In re Stanford Clothing Co.

Citations

• 187 F. 172
• 1911 U.S. Dist. LEXIS 282

Syllabus

<p>1. Bankruptcy (§ 316*) — Debts of Former Corporation — Claims Provable.</p> <p>A bankrupt purchased only part of the assets of a former insolvent corporation doing a similar business at the same stand. The bankrupt was used as a liquidating and collecting agent for tbe old company; tbe principal owners of both being tbe same, though there was not an identity of stock interest. Held, that renewal notes, executed by the new corporation to a bank, covering notes given for an indebtedness of tbe old corporation to tbe bank, without any new consideration, were not enforceable agairlst tbe new corporation’s estate in bankruptcy, under tbe rule that a corporation has no authority to pay the debts of a third person, in the absence of a binding obligation arising from an agreement 'to assume such third party’s debts, based on a valuable consideration.</p> <p>[Ed. Note. — For other cases, see Bankruptcy, Dec. Dig. § 316.*]</p> <p>2. Bills and Notes (§ 360*)' — Renewal Paper — Execution by Third Person — Want of Consideration — Notice.</p> <p>Where a bank, bolding .notes of an insolvent corporation, knew that renewal notes executed by the bankrupt, a new corporation organized to purchase and carry on tbe old corporation’s business, constituted an agreement by tbe new corporation to pay tbe debts of the old, and that they were separate, legal entities, the bank was put on inquiry as to whether there was a valid consideration moving to the new corporation ’for such renewal notes, under the rule that payment by one corporation of the debts of another is not in tbe regular course of business, and that the taker of paper with notice that it is of that character does so at his peril.</p> <p>[Ed. Note. — For other cases, see Bills and Notes, Cent. Dig. § 793; Dec. Dig. § 360.*]</p>