lowing from the larger power, a corporation which may sell its property or dispose of any interest in the same as it deems expedient.' The general rule of the absolute alienability of corporate property is clearly applicable to private corporations established solely for trading or manufacturing purposes in which the public has no direct interest. But a majority of the shareholders of a prosperous corporation can not sell out the property and invest in other enterprises against the wishes of the minority. Nor may the directors even with the consent of a majority of the shareholders do so. But in case of a failing company the rule is different, and sale of the whole property may be made by the directors." Such a sale, however, and the assignment of all a corporation's property, will not in itself accomplish its dissolution or operate as a surrender of its franchises." § 358. Power to sell entire property.—A corporation through a majority of its directors may make a transfer of all its property in payment of one creditor if it be done bona fide. Such a debtor corporation may prefer one creditor to Metc. 498; Treadwell v. Salisbury Mfg. Co., 7 Gray, 393; Hodges v. New England Screw Co., 1 R. I. 347; State v. College of California, 38 Cal. 166, 171; Webster v. Turner, 12 Hun, 264; Ardesco Oil Co. v. N. A. Min. Co., 66 Pa. St. 375, 382. 1 Barry v. Merchants' Ex. Co., 1 Sand. Ch. 280; White Water &c. Co. v. Vallette, 21 How. 424; Clark v. Titcomb, 42 Barb. 122. 2 Webster v. Turner, 12 Hun, 264; Hancock v. Holbrook, 4 Woods, 52; Sheldon &c. Co. v. Eickemeyer &c. Co., 90 N. Y. 607; Dupee v. Boston &c. Co., 114 Mass. 37. 3 Kean v. Johnson, 9 N. J. Eq. 401; McCurdy v. Myers, 44 Pa. St. 535; Boston &c. R. Co. v. New York &c. R. Co., 13 R. I. 260; Clinch v. Financial Co., L. R. 4 Ch. 117. 4 Abbott v. American &c. Co. 21 How. Pr. 193; Barclay v. Quicksilver Min. Co., 9 Abb. Pr. N. S. 284; Middlesex R. Co. v. Boston &c. R. Co., 115 Mass. 347; Balliet v. Brown, 103 Pa. St. 546. 5 Lauman v. Lebanon &c. R. Co., 30 Pa. St. 42; Hancock v. Holbrook, 4 Wood, 52; s. c. 9 Fed. Rep. 353; Sheldon &c. Co. v. Eickemeyer &c. Co., 90 N. Y. 607; Hutchinson v. Green, 91 Mo. 367; Chew v. Ellingwood, 86 Ind. 260; De Camp v. Alward, 52 Ind. 473; Dana v. Bank of United States, 5 Watts & S. 223. 6 Hill v. Fogg, 41 Mo. 563; Kansas &c. Co. v. Sauer, 65 Mo. 279; Bruffett v. Railroad Co., 25 Ill. 353; Reichwald v. Commercial &c. Co., 106 Ill. 439; De Camp v. Alward, 52 Ind. 468; State v. Bank of Maryland, 6 Gill & J. 205, 230. Buell v. Buckingham, (1864) 16 Ia. 284, citing Town v. Bank of River Raisin, 2 Doug. (Mich.) 530; Revere v. Boston Copper Co., 15 Pick. 351; Boston Glass Manuf. v. Langdon, 24 Pick. 49; State v. Bank of Maryland, 6 Gill & J. 205; Union Bank v. Mor The ma another. And generally, a corporation may sell and transfer its property, and may prefer its creditors, although it is insolvent, unless such conduct is prohibited by law; even when all the property of the corporation is conveyed absolutely in payment of a single debt leaving others unpaid. A deed of trust given by a corporation to secure certain of its creditors is valid though it conveys nearly all of its property. Its validity is not affected by the fact that it was the result of a compromise among the directors, who were not harmonious, and favored securing different creditors. So, a corporation may make an assignment for the benefit of creditors. jority of the stockholders of a co-operative association may sell the property and business; and, even if the sale is voidable by the remainder of the stockholders, after being ratified by them, it can not be avoided by one of those participating in it. The deed of a mining corporation, however, does not pass the title to its mining land, unless it is shown to have been ratified by two-thirds of its stockholders, as is provided by law. Where a statute declares that the revenues of religious corporations shall be applied by the trustees according to the usages of the denomination, and that equity may enforce the law, a trustee may sue in the name of the corporation to restrain his co-trustees from diverting the property. So under the same law the court may, at suit of a minority of the trustees of a religious corporation, enjoin diversion of its property to the uses of any other than its denomination.9 ris, 6 Gill & J. 363; Catlin v. Eagle 1 Sommerville v. Horton, 4 Yerg. 541; Niolon v. Douglas, 2 Hill. Ch. 433; Milburn v. Beach, 14 Mo. 104; Kuykendall v. McDonald, 15 Mo. 416. 2 Bergen v. Porpoise Fishing Co., (1887) 42 N. J. 397. 5 And such assignment is not invalid, when made by a quorum of the directors. Chase v. Tuttle, (1887) 55 Conn. 455; s. c. 3 Am. St. Rep. 64. 6 Berry v. Broach, (1888) 65 Miss. 450. 7 McShane v. Carter, (1889) 80 Cal. 310; Pekin &c. Co. v. Kennedy, (1889) 81 Cal. 356; Cal. Laws 1880, p. 131. 8 Reformed Presbyterian Church v. Bowden, 14 Abb. N. Cas. 356; 3 Lampson v. Arnold, 19 Iowa, New York Laws 1875, ch. 79. 487. 9 First Reformed Presbyterian 4 Rollins v. Shaver &c. Co., (Iowa, Church v. Bowden, 10 Abb. N. Cas. 1890) 45 N. W. Rep. 1037. 1; New York Laws 1875, ch, 79. -- 359. Sale by one corporation to another. A corporation may sell its property to another corporation. Thus a duly incorporated irrigating company having power under its charter to construct and operate a canal for irrigation, water works, and manufacturing purposes, may, with the assent of the stockholders, lawfully sell and convey to another irrigating company its right of way, canal, personal and real property, provided it is done in good faith, and not to delay or defraud creditors. And it is the same where a corporation could not be carried on with profit, and was approaching serious financial embarrassment. A sale, without fraud and in good faith, of all its property to a rival corporation engaged in the same business, whose paid-up stock was given in payment, affords no ground of complaint by a stockholder. But generally when the property of one corporation is sold to another, no shareholder of the former can be required without his own consent to accept the stock of the latter as his share of the proceeds of the sale. The reason is that such a transaction would in effect amount to a consolidation of the two companies. A company may, however, sell its assets for the stock of another company having a fixed money value and 1 Warfield v. Marshall &c. Co., (1887) 72 Iowa, 666; s. c. 2 Am. St. Rep. 263. Here where the first corporation was insolvent, and had executed a mortgage to its shareholders to secure them as creditors, thus preferring them to other creditors, and the second corporation was organized by the shareholders of the first and other persons, all paying value for their stock therein, and the first corporation sold its property to the second corporation so organized, in consideration that the second corporation would pay the mortgage to the shareholders in the first corporation, which was the full value of the property conveyed, and all this was done in good faith, though with knowledge by all the parties that the other creditors of the first corporation would never be able to realize anything on their claims, it was held that the transaction was a valid one, and could not be set aside at the suit of the unsecured creditors of the first corporation. 2 State v. Western Irrigating Canal Co., (1888) 40 Kan. 96; s. c. 10 Am. St. Rep. 166. 3 Even though he was not notified of, nor present at, the meeting at which the transfer was decided upon. Sawyer v. Dubuque Printing Co., (1889) 77 Iowa, 242. 4 Taylor v. Earle, 8 Hun, 1; Frothingham v. Barney, 6 Hun, 366; McCurdy v. Meyers, 44 Pa. St. 535; In re Empire Assoc., L. R. 4 Eq. 341; Clinch v. Financial Co., L. R. 4 Ch. 117; Bird v. Bird's &c. Co., L. R. 9 Ch. 358; Morawetz on Corporations, 212. 5 Morawetz on Corporations, 212. See, however, St. Louis &c. R. Co. v. Fiernan, 37 Kan. 606. capable of being converted into money at any time and of being distributed as money among shareholders not consenting to the arrangement.1 Statutory authority to transfer "the work done, together with all rights, privileges and easements,' of a railroad company, unable to complete the construction of its line, to another company, not competing, does not empower the assigning of the railroad company's contracts of subscription payable upon completion of the road.2 A contract in restraint of trade, running to a corporation, "its successors and assigns," is assignable to and enforceable by a corporation who succeeds to the business and property of such obligee.3 § 360. The same subject continued.- Where an old-established corporation sells out to a newly-organizeed one, and turns over all its property, the new company becomes liable upon the debts and contracts of the old. Therefore, when a 1 Treadwell v. Salisbury Manuf. Co., 73 Mass. 393; s. c. 66 Am. Dec. 480; Morawetz on Corporations, 212. 2 Toledo &c. R. Co. v. Hinsdale, (1888) 45 Ohio St. 556. which was contemplated. One of the considerations of the assignment was the payment of the old company's debt. In 1874 the new company was organized and received 3 Diamond Match Co. v. Roeber, a transfer of all of the property. (1887) 13 N. E. Rep. 419. 4 Slattery v. St. Louis &c. Co., (1886) 91 Mo. 217; Hibernia Ins. Co. v. St. Louis &c. Co., 10 Fed. Rep. 596; s. c. 13 Fed. Rep. 516; Fogg v. Receiver, 17 Fed. Rep. 516; Brum v. Insurance Co., 16 Fed. Rep. 140; Railroad v. Boring, 51 Ga. 582; Dean v. La Motte Lead Co., 59 Mo. 523; Town of Reading v. Wedder, 66 Ill. 80; Charitable Soc. v. Episcopal Church, 1 Pick. 371; Railroad v. Bee, 48 Cal. 398; Miners' Ditch Co. v. Zellerbach, 37 Cal. 543; City of St. Louis v. Gas Co., 70 Mo. 98; Fastings v. Drew, 50 How. Pr. 254; Railroad v. Evans, 6 Heisk. 607; Thompson v. Abbott, 61 Mo. 176. B. recovered a judgment in 1868, against a railroad company shortly after it had assigned all its property to trustees as one of the means of transferring it to a new company In 1880 the holder of the judg ment brought suit upon it against the trustees, who defaulted, and the new company, pleaded that the debts due the creditors of the old company of the same class as plaintiffs' claim exceeded its assets, and that plaintiff was only entitled to a pro rata of such assets upon distribution among all the creditors; and it was held that it should be presumed the claims of the other creditors had been paid, or that the assets were ample for the full satisfaction of the remaining ones, SO that the suit might be maintained without making the other creditors parties. Galveston, Harrisburg &c. Ry. Co. v. Butler, 56 Tex. 506. By deed from one railroad company to another, the title was reserved in the vendor till the vendee had discharged the vendor's floating debt corporation, after contracting debts, transfers, without consideration, all of its property to another corporation having notice of the indebtedness, equity has jurisdiction of a suit to enforce the indebtedness against the latter corporation, although no judgment has been obtained against the former one.1 And where a corporation, organized by the members of a partnership, passes a resolution to purchase the assets of the partnership, and assumes its indebtedness, it can not, by a secret understanding between the trustees that certain claims. are not included, prevent the creditor from following the firm's assets into the hands of the corporation. While consolidation is frequently effected by the sale of the property and franchises of one corporation to another, every case of sale is not necessarily a consolidation, properly so called; it may be a mere succession, as it has been felicitously termed by a learned writer. The same writer says that a succession differs from a consolidation in this respect among others, that the purchaser acquiring the property and franchises of a corporation does not thereby become responsible for its liabilities already accrued. It will have been seen, however, that the later cases show a disposition to follow the assets of the former corporations even after a sale for the purpose of insuring that the full amount of the same shall be rendered to the creditors of the original corporation. But that the president of the former corporation is not properly a party to such suit. Hibernia Ins. Co. v. St. Louis &c. Co., 3 McCrary, 368. § 361. The sale of the corporate franchise. The cases are agreed that a railroad corporation can not, independent of legislative authority, alienate or mortgage its franchise to by certain methods of payment. The vendee made partial payment in that way by cash and bonds to A., one of the vendor's creditors and directors, with the approval of the vendor's president, and his consent that A. might appropriate the sum to his own use, the directors of the company taking no action; and it was held that this was not a compliance with all the conditions so as to estop the vendor from asserting his title. Tennessee & Coosa R. Co. v. East Alabama Ry. Co., 73 Ala. 426. 2 Williams v. Colby, (1889) 53 Hun, 637. 3 Taylor on Corporations, § 415; Hammond v. Port Royal &c. R. Co., 15 S. C. 10; and 16 S. C. 567; Cook v. Detroit &c. Ry. Co. 43 Mich. 349; City of Menasha v. Milwaukee &c. R. Co. 52 Wis. 414; Gilman v. Sheboygan &c. R. Co., 37 Wis. 317. |