"This suit was originally brought November 20, 1889, by appellees, Perry Stove Manufacturing Company and six other simple contract creditors of the Lyons-Thomas Hardware Company, in what they termed a `creditors' bill,' setting up that the said hardware company was an insolvent private corporation, and had on November 9, 1889, executed to L. P. Harrison, trustee, three mortgages to secure certain debts, covering all of its property and giving preferences; that the Baker Wire Company had sequestered a part of the assets, making the hardware company, the trustee, and the Baker Wire Company parties; and praying for an injunction; that a receiver be appointed; that the mortgages be set aside, and the fund distributed as a trust fund among the creditors without preferences. A temporary injunction was granted by the district judge at chambers November 20, 1889, and notices ordered to be issued for all of said parties to appear before him on November 29, 1889, to answer said petition, and show cause, if any they have, why a receiver should not be appointed as prayed for. Upon the hearing, November 29, 1889, all the defendants answered under oath, and the creditors secured under the first mortgage made themselves parties, and, with the trustee, set up the mortgages, and prayed that he be allowed to administer the trusts and to execute the same under the direction of the court, and the case was fully heard before the court upon questions growing out of the application for injunction and receiver, and the court rendered its judgment, dissolving the injunction, declaring the mortgages to be valid and the security good, refusing the plaintiffs' application for a receiver, and granting the application of the defendants and interveners that the trustee, L. P. Harrison, be allowed to administer the trusts under the order and direction of the court in the nature of a receiver, ordering that he execute bond in the sum of $85,000, conditioned that he would faithfully execute the trusts, and pay over to the secured creditors the money as in the mortgages directed, appointing appraisers to inventory and appraise all of the said property, and directing that the trustee make his report at the next regular term of the district court, and directing the clerk to enroll the decree upon the minutes of the court, which order was duly excepted to at the time. This decree was duly signed by the judge, and enrolled by the clerk, and at the following term the minutes of the court were signed by the judge. The trustee gave bond for $85,000, as required. The inventory was duly filed and approved, and the trustee administered the trusts, under the directions and orders of the court, made in vacation, sold the property, and paid the proceeds upon the mortgage debts as ordered, and at the following term filed his accounts showing how he had executed the same, and asked to be discharged. The plaintiffs took no further action in the case, and made no effort to have the decree of the court set aside, but acquiesced therein, until all of the property had been sold, and the proceeds applied to the payment of the secured debts, under the order of the court, when on August 7, 1890, the plaintiffs and a number of other creditors filed a first amended original petition, setting up that Shoveling, Daily & Gales and eighteen other creditors of the Lyons-Thomas Hardware Company had obtained judgment against it; that the mortgages were invalid, and the trustee had refused to pay any except the secured debts; that the members of the hardware company owed large amounts of unpaid stock; that the court had rendered its decree, and directed that the trust be executed by the trustee, L. P. Harrison, under the direction of the court, and that he give bond for $85,000, which he did give; that he had wasted the funds; and praying judgment against him on the bond; that the funds be divided, etc. On March 30, 1891, the plaintiffs filed a second amended original petition, in which they seek judgment setting aside the mortgages, and against the trustee for conversion, waste, and devastavit, and also against the stockholders of the corporation for unpaid stock, and ask judgment against the two banks and L. P. Harrison. The answers and pleas of intervention set up the mortgages and their validity, and the execution thereof by the trustee under the orders of the court. The case was tried before the court, and on April 9, 1891, the court overruled the demurrers and exceptions of the defendants and interveners to plaintiffs' petition, and sustained the plaintiffs' demurrer and exceptions to the answers of defendants and pleas of intervention by interveners, to which they excepted, and rendered judgment in favor of the plaintiffs against the proceeds of the sale of the property, less his costs, expenses, and commission for selling; also, a judgment in favor of plaintiffs against the Farmers' & Merchants' Bank for $48,193.70, the amount of said money paid to it by said trustee on its debt; also, a judgment against the Paris Exchange Bank for $7,508.10, the amount of said money paid to it by said trustee on its debt, — decreeing that the mortgages were
void; that the fund be paid into court, dismissing the Baker Wire Company from the case, etc. Defendants and interveners, in open court, excepted, and gave notice of appeal, filed their statement of facts, appeal bonds, and assignments of error, and bring the case up by appeal.
"The first and fourteenth assignments of error are treated together by appellants. Under these assignments two propositions are made, as follows: (1) A private business corporation, when not restrained by statute, has the same power to execute a mortgage as an individual, and, if insolvent, may in good faith execute a valid mortgage with preferences. (2) A private corporation in this state is authorized by statute to execute a mortgage, and, there being no exception in the statute, the courts cannot legally ingraft one; but corporations have the same rights as individuals to execute mortgages preferring creditors. When this case was pending in the court of civil appeals of the second supreme judicial district, that court certified to the supreme court for answer the following question: `Whether or not a preferential deed of trust executed a private trading corporation (chartered in July, 1884, under General Laws), after it has become insolvent, and consequently ceased to carry on its business, without any intention of resuming the enterprise, is void as against the unsecured creditors of such corporation.' This question was based upon the findings of the court below, which are fully sustained by the evidence adduced on the trial. The supreme court, in an elaborate and exhaustive opinion, rendered by Mr. Stayton, C. J. (24 S. W. 16), in answer to said question, after discussing the powers of a corporation under the different provisions of our statutes, and after reviewing at length the numerous decisions on the subject, both of England and America, closes its opinion as follows: `The condition of the corporation set forth in the question propounded, under the long-recognized rules of equity, conferred upon every unsecured creditor of the corporation a right to a ratable share of the proceeds of all the assets of the corporation not subject to priorities lawfully existing when this condition arose, and we therefore answer that neither the stockholders nor directors of the insolvent corporation had lawful power, under the facts stated, to make a preferential deed of trust, whereby any creditor, whether a stockholder, director, or other officer of the corporation or not, could acquire a preference, and that the attempted preference would be invalid as to other creditors of the corporation.' This settles the propositions raised by said assignments against the appellants, and we must hold that said assignments are not well taken. This ruling applies to the fifth assignment of error, which raises practically the same issue.
"2. The second assignment of error raises the proposition that plaintiffs below were not entitled to maintain this action, because it was not alleged that they had valid liens; nor had their claims been reduced to judgment, and they had failed to collect the same under execution. We will not here discuss what the status of claims of creditors must be before they can ordinarily bring a suit in the nature of a creditors' bill, as it is not necessary under the attitude of this case. This action was brought to have the trust deed declared void, and to subject the property of an insolvent corporation to the payment of the claims of all the creditors of the concern. The corporation being insolvent, the property it owned was held in trust by the directors for the benefit of all creditors who under the law had an equitable lien upon the property of the corporation; and when the directors attempted to appropriate that property to the payment of some creditors, to the exclusion of others, those others had the right to bring an action for their relief in the manner here done. The allegations of the petition show all the plaintiffs to be creditors of appellant company, and it was unnecessary to allege that their claims had been reduced to judgment, or that they were secured by specific liens, as their rights were not affected by the status of their claims.
"3. Appellants complain of the court for overruling their special demurrer, which...
