Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/678

 § 057.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XI. Transfer of assets to a new corpo- ration. sideration is a proposition supported unanimously by the authorities. 1 § 657. Accordingly, a corporation cannot place its assets beyond the reach of its creditors, merely by going through a process of re-incorporation, taking a new name, transferring without consideration the assets of the old corporation to the new one, and issuing shares in the capital stock of the new corporation to holders of shares in the capital stock of the old/ 1 And if the share- holders of one corporation organize another, and transfer to it all the property of the former without paying the former's debts, the obligations of the old company may be enforced against the new one to the extent of the assets transferred to it. 3 It is held, however, that before a creditor has a standing 1 Wood v. Dummer, 3 Mason, 308; Wright v. Petrie, 1 Sm. & M. Ch. (Miss.) 282; Marr v. Bk. of West Tennessee, 4 Coldw. (Tenu.) 471; Tinkham v. Borst, 31 Barb. 407; Goodwin v. McGehee, 15 Ala. 232; Jones v. Arkansas Mechanical Co., 38 Ark. 17; Union Nat. Bank v. Douglass, 1 McCrary, 86. See Cur- ran v. State, 15 How. 304, 307; Rail- road Co. v. Howard, 7 Wall. 393, 409. Montgomery, etc., R. R. Co. v. Branch, 59 Ala. 139. These princi- ples would apply to fraudulent leases of its property by a heavily indebted corporation. See Chicago, etc., Ry. Co. v. Chicago Bank, 134 U. S. 276. 2 San Francisco, etc., R. R. Co. v. Bee, 48 Cal. 398; Hancock v. Hol- brook, 40 La. Ann. 53. See Cole v. Millerton Iron Co., 133 N. Y. 164; Hurd v. N. Y. & C, etc., Co., 1(57 N. Y. 89; Montgomery Web Co. v. Dieuelt, 133 Pa. St. 585; Vance v. McNabb Coal Co., 20 S. W. Rep. (Tenn.) 424; Ewing v. Composite Brake Shoe Co., 169 Mass. 72; cf. White v. New Bedford Cotton Waste Corp., 178 Mass. 20. 3 Hibernia Ins. Co. v. St. Louis, 658 etc., Transportation Co., 13 Fed. Rep. 516; Booth v. Bunce, 33 N. Y. 139; Barclay v. Quicksilver MTg Co., 9 Abb. Pr. N. S. (N. Y.) 283; Same v. Same, 6 Lans. (N. Y.) 25; Kelly v. Mariposa Land, etc., Co., 4 Hun (X. Y.), 632; Brum v. Merchants' Mut. Ins. Co., 16 Fed. Rep. 140. National B'k v. Texas Investm't Co., 74 Tex. 421; Grennell v. Detroit Gas Co., 112 Mich. 70; Santa Fe E. Co. v. Hitchcock, 9 N. Mex. 156. Com- pare Fort Worth Pub. Co. v. Hitsou, 80 Tex. 216; Chase v. Michigan Tel. Co., 121 Mich. 631. Unsecured cred- itors of a corporation have a lien on its property transferred to a suc- ceeding corporation superior to the lien of bondholders under a mort- gage executed by the succeeding cor- poration; the succeeding corporation having given only its own stock in payment for such property. Mont- gomery, etc., R. R. Co. v. Branch, 59 Ala. 139. When, however, a railroad corporation under authority of its charter sells all its property and franchises to another corporation for value, the general creditors of the vendor have no lien on such prop. erty, and the vendee takes free from