pany, it will be allowed to stand after the dissolution as a judgment against the several constituent companies.1

§ 348. Debts of the old companies.-The new company succeeds to all the rights, franchises, privileges and immunities, and becomes subject to all liabilities of the constituent companies. Statutes in nearly all cases provide that the new company shall acquire the rights and be subject to the liabilities of the old. Therefore the debts of the old corporation

1 Ketcham v. Madison &c. Co., 20 v. Dunlap, 47 Mich. 456; Central R. Ind. 280.

are enforceable against the new. Because, also, when a new corporation is formed by the amalgamation of two or more distinct corporations into one, the new corporation succeeds to all the faculties and rights of the several components, it must, as a necessary consequence, be subject to all the conditions and duties also, imposed by the law of their creation, both as to private persons and the public. For corporations can not by their own acts divest themselves of the duties and liabilities imposed upon them by law, the performance of which was the consideration upon which their charters were granted, and which thus entered into their contract with the Commonwealth. So that, as above stated, unless otherwise provided by statute, the new company succeeds to the rights and liabilities of the old ones. But a creditor of the old company is not bound to accept the responsibility of the new, for the old company is deemed to remain in existence for the purposes of actions. As a general rule corporate creditors have no standing in court to object to the consolidation of the debtor company with other corporations. For the reason that their claims remain a lien upon the property of the company after consolidation as before, and since they are in no wise con

confirmed respectively; and with respect to all things so done, suffered, and confirmed respectively, and to all such rights, liabilities, claims, and demands, the amalgamated company shall to all intents represent the dissolved company; and the generality of this present provision shall not be deemed to be restricted by any other of the provisions of this part of this act or by any provision of the amalgamating act that does not expressly refer to this present provision, and expressly restrict the operation thereof. "The Railways Clauses Act of 1863," 26 & 27 Vic. ch. 92, § 55.

1 Indianapolis &c. R. Co. v. Jones, 29 Ind. 465; Montgomery &c. R. Co. v. Boring, 51 Ga. 582; Thompson v. Abbott, 61 Mo. 176.

2 Tomlinson v. Branch, 15 Wall. 460; Gould v. Langdon, 43 Pa. St. 365.

3 Quested v. Newburyport Horse R. 127 Mass. 204; McCluer v. Manchester &c. R. 13 Gray, 124; s. c. 74 Am. Dec. 624; Langley v. Boston &c. R. Co., 10 Gray, 103; Freeman v. Minneapolis &c. R. Co., 28 Minn. 443. But see Ditchett v. Spuyten Duyvil &c. R. Co., 67 N. Y. 425. Cf. Tower Manuf. &c. Co. v. Ullman 89 Ill. 244.

4 Chicago &c. R. Co. v. Moffitt, 75 Ill. 524; Zimmer v. State, 30 Ark. 677; Tennessee v. Whitworth, 117 U. S. 147; Peoria &c. Ry. Co. v. Coal Valley Mining Co., 68 Ill. 489.

5 New Jersey &c. R. Co. v. Strait, 35 N. J. L. 323.

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

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

7

ley Co. v. Chicago &c. R. Co., 58 348; McAlpine v. Union Pacific Ry. Miss. 896; s. c. 38 Am. Rep. 348. Co., 23 Fed. Rep. 168.

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.

McAlpine v. Union Pacific Ry. Co., 23 Fed. Rep. 168.

6 Bruffett v. Great W. R. Co., 25 Ill. 353.

Western U. R. Co. v. Smith, 75 Ill. 496; Philadelphia &c. v. Howard, 13 How. 307. Especially where the articles of consolidation of two rail

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.