Spadra-Clarksville Coal Co. v. Nicholson

Citations

• 93 Kan. 638

Syllabus

<p>SYLLABUS BY THE COURT.</p> <p>1. Corporations — Bondholders Take Possession of Corporate Assets — Continue Business — Incur Debts — Purchase Assets at Mortgage Sale — Organize New Corporation — Transfer Property to New Corporation without Consideration — New Corporation Becomes Liable for Debts Incurred by Bondholders. A manufacturing corporation, without having issued any shares of its authorized capital stock, gave a mortgage on all of its property to secure an issue of bonds, with a provision that upon default in the payment of interest the bondholders were authorized to take all the mortgaged property into their possession through the trustee, and operate and manage the business and property as a going concern for the purpose of preserving it as security. The company defaulted on its payments, and at the request of a majority of the bondholders the trustee took possession of all the property and business, making one of the principal bondholders its agent, and the business was continued for more than two years by the bondholders in the name of the mortgagor. Thereafter, at the request of the bondholders, the trustee foreclosed the mortgage, and the property was sold under the decree and purchased by the bondholders, who thereupon organized a new company as a holding company to take the title to the property, ■ and the sheriff’s deeds were made conveying all the property to the new company, none of the authorized capital stock of which was issued. No consideration was paid for the purchase of the property by the new company, except the interest its incorporators owned as bondholders. In an action by plaintiff to recover for material and supplies furnished to the bondholders while in possession, and which were used for the purpose of preserving the property as security for the bonds, it is held that it would constitute a fraud on the rights of the plaintiff to permit the new company to acquire the title to the property freed from such obligations; that the circu