The writer will attempt to show that the courts, in spite of their language of fraud and breach of trust, are not applying the legal rules of fraud and trust relationship in allowing recovery to the creditor. The cases brought by the receiver for the benefit of creditors can be roughly divided into three broad groups: (1) instances where the court speaks of a trust relationship, holding that the corporation has breached the duty of trust to the creditors; (2) situations where the court speaks of some hazy principle of "fraud" on the creditors; (3) cases where the court forgets this broad basis and speaks neither of "fraud" nor of breach of trust, but holds that the creditor has certain rights which must be protected. It must be remembered at the outset that these groups blend into each other and that it is impossible to segregate a case into just one group, but for the convenience of the discussion the aforementioned classification will be used.
Jerome J. Dick,
CORPORATIONS - RECEIVERS - RIGHTS OF CREDITORS OR RECEIVER TO RAISE AN OBJECTION TO CORPORATE ACTION WHICH WOULD BE OPEN TO SHAREHOLDERS,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol38/iss5/6