Bank Commissioners v. Bank of Brest , 1 Harr. Ch. 106 ( 1839 )

The Chancellor.

From the facts which appear in the bill and answer, in this case, there can be no doubt that the bank of Brest is insolvent within the meaning of the law, and that a proper case is made for the appointment of a receiver to take charge of its effects.

The question as to the validity of -the assignment, is not regularly before the court; the assignee not being a party, but both parties and the assignee are anxious to obtain an expression of opinion upon this point.

The assignment set up in the answer, is an assignment by the directors of all the estate, real and personal, and assets and effects of the bank, to a trustee. A transfer by way of security of a portion of its effects for the purpose.of carrying on the concern is within the power of the directors; and a corporation which has no particular mode pointed out for closing its concerns, may make an assignment on obtaining the assent of the stockholders. If this assignment is valid, it is no doubt a surrender of the charter; for if a corporation suffers acts to be done which destroy the end and object for which it was instituted, it is equivalent to a surrender of its rights. Slee vs. Bloom 19 Johns. Rep., 456; the People vs. the Bank of Hudson, 6 Covoen Rep., 219.

The directors in making- the assignment in question, without authority from the stockholders have exceeded their powers.

They are made trustees of the stockholders, for the purpose of carrying on the business of the corporation, and not for'the purpose of winding it up and destroying its existence, Angel and Ames on Corp., 507; 3 Hess., 557.

The statute prescribes the manner in which the affairs of this class of corporations shall be wound up in case of insolvency. This forms a part of the security to the public, and is one of the conditions upon which they take their chartered powers. An assignment made manifestly with a.view to evade the provisions of the statute, as this seems to have been, is against the policy of the law, and cannot be sustained.

Motion granted.