party, by virtue of this section. Creditors should likewise be made par- § 54-56 ties. (Camp v. Taylor, 19 Atl. Rep., 968.)

On the expiration of the charter of a corporation, the corporate existence is continued by this section for the purposes therein mentioned. (Grey v. Newark Plank Road Co., 48 Atl. Rep., 557.)

54. Directors; trustees on dissolution.-Upon the dissolution in any manner of a corporation the directors shall be trustees thereof, with full power to settle the affairs, collect the outstanding debts, sell and convey the property and divide the moneys and other property among the stockholders, after paying its debts, as far as such moneys and property shall enable them; they shall have power to meet and act under the bylaws of the corporation, and, under regulations to be made by a majority of said trustees, to prescribe the terms and conditions of the sale of such property, and may sell all or any part for cash, or partly on credit, or take mortgages and bonds for part of the purchase price for all or any part of said property.

Act of 1875, § 57.

This section seems to give directors power to sell at private sale. (Freeman v. Sea View Hotel Co., 57 N. J. Eq., 68.)

55. Powers and liabilities of such trustees.-The directors, constituted trustees as aforesaid, shall have authority to sue for and recover the aforesaid debts and property, by the name of the corporation, and shall be suable by the same name, or in their own names or individual capacities, for the debts owing by such corporation, and shall be jointly and severally responsible for such debts, to the amount of the moneys and property of the corporation which shall come to their hands or possession as such trustees.

Act of 1875, § 58; P. L. 1892, p. 35; P. L. 1894, p. 136; P. L. 1895, p. 609.

56. Court of chancery may continue directors as trustees or appoint receivers of dissolved corporation.-When any corporation shall be dissolved in any manner whatever, the court of chancery, on application of any creditor or stockholder at any time, may either continue the directors trustees as aforesaid, or appoint one or more persons to be receivers of such corporation, to take charge of the estate and effects thereof, and to collect the debts and property due and belonging to the corporation, with power to prosecute and defend, in the name of the corporation or otherwise, all suits necessary or proper for the purposes aforesaid, and to appoint an agent or agents

§ 57-59 under them, and to do all other acts which might be done by such corporation, if in being, that may be necessary for the final settlement of its unfinished business; and the powers of such trustees or receivers may be continued as long as the court shall think necessary for such purposes.

P. L. 1846, p. 73; P. L. 1849, p. 308; Act of 1875, § 60.

The authority of the Chancellor to interpose and take from the "directors the power to close up the business of the corporation, and "place its affairs in charge of a receiver, is a discretionary power, to be "exercised only on good cause shown-upon circumstances disclosed by "the proof which show the need of the interference of the court for the protection of creditors or stockholders from breaches of trust by the "directors in the performance of their duties." (Newfoundland R. R. Construction Co. v. Schack, 40 N. J. Eq., 222, 229; Rawnsley v. Trenton Mut. Life Ins. Co., 9 N. J. Eq., 95, 347.)

A corporation which has defaulted in the payment of State taxes and has been proclaimed by the Governor is within the provisions for winding up corporations contained in Sections 53-60 of the Corporation Act, and the Chancellor in his discretion may continue directors as trustees to settle the corporate affairs or may appoint a receiver for that purpose. Discretion to appoint a receiver should not be disclaimed because of failure of proof of breaches of trust by the directors since the Governor's proclamation, but should be exercised upon proof of such breaches of trust or of previous breaches of trust or misconduct or incapacity evincing the unfitness of the directors to properly discharge the duties of such trust. (American Surety Co. v. Great White Spirit Co., 58 N. J. Eq., 526.)

57. Jurisdiction of court of chancery.-The court of chancery shall have jurisdiction of said application and of all questions arising in the proceedings thereon, and may make such orders and decrees therein as justice and equity shall require. P. L. 1846, p. 73; P. L. 1849, p. 309; Act of 1875, § 61.

58. Disposition of proceeds by trustees or receivers.-The said trustees or receivers shall pay ratably, as far as its moneys and property shall enable them, all the creditors of the corporation who prove their debts in the manner directed by the court; and if any balance remain after the payment of such debts and necessary expenses, the same shall be distributed among the stockholders.

P. L. 1846, p. 73; P. L. 1849, p. 309; Act of 1875, § 62.

59. Actions not to abate on dissolution.-Any action, now pending or to be hereafter begun, against any corporation which

may become dissolved before final judgment, shall not abate by § 60-62 reason thereof, but no judgment shall be entered therein except upon notice to the trustees or receivers of the corporation.

P. L. 1852, p. 140; Act of 1875, §§ 65, 92.

60. Copy of decree of dissolution to be filed in office of secretary of state.—A copy of every decree or judgment dissolving a corporation or forfeiting its charter shall be forthwith filed by the clerk of the court in the office of the secretary of state, aħd a note thereof shall be made by the secretary of state on the charter or certificate of incorporation, and in the index thereof, and be published by him in the annual volume of laws.

VI.-Execution Against Corporation.

61. On execution schedule of property to be furnished to officer. Every agent or person having charge or control of any property of a corporation, on request of any public officer, having for service a writ of execution against it, shall furnish to him the names of the directors and officers thereof, and a schedule of all its property, including debts due or to become due to it, so far as he may have knowledge of the same.

P. L. 1846, p. 71; P. L. 1849, p. 307; Act of 1875, § 66.

62. Execution may be satisfied by debts due the corporation.If any officer, holding an execution, shall be unable to find other property belonging to the corporation liable to execution, he or the judgment creditor may elect to satisfy such execution, in whole or in part, by any debts due to the corporation; and it shall be the duty of any agent or person having custody of any evidence of such debt, to deliver the same to the officer, for the use of the creditor, and such delivery, with a transfer to the officer in writing, for the use of the creditor, and notice to the debtor shall be a valid assignment thereof; and such creditor may sue for and collect the same in the name of the corporation, subject to such equitable set-offs on the part of the debtor as in other assignments; and every agent or person who shall neglect or refuse to comply with the provisions of this and the last preceding section, shall be himself liable to pay to the execution creditor the amount due on said execution, with costs.

P. L. 1846, pp. 71-72; P. L. 1849, p. 308; Act of 1875, §§ 67-68.

§ 63-64

Where a corporation had no bank account, and the treasurer deposited the amounts which he received for the company in his own account in the bank, in his individual name, and not as an officer of the company, held, that this was a debt due the corporation within the meaning of this section, and was not cash in bank belonging to the corporation and going to the receiver on his appointment. So far as a corporation and its receiver are concerned, the debts are bound for the application of the execution creditor's debt by the service upon the corporation of the notice of election. (Van Steenberg v. E. R. Parsel Pearl Button Co., 19 N. J. L. J., 151.)

VII.-Insolvency.

63. Directors must call meeting of stockholders when corporation becomes insolvent.-Whenever any corporation shall become insolvent, the directors, within ten days thereafter, shall call a meeting of the stockholders, and lay before them for inspection and examination all the books of accounts, by-laws and minutes of the corporation, and exhibit a full and true statement of all its estate, funds and property, and of all the debts due and owing to it, and by whom, and of all the debts owing by it, and to whom, as far as the directors can at that time make out the same; so as to exhibit to the stockholders a full, fair and true account of the situation of the affairs of the corporation.

P. L. 1829, p. 58; P. L. 1869, p. 1448; Act of 1875, § 69.

This and the following sections are in substance a re-enactment of the "Act to Prevent Frauds by Incorporated Companies." (P. L. 1829, p. 58.) Under that act it was held that the only criterion of insolvency furnished by the act was the suspension of business, and that the act of insolvency contemplated by the statute is committed at the time the company suspends its ordinary business operations. (Bedford v. Newark Machine Co., 16 N. J. Eq., 117.)

64. Conveyance or assignment of property, etc., after insolvency, or contemplation of insolvency, void as against creditors. -Whenever any corporation shall become insolvent or shall suspend its ordinary business for want of funds to carry on the same, neither the directors nor any officer or agent of the corporation shall sell, convey, assign or transfer any of its estate, effects, choses in action, goods, chattels, rights or credits, lands or tenements; nor shall they or either of them make any such sale, conveyance, assignment or transfer in contemplation. of insolvency, and every such sale, conveyance, assignment or

transfer shall be utterly null and void as against creditors; pro- § 64 vided, that a bona fide purchase for a valuable consideration, before the corporation shall have actually suspended its ordinary business, by any person without notice of such insolvency or of the sale being made in contemplation of insolvency, shall not be invalidated or impeached.

P. L. 1829, p. 58; P. L. 1895, p. 166.

For a statement of facts on which it was held that a corporation was insolvent within the meaning of this section at the time it executed certain bonds and a mortgage securing the same, see Skirm et al. v. Eastern Rubber Mfg. Co. (57 N. J. Eq., 179.)

In Streit v. Citizens' Fire Insurance Co. (29 N. J. Eq., 21) it was held that mere impairment of capital, even though to the extent of more than one-fourth, is not prima facie evidence of the condition of insolvency.

The directors of a corporation are not trustees for creditors in transacting the ordinary business of the company but only become such when dealing with the property of an insolvent company. The duty to the creditors springs into existence when the corporation becomes insolvent, and this duty may arise before actual steps, either voluntary or involuntary, are taken to wind up the corporate business. (Bird v. Magowan, 43 Atl. Rep., 278; Landis v. Hotel Company, 31 Atl. Rep., 755.)

The object of this provision is to prevent companies, actually insolvent, or whose embarrassments are such as must inevitably lead to insolvency, from making a preference in favor of any one or more of its creditors. (Holcomb's Exr's v. New Hope Del. Br. Co., 9 N. J. Eq., 457; and see Van Wagnen v. Savings Bank, 10 N. J. Eq., 13; State Bank v. Receiver, 3 N. J. Eq., 266; Receivers v. Paterson Gas Co., 23 N. J. Law at 291; Kinsela v. Cataract Bank, 18 N. J. Eq., 158; Wells v. Rahway White Rubber Co., 19 N. J. Eq., 402; Wilkinson v. Bauerle, 41 N. J. Eq., 635, 641; Frost v. Barnert, 56 N. J. Eq., 290, 292.)

This section was enacted in 1829, and continued in force to 1875, but was omitted from the Revision of that year. It was again enacted in the Revision of 1896.

While such provision was not in force (in 1886) Wilkinson v. Bauerle, 41 N. J. Eq., 635, was decided in the Court of Errors and Appeals, which held that a corporation might sell and transfer its property and prefer one or more of its creditors to others, although it was insolvent. Several other cases to the same point followed.

Montgomery v. Phillips, 53 N. J. Eq., 203, held that the board of directors of an insolvent corporation could not by a mortgage upon the corporate property prefer one of its own members, distinguishing Wilkin son v. Bauerle. (See also Mallory v. Kirkpatrick, 54 N. J. Eq., 50; Savage v. Miller, 56 N. J. Eq., 432.)

Cases since the Revision of 1896.-A mortgage executed by a debtor corporation to certain creditors in violation of a temporary injunction granted in a suit by those creditors for the appointment of a receiver is an