CORPORATE ASSETS AS A "TRUST FUND FOR THE BENEFIT OF CREDITORS."-II.

It is to be hoped that the United States Supreme Court will soon explain its decision in Hollins v. Brierfield Coal Co., 150 U. S. 371. When the decision first appeared it seemed as if the last nail had been driven in the coffin of the great American trust-fund doctrine." The recent case of Sutton Mfg. Co. v. Hutchinson, 63 F. 496, however, seems to show that there is a difference of opinion among the members of the Supreme Court as to the effect of its decision. The Circuit Court of Appeals in the seventh circuit, in the opinion by Mr. Justice Harlan in Mfg. Co. v. Hutchinson, distinctly lays down the doctrine that, when a corporation becomes insolvent and determines to discontinue the prosecution of business, its property is thereafter affected by an equitable lien or trust for the benefit of creditors; that the directors thereupon occupy a fiduciary position toward creditors, and that a preference to a director is therefore void. The court, curiously enough, cites Hollins v. Coal Co. as an authority for this doctrine. How the language of Mr. Justice Brewer in that case can support the opinion of Mr. Justice Harlan in Mfg. Co. v. Hutchinson, may well puzzle the reader. Mr. Justice Brewer, in Hollins v. Coal Co., says: "The same idea of equitable lien and trust exists to some extent in the case of partnership property. Whenever a partnership becoming insolvent, a court of equity takes possession of its property, it recognizes the fact that in equity the partnership creditors have a right to payment out of those funds in preference to individual creditors, as well as superior to any claims of the partners themselves." Mr. Justice Harlan, in citing Mr. Justice Brewer's opinion, leaves out the words in italics, and thereby alters the whole meaning of the opinion. The vital question is, does the so-called "equitable lien and trust" in favor of corporation creditors arise upon the insolvency of the corporation, or upon the taking possession of the assets by a court of equity? Mr. Justice

Brewer's view is clearly that the rights in rem of the creditors attach only when the court of equity takes possession of the property. Mr. Justice Harlan holds that when the corporation becomes insolvent and has no expectation of continuing its business, the rights of creditors attach. The issue between the opinions of the two eminent justices seems clear.

The issue also seems clear between the Circuit Court of Appeals for the seventh circuit and that for the sixth circuit. The latter court, consisting of Jackson and Taft, circuit judges, and Barr, district judge, in Brown v. Furniture Co., 58 F. 286, sustained a preference given by an insolvent corporation to its directors. Brown v. Furniture Co., is an authority directly opposed to Mfg. Co. v. Hutchinson, though the court in the latter case does not seem so to have regarded it. Mr. Justice Harlan seems to regard Brown v. Furniture Co., as a decision upon the local law of Michigan. As a matter of fact, however, the decision in Brown v. Furniture Co., is just as much a decision upon the "general jurisprudence" of the United States as Mfg. Co. v. Hutchinson. It is true that the court in Brown v. Furniture Co., does not state whether its decision rests on general or local law; but as no statute of Michigan was involved in the case, the decision is clearly a decision as to the general law of the United States.

Mfg. Co. v. Hutchinson, has just been followed in another case in the same court, Bosworth v. Jacksonville Bank, 64 F. 615 (C. C. A. 7th circuit); in which, however, the court seems to be influenced by an idea that the Illinois law should apply, as the case arose in this State. The only difference between the two cases is that in Mfg. Co. v. Hutchinson, the preference was given to a corporation in which the directors of the insolvent corporation were largely interested, while in Bosworth v. Bank, the preference was given to the bank in payment of a note for money borrowed of the bank by the insolvent corporation, on which note the president of the corporation was surety. The facts in Bosworth v. Bank, are therefore exactly identical with those in Re Wincham Shipbuilding Co., 9 C. D. 322, and the decision in the former case exactly contrary to that in the latter.

With two divisions of the Circuit Court of Appeals clearly opposed to each other, and with Mr. Justice Harlan and Mr. Justice

Brewer holding opposite opinions, it seems certain that there will be some dissenting opinions when the Supreme Court decides the question. When that time comes we sincerely hope that the opinion of that very great judge, Sir George Jessel, in Re Wincham Shipbuilding Co., 9 C. D. 322, will not be overlooked, as it seems to have been in the Circuit Court of Appeals.

EDWARD AVERY HARRIMAN.

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BILLS

ILLS OF LADING.-THEIR NEGOTIABILITY.-The question of the quasi-negotiable character of bills of lading recently came before the Circuit Court of Appeals in Pollard v. Reardon, 65 Fed. Rep. 848 (Mass.) In this case a bill of sale for a cargo of hides was given by the consignee in consideration of certain advances, and later the bill of lading for the same goods was endorsed and delivered to another party who had no notice of the first transaction. The court held that the indorsee of the bill of lading was entitled to the goods.

The decision proceeds on the ground that the party taking the bill of sale was chargeable with knowledge that the owner of the cargo would get a clean bill of lading, which, according to custom, might be negotiated, and that he was guilty of laches in not procuring an assignment of it. That a bill of lading, while not strictly a negotiable instrument in every respect, is so in the sense that a bona fide endorsee of such bill takes a clear title to all goods free from all equities.

The authorities are by no means harmonious on the question of negotiability of a bill of lading. The general doctrine of the United States courts is that such bills are merely symbols of the goods described in them, and as such may be passed from hand to hand when endorsed in blank. (Pollard v. Vinton, 105 U. S. 7; Friedlander v. Railroad, 130 U. S. 416.) Under that theory it would certainly appear that a prior bill of sale would take precedence over the bill of lading on the same principle that a subsequent purchaser of goods would take no better title than the vendor had. A person cannot by selling the goods of another or by delivering the title deeds to them, divest that other person of his ownership.

On the other hand some courts attribute to bills of lading practically all the elements of negotiable paper. (Sioux City Railroad Co. v. First National Bank, 10 Neb. 556; Batavia v. Railroad, 106 New York, 195.) These cases take into consideration the fact