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§ 4967. Property which has vested in others on happening of contingency. No property or right of a corporation can pass to another corporation succeeding to its property and rights, if, under a contract of the former corporation, the property or right has ceased to belong to it, and vested in another, by reason of its dissolution or the happening of other contingencies.78

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§ 4968. Title of reorganized company to right of way. Where a railroad company mortgages its road and all its effects, under legislative authority, and the mortgage is foreclosed, the purchasers, afterwards incorporated under a new name, succeed to all the rights of the old company under a deed conveying a right of way for the construction of the road; 79 and this includes a right of way over the city streets granted by a municipal corporation.80

At the same time, the foreclosure sale does not divest the right of landowners to compensation for their land, and they are entitled to such compensation from the purchasers at the sale, although the purchasers are created a new corporation, at least where the land

ment obtained by the old company, but which was not covered by the mortgage. Higgins v. Downward, 8 Houst. (Del.) 227, 40 Am. St. Rep. 141, 14 Atl. 133.

As to estoppel of stockholders of new corporation to attack compromise between old corporation and a subscriber for its stock, see Whitaker v. Grummond, 68 Mich. 249, 36 N. W. 62.

78 Where a telegraph company, incorporated for a certain number of years, contracted with a railroad company that so long as it should exist as a telegraph company it might erect and maintain a telegraph line within the limits of the railroad, and also that, in the event of the dissolution of the telegraph company or the suspension of operation, the railroad company might take charge of the telegraph line for its own purposes until the telegraph company should resume active operations, and that no interest of the telegraph company in the line should be assignable so as to affect

or impair the rights of the railroad company under the agreement, and the telegraph company was reincorporated, just prior to the expiration of its term, under a new name, with new powers, and under different responsibilities, and under a charter which provided for the surrender of the old charter, it was held that its rights in and to the telegraph line were lost, and passed to the railroad company, though the new charter provided that all the property and assets of the former corporation, and all its debts, should devolve upon the new corporation, which for this purpose should be regarded as substituted by operation of law in place of the former corporation. Latrobe v. Western Tel. Co. of Baltimore, 74 Md. 232, 21 Atl. 788.

79 Pollard v. Maddox, 28 Ala. 321; Harshbarger v. Midland R. Co., 131 Ind. 177, 27 N. E. 352, 30 N. E. 1083. 80 New Orleans, S. F. & L. R. Co. v. Delamore, 114 U. S. 501, 29 L. Ed. 244.

was acquired by the right of eminent domain.81 So the reorganized railroad company takes the right of way subject to all valid agreements and conditions in favor of the landowner,82 including valid oral agreements.83 So where the owners of land allowed its use by a railroad company in consideration of the building of a depot on the premises, but the company did not build the depot, a company organized after purchase of the railroad at foreclosure sale is liable for the value of the land and damages as of the time the original company took possession, and interest on such valuation from that time.84

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§ 4969. Franchises of old company as passing to new company. Unless otherwise provided by statute, the franchise to exist as a corporation does not pass to the reorganized company.85 On the other hand, other franchise rights ordinarily pass to the reorganized company,86 provided they are transferable,87 and provided, further, in case of a transfer by a foreclosure sale, that they are included in the mortgage,88 subject to the conditions contained in the fran

81 New York & G. L. Ry. Co. v, Stanley's Heirs, 35 N. J. Eq. 283, 288; Western Pennsylvania R. Co. v. Johnston, 59 Pa. St. 290; Gillison v. Savannah & C. R. Co., 7 S. C. 173; Pfeifer v. Sheboygan & F. du L. R. Co., 18 Wis. 155, 86 Am. Dec. 751.

The right to recover does not depend upon the existence of any lien. Rio Grande & E. P. Ry. Co. v. Ortiz, 75 Tex. 602, 12 S. W. 1129.

Laches, however, may preclude right to recover compensation. Cory v. Chicago, B. & K. C. Ry. Co., 100 Mo. 282, 13 S. W. 346.

That a different rule applies where there is merely a voluntary transfer of land for a right of way, without any condemnation proceedings, see Vilas v. Milwaukee & P. du C. Ry. Co., 17 Wis. 497, as distinguished in Pfeifer v. Sheboygan & F. du L. R. Co., 18 Wis. 155.

82 Rock Island & P. Ry. Co. v. Dimick, 144 Ill. 628, 19 L. R. A. 105, 32 N. E. 291; Post v. West Shore R. Co., 50 Hun (N. Y.) 301, 3 N. Y. Supp. 172, aff'd 123 N. Y. 580, 26 N.

E. 31. And see cases cited in § 1407, notes 26-31, supra.

83 As said in one case, it would be a very harsh rule that, when a railroad is sold at judicial sale under a mortgage foreclosure, all rights of persons granting the right of way by oral contract are cut off." Swan v. Burlington, C. R. & N. R. Co., 72 Iowa 650, 34 N. W. 457.

84 New York & G. L. Ry. Co. v. Stanley's Heirs, 35 N. J. Eq. 283.

85 See § 4860, supra, and see § 1410, and also §§ 1152-1155, 1224, supra.

86 Parker v. Elmira, C. & N. R. Co., 165 N. Y. 274, 59 N. E. 81.

A franchise to be a corporation is distinct from a franchise, as a corporation, to maintain and operate a railway; the latter may be mortgaged, without the former, and may pass to a purchaser at a foreclosure sale. Memphis & L. R. R. Co. v. Railroad Com'rs, 112 U. S. 609, 28 L. Ed. 837. 87 See § 1225, supra.

88 See §§ 1284, 1410, supra. Franchises not included in the mortgage do not pass on a foreclosure sale.

chise.89 And if private persons purchase the corporate property and then turn it over to a reorganized company, such franchises, while it might be that all or part of them could not be exercised by a private person, pass to the new company.90 And a statute conferring upon the purchaser of a street railroad at judicial sale the authority to organize a corporation with all the powers of a corporation organized under the general law, is not limited to the first or immediate purchasers at such a sale, but extends to successive purchasers, so that where a subsequent purchaser organizes a corporation it acquires the franchises of the old company.91

§ 4970. Contracts of old company as continuing in favor of new company. Whether a continuing contract terminates upon the reorganization of the corporation by which it is made depends, of course, upon the terms of the contract and the nature and effect of the reorganization. It seems perfectly clear that a contract conferring rights upon a corporation so long as it shall exist must terminate when the corporation is dissolved, and cannot pass to an entirely new corporation succeeding to the property and rights of the corporation by purchase, or on a reorganization, though it will not be terminated by a mere amendment of the charter of the corporation, or by a reorganization which does not create a new and distinct corporation.92 It has been held that the rights under a continuing contract will pass to a reorganized corporation, even when it is technically a new corporation, if it is in reality a mere continuance of

Wilmington & R. R. Co. v. Downward,

8 Houst. (Del.) 227, 40 Am. St. Rep. 141, 14 Atl. 720, 32 Atl. 133.

The unconditional consent of a municipality had been given to a railroad to construct its line on a public street. Upon foreclosure sale all the properties and franchises of the railroad passed to the purchaser. Thereby the purchaser was deemed to have acquired the right of the original corporation to use the entire street, although on a portion thereof no tracks had actually been laid. That the purchasing company enjoyed power under its charter to occupy the streets of the municipality for its right of way subject to the obtaining by it of the consent of the city thereto did not render it necessary that the right of

way which it derived by the purchase at foreclosure sale be surrendered by it and acquired under the provisions of its charter. Denison & S. R. Co. v. St. Louis Southwestern R. Co., 96 Tex. 233, 72 S. W. 161, 201, holding that concession of right of way was not personal in a sense which would preclude a transfer thereof to the successor of the original company.

89 See § 1410, and also § 1229, supra. 90 Watson v. Albany & N. Ry. Co., 111 Ga. 10, 36 S. E. 324; Parker v. Elmira, C. & N. R. Co., 165 N. Y. 274, 59 N. E. 81.

91 Birmingham Ry. & Elec. Co. v. Birmingham Traction Co., 128 Ala. 110, 121, 29 So. 187.

92 See Canal & C. R. Co. v. St. Charles St. R. Co., 44 La. Ann. 1069.

94

the original corporation; 93 and it would seem that ordinarily, regardless of how a reorganization is accomplished, the new corporation succeeds to the contract rights of the old company. The new company may enforce restrictive covenants in deeds of land sold by the old company.95 Where a street railroad company entered into a contract with another street railroad company to pay the latter a certain sum for the use of its track, the agreement to last during the terms of their respective charters or any extension thereof, and the latter company was reorganized under a different name by its stockholders for the express purpose of the new company's taking all its property, assuming its obligations, and continuing its business, and the old company was then dissolved, it was held that the contract was not terminated by the reorganization, and that the right to use the tracks passed to the reorganized corporation.9 The right of a corporation to transfer subscriptions to its capital

93 Canal & C. R. Co. v. St. Charles St. R. Co., 44 La. Ann. 1069.

94 Under a Michigan statute authorizing the reorganization of a national bank as a state bank, and providing that all assets of a dissolved national bank should, by act of law, vest in and become the property of such state bank, it was held that, where a national bank was reorganized as a state bank, and the latter took all its paper and assumed all its liabilities, and continued the same board of directors, the state bank was substantially the same as the national bank, and could enforce a written authority held by the national bank for the indorsement

of commercial paper. First Commer cial Bank of Pontiac v. Talbert, 103 Mich. 625, 50 Am. St. Rep. 385, 61 N. W. 888.

Where a corporation made an assignment after a person had contracted with it to furnish a certain number of staves, and on the trustee's sale its assets were purchased by a new corporation, it was held that the benefit of the contract passed to the new corporation, and it could maintain an action for breach thereof as White River Stave Co. v.

successor.

VII Priv. Corp.-79

96

Emmerson, 67 Ark. 617, 56 S. W. 1069.

Even if a contract is not ordinarily assignable, the rights thereunder pass to a reorganized company, since in such a case there is no real assignment, because the new company is to all intents and purposes the old company. New York Bank Note Co. v. Hamilton Bank Note Engraving & Printing Co., 28 N. Y. App. Div. 411, 50 N. Y. Supp. 1093.

95 Compton Hill Improvement Co. v. Garvey, 162 Mo. App. 88, 141 S. W. 1163.

Where a contract of sale to a corporation contained a negative agreement not to sell a like article to other customers, but the contract contained no provision for its assignment, it was held that a new reorganized company does not become entitled to enforce the negative agreement except as to breaches occurring before the creation of the new company and the transfer of the property of the old company. New York Bank Note Co. v. Kidder Press Mfg. Co., 192 Mass. 391, 404, 78 N. E. 463.

96 Canal & C. R. Co. v. St. Charles St. R. Co., 44 La. Ann. 1069.

stock and the right of a corporation with respect to subscriptions to the stock of a corporation to the property, rights and franchises to which it has succeeded by purchase or otherwise, including the rights in such cases with respect to subscriptions by municipal corporations, are treated in another chapter.97

§ 4971. Succession to causes of action existing in favor of old company. A reorganized company succeeds to the right of the old company to sue to reform the description in a deed to property included in that sold at judicial sale to the reorganized company.98 If the old company, or its stockholders, could only have sued in equity to set aside a sale to corporate officers, then the new company can sue on such a cause of action only in equity.99 There can be no transfer, it is held, even under the English statute, of the right to enforce calls against stockholders of the old corporation made for the purpose of procuring moneys to be paid into the treasury of the new corporation.1

§ 4972. Succession to privileges and exemptions of old company -General rule. Unless it is otherwise provided by statute, the reorganized company, by virtue of the purchase under foreclosure, does not succeed to a special statutory exemption or privilege granted the old company,2 such as immunity from taxation, or a right to charge certain rates of fare without interference.

§ 4973. Effect of statutes in existence at time of reorganization. Especially is it true that the new reorganized company does not succeed to privileges and exemptions of the old company, where a valid statute is enacted before the creation of the new company forbidding the grant of such privileges or exemptions. Thus, pur

97 See chapter on Stockholders.

98 Williams v. American Ass'n, Inc., 197 Fed. 500.

99 Where a railroad company succeeds, by reorganization and purchase, to the property of another company, it cannot maintain an action at law to recover property of the old company which it had conveyed to one of its directors. Little Rock & Ft. S. Ry. Co. v. Page, 35 Ark. 304, holding suit must be brought in equity.

1 Under the English statute author

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izing the transfer of the "business or property' of the old company, “business does not include uncalled capital and "property" does not include calls upon stockholders. Bank of China, Japan & The Straits v. Morse, 168 N. Y. 458, 56 L. R. A. 139, 85 Am. St. Rep. 676, 61 N. E. 774.

2 St. Louis & S. F. R. Co. v. Gill, 156 U. S. 649, 656, 39 L. Ed. 567. 3 See § 4975, infra. 4 See § 4974, infra.

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