Page:North Dakota Reports (vol. 48).pdf/587

 App. Div. 84, 100 N. Y. Supp. 659, 126 App. Div. 257, 110 N. Y. Supp. 629; Seaich v. Mason-Seaman Transp. Co., 170 App. Div. 686, 156 N. Y. Supp. 579. In this case, we are of the opinion that it is neither necessary nor helpful to apply any arbitrary formula. The interest of the plaintiffs must be valued as of the time they elected to take a money judgment. The attempted sale of that interest in the manner hereinbefore indicated was voidable as to them, and they, having elected to avoid it, may follow their interest into the new corporation, disregarding the indirect attempt of Follett to purchase it. The plaintiffs, in the beginning, offered to take in settlement of their liquidation claims a proportionate amount of stock in the new corporation, which would have placed them in the same position with respect to the new corporation that the other stockholders occupied. Since the sale was invalid as to them, this proposition offered an entirely equitable solution of the difficulty, and the plaintiffs in asserting it as their right were wholly justified on principles applicable to trust obligations.

While it is true, as asserted by counsel for the defendants, that those who organize a new corporation have a right to select whom they will as stockholders, this right, where liquidation and reorganization are involved, presupposes the legal adjustment of liquidation claims in such a manner that the property of no claimant is used to the advantage of those who form the new corporation. The failure thus to effect a valid settlement of the trust obligation and the resulting use of trust property to pay for the stock in the new corporation, leave the beneficiary of the trust, who is the claimant in liquidation, free to follow the res into its converted form. Hence his equity is measured, if he choose, by the value of a proportionate interest in the new corporation. From this certain conclusions follow with respect to the valuation of the assets: First, the Lyon-Gearey appraisement is not applicable, for the assets, as far as these plaintiffs are concerned, were not, in law, sold. The 25 per cent. discount of the bills and accounts receivable upon the theory of a sale of these assets en bloc is not permissible, therefore, as the record shows that the bills and accounts receivable, in connection with the operation of the going business, were worth upwards of 97 per cent. of their face. It also follows that the plaintiffs are entitled to a proportionate share of the earnings until the date of the election to take the money judgment, and from this time forward to the legal rate of interest. They have not participated in the earnings subsequent to