no such *538 knowledge, they are merely exercising ‘greater diligence and without fraud,’ is a strange perversion of language, and one which exhibits a low sense of justice. The principle under consideration does not, of course, apply to the case where directors have advanced money to the corporation in good faith, while it is a solvent and going concern, to prosecute its ordinary business, and the corporation, while still a solvent and going concern, repays this advance. Nor does the principle have any necessary connection with a case where a corporation, being in difficulties, some of its directors come to its rescue and advance money and take a mortgage to secure their present advances, and thereby help the corporation out of its difficulties and put it upon its feet so that it becomes prosperous, — after which, otber of its members who failed or refused to aid in its difficulties, come forward and in a suit brought in its name, endeavor to make the directors, who have purchased, its property under their mortgage at a foreclosure, account for the profit which they have realized.”
In the case of Sutton Manufacturing Co. v. Hutchin son, 63 Fed. Rep. 496, Harlan, J., considered the question at great length, reviewing many of the decisions of the Supreme Court of the United States, and drew the distinction between the rights and duties of the managing officers of an insolvent corporation and an individual who was not able to pay his debts. He uses the following language: “A corporation is not required by any duty it owes to creditors to suspend operations the moment it becomes financially' embarrassed, or because it may be doubtful whether the objects of its creation can be attained by further effort upon its part. It is in the line of right and of duty when attempting, in good faith, by the exercise of its lawful powers and by the use of all legitimate means, to preserve its active existence, and thereby accomplish the objects for which it was created. In such a crisis in its affairs, and to these ends, it may accept financial assistance from one of its directors, and by a mortgage upon its property secure the payment of money then loaned or advanced by him, or in that mode protect him against liability then incurred in its behalf by him. Of course, in cases of that kind, a court of equity will clearly scrutinize the trans *539 action, and, in a contest between general creditors and a director or managing officer who takes a mortgage upon its property, will hold the latter to clear proof that the mortgage was. executed in good faith, and was not a device to enable 'him to obtain an advantage for himself over those interested in the distribution of the mortgagor’s property. — Richardson’s Ex’r v. Green, 133 U. S. 30, 43 , 10 Sup. Ct. 280; Oil Co. v. Marbury, 91 U. S. 587, 588 .
“Entirely different considerations come into view when an insolvent corporation, having no expectation of continuing its business, and recognizing its financial embarrassment as too serious to be overcome, mortgages its property to secure a debt previously incurred by one of its directors, or, in a general assignment of all its property, gives him a preference. To a general assignment by a private corporation for the full benefit of all its creditors, including directors, no objection could be made, because it recognizes the equal right of creditors to participate in the distribution of the common fund. Such an assignment, Lord Ellenborough said in Pickstock v. Lyster, 3 Maule & S. 371, 375, is to be referred to an act of duty rather than of fraud, and is an act by the assignor that arises out of a discharge of t'he moral duties attached to his'character of debtor to make the fund available for the whole body of creditors.
“The contention of the defendants is that in disposing of their respective properties, an individual and a corporation were recognized at common law as having equal rights; and as the former may, in the absence of a statute forbidding it, transfer the whole or part of his property with the intention or with the effect of giving a preference to some of his creditors to the exclusion of others, so an insolvent corporation, when financially embarrassed and not intending to continue in business, may make a preference among its creditors, whoever they may be, and whatever their relation to the corporation or to the property transferred. If this be a sound rule, it would follow that directors, being also creditors, of an insolvent corporation, which has abandoned the objects of its creation and ceased an active existence, may distribute among themselves its entire assets, if the reasonable value thereof does not exceed their aggregate demands. We cannot accept this view. In our *540 judgment, when a corporation becomes insolvent and intends not to prosecute its business, or does not expect to make further effort to accomplish the objects of its creation, its managing officers or directors come under a duty to distribute its property or its proceeds ratably among all creditors, having regard, of course, to valid liens or charges previously placed upon it. Their duty is To act up to the end or design’ for which the corporation was'created (1 Bl. Comm. 480), and AAdien they can no longer do so their function is to hold or distribute the property in their hands for the equal benefit of those entitled to it. Because of the existence of this duty in respect to a common fund in their hands to be administered, the laAv will not permit them, although creditors, to obtain any peculiar adA7antage for themselves to the prejudice of other creditors. This rule is imperatively demanded by the principle that one av'Jio has the possession and control of property for the benefit of others — and surely an insolvent corporation, which has ceased to do business, holds its property for the benefit of creditors — may not dispose of it for its own special advantage to the injury of any of those for whom it is held. That principle pervades the entire law regulating the conduct of those who hold fiduciary relations to others, and, instead of being relaxed, should .be rigidly enforced in cases of breach of duty or trust by corporate managers seeking to enrich themselves at the expense of those who haAre an interest equally with themselves in the property committed by law to their control. It Avould be difficult to overstate the mischievous results of a contrary rule, as applied to those intrusted Avith the management of corporate property.”
The latest decision bearing on the question, to which our attention has been called, is that of Sanford Tool Co. v. Howe, Brown & Co., 157 U. S. 312 , the opinion delivered by Mr. Justice Bueavek. In this opinion it is declared that “a corporation acting in good faith and without any purpose of defrauding its creditors, but Avith the sole object of continuing a business which promises to be successful, may give a mortgage to directors who have lent their credit to it, in order to induce a continuance of that credit, and to obtain reneAVals of maturing paper, at a time when the corporation, *541 although it may not then in fact be possessed of assets equal at cash prices to its indebtedness, is in fact a going concern, and is intending and is expecting to continue its business.” The circumstances under which a corporation, not in fact possessed of assets equal at cash prices to its indebtedness, may execute a mortgage of indemnity in favor of its directors, is stated with great care and precision, as if the court intended carefully to guard against committing itself to the conclusion under different circumstances. The case of the Sutton Manufacturing Co., supra, is cited in the opinion, without an intimation of disapproval of any of its statements. It is impossible to read the opinion of Mr. Justice Brewer, supra, without being impressed with the conclusion, that the court would not uphold a mortgage to indemnify directors of an insolvent corporation made with a knowledge of its insolvency, having no intention to continue its busitfess or aid it, but in anticipation of its speedy termination as a going concern, the effect of which transaction merely secured a preference over other creditors. On page 319, Mr. Brewer says: “Carrying on business after the giving of an indemnifying mortgage, with a knowledge of insolvency, with the expectation of soon winding up the affairs of the corporation, and only for the sake of giving an appearance of good faith, leaves the transaction precisely as though the mortgage was executed at the moment of distribution, and with the view of a personal preference.”
The illustration that a line drawn, with the insolvent debtor and his insufficient property on one side, and the creditors and their claims on the other side, and that the passing of the property to somebody on the other side, is what the law demands, is misleading and fallacious. The fundamental difference is overlooked. In the case of the insolvent corporation, on one side of the line stands the director having the power to dispose of the insufficient property, and on the other side of the line this same director is ranged with the other creditors with his claim. The grantor and the grantee are one and the same person. No amount of argument or assertion can ever satisfy an impartial judgment that the general creditors stand upon equal footing with a creditor who has the power to dispose of the assets subject to debts. Under such conditions to apply the rule that *542 the law favors the diligent perpetrates a travesty on justice. We do not believe, in any case, has it ever been contended, that it is right to permit a grantor to convey directly to himself, to the injury of creditors of the conveyed assets. The only escape from such an obnoxious rule, is to refuge behind the doctrine that a corporation is in law and must be regarded for all purposes as a single individual. With this circumstance out of the way, there is nothing left to support the doctrine that a controlling officer .of an insolvent corporation may prefer himself to all other creditors.
In the case of Mobile & Ohio Railroad Co. v. Nicholas, 98 Ala. 92 , one of the principal questions settled involved this question. The case was one of unusual importance, discussed orally and at great length by written argument by eminent counsel, and after thorough discussion and great deliberation, this court unanimously approved the declaration that for any purposes, a corporation was not in reality a person or thing distinct from its constituent parts. It required no statute to authorize stockholders as such to resort to courts of equity for protection against the corporation of which they were constituent parts, and yet an individual cannot maintain an action against himself. Many individuals are wealthy by reason of their stock in corporations. The debt of the corporation and the appropriation of its assets to tho payment of its debt, lessens the (individual wealth of the owner of its stock. Whatever affects the interest of the corporation affects the pecuniary values of the stockholder in his individual capacity. The fact that by law the property of an individual partner may be subjected to the payment of partnership debts, and the liability of a stockholder for the debts of fehe corporation is limited to his corporate interest, emphasizes the fact that the debt of the corporation is his individual debt to the extent of his corporate interest. It is noticeable that so many of the authorities which announce the conclusion that the directors of an insolvent corporation may prefer themselves to other creditors, seemingly admit that the contrary rule is the sounder and more just, but hold that it requires legislation to authorize the courts to so hold. This conclusion proceeds solely from the premise, that courts cannot *543 distinguish between the members associated as a corporation under a corporate name and with corporate privileges and the corporation as a unity — a holding contrary to every-day practice in the courts in other matters, and contrary to obvious facts and many adjudications.
Independent of these considerations there stands the undisputed fact, that the directors of an insolvent corporation whose skill and supposed integrity have induced the credit and confidence of the business public, without warning of its tottering condition and approaching dissolution, a condition known to the directors and by them kept concealed from the confiding public, conscious that the creditors, if perchance they should come to a knowledge of its condition, will be forced to the slow process of suit, they can by a simple transaction of purchase from the corporation which ‘they alone can execute, secure all its assets in satisfaction of their claims and demands. Of course, being the governing board, they know exactly how far to trust the electrified corpse, and when to act for their own security. No others can know. They are not deceived. It is in their power and theirs alone to see that they are fully paid. They run no risk in giving credit. When the creditors complain, they must be content with t'he reply that the “law favors the diligent,” that “our credit and money have kept the concern apparently alive for the past. True, you were deceived, and we were not, but that is your misfortune. We are in control of the assets, and will pay ourselves.”
This court, in four decisions cited above, has deliberately condemned such a transaction as unjust and fraudulent. Justice and fair dealing must be against it. The great weight of authority is against it. We cite from brief of counsel a few decisions which have been verified, out of the many which might be cited: “The allowance of preferences was termed a ‘pernicious doctrine’ in Conover v. Hull, 45 Am. St. Rep. 810 ; 10 Wash. 673 . ‘At variance with the whole theory of the law.’ — 2 Morawetz, §803. ‘The law does not intend or allow such an application.’ — Sicardi v. Keystone Co., (Pa.), 24 Atl. Rep. 163 ; 149 Pa. St. 148. ‘Weight of authority and reason was against the validity of such preferences.’ Howe v. Sanford Co., 44 Fed. Rep. 231. ‘It is a doctrine *544 which, is at variance with the whole theory of the law covering the rights of creditors of insolvent corpora tions.’' — Rouse v. Bank, 5 L. R. A. 378, (383), 46 Ohio St. 493 .’ i:' * * * * * ‘Is entitled to take precedence among the many reckless absurdities,’ etc. Wait Insolv. Corp., §162. ‘Great iveight of authority denies the right.’' — Editorial note, 22 L. R. A. 807. ’'Could not be rightfully done.’ — Sutton v. Mfg. Co., 11 C. C. A. 321 ; 63 Fed. Rep. 496.
“The invalidity of such preferences has been said to be ‘well settled — Bonney v. Tilley, 109 Cal. 346 . This is said to be ‘in line with the great iveight of modern authority/ — Tilson v. Downing, (Neb.) 63 N. W. Rep. 837 . ‘Tlie conservative and preservative tendency of the courts * * * has been to establish and maintain the doctrine’ (of invalidity). — Northwestern &c. Co. v. Cotton &c., 70 Fed. Rep. 155. ‘A careful perusal of what is said by the leading text writers on the subject, and a laborious examination of the cases to which they refer, has convinced us that the decided iveight of American authority is as indicated.’ — Lowery Co. v. Empire Co., 17 S. E. Rep. 968 ; 91 Ga. 624 . ‘The rule which prohibits directors, when a corporation is insolvent and about to go into liquidátion, from preferring debts due to themselves,’ etc. — Adams v. Milling Co., 35 Fed. Rep. 433. ‘The modern authorities, almost without exception, utter the same strong condemnatory language.’' — Corey v. Wadsworth, 99 Ala. 68 .
“ ‘That appellants came within the prohibition of this rule is beyond controversy.’ — Roseboom v. Warner, 23 Northeastern Rep. 339; 132 Ill. 81 (directly in point). ‘This principle was applied to the taking of a mortgage by the directors on the property of the corporation to secure their liability as sureties on the note of the cor poration.’' — Haywood v. Lumber Co., 64 Wis. 639 . ‘It seems to be well settled that the directors of an insolvent corporation * * * * cannot secure to themselves any x>reference * * * .’ — Bonney v. Tilley, 42 Pac. Rep. 439 ; 109 Cal. 346 .
“ ‘It appears to be well settled by authority — W. P. Noble &c. Co. v. Mt. Pleas. Inst., (Utah), 42 Pacific Rep. 869 . In speaking of cases holding to the same effect, it was said in Tillson v. Downing, (Neb.), 63 N. W. Rep. *545 837 : ‘We think both these cases are in line with the great weight of modern authority.’ This is said, in 1 Beach. Priv. Corp. 241, to be a ‘general rule.’ ‘The only just and equitable rule/ — Editorial Note, Conover v. Hull, 45 Am. St. Rep. 835 ; 10 Wash. 673 . ‘A general rule.’ — 17 Am. & Eng. Encyc. of Law, 122. ‘The above case is clearly in accord with the weight of authority.’ Editorial Note to Corey v. Wadsworth, 23 L. R. A. 618; Lyons v. Perry, 22 L. R. A. 802; 86 Texas, 143 ; Rouse v. Bank, 46 Ohio St. 493 .”
No satisfactory argument has been adduced to show that this court should depart from its settled doctrine, and certainly none which has not been met and successfully controverted in one or more of the decisions cited-
The 15th paragraph of the amended answer avers that “‘Corey is the owner and possessor of a large indebtedness of the Building Supply Company, which was existing at the time of the assignment; and that the same has been assigned, and transferred to him, and that it amounts to about $5,000, besides $1,500 mentioned in the original answer, and he claims to be a creditor,” etc. The prayer is, that the answer be taken as a cross-bill, and that he be allowed to share in the distribution. To the cross-bill the complainant demurred, and among others assigned substantially as a ground of demurrer, that the claims set up in the cross-bill were not described with sufficient definiteness to enable the complainant to tell whether the claims’were by account, or note, nor from whom, nor when obtained. The demurrer to the cross-bill was well taken and properly sustained.
The evidence of the respondent, that the corporation was indebted to him, other than the debt due the Exchange Bank, is not clear nor satisfactory. He testified in a general way that the property purchased by him, was in payment of advances and loans made by him, but when these advances were made, in what amounts, and how evidenced, is not stated, though 'he was interrogated thereto. The most that could be obtained from him as to the price of the goods, was that he did not remember, but that the books of the company would show. The account taken from the books, and the testimony of Poley, who kept the books in part, and was an officer, does *546 not sustain Corey. . We are satisfied that tlie decree of the chancery court has done the appellant no injury, and that there is no error of which he can complain.)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/6517590. Public record. Not legal advice.