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strained to relinquish their lien and accept in lieu thereof the personal liability of the new company, corporate creditors have no standing in court to object to the consolidation of the debtor company with other corporations. It would seem, however, that when the consolidation evidently imperils the security of corporate creditors, and no provision is made for the payment of the debts of the original companies, the creditors may prevent the consolidation, at least until their rights have been secured. As the new company succeeds to the righ's as well as the debts of the old, it has power to compromise and settle claims against them. The directors of the new company may discharge debts of the old, without special authorization of their shareholders. The new company can not deny the validity of the bonds of the old company put in circulation by the new."

§ 349. Mortgage debts and liens.-Liens created by the constituent companies are superior to those of the same class created by the consolidated corporation. Express liens, however, merely follow the property coming into the hands of the consolidated company; and all subsisting liens on the acquired property remain unimpaired. The consolidated com

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1 Powell v. North Missouri &c. R. Co., 42 Mo. 63; In re Manchester &c. Assoc., L. R. 9 Eq. 643; In re India &c. Assurance Co., L. R. 7 Ch. 651; Griffith's Case, L. R. 6 Ch. 374; In re Family Endowment Soc., L. R. 5 Ch. 118.

2 Booth v. Bruce, 33 N. Y. 139; s. c. 38 Am. Dec. 372; Barclay v. Quicksilver Mining Co., 9 Abb. Pr. N. S. 283. Cf. Kelly v. Mariposa &c. Co., 4 Hun, 632.

Pacific R. Co., (U. S. C. C. S. D. of N. Y. 1883) 12 Am. & Eng. R. Cas. 374; Hazard v. Vermont &c. R. Co., 17 Fed. Rep. 753.

7 Powell v. North Missouri R. Co., 42 Mo. 63. Thus, of course, a mortgage lien may be enforced against property covered by it, after the consolidation. Eaton &c. R. Co. v. Hunt, 20 Ind. 457; Racine &c. R. Co. v. Farmers' Loan & Trust Co., 49 Ill. 331; s. c. 95 Am. Dec. 595. Like

Paine v. Lake Erie &c. R. Co., 31 wise, a maritime lien on a vessel reInd. 283. mains after the consolidation of the

4 Shaw v. Norfolk County R. Co., corporation owning the vessel. The 15 Gray, 407.

5 Eaton &c. R. Co. v. Hunt, 20 Ind. 457.

6 Shackleford v. Mississippi Central R. Co., 52 Miss. 159; Ritter v. Union

Key City, 14 Wall. 653.

8 Rutten v. Union Pacific Ry. Co., 17 Fed. Rep. 480; The Key City, 14 Wall. 653; North Carolina R. Co. v. Drew, 3 Woods, 691; Mississippi Val

pany is not a purchaser without notice with respect to the property derived from the original companies.' But while the consolidated company receives the assets of the old with notice and therefore takes them cum onere, yet a purchaser from it may occupy, in respect of them, the status of a bona fide purchaser without notice, so as to hold them free from liability for the debts of the original company. Though, of course, where one company purchases the assets of another for value in good faith, it does not take them in trust to pay the debts. of the other. A consolidated company can not plead ignorance of liens upon property it acquires by consolidation, although dormant and unrecorded. So too, a consolidated corporation is chargeable with notice of a contract for the sale of land, made by one of the companies forming the consolidation and entered upon its corporate books, and does not occupy the position of an innocent purchaser in good faith and without notice. A corollary of the rule of fastening the debts of the old companies upon the new is that where the indebtedness of an old company has not ripened into a lien, the effect of consolidation with another is to release the former of all indebtedness where the latter becomes the proprietor of the property and franchises of the former."

§ 350. Contractual obligations. A person performing labor under a contract with one of the old companies may maintain an action against the new company to recover whatever sum was due him upon his contract. But under a con

ley Co. v. Chicago &c. R. Co., 58 Miss. 896; s. c. 38 Am. Rep. 348.

1 The Key City, 14 Wall. 653; North Carolina R. Co. v. Drew, 3 Woods, 691; Mississippi Valley R. Co. v. Chicago &c. R. Co., 58 Miss. 896; s. c. 38 Am. Rep. 348. Cf. Whipple v. Union Pacific Ry. Co., 28 Kan. 474. 2 McMahon v. Morrison, 16 Ind. 172.

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Powell v. North Missouri R. Co., way companies provided that the 42 Mo. 63.

The Key City, 14 Wall. 653; Mississippi Valley Co. v. Chicago &c. R. Co., 58 Miss. 896; s. c. 38 Am. Rep.

new company should assume the debts and liabilities of the old companies, and should assume and carry out all their unexecuted contracts,

tract made by a railroad company to haul the cars of a car company over its road, a new company by the same name formed by consolidation with other companies is not bound to haul such cars except over the road of the old company and is not bound to do so over the new lines.' And a railroad whose stock is mostly owned by another company, but whose existence is still preserved and which is operated by its own board of directors, is in no legal sense controlled by the company owning its stock so as to make an agreement by the latter company to haul cars over its road apply to hauling them over the subordinate road. So too a provision in a contract of purchase of the property and franchises of one company by another, that all existing contracts for certain privileges "shall be respected and maintained at rates not exceeding the present rates," was held not to be perpetual as to those contracts, but merely as binding the purchaser to respect them during what remained of their unexpired term. The obligation, however, of one of the original companies to restore a stream, the usefulness of which had been impaired by its works, devolves upon the consolidated company.*

Although it is

§ 351. Status of holders of the old stock. said that if the consolidation be lawfully effected, the shareholders of the constituent companies become shareholders of the new, still it is probably more near the fact that the holders of stock in the original companies do not become ipso facto stockholders in the consolidated company, but only have the right to become so by surrendering their old shares. Moreover a member can not be compelled to accept the stock of another company for his interest, a consolidation of the two having

and the act of the legislature, ratifying and confirming the consolidation, saved the rights and remedies of creditors.

1 Pullman Car Co. v. Missouri Pac. Ry. Co., (1885) 115 U. S. 595, affirming s. c. 11 Fed. Rep. 634.

2 Pullman Car Co. v. Missouri Pac. Ry. Co., (1885) 115 U. S. 596, affirming s. c. 11 Fed. Rep. 634.

4 Chicago &c. R. Co. v. Moffitt, 75 Ill. 524.

Ridgway Township v. Griswold, 1 McCrary, 151.

6 Wood's Ry. Law, 1686, citing Philadelphia &c. R. Co. v. Catawissa R. Co., 50 Pa. St. 20; McCray v. Junction R. Co., 9 Ind. 358. But see Cork &c. Ry. Co. v. Paterson, 18 Com. B. 414; "Consolidation of

Hurt v. Terrill, (1887) 83 Va. 167. Corporations," by S. D. Thompson, (1890) 31 Cent. L. J. 4.

been made,' though he may not be able to prevent the consolidation. In England agreements or provisions respecting the transfer of the 'business of one company to another, commonly provide for the shareholders in the transferrer company exchanging their shares in that company for shares of the same number or value in the company to which the transfer is effected. But it is well settled that as to such a transaction as this, a majority of shareholders can not bind a minority to take shares in the transferee company. No individual shareholder in the one can become a shareholder in the other but by his own free will and his own express assent. The statement of the same doctrine in this country is, that in conferring authority to consolidate corporations the legislature never intended to compel a dissenting stockholder to transfer his interest because a majority of the stockholders consented to the consolidation. Such legislation would impair the obligation of contracts and therefore be invalid; consequently there is no power to force a stockholder of the old corporation to join the new corporation and to receive stock in it on the surrender of his stock in the old company. Where a consolidation was made on the basis of equality between the shares of the two corporations, plaintiffs held bonds, issued by one of the corporations, convertible into its stock on completion of its road; and it was held that they were entitled to demand stock in the new corporation, as for the purposes of this contract the old corporation continued under the new name." And it has also been held that a statute authorizing three-fifths of the stockholders of two gas light companies to effect a consolidation, did not authorize them to place stock of non-participating stockholders on a footing inferior to their own, or to transfer their rights to third persons without their consent."

1 Frothingham v. Barney, 13 Hun, 39; Gardner v. Hamilton, 33 N. Y. 366. 421.

2 McVicker v. Rose, (1869) 55 Barb. 247.

3 Los' Case, 13 W. R. 883; Higg's Case, 2 H. & M. 657; Martin's Case, 2 H. & M. 699; Ex parte Bagshaw, L. R. 4 Eq. 341; In re London &c. Bank, 15 W. R. 1057.

Clearwater v. Meredith, 1 Wall.

5 Day v. Worcester, N. & R. R. Co., (Mass. 1890) 23 N. E. Rep. 724; following John Hancock &c. Co. v. Worcester &c. R. Co., (1889) 149 Mass. 214.

6 Fee v. New Orleans Gas Light Company, 35 La. Ann. 413.

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352. Exchange of new stock for old.- When two corporations are consolidated, no doubt, for most purposes, they cease to exist; and the new corporation is a distinct person in the eye of the law, although it is their "legal successor." But so far as the legislature sees fit, it may direct that the new corporation shall be regarded as the same with one, or even alternately as the same with each, of the old ones; or, more explicitly, that, although the new corporation is a new person, for the acquisition of new rights or the making of new contracts, the old corporations shall not be altogether ended, but shall continue under the new name, so far as to preserve all their existing obligations unchanged. If that is made a condition of the consolidation, the consolidating companies remain in existence to that extent. And it is immaterial whether the statute expressly so provides or whether it be necessarily implied. In a recent case in point it was said: "There is no greater legal difficulty in continuing the liability upon a contract to exchange stock for the bonds than there is for continuing it upon one to pay money for them. In neither case does the legislature say, in terms, that the old corporation shall be taken to remain in existence for this purpose; but, if it requires the end, it implies the means. Quando aliquid mandatur, mandatur et omne per quod pervenitur ad illud." Therefore, where a statute consolidating two corporations provided that the new corporation should be subject to all the duties, restrictions, obligations, debts, and liabilities to which, at the time of the union, either of said corporations is subject, and that all claims and contracts against either corporation may be enforced by suit or action against the new corporation; and the consolidation was made on the basis of equality between the shares of the two corporations; the plaintiffs who held bonds, issued by one of the corporations, convertible into its stock on completion of

1 Graham v. Railroad Co., 118 U. S. 161, 180; Day v. Worcester &c. R. Co., (1890) 7 Ry. & Corp. L. J. 447. 2 Compton v. Railway Co., 45 Ohio St. 592, 618; Day v. Worcester &c. R. Co., (Mass. 1890) 7 Ry. & Corp. L. J. 447.

3 Broughton v. Pensacola, 93 U. S. 266, 269, 270; Bank v. Harris, 118 Mass. 147, 151; Coffey v. Bank, 46 Mo. 140, 143; Board v. Gas Light Co., 40 La. Ann. 382; Day v. Worcester &c. R. Co., (Mass. 1890) 7 Ry. & Corp. L. J. 447.

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