This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
In most jurisdictions it is recognized, however, that a corporation is, for many purposes at least, a legal fiction and that the real interests involved, apart from those of the state, are those of the parties who do business with it on the one hand, and its members on the other. Equity treated the assets of the corporation as analogous, at least, to a trust fund, out of which must be paid all liabilities due from the corporation and into which must be paid all liabilities due to the corporation, whether the corporation is engaged in business or is dissolved; and the net balance of which on dissolution is to be distributed among the members of the corporation, at least if the corporation is one whose members have financial interests therein as in the case of the ordinary corporation for profit.1 It is said that a judgment rendered against a corporation after dissolution, in a case which was submitted before dissolution, may be rendered nunc pro tunc as of the day at which it was tried.1
7 Lorillard v. Clyde, 142 N. Y. 456, 24 L.R. A. 113,37 N. E. 489.
8 Boyd v. Fire Association, 116 Wis. 155, 96 Am. St. Rep. 948, 61 L. R. A. 918, 90 N. W. 1086, 94 N. W. 171.
9 People v. Ins. Co., 91 N. Y. 174. Contra, Spader v. Mfg. Co., 47 N. J.
Eq. 18, 20 Atl. 378.
I0 Griffith v. Blackwater B. & L Co., So W. Va. 604, 69 L. R. A. 124, 48 S. E. 442 [for former opinion, see Griffith v. Lumber Co., 46 W. Va. 56, 33 S. E. 1251.
11 Bijur v. Standard Distilling & Distributing Co., 74 N. J. Eq. 546, 70 Atl. 934.
1 Curran v. Arkansas, 56 U. S. (15 How.) 304, 14 L. ed. 70.1; Broughton v. Pensacola, 93 U. S. 266, 23 L. ed. 896; In re Mullings Clothing Co., 238 Fed. 58, L. R. A. 191SA, 539; Bowe v. Minnesota Milk Co., 44 Minn. 460, 47 N. W. 151; Cole v. Millerton Iron Co., 133 N. Y. 164, 28 Am. St. Rep. 615, 30 N. E. 847; McClaren v. Union Roller Mills & Elevator Co., 95 Tenn. 696, 35 S. W. 88.
This theory is generally recognized at modern law, and the dissolution of a corporation does not discharge its rights or its liabilities;3 although, of course, the corporation can not lawfully perform after dissolution. The fact that a corporation is insolvent and that a receiver has been appointed to manage its business and to wind up its affairs, docs not operate as a dissolution of such corporation; nor do such facts prevent the corporation from suing to enforce obligations which are due to it or enforcing judgments which it has obtained.4 Dissolution of a corporation is held not to be a discharge of its executory contracts by impossibility of performance, which ends contractual liability without any right of action for damages,5 but breach, which may discharge the contract, but which leaves a right of action for damages.6 A contract by which a corporation employs an agent or employe for a certain period of time is not discharged by the dissolution of the corporation during such time; and, while dissolution terminates performance, it operates as a breach, giving to the agent or employe a right to recover damages therefor.7 A contract between a corporation which conducted a drug store and a person who agreed to construct a sodawater fountain in such store at his expense, and to share the gross receipts with the corporation, is not discharged by a decree adjudging the corporation insolvent.8 If a lease has been made to a corporation, and the charter of the lessee corporation expires, and substantially the same stockholders form a new corporation which keeps possession of such realty, such facts do not discharge the promise of the original corporation upon valuable consideration to pay to a third person a certain sum of money as long as such corporation and its successors should occupy such realty.9 The voluntary dissolution of a corporation does not operate as a discharge of a lease which has been made to it.10 If the lessor of such corporation and its trustee in bankruptcy repudiate the lease, the lessor may treat such conduct as a breach, and may present a claim for damages,11 on the theory of breach by anticipation.12 Upon the dissolution and liquidation of a corporation, all its executory contracts for the payment of money which is not yet due, mature at once.13
2 Shakman v. United States Credit System Co., 92 Wis. 366. 53 Am. St. Rep. 920, 32 L. R. A. 383, 66 N. W. 52S.
3 England. In re Higginson , 1 Q. B. 325.
United States. In re Mulling Clothing Co., 238 Fed. 58, L. R. A. 19I8 A, 539.
Arkansas. Arlington Hotel Co. v. Rector, 124 Ark. 90, 186 S. W. 622.
Kansas. Leonard v. Hartzler, 90 Kan. 386, 50 L. R. A. (N.S.) 383, 133 Pac. 570.
Louisiana. Schleider v. Dielman. 44 La. Ann. 462, 10 So. 934.
New Jersey. Rosenbaum v. U. S. Credit System Co., 65 N. J. L. 255, 48 Atl. 237; Spader v. Mural Decoration Mfg. Co., 47 N. J. Eq. 18. 20 Atl. 378; Bolles v. Crescent Drug & Chemical Co., 53 N. .J. Eq. 614. 32 Atl. 1061.
Oregon. Dowd v. American Surety Co., 69 Or. 418, 139 Pac. 112.
Wisconsin. Huber v. Martin, 127 Wis. 412, 115 Am. St. Rep. 1023, 1038, 3 L. R. A. (N.S.) 653, 105 N. W. 1031, 1135.
See also, George v. Rollins, 176 Mich. 144, 142 N. W. 337.
4 Leonard v. Hartzler, 90 Kan. 386, 50 L. R. A. (N.S.) 383, 133 Pac. 570.
For the effect of the appointment of a receiver, see Sec. 2702.
5 See Sec. 2687.
6 In re Wiltshire Iron Co., L. R. 3 Ch. A. C. 443; Schleider v. Dielman, 44 La. Ann. 463, 10 So. 934; Bowe v. Minnesota Milk Co., 44 Minn. 460, 47 N. W. 151.
7 Yelland's Case, L. R. 4 Eq. 350; Rosenbaum v. United States Credit System Co., 61 N. J. L. 543, 40 Atl. 591; Spader v. Mural Decoration Mfg. Co., 47 N. J. Eq. 18, 20 Atl. 378; Potts v. Rose Valley Mills, 167 Pa. St. 310, 31 Atl. 655.