Folsom v. Detrick Fertilizer & Chemical Co.

Citations

• 85 Md. 52
• 36 A. 446
• 1897 Md. LEXIS 25

Syllabus

<p>Corporations — Transfer of a Trader's Insolvent Business to a Corporation Controlled by Him. — Preference to Individual Creditor of Trader — Rights of Subsequent Creditors of the Corporation— Fraudulent Conveyances — Partnership Real Estate — Parties.</p> <p>W., a trader then insolvent, in order to secure the payment of his principal creditor F., transferred all of his property to a corporation organized by himself and the creditor, and controlled by the latter. All of the stock of the corporation was issued as full paid to W., and the corporation also issued to him promissory notes to a large amount and assumed his debts. The valuation put upon the property transferred to the corporation for the stock and notes was largely in excess of its real value. Most of the promissory notes of the corporation were assigned by W. to his creditor F., and the corporation afterwards executed to F. a deed of certain property in satisfaction of some of them. Upon a bill by subsequent creditors of the corporation which was insolvent, Held,</p> <p>ist. That the effect and object of this transaction was to delay, hinder and defraud subsequent creditors of the corporation, the plan being to use the property of the corporation to pay W.’s debt to F. and to leave the future debts of the corporation unpaid.</p> <p>2nd. That the conveyance of the property to F. should be vacated.</p> <p>3rd. That the promissory notes executed by the corporation to W. must be postponed to the claims of subsequent creditors without notice, (a).</p> <p>Where a conveyance of real estate to a firm in payment of a debt due to it is assailed because in fraud of the rights of creditors of the grantor, the heirs of a deceased partner are not necessary parties to a bill by the creditors.</p>