Directors and managers of an insolvent corporation hold the position of trustees of its assets for the equal benefit of all its creditors, and if they are themselves creditors they are precluded by their trust from securing, by their official action, any preference over other creditors.
Directors of corporations are presumed to perform the duties of their trust gratuitously, and must look either to a statute or to a contract for the right to receive compensation for their services.
BLODGETT, J.
The law applicable to these cases is extremely clear. While directors of corporations are not trustees in a technical sense, there is yet no doubt that they occupy a fiduciary position towards stockholders and creditors of the corporation, and that they come within the designation of persons filling a fiduciary relationship. In fact, they hold a position of the highest trust, and will therefore be required to execute it with the utmost fidelity. This being so, it is plain that the defendants could not use their official position to advance their individual interests. But this is precisely what they did, that is, with actual knowledge that the corporation was insolvent, and on the very day an assignment of its property was voted they received compensation in full for their past services as directors. This was a flagrant violation of their trust; for as soon as the corporation became insolvent, its property became a fund belonging equally in equity to all the creditors, and the fact of its insolvency being known to the defendants, they could not either morally or legally appropriate any part of the fund to the payment of their claims in full, and thus secure to themselves a preference or advantage over other creditors in manifest opposition to their duty. Their conduct in this respect was a fraud in law, if not in fact, from which they will not be permitted to profit. Richards v. Ins. Co., 43 N.H. 263; Bradley v. Farwell, 1 Holmes 433, and cases cited; Hopkins's Appeal, 90 Pa. St. 69; Road Company v. Branegan, 40 Ind. 361; Green's Brice's Ultra Vires (2d ed.) 477, 479; Mor. Corp., ss. 243, 244; 2 Per. Trusts (3d ed.), s. 901; Pierce Rail. L. 38, and authorities cited.
But the defendants were not creditors of the corporation. It is not claimed that there was any express contract on its part to pay them anything for their services, and the law will imply none. The rule is, not only that directors are not entitled to compensation for their services in the absence of any agreement on the part of the corporation to pay for the same, but, on the contrary, such services are presumed to be rendered gratuitously, and they must consequently look either to a statute or to a contract for the right to receive compensation. Railway Co. v. Miles, 52 Ill. 174; Railway Co. v. Sage, 65 Ill. 328; Holder v. Railway Co., 71 Ill. 106; Gridley v. Railway Co., 71 Ill. 200; Hall v. R. R. Co., 28 Vt. 401, 409; Clark v. San Francisco, 53 Cal. 306; Kilpatrick v. Bridge Co., 49 Pa. St. 118; R. R. Co. v. Ketchum, 27 Conn. 170; Road Company v. Branegan, 40 Ind. 361; Pew v. Gloucester Nat. Bank, 130 Mass. 391; Mining Asso. v. Meredith, 49 Md. 389; Dunstan v. Gas Light Co., 3 Barn. Ad. 125; Pierce Rail. L. 31.
Nor is there any view of these cases, as they stand upon the facts, which does not entitle the plaintiff to a recovery.
Judgment for the plaintiff.
SMITH, J., did not sit: the others concurred.