Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/431

PAKT V.] CONSOLIDATION. [§ 427. § 427. The rationale of these different cases, and especially of Prouty v. Lake Shore, etc., R. R. Co., will be more apparent if the matter be considered from the point of view of the rights of the former corporations' creditors as against the consolidated company and the property which it has acquired through con- solidation, rather than from the point of view of that corpora- tion's liability to them. A creditor cannot prevent a corpora- tion which owes him money from consolidating with another ; but, on the other hand, his rights respecting the property of his debtor — which constitutes a fund for the payment of its debts — cannot be affected by its consolidation with another corporation. 1 He can follow this fund into the hands of the consolidated corporation ; and his rights in regard to the prop- erty of his debtor are certainly prior to the rights of the cred- itors of the other consolidating companies. The idea of con- solidation seems to imply responsibility on the part of the consolidated corporation for the debts of the former companies : the rights of the creditors of each consolidating company are unaffected by the consolidation : the outcome is, that the con- solidated corporation is personally liable for all the debts of the former companies ; but the equitable lien which each group of creditors has on the property of their debtor corporation pre- serves its validity and priority as against the creditors of the other corporations. 2 Although the (Michigan law) sub- jects consolidated companies to the obligations of their constituents, yet the consolidation creates a new and distinct corporation, and a declara- tion against it for a cause of action arising hefore consolidation should show against what company it arose, and aver such facts as will subject the new company to be sued on it. Marquette, H. and O. R. R. Co. v. Langtou, 32 Mich. 251. 1 See Shackleford v. Miss. Central R. R. Co., 52 Miss. 159. Compare Indianola R. R. Co. v. Fryer, 56 Tex. 609; Houston, etc., R. R. Co. v. Shir- ley, 54 Tex. 125; Whipple v. Union Pacific Ry. Co., 28 Kan. 474; Hamlin v. Jerrard, 72 Me. 62. 2 See Shackleford v. Miss. Central R. R. Co., 52 Miss. 159. See further as to the rights of creditors on con- solidation, §§665, 666. A consoli- dated company is affected with no- tice of an unrecorded mortgage on the property of the corporations from which it is formed; and such mort- gage will be good as against judg- ment creditors of the consolidated company who buy the mortgaged premises on execution. Mississippi Valley Co. v. Chicago, etc., R. R. Co., 58 Miss. 846; cf. Cordova Coal Co. v. Long, 91 Ala. 538. A shareholder, by provisions of the consolidating agreement, to which he was a party, may be precluded from collecting from the consolidated company a 411