Jones, McDowell & Co. et al. v. Arkansas Mechanical and Agricultural Co. closes, no one held stock in the new company who had not been a stockholder in the old one. RATION. trust fund debts. The assets of an incorporated company are a trust fund 1. CORPOfor the payment of its debts, which may be followed into Assets a the hands of any person having notice of the trust. This to pay doctrine was invented by Judge STORY, in the case of Wood v. Drummer, 3 Mason, 308, and it will constitute not the least enduring of his titles to be considered a great jurist. It has been applied by the Supreme Court of the United States in the following cases: Mumma v. Potomac Co., 8 Pet., 281; Curran v. Arkansas, 15 How., 308; Ogilvie v. Knox Ins. Co., 22 Id., 387; Drury v. Cross, 7 Wall., 299; Railroad Co. v. Howard, 7 Id., 392; New Albany v. Burke, 11 Id., 96; Burke v. Smith, 16 Id., 390; Sawyer v. Hoag, 17 Id., 610; Sanger v. Upton, 91 U. S., 60 ; Upton v. Tribilcock, Ib., 47; Hatch v. Dana, 101 U. S., 205; County of Morgan v. Allen, 103 U. S., 498. The cases in the State courts on this subject are too numerous to cite; but it is sufficient to say that the doctrine has never been denied by any court of last resort in the Union, before which the question has come, and it is as well settled as any legal principle can be. The rule in England is different. The winding up act of 1848, and the companies act of 1862, as expounded in Re Phillips, 18 Beavan, 629, and Spackman v. Evans, L. R., 3 H. L., 171, seem to have been intended rather to secure equality among shareholders than to protect creditors. purchaser. not. Now, it is quite plain that Weeks was not a bona fide Innocent purchaser, without notice of the trust. As a director, he Director is is conclusively presumed to know the pecuniary condition of his company. Moreover, his deposition shows that he had actual knowledge that it was on the verge of insolvency. And we cannot doubt, from the testimony, that he had purchased in pursuance of a scheme to preserve to the 2. TRUS TEE: by, only Jones, McDowell & Co. et al. v. Arkansas Mechanical and Agricultural Co. members of the corporation its property, and at the same time to get rid of its debts, in the event that a sufficient sum of money was not raised by the assessment to pay all creditors. Indeed there is some doubt whether being a trustee for Purchase stockholders and creditors, he could buy at all. It is laid voidable. down in some of the text books, and in some adjudged cases, that such a purchase is absolutely void without regard to the good faith of the transaction, and that the property belongs to the corporation, the same as it did before such sale. The better opinion, however, is, that it is only to be avoided at the instance of some party in interest. Twin Lick Oil Co. v. Marbury, 91 U. S., 587. And such we understand to be the rule indicated by this court in an analogous class of cases. Imboden v. Hunter, 23 Ark., 622; West v. Waddell, 33 Id., 575. There is evidence enough in this record to set aside the sale to Weeks, and his subsequent conveyance to the State Fair Association, as an attempt to place the assets of the Agricultural and Mechanical Association beyond the reach of creditors by going through the process of re-incorporation, taking on a new corporate name, transferring the assets of the old corporation to the new one, and issuing stock in the new corporation to holders of stock in the old one. And we should not hesitate to apply the axe to the root, if the ends of justice required it. But we have no disposition to upset things further than is necessary to work out the equities of the parties before the court. The State Fair Association may keep the property, on condition that it pays the debts of its predecessor. Being a volunteer, it is immaterial whether it had notice of the trust or not. Perry on Trusts, secs. 217, 828. We regard the whole transaction as a scheme to distribute the assets of the corporation among its stockholders, or Jones, McDowell & Co. et al. v. Arkansas Mechanical and Agricultural Co. such of them as were willing to embark a further advance of money in it, leaving creditors unprovided for. This was not only against conscience, but it was against the spirit if not the letter of our statute. Gantt's Digest, sec. 3354. We therefore declare that Weeks and the State Fair Associotion took the property charged with a trust in favor of creditors, which a court of equity will enforce by laying hold of the property and compelling its application to the satisfaction of these demands. But Jones, McDowell & Co. are not the owners of this land. We attach no special significance to their judgment, except as a judicial ascertainment of the amount of their debt, and as placing them in a position to assail the subsequent transfers. The filing of a transcript of their judgment in the office of the clerk of the Circuit Court, with a view to obtain a lien upon the real estate of the corporation, was futile. As the justice of the peace rendered judgment on the thirtieth of March, 1874, and the transcript was filed April 13th, 1874, it is obvious that the constable must have returned the execution, "no property found," before its return day. The fact that a defendant has no property subject to a writ, when it comes to the officer's hands, gives no assurance that he will continue to have none until the return day. And inasmuch as, in such cases, the return is the basis of further proceedings, which further proceedings depend for their validity on a previous valid return, it is doubtful whether Jones, McDowell & Co. acquired any lien. by filing the transcript and docketing their judgment in the Circuit Court. Freeman on Executions, secs. 14, 353. LIEN: of Chan But if they did secure such a lien, it was swept away by 3. JUNIOR the master's sale, under a decree enforcing a paramount lien. Effect on, After that their lien was either extinguished or it was trans- cery sale ferred to the proceeds of the sale. Markey v. Langley, 92 senior. U. S., 155, and cases there cited. And to get any benefit to enforce 4. LIEN: Acquired Jones, McDowell & Co. et al. v. Arkansas Mechanical and Agricultural Co. from it, they were bound to make themselves parties to the Wait suit, and intervene for the surplus produced by the sale. Jones on Mortgages, secs. 1684, 1687; Clark v. Carnall, 18 Ark., 209. It follows that the purchases of the land by Jones, McDowell & Co., and by Townsend, under their respective executions, were nugatory, and the satisfaction of their judgments thereby was apparent and not real. The equitable principles of the Statute of 22 Henry VIII, ch. 5, which gave a remedy to the creditor to whom the debtor's land had been delivered under an elegit, when the tenant was thereafter evicted, without fault on his part, are probably a part of the common law of this State, as they have been decided to be of New York; and remain in force, notwithstanding that writ has no place in our system, and are so far applicable to sales under execution as to entitle plaintiffs to equitable relief on the failure of title to property purchased by them, under execution against defendant. Bank of Utica, v. Musena, 3 Barb., ch. 586; Freeman on Executions, secs, 54, 352. The only lien that the appellants have is by virtue of havby filing ing brought this suit, and served process upon the appellees. bill. And as the judgment creditor, who first files his bill and serves his subpoena, obtains a lien upon the assets, which his bill seeks to reach, Jones, McDowell & Co. will have preference over Townsend, in the distribution of the fund. Freeman on Executions, sec. 434; Jackson v. Robinson, 64 Mo., 290; Kimberling v. Hartley, 1 McCrary, 136, and cases cited. The decree of the Chancellor is reversed, and this cause is remanded to the Pulaski Chancery Court, with directions to enter a decree there, charging the land with a trust in favor of the appellants; and that unless their debts be paid by a short day, the premises be sold and the proceeds applied, Jones, McDowell & Co. et al. v. Arkansas Mechanical and Agricultural Co. first, to the payment of the expenses of such sale, and the costs of this suit, both here and below; secondly, to the payment of the judgment of Jones, McDowell & Co., computing the interest thereon at the rate of ten per cent. per annum from the rendition thereof by the justice; thirdly, to the payment of the several judgments recovered by Townsend, and the surplus, if any, to be returned to the State Fair Association. The judgment of Jones, McDowell & Co., as copied in the transcript, purports to carry interest at the rate of eighteen per cent. per annum; but the contract for the higher rate was merged in the judgment, as held in Badgett v. Jordan, 32 Ark. 154; and Miller v. Kempner, 32 Ark., 573. HARRISON, J., dissenting. I am unable to concur in the opinion in this case. I think, if there might be a sale of the property, if the appellants be not paid, as is directed, that the $4,000 paid by Weeks in the purchase of it at the foreclosure sale, ought, before their claims are satisfied out of the proceeds, to be refunded to the Arkansas State Fair Association. As to so much thereof as went to satisfy the decree, it seems to me clear beyond question; and if the appellants had no liens, as the opinion holds, it is equally so, as to the remainder. I am, however, of the opinion that they did have liens.. No particular day was named in the executions upon which the constable was required to return them. The Statute (sec. 3792 Gantt's Digest) says that the execution "must be dated as on the day on which it is issued, and made returnable within thirty days thereafter." It was not nec-essary that the constable should have retained them in his hands until the last day within which they were returnable; but if the facts warranted it, he had the right to make the returns he did on any day within the thirty days after their |