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primarily by bondholders with the concurrence and assent of stockholders and other creditors. In the one case, the new company ordinarily is liable for the debts of the old company, while in the latter case a reorganization in connection with a foreclosure sale ordinarily cuts off all rights of creditors except prior liens.32 So far as the effect of the reorganization is concerned, it is necessary to consider whether there is a new and independent corporation created, or whether the successor is merely a continuation of the old company under the same or a different name.33 In the former case and this embraces all reorganizations by foreclosure purchasers or other purchasers at a judicial or execution sale-,34 the new company, with certain exceptions,35 is not liable for the debts of the old company, while in the latter case the so-called new company, being in reality but a continuation of the so-called old company, is liable just the same as the old company would have been had it continued in existence. And in this last class, generally speaking, there are included all reorganizations where the rights of creditors are not cut off by judicial or execution sales, including, ordinarily, cases of mere reincorporation as well as reorganizations by stockholders or others without a judicial sale and without any provision as to creditors.36 In other words, a successor of an old company which has become defunct is ordinarily not liable for the debts of the old company where not merely a continuation of the old company; 37 and a new corporation is not liable for the debts of an old corporation merely because the former was organized to succeed the latter.38

32 National Foundry & Pipe Works v. Oconto City Water Supply Co., 105 Wis. 48, 59, 81 N. W. 125, and see SS 4984, 4988, infra.

33 See § 4952, supra.

34 See § 4988, infra.

35 See §§ 4990-4995, infra.

36 See § 4984, infra.

37 Evans v. Unity Investment Co. (Mo. App.), 196 S. W. 49; Baker Furniture Co. v. Hall, 76 Neb. 88, 107 N. W. 117, 111 N. W. 129, 113 N. W. 267; Gulf & B. V. R. Co. v. Winder, 26 Tex. Civ. App. 263, 63 S. W. 1043.

A new company is not liable for the debts of the old where all the assets of the old company had been sold by the state for a sum barely suffi

cient to pay the lien of the state, and the new corporation is not merely a continuation of the old but has a new paid up capital stock. Capital State Bank of Oklahoma City v. Western Casualty & Guaranty Ins. Co., 47 Okla. 549, 149 Pac. 149.

If a corporation is dissolved and thereafter its trustees sell a portion of its assets, the corporation purchas ing such assets take them free from any liens or incumbrances on the property of the old company, at least under some statutes. Houston Ice & Brewing Co. v. Nicolini (Tex. Civ. App.), 96 S. W. 84.

38 Good v. Ferguson & Wheeler Land, Lumber & Handle Co., 107 Ark.

An execution issued on a judgment against an old corporation is
not leviable on land conveyed to the new corporation by a debtor of
the old company in satisfaction of his debt, since such land never
belonged to the old company.39

§ 4982. Express assumption of debts-In general. Without re-
gard to whether the reorganization is in connection with a judicial
or execution sale or not, the reorganized company may be liable
for the debts or on the contracts of the old company because of its
express assumption of such debts or contracts.40 So, under some
circumstances, an assumption of debts or other liabilities will be
implied. The rules as to construction of agreements to assume
debts, in connection with combination of corporations, as already
referred to in a preceding chapter,42 are equally applicable in case
of reorganizations.43 It is generally held that the express assump-

118, Ann. Cas. 1915 A 544, 153 S. W.
1107. Compare American Bank Note
Co. v. Blue Ridge Elec. Co., 230 Fed.
911, as to liability of promoters of
reorganization.

39 Houston Ice & Brewing Co. v.
Stratton, 40 Tex. Civ. App. 378, 89
S. W. 1111.

40 United States. Dancel v. Good-
year Shoe Machinery Co. of Portland,
Maine, 144 Fed. 679, aff'g 137 Fed.
157; Appeal of Columbus, S. & H. R.
Co., 109 Fed. 177; Dubuque & S. C.
R. Co. v. Pierson, 70 Fed. 303.

Arkansas. Arlington Hotel Co. v.
Rector, 124 Ark. 90, 186 S. W. 622.
Illinois. Quinlan v. Almini Co., 191
Ill. App. 568.

New York. Fernschild v. D. G.
Yuengling Brewing Co., 154 N. Y. 667,
49 N. E. 151, aff'g 15 App. Div. 29,
44 N. Y. Supp. 106; Baker v. D. Ap-
pleton & Co., 107 App. Div. 358, 95
N. Y. Supp. 125.

Texas. Cattlemen's Trust Co. v.
Beck, Tex. Civ. App. —, 167 S. W.
753.

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But the mere certificate of the sec-
retary of the new company that a
ertain sum was due on a debt of the
old company is not sufficient to prove

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a new promise or to bind the com-
pany, unless it is shown that he had
power to adjust the claim, American
Cent. Ry. Co. v. Miles, 52 Ill. 174.

And a promise of the old company
that the new company will pay the
debts of the old company is not bind-
ing on the new company. Providence
Albertype Co. v. Kent & Stanley Co.,
19 R. I. 561, 35 Atl. 152.

41 See § 4753, chapter on Consolida-
tion.
42 See § 4741 et seq., supra, chapter
on Consolidation.

43 See Davidson v. Mexican Nat. R.
Co., 58 Fed. 653.

Agreement to issue stock to cred-
itors does not include promise to pay
in money. American Cent. Ry. Co.
v. Miles, 52 Ill. 174.

A reorganization agreement by
bondholders, to get corporate prop-
erty out of the hands of a receiver,
provided for the issuance of pre-
ferred bonds to pay the company's
"indebtedness''; and it was held that
this did not include an unliquidated
claim for conversion of coal and tim-
ber, in the nature of an action for
waste, on which an action was pend-
ing, although it did include liability

tion of liability for debts of the old company does not create a lien
for the security of the debts so assumed."

Under the New York statute as to reorganizations in connection
with judicial or execution sales, the new company may, if it so
desires, assume the indebtedness of the old company in its plan of
organization.45

§ 4983. Liability for breach of agreement with creditors of old
company. The reorganized company may be liable in damages to
a judgment creditor of the old company, who accepted bonds of the
new company in place of his judgment, for failure to comply with
its promise, in connection with such agreement to accept bonds, to
invest a certain sum out of the bond issue in betterments.4
46

§ 4984. Liability where new company merely a continuation of
old company-General rule. The rule that a corporation is not li-
able for the debts of another corporation, to whose property and
franchises it has succeeded, clearly does not apply where the corpora-
tions are, in law, the same body. Where the charter of a corpora-
tion is merely amended, either by a special act or under a general
law, there is no change in the identity of the corporate body,-no
dissolution of one corporation and creation of another, and the
corporation, under the amended charter, is liable for all debts con-
tracted by it before the amendment.47 The same is true where the
charter of a corporation is merely extended or revived, or the corpo-
ration reorganized, without creating a new corporation,48 as ex-

for coal and timber taken by the re-
ceiver. Hinrichs v. Mississippi Val-
ley Trust Co., 223 Fed. 995.

Agreement to provide a certain sum
to be used to pay debts of the old
company does not bind the new com-
pany to pay all of such sum without
regard to the justice of the claims pre-
sented. Moyer v. Ft. Wayne, C. &
L. R. Co., 132 Ind. 88, 31 N. E. 567.

"Debts" include a judgment re-
covered in an action pending at the
time of the transfer to the new com-
pany. Noll v. Chattanooga
(Tenn.), 38 S. W. 287.

Co.

44 Appeal of Columbus, S. & H. R.
Co., 109 Fed. 177. See also § 4732,
chapter on Consolidation.

45 Klein v. East River Elec. Light
Co., 90 N. Y. App. Div. 92, 86 N. Y.
Supp. 164, rev'd on other grounds 182
N. Y. 27, 74 N. E. 495.

46 South Texas Tel. Co. v. Hunting-
ton, 104 Tex. 350, 138 S. W. 381, rev 'g
136 S. W. 1053, 121 S. W. 242.

47 Trustees of University v. Moody,
62 Ala. 389; Johnston v. Crawley, 25
Ga. 316, 71 Am. Dec. 173; Washing-
ton College v. Duke, 14 Iowa 14;
Dean v. La Motte Lead Co., 59 Mo.
523.

48 Connecticut. National Exch.
Bank v. Gay, 57 Conn. 224, 4 L. R. A.
S43, 17 Atl. 555.

Illinois. People v. Marshall, 6 Ill.

672.

plained in a former section.49 Thus where a company is merely reincorporated, the new company is liable for the debts of the old.50 And it is further held that where the circumstances attending the creation of a new corporation, and its succession to the property, franchises and business of another corporation, are such as to show that the new corporation is in reality, however it may be in law, a mere continuation of the old corporation; or, in other words, that, although technically, as a matter of law, a new corporation may be created, yet, if the old corporation ceases to exist, and all its assets and franchises are acquired by the new, which is in reality a mere continuation of the old, as where there is no judicial or execution sale, the new corporation is deemed to have impliedly assumed, and is liable upon, all the obligations of the old.51 The ground of liability in

Maryland. Frostburg Min. Co. v. Cumberland & P. R. Co., 81 Md. 28, 31 Atl. 698.

New Jersey. Miller v. English, 21 N. J. L. 317.

New York. Lea v. American, A. & P. Canal Co., 3 Abb. Pr. (N. S.) 1. South Carolina. St. Philip's Church v. Zion Presbyterian Church, 23 S. C. 297.

Virginia. Wilson v. Chesapeake & Ohio R. Co., 21 Gratt. 654; Barksdale v. Finney, 14 Gratt. 338.

49 See § 4957, supra.

50 A corporation improperly organized which dissolves and is legally incorporated under a different name cannot repudiate its paper issued before the dissolution. Empire Mfg. Co. v. Stuart, 46 Mich. 482; 9 N. W. 527.

Where a national bank went into liquidation as allowed by the National Banking Act, and was reorganized as a state bank, taking all the assets of the old corporation, it was held liable for its deposits. Eans' Adm'r v. Exchange Bank of Jefferson City, 79 Mo. 182.

51 United States. Armour v. E. Bement's Sons, 123 Fed. 56; McVicker v. American Opera Co., 40 Fed. 861. Arkansas. Arlington Hotel Co. v. Rector, 124 Ark. 90, 186 S. W. 622; Ferguson & Wheeler Land, Lumber &

Handle Co. v. Good, 112 Ark. 260, 165 S. W. 628.

California. Higgins v. California Petroleum & Asphalt Co., 122 Cal. 373, 55 Pac. 155; Strahm v. Fraser, 32. Cal. App. 447, 163 Pac. 680; Stevens v. Selma Fruit Co., 18 Cal. App. 242, 123 Pac. 212.

Florida. J. I. Kelly Co. v. Pollock & Bernheimer, 57 Fla. 459, 131 Am. St. Rep. 1101, 49 So. 934.

Illinois. Luce Furniture Co. v. Almini Co., 192 Ill. App. 386; Loughlin v. United States School Furniture Co., 118 Ill. App. 36.

Kansas. Berry v. Kansas City, Ft. S. & M. R. Co., 52 Kan. 774, 39 Am. St. Rep. 381, 36 Pac. 724.

Louisiana. W. F. Taylor Co. v. Gulf Land & Lumber Co., 119 La. 426, 44 So. 187; Lenehan v. Gulf Land & Lumber Co., 118 La. 217, 42 So. 780.

Mississippi. Meridian Light & Railroad Co. v. Catar, 103 Miss. 616, 60 So. 657.

Missouri. Thompson v. Abbott, 61 Mo. 176; Sweeney v. Heap O'Brien Min. Co., 194 Mo. App. 140, 186 S. W. 739; Quinn v. American Bankers' Assur. Co., 183 Mo. App. 8, 165 S. W. 823; Berthold v. Holaday-Klotz Land & Lumber Co., 91 Mo. App. 233.

Nebraska. Austin v. Tecumseh Nat. Bank, 49 Neb. 412, 35 L. R. A. 444, 59

such a case, it seems, where, as a matter of law, the old and the new

App. 683, 162 S. W. 1077.

Am. St. Rep. 543, 68 N. W. 628; Reed Zachra v. American Mfg. Co., 179 Mo. Bros. Co. v. First Nat. Bank of Weeping Water, 46 Neb. 168, 64 N. W. 701. New Jersey. Parsons Mfg. Co. v. Hamilton Ice Mfg. Co., 78 N. J. L. 309, 73 Atl. 254.

New York. Clokey v. International Rubber Clothing & General Supply Co., 28 Misc. 326, 59 N. Y. Supp. 878. Compare, however, New York v. Eppinger & Russell Co., 170 App. Div. 747, 156 N. Y. Supp. 662.

Oklahoma. First State Bank of Oklahoma City v. Lee, 166 Pac. 186. Pennsylvania. Pennsylvania Knitting Mills v. Bibb Mfg. Co., 12 Pa. Super. Ct. 346. Compare Art Society of Pittsburgh v. Leader Pub. Co., 60 Pa. Super. Ct. 548.

Tennessee. Long v. Fisher Typewriter Co., 1 Tenn. Ch. App. 668.

Utah. Cooper v. Utah Light & Railroad Co., 35 Utah 570, 136 Am. St. Rep. 1075, 102 Pac. 202.

Virginia. Barksdale v. Finney, 14 Gratt. 338.

But see Chase v. Michigan Tel. Co., 121 Mich. 631, 80 N. W. 717; Goldmark v. Magnolia Metal Co., 44 N. Y. App. Div. 35, 60 N. Y. Supp. 425, aff'd 170 N. Y. 579, 63 N. E. 1117. Compare Houston Ice & Brewing Co. v. Nicolini (Tex. Civ. App.), 96 S. W. 84.

Especially is this so where it is so provided in the agreement in regard to the reorganization. Stevens Selma Fruit Co., 18 Cal. App. 242, 123 Pac. 212, and see § 4982, supra.

V.

Rule applies to liability on judg ments against the old corporation. Alberger Condenser Co. v. United Water, Gas & Electric Co., 87 Kan. 843, 126 Pac. 1087.

If a corporation is formed to take over the business and property of another company, and is in reality the same entity under another name, it is liable for the debts of its predecessor.

On reorganization by sale and exchange of stock, the new company takes subject to the obligations of the old. Alden v. Wright, 175 N. Y. App. Div. 692, 162 N. Y. Supp. 668.

Where a new corporation absorbs all the assets of an old corporation, and continues to do business in the name of the old corporation, it is liable for obligations so contracted, as a principal is liable for the acts of his agent. Davis Provision Co. v. Fowler Bros., 20 N. Y. App. Div. 626, 47 N. Y. Supp. 205, aff'd 163 N. Y. 580, 57 N. E. 1108.

Where one corporation takes over the assets of another company for the purpose of carrying on its business, without apparent change in the personnel of the concern, it is liable for the payment of the debts of the former concern. Parsons Mfg. Co. v. Hamilton Ice Mfg. Co., 78 N. J. L. 309, 73 Atl. 254.

Where a corporation is organized for the purpose of acquiring the assets of another company by paying over the consideration, not to the selling company but directly to and for the benefit of the trustees of the selling company, the transfer is fraudulent and the purchasing company is liable for the debts of the selling company. Carstens & Earles v. Hofius, 44 Wash. 456, 87 Pac. 631.

Where a company is organized for the purpose of purchasing all of the property of another company, and it is paid for in shares of stock of the purchasing company issued to the stockholders of the selling company, the purchasing company is liable for all the debts of the selling company. Otis v. Ohio Mines Co., 15 Ariz. 264, 138 Pac. 777.

Where a new corporation is merely

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