appointed committee,7 is practically the first step to be taken. Often it expressly requires the committee to formulate and submit to the bondholders, or bondholders and others, a detailed plan for the reorganization. Then the next step ordinarily is the publication or sending of notices to the bondholders, stockholders and creditors, or the part thereof given the right to participate, of the plan and agreement for reorganization, and requesting them to participate in the reorganization. Thereafter, usually, comes the depositing of bonds, stock or other securities with the committee, which must be done. within the fixed time limit prescribed by the agreement,10 and if stockholders desire to participate, it is generally necessary also to make certain payments within the time fixed in the reorganization plan or agreement. Generally, all these steps are taken before the judicial or execution sale, although not necessarily so. The committee, or its representatives, must perform the duties imposed upon them by the agreement,12 and when the judicial or execution sale takes place, it purchases at the sale, ordinarily paying the price bid in part by a turning in of the bonds or other securities deposited with it.13 The sale having taken place and the purchase having been made by the committee or by some one acting in their behalf, it is then necessary in most states to file a certificate of incorporation, the contents of which generally are somewhat different from the original articles of incorporation, which must contain the matters required by the reorganization statute.14 § 4858. Legality of such reorganization agreement. Such a reorganization agreement and the purchase in pursuance thereof are not only legal 15 but are regarded with favor by the courts.16 More The allegation that the committee was self-appointed is of no importance." Cutter v. Iowa Water Co., 128 Fed. 505. 8 Forms of notices, see Fletcher's Corporation Forms, Form No. 2074, 2079 et seq. 9 For forms of certificate of deposit, see Fletcher's Corporation Forms, pp. 1914-1918. 10 See § 4898, infra. 11 See $4900, infra. 12 See $4913, infra. 13 See § 4940, infra. 14 Statute in New York, see Stock Corporation Law, § 9. 15 See Easton v. German American Bank, 127 U. S. 532, 32 L. Ed. 210; Shaw v. Little Rock & Ft. S. R. Co., 100 U. S. 605, 25 L. Ed. 757; Plat v. Philadelphia & R. R. Co., 65 Fed. 872; Mackintosh v. Flint & P. M. R. Co., 34 Fed. 582; Robinson v. Philadelphia & R. R. Co., 28 Fed. 340; Farmers' Loan & Trust Co. v. Green Bay & M. R. Co., 6 Fed. 100; Kropholler v. St. Paul, M. & M. Ry. Co., 1 MeCrary 299, 2 Fed. 302; Gates v. Boston & N. Y. Air Line R. Co., 53 Conn. 333, 5 Atl. 695; Child v. New York & N. E. R. Co., 129 Mass. 170. 16 See § 4840, supra. over, the right of the bondholders to thus purchase for the purpose of reorganization is not limited to foreclosure sales under a decree of the court. They may purchase at a sale by the trustee under a power of sale given in the mortgage or deed of trust.17 § 4859. Statutory provisions. Where the property and franchises of a corporation are sold under a mortgage thereon, or at any other judicial sale, or under execution, the purchasers are generally expressly authorized by statute to reorganize the corporation, 18 and such statutes generally fix the procedure to effect a reincorporation.19 While purchasers at such a sale are generally expressly authorized by statute to reorganize the corporation, a statute expressly applicable to such cases is not necessary. In the absence of express restrictions, they may organize a corporation under the general laws authorizing the formation of corporations for such purposes. And the right to organize under a general law is not taken away by a special statute authorizing reorganization under such circumstances.20 And it fol 17 Easton V. German-American Bank, 127 U. S. 532, 32 L. Ed. 210. And see Child v. New York & N. E. R. Co., 129 Mass. 170. 18 Thomas v. Milledgeville Ry. Co., 99 Ga. 714, 27 S. E. 756, holding petition for incorporation need not be verified and no certificate of incorporation was necessary, prior to the act of 1894; Commissioner of Railroads v. Grand Rapids & I. R. Co., 130 Mich. 248, 89 N. W. 967; Dester v. Ross, 85 Mich. 370, 45 N. W. 530; People v. Brooklyn, F. & C. I. Ry. Co., 89 N. Y. 75; Texas Southern R. Co. v. Harle, 101 Tex. 170, 105 S. W. 1107. the place of its principal office, the amount of capital stock and the number of shares, the number of the directors and their designation for the first year, etc. See, for instance, New York Stock Corporation Law, $9. The New York statute is not repealed by the Public Service Commissions Law. People v. Public Service Commission for First Dist., 203 N. Y. 299, 96 N. E. 1011, aff'g 145 N. Y. App. Div. 318, 130 N. Y. Supp. 97. Repeal of Act of 1854 by Act of 1874, see Pratt v. Munson, 84 N. Y. 582. History of reorganization statutes in New York, see Vatable v. New York, L. E. & W. R. Co., 96 N. Y. 50, 54. A sale by decree of court may be ordered and a reorganization had, under the North Carolina statute, where there is statutory proceeding to dissolve a corporation for failure to pay or earn dividends for a specified time. Pocahontas Fuel Co. v. Tarboro Cotton Factory, N. C., 93 S. E. 790. 19 See infra, this section. 20 State v. Hare, 121 Ind. 308, 23 N. E. 145; Moore v. State, 71 Ind. lows that such a statute, where merely permissive, does not preclude the right to organize as a corporation under the general laws, after the time to organize under the special statute has expired.21 If there is a special statute fixing the steps to be followed, and it is applicable, then of course reference must be made thereto and a reorganization accomplished in conformity therewith.22 In consid 478. See also Vicksburg, S. & P. R. Co. v. Elmore, 46 La. Ann. 1237, 15 So. 701. Unless there is something to show a contrary intent upon the part of the legislature, a statute authorizing the reorganization of corporations, and prescribing a particular mode, is merely cumulative, and does not exclude the right of the purchasers of the franchises and property of a corporation to organize as a new corporation under general laws. Jeffrey v. Moran, 101 U. S. 285, 25 L. Ed. 785; Moore v. State, 71 Ind. 478. 21 Where a statute provided that the purchasers of railroads, turnpikes, etc., under foreclosure, should have the franchises and privileges of the corporation owning the road purchased, and declared that they should be a distinct corporation under such name as might be assumed by them, provided they should proceed to organize within three months under the old charter, etc., it was held that the statute was permissive merely, and that it did not prohibit such purchasers from organizing as a corporation of the like kind, after the three months, under the general laws. Moore v. State, 71 Ind. 478. See State v. Hare, 121 Ind. 308, 23 N. E. 145. 22 See Thomas v. Milledgeville Ry. Co., 99 Ga. 714, 27 S. E. 756; Vicksburg, S. & P. R. Co. v. Elmore, 46 La. Ann. 1237, 15 So. 701. Where the procedure to reorganize after a judicial sale is expressly provided for by statute, the failure to fully comply therewith does not preclude the existence of a new de facto But there is no reorganization in connection with a foreclosure sale, so as to be within the terms of the statute authorizing the reorganization, unless all the material provisions of the statute in regard to such reorganization are complied with. For instance, the purchase of independent parts of the property and franchises of a street railroad company, at a judicial sale, by certain individuals who later become a corporation in another name, and the formation of the latter company, do not constitute a reorganization, within the meaning of the New York statutes, where no plan or agreement was entered into at or previous to the judicial sale for readjustment of the interests of creditors, mortgagees, stockholders and others as provided for by the statute. People v. Public Service Commission for Second Dist., 210 N. Y. 456, 104 N. E. 952, modifying 158 N. Y. App. Div. 251, 143 N. Y. Supp. 148. The New York statute, which is more or less typical of the statutes in the various states providing for the reorganization of corporations in general after a judicial or execution sale, provides, in short (1) that the purchasers at such a sale may become a corporation, (2) upon making and filing a certificate of incorporation containing certain required matters, (3) pursuant to a reorganization plan or agreement entered into at or previous to the sale. New York Stock Corporation Law, §§ 9, 10. ering the statute, several things must be noticed. First, is it permissive or mandatory. As already noted,23 such statutes are generally merely permissive, so that the purchasers or their transferees may incorporate as provided for therein, or may disregard such statute and incorporate under the appropriate general statute just as any other persons, where there is no corporation already in existence. However, such a statute may be mandatory, in which case, of course, the purchasers must incorporate as provided for therein. Second, it must be observed whether the statute applies merely to purchasers at foreclosure sales or whether it also includes purchasers at other judicial sales and at execution sales.24 Third, such statutes sometimes apply only to particular classes of corporations. For instance, in at least one state, the statute applies to manufacturing corpora tions.25 In other states, the statue applies only to railroad corporations. In still other states, the statute applies to all corporations, or at least all stock corporations, while in other states one or more other corporations is all that the statute applies to. Fourth, statutes applicable to "reincorporation" of existing corporations, independently of any judicial or execution sale, are of course not applicable. where purchasers at a judicial or execution sale desire to incorporate. Such statutory provisions do not apply where the purchaser is already a corporation of the same nature as the old company,26 nor where the purchasing company does not intend to operate the business. 27 § 4860. Purchase of corporate property as itself making purchasers a corporation. As already stated, the franchise to be a The clause in the New York statute giving to every stockholder the right to assent to a plan of reorganization and obtain the benefits thereof within six months after the organization of the new corporation was stricken out by amendment in 1901. 23 See § 4841, supra. 24 The New York statute applies not only to reorganizations in conneetion with foreclosure sales, but also with an execution sale or any other judicial sale. New York Stock Corporation Law, § 9. 25 An electric light, heat and power company is a manufacturing corporation, within the Pennsylvania statute providing that, whenever the property and franchises of a manufacturing company shall be sold under process of court, the purchasers may reorganize the company. Com. v. Keystone Elec. Light, Heat & Power Co., 193 Pa. St. 245, 44 Atl. 326. The statute includes companies which manufacture artificial gas. Gas & Water Co. of Downingtown v. Borough of Downing. town, 193 Pa. St. 255, 44 Atl. 282. What are manufacturing companies in general, see § 88, supra. 26 People v. Brooklyn, F. & C. I. Ry. Co., 89 N. Y. 75. 27 Munson v. Syracuse, G. & C. R. Co., 103 N. Y. 58, 8 N. E. 355. corporation is not transferable by a corporation without legislative authority.28 Although a corporation may be authorized to sell and convey to others its property and franchises, and may do so in pursuance of such authority, or although the property and franchises of a corporation may be sold, under legislative authority, by virtue of an execution against it, or under a decree foreclosing a mortgage, the purchasers do not become a corporation merely by virtue of the purchase and transfer, unless the legislature expressly so provides; but they can become so only by procuring a special act of incorporation, or by organizing under a general law, and then transferring the property and franchises to the corporation thus created.29 It is within the power of the legislature, however, subject to constitutional limitations, if any are applicable,30 to permit and provide for a transfer of the right to be a corporation; and sometimes the statutes provide that a purchaser at a foreclosure or other judicial or execution sale of corporate property shall become a corporation and acquire the franchise of the old company to exist as a corporation.31 When a corporation, in pursuance of an act of the legislature, transfers its property and franchises, including the franchise to be a corporation, the transaction, in legal effect, is a surrender or abandonment of its charter by the corporation, with the consent of the legislature, and a grant by the legislature of a similar charter to the transferees, as of the time of the transfer.32 The question as to what words are sufficient to show an intention to create a corporation has been considered in a former chapter.33 28 See § 1224, supra. 29 Norfolk & W. R. Co. v. Pendleton, 156 U. S. 667, 673, 39 L. Ed. 574; Memphis & L. R. R. Co. v. Railroad Commissioners, 112 U. S. 609, 28 L. Ed. 837; State v. Morgan, 28 La. Ann. 482; Chaffe v. Ludeling, 27 La. Ann. 607; Atkinson v. Marietta & C. R. Co., 15 Ohio St. 21. See also Bruffett v. Great Western R. Co., 25 Ill. 353. And see § 179, and § 1410, supra. 30 See Atkinson v. Marietta & C. R. Co., 15 Ohio St. 21, holding statute unconstitutional as an attempt to create a corporation by special act. 31 See Guardian Trust & Deposit Co. v. Greensboro Water Supply Co., 115 Fed. 184; Holland v. Lee, 71 Md. 338, 18 Atl. 661; First Division St. Paul & P. R. Co. v. Parcher, 14 Minn. 297; Com. v. Central Passenger Ry. Co., 52 Pa. St. 506. See also Acres v. Moyre, 59 Tex. 623. Where a statute authorized the sale of the state canals, and provided that the grantees should hold and enjoy the same, together with all the rights, privileges, and franchises" of the grantors, who were a corporation, "and under such corporate name as said grantees" might adopt, it was held that an association of individuals purchasing the property became a corporation by virtue of the statute. Delaware Division Canal Co. v. Com., 50 Pa. St. 399. 32 State v. Sherman, 22 Ohio St. 411. 33 See § 233 et seq., supra. |