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§ 65. The same subject.-Express adoption.

The fact that the contract of the promoters is one made by the promoters to be performed by them individually, and not a contract contemplating performance by the corporation when organized, is of course immaterial if the corporation not only accepts the benefits of the promoters' contract but expressly assumes its obligations.84

84. California.-Northup v. Altadena Min. & Inv. Synd., 6 Cal. App. 101, 91 Pac. 422.

Connecticut.-Waterman's Appeal, 26 Conn. 96.

Kansas.-Davis & Rankin V. Dexter Butter & Cheese Co., 52 Kan. 693, 35 Pac. 776, distinguished in Tryber v. Girard Creamery Co., 67 Kan. 489, 496, 73 Pac. 83, 86.

Mississippi.-Johnston v. Gumbel, 19 So. 100.

Missouri.-Shufeldt v. Smith, 139 Mo. 367, 40 S. W. 887.

Nevada.-Paxton v. Bacon Mill & Mining Co., 2 Nev. 257, 261–262.

New York.-J. H. Lane & Co. v. United Oil Cloth Co., 103 App. Div. 378, 92 Supp. 1061.

It has been held that where the corporation expressly assumes all the debts of a partnership whose business it takes over, a secret understanding of the directors that the claims of certain creditors are to be excepted, is of no effect and will not prevent these creditors from insisting on payment by the corporation. Williams v. Colby, 53 Hun (N. Y.) 637, 6 Supp. 459. Compare, though a very different case, Lee v. Steinhart Lumber Co., 66 Wash. 572, 119 Pac. 1117.

It has been held that an express assumption by the corporation of all

liabilities incurred in the partnership business which it takes over, includes tort as well as contract liabilities. Forbes v. Thorpe, 209 Mass. 570, 95 N. E. 955, and see Ziemer v. C. G. Bretting Mfg. Co., 147 Wis. 252, 133 N. W. 139, Am. & Eng. Ann. Cas. 1912, D. 1275.

As to priorities between debts of a partnership assumed by the corporation and subsequent debts of the corporation itself, see Lamkin v. Baldwin and Lamkin Mfg. Co., 72 Conn. 57, 43 Atl. 593, 44 L. R. A. 786.

As to such priorities where the debts of the partnership are not expressly assumed, see Thorpe v. Pennock Merc. Co., 99 Minn. 22, 108 N. W. 940, 9 Am. & Eng. Ann. Cas. 229.

It was held in Smith v. Bowker Torrey Co., 207 Fed. Rep. 967, where the corporation had issued, in payment for the gross personal assets of the partnership, shares to the full value thereof, that there was no consideration for the further agreement to assume the partnership debts. The decision rests largely upon the particular facts.

As to whether a corporation taking over the business of a partnership or of another corporation thereby necessarily debts, see post, § 67n.

assumes the

§ 66. The same subject.-Obligations cast upon assignee by terms of contract.

A contract with the promoters, though made without reference to performance thereof by a corporation to be formed for the purpose, may be so drawn as to make its obligations binding upon any assignee thereof, and the corporation cannot, in such case, any more than can any other assignee, accept an assignment of the contract without at the same time assuming responsibility for the performance of its obligations.85

§ 67. The same subject.-Where corporation is organized to escape existing obligations.

If the promoters resort to the fiction of a separate corporate entity, merely to avoid obligations to which they had before its organization become subject with respect to the business transferred to the company, courts of equity will, when the ends of justice require it, look beyond the fiction of the corporate entity and hold the corporation to a discharge of the liabilities previously resting upon its members.86

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Arkansas.-Carter V. Gray, 79 Ark. 273, 282-283, 96 S. W. 377, 380.

California. Higgins v. California P. & A. Co., 122 Cal. 373, 55 Pac. 155; Higgins v. California P. & A. Co., 147 Cal. 363, 81 Pac. 1070; Cornell v. Corbin, 64 Cal. 197, 30 Pac. 629.

Colorado.-Franklin Mining Co. v.
O'Brien, 22 Colo. 129, 141-142, 43
Pac. 1016, 1020, 55 Am. St. Rep. 118.
Michigan-Beal V. Chase, 31

Mich. 490, 495, 532.
New York-Booth v. Bunce, 33 N.
Y. 139, 88 Am. Dec. 372.

North Carolina-Nat'l Union Bk. of Md. v. Hollingsworth, 135 N. C. 556, 47 S. E. 618, and cases cited.

§ 68. Liability of the corporation as affected by nature of the

particular agreement.

It is obvious that performance of a contract entered into by

Pennsylvania.-Penn. Knitting Mills v. Bibb Mfg. Co., 12 Pa. Super. Ct. 346, 351.

Utah Utah Black Marble Co. v. Am. Marble & Onyx Co., 43 Utah 68, 133 Pac. 472.

United Kingdom and Colonies.Trustee of Gonville v. Patent Caramel Co., Ltd., 1912, 1 K. B. 599.

See also note to Oakes v. Cattaraugus Water Co., 26 L. R. A. 551; note to Donovan V. Purtell, 1 L. R. A. N. S. 176 and note to Cushion Heel Shoe Co. v. Hartt, 50 L. R. A. N. S. 979, 987. See Moore on Fraudulent Conveyances, page 56.

See also post, § 71.

In Bergen v. Porpoise Fishing Co., (41 N. J. Eq. 238, 3 Atl. 404), the court held a mortgage made by the corporation, fraudulent as against creditors whose debts arose out of business done by the promoters before incorporation, but in the name of the company afterwards formed. This judgment was, however, reversed on appeal, 42 N. J. Eq. 397, 8 Atl. 523.

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avoided, is not material, if all the stockholders had notice and participated in the effort to avoid the obligations of their associates. Moore & Handley Hardware Co. v. Towers Hardware Co., 87 Ala. 206, 211, 6 So. 41, 43, 13 Am. St. R. 23. It has been held that a subsequent transfer of shares to innocent purchasers does not affect the corporate liability. Higgins v. California P. & A. Co., 122 Cal. 373, 55 Pac. 155, same v. same, 147 Cal. 363, 81 Pac. 1070.

As to whether a corporation taking over the business of an individual, of a partnership, or of another corporation, thereby assumes its debts, see:

Federal.-DuVivier & Co. v. Gallice, 149 Fed. Rep. 118, 80 C. C. A. 556, and note.

Colorado.-Curtis, Jones & Co. v. Smelter Nat'l Bank, 43 Colo. 391, 96 Pac. 172; Denver & Santa Fe Ry. Co. v. Hannegan, 43 Colo. 122, 95 Pac. 343, 16 L. R. A. N. S. 874, 127 Am. St. Rep. 100.

Georgia. Culberson v. Alabama Const. Co., 127 Ga. 599, 56 S. E. 765, 9 L. R. A. N. S. 411, 9 Am. & Eng. Ann. Cas. 507; Georgia Co. v. Castleberry, 43 Ga. 187; Greenberg-Miller Co. v. Everett Shoe Co., 138 Ga. 729, 75 S. E. 1120; Atlantic & Birmingham Ry. Co. v. Johnson, 127 Ga. 392, 56 S. E. 482, 11 L. R. A. N. S. 1119.

Illinois.-Lemars Shoe Co. v. Le

the promoters cannot be lawfully undertaken by the corporation, and that the contract cannot become binding upon it, if the contract is one that the corporation could not make in the first in

mars Shoe Mfg. Co., 89 Ill. App. 245; Chicago City Ry. Employees' Mutual Aid Ass'n v. Hogan, 124 Ill. App. 447; Lawrence V. Nyberg Automobile Works, 162 Ill. App. 348. Iowa.-Luedecke v. Des Moines Cabinet Co., 140 Iowa 223, 118 N. W. 456, 32 L. R. A. N. S. 616.

Kentucky.-Guenther v. Am. Steel Hoop Co., 116 Ky. 580, 25 Ky. L. R. 795, 76 S. W. 419.

V. Pennock

Minnesota.-Thorpe Mercantile Co., 99 Minn. 22, 108 N. W. 940, 9 Am. & Eng. Ann. Cas. 229; Swing v. Empire Lumber Co., 105 Minn. 356, 117 N. W. 467.

Missouri.-Slattery v. St. Louis & N. O. Transp. Co., 91 Mo. 217, 4 S. W. 79, 60 Am. Rep. 245; Shufeldt v. Smith, 139 Mo. 367, 40 S. W. 887; Bremen Savings Bank v. BranchCrookes Saw Co., 104 Mo. 425, 16 S. W. 209; Berthold v. HolladayKlotz Land, etc., Co., 91 Mo. App. 233.

Nebraska.-Campbell v. Farmers' & Merchants' Bank, 49 Neb. 143, 68 N. W. 344, and cases cited; Austin v. Tecumseh Nat'l Bank, 49 Neb. 412, 68 N. W. 628, 35 L. R. A. 444, 59 Am. St. R. 543, and cases cited. Tecumseh Nat'l Bank v. Saunders, 50 Neb. 521, 70 N. W. 42, 51 Neb. 801, 71 N. W. 779; Buerstetta v. Tecumseh Nat'l Bank, 57 Neb. 504, 77 N. W. 1094; Douglas Printing Co. v. Over, 69 Neb. 320, 95 N. W. 656; Baker Furniture Co. v. Hall, 76 Neb. 88, 107 N. W. 117; 111 N. W.

129; 113 N. W. 267; Hall v. Baker Furniture Co., 86 Neb. 389, 125 N. W. 628; Reed Bros. v. First Natl. Bank of Weeping Water, 46 Neb. 168, 64 N. W. 701.

Nevada.-Paxton v. Bacon Mill & Min. Co., 2 Nev. 257.

New York.-Irvine v. New York Edison Co., 207 N. Y. 425, 101 N. E. 358, Am. & Eng. Ann. Cas. 1914 C. 441; Goldmark v. Magnolia Metal Co., 28 App. Div. 264, 51 Supp. 68; same v. same, 44 App. Div. 35, 60 Supp. 425, aff'd, 170 N. Y. 579, 63 N. E. 1117; Thorn v. Volunteer St. Gregory Hosp., 59 Misc. 442, 110 Supp. 931.

North Carolina.-Nat'l Union Bk. of Md. v. Hollingsworth, 135 N. C. 556, 47 S. E 618, and cases cited.

Ohio.-Andres V. Morgan, 62 Ohio St. 236, 56 N. E. 875, 78 Am. St. R. 712, and cases cited.

Pennsylvania.-Dengler v. Helms, 4 Walker 476, 481.

South Dakota.-Byrne & Hammer Dry Goods Co. v. Willis-Dunn Co., 23 S. D. 221, 121 N. W. 620, 29 L. R. A. N. S. 589.

Wisconsin.-Ziemer v. C. G. Bretting Mfg. Co., 147 Wis. 252, 133 N. W. 139 Am. & Eng. Ann. Cas. 1912 D. 1275, and cases cited.

Wyoming.-Durlacher v. Frazer, 8 Wyo. 58, 55 Pac. 306, 80 Am. St. R. 918.

See note to El Cajon Portland Cement Co. v. Robert F. Wentz, Engineering Co., 92 C. C. A. 460–462;

stance,87 such as a contract that is contrary to public policy,8 or one that is beyond the scope of the corporate powers. 89

note to Austin v. Tecumseh Natl. Bank, 59 Am. St. Rep. 543, 547-560; note to Atlantic & Birmingham Ry. Co. v. Johnson, 11 L. R. A. N. S. 1119; note to Byrne-Hammer Dry Goods Co. v. Willis-Dunn Co., 29 L. R. A. N. S. 589, and note to Luedecke v. Des Moines Cabinet Co., 32 L. R. A. N. S. 616.

In Natl. Union Bank of Md. v. Hollingsworth, 135 N. C. 556, 47 S. E. 618, where a surviving partner, personally liable on an indorsement of a note in the firm name made by him without authority, organized a corporation and without fraudulent intent transferred to it the assets of the firm in payment of his subscription to its capital stock, it was held that the corporation was not liable for the debt evidenced by the note.

It has been held that partners who have transferred their partnership business to the corporation remain primarily liable for the debts of the partnership. Broyles v. McCoy, 5 Sneed (Tenn.) 602.

87. McArthur v. Times Printing Co., 48 Minn. 319, 51 N. W. 216, 31 Am. St. Rep. 653; Schreyer v. Turner Flouring Mills Co., 29 Or. 1, 43 Pac. 719. A corporation may make itself liable for money loaned to it through its promoters before its organization; Schreyer V. Turner Flouring Mills Co., supra. See also Pitman v. Chicago J. L. & Z. Co., 113 Mo. App. 513, 87 S. W. 10; Quinn v. American Bankers' Assur. Co., 183 Mo. App. 8, 165 S. W. 823.

88

In Ex parte Watson, L. R. 21 Q. B. D. 301, an unincorporated building society borrowed money on the notes of its directors, though it had, as then constituted, no power to borrow money. The society was afterwards incorporated with borrowing powers and the corporation gave its note for the moneys borrowed by the society. It was held that the note was unenforceable as the original loan was unlawful.

88. Michigan.-Chicago & Grand Trunk Ry. Co. v. Miller, 91 Mich. 166, 51 N. W. 981.

New Hampshire.-Low V. Connecticut & Passumpsic Rivers R. R., 45 N. H. 370, 376.

New York.-Wilbur v. New York Electric Construction Co., 58 Super. 539, 35 St. Rep. 81, 12 Supp. 456; Oakes v. Cattaraugus Water Co., 143 N. Y. 430, 437, 38 N. E. 461, 62 St. Rep. 445, 26 L. R. A. 544.

Pennsylvania.-Martin v. Second & Third Street Passenger Ry. Co., 3 Phila. 316; Gearhart v. Standard Steel Car Co., 56 Pitts. L. J. 94.

Washington.-Hampton

V. Buchanan, 51 Wash. 155, 98 Pac. 374. 89. First Nat'l Bank v. Church Federation of America, 129 Iowa 268, 105 N. W. 578; Bradford v. Metcalf, 185 Mass. 205, 207, 70 N. E. 40; Tift v. Quaker City National Bank, 141 Pa. 550, 551, 21 Atl. 660, 38 Am. & Eng. Corp. Cas. 339; Preston V. Proprietors of Liverpool, Manchester, etc., Ry. Co., 5 H. L. Cas. 605, 621; Caledonian, etc., Ry. Co. v. Magistrates of Helens

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