| Show RAilROADS CANNOT AVOiD OBLIGATIONS TION Supreme Court Divides Five to Four in Decision of Great Importance po TV April 28 In In W vy sion of or momentous importance O especially as to railroads the thc supreme court toda today laid down the tho general principle principle prin prin- ciple the creditor of a a. corporation not nota a 3 party part to Its reorganization ma may hold its ils successor for tot debt The decision was vas announced b by Justice Lamar In a asuit asuit asuit suit brought b by Joseph H. H Boyd In this specific case tho court In a 3 decision which Justice Lurton who dissented declared was alarming held heM the tho Northern Pacific Railway cemp company corn com p pany 11 responsible for Sl judgment against the Northern Pacific Railroad company compau which it succeeded despite the tho fact tact that the court expressly stated stated stat stat- ed eel that no moral wrongdoing was to tobe tobe tobe be found round in the reorganization Corporation lawyers lawers who heard tho the decision declared It was a a. direct blow at tho the practice of oC reorganizing corporations corporations corporations cor cor- to get rid of ot onerous contracts contracts contracts con con- tracts or escape payment to un unsecured cre creditors Its effect they thought would be far The vote voto stood five fl to four with Ju Justices s tie c s Holmes s Va n d even t e r and Chief Chlor Justice White concurring concurrIng- with Continued on en Page e C G Column 5 I RAilROADS CANNOT AVOID BY ORGANIZATION OBLIGATIONS Continued From Pa Page e I 1 I Justice Lurton's dl dissent sent The rho decision It Is IM said will wll nf affect ct in some Sonic degree man many railroad reorganizations floyd Dod orl originally ha hart liaa a judgment for a against the Coeur dAleno leno Pacific Pacific Pa Pa- cHic company compan and brought suit ui a against the Northern Pacific Railroad Hal Hal- Rail road rond company compan after It 1 bought the tuG Coeur dAlene company compan He lie ought nought to have his jud Judgment ment ag against the tue railroad company compan declared a a lien upon the property property property prop prop- erty of or Its successor S tho the Northern Paci Pa Pa- ci Ic When Boyd Tord found tho the property In Inthe Inthe the same hands after the tho reorganization tion ton as before he had a right to get set the prop property rh for tOl the pa payment ment 0 of oC the debt even though thought there had been a Judicial sale declared Justice Lamar Lamal Ho lie 11 held heldI I that although h there had been no moral I fraud yet the decree of ot sale of ot tho the property property prop prop- ert erty from the railroad company to the tho I railway company compan was void old as to a nonI nonconsenting nonconsenting non- non I consenting creditor He lie added this was true although the reorganization aton oc occurred oc- oc years rears ago aso I Justice Lurton in dissenting held that th reorganization was not a mere transfer Of the property of or the Northern Northera North orth- ern era Pacific railroad stockholders to themselves as aa stockholders holders of or tho the Northern Pacific railway but was vas an effort effon of or tho the stockholders to save sa o tho the property in a situation where tho tue property had gone gono into Inlo the hands of a receiver and where hero conditions were steadily growing worse vorse Therefore he lie added tho the sale salo should stand as ns valid vald after the against anyone who years CarH sale came forward to attack atack the act to save the proper property Principle Jal flown Down by bj- The Tho principle as laid down b by Justice Jus Jus- tice Lamar wa was wan stated lu lit this language language lan lan- guage Corporations insolvent or financially financial financial- ly Iv embarrassed often oCen find it I nece necessary to ta scale cale their debts and rea readjust Just stock issues with wih an agreement arcement to conduct th the same business with the tho same sanio property property prop prop- ert erty under tInder a reorganization This ma maybe may maybe be done llone in pursuance to private contract contract contract con con- tract b by bondholders and stockholders and thou though h the tho corporation propertY is 16 thereby transferred to a new company com corn pany having the tue lanH same shareholders the transaction would bo be bl binding between between be bo- be- be tween the parties partes But of course such ch a transfer by bj stockholders from rom themselves to themselves themselves them them- selves cannot defeat the tho claims of or a a nonas creditor As against him tho thio sale salo Is void In equity rc regardless of the motive with which It was wa mad made For If t such uch contract reorganization wa was wag consummated in good faith and amI in tn I Ignorance of the existence o of the credItor creditor cred cred- yet et when he ho appeared and established h hs s debt the subordinate Interest of the oi old stockholders would still be subject to his claim In th the tho hands hand of or the reorganized company There is no difference difference dif dif- ference In principle If It tho the reorganization tion instead of being by b private sale I Is consummated b by a a masters master's masters master's mas mS- ter's deed ded under a. a n consent decree Favor o Fn J Widows and other oilier e relatives of ot de deceased do- do ceased bankrupt won a victory Ictor to today a in the supreme court which held that on only the cash surrender value of or insurance in insurance In- In policies go to the trustee In JO hanl bankruptcy for creditors and the re remainder remainder re- re to the widows or other rela rela- reli- reli tIcs tives of ot bankrupts On th the outcome depended Insurance on the life of the late latr Thomas A. A McIntyre McIntyre Mc- Mc Intyre Intyre of or New York Tork on Alfred M. M r Judson Jud- Jud son also of or New York and on Benjamin Benjamin Benja Benja- min rain D D. Andrews of ot New Jersey Jorsey Tho The decision chan changes e what was wa held to b be hi the law In New ew Jers Jersey and Pennsylvania Pennsylvania Penn Penn- sylvania sylvania and r removes moves doubt as to tho the point In all al the other states Justice DR Day rendered the courts court's opinion which turned upon the interpretation inter Inter- of the tho intention of or Congress In passing the bankruptcy act In passing passing this statute said he he Congress Congress Intended while exacting this much the value of the policy at the time of ot the beginning beginning- of ot thi the bankruptcy bank bank- proceeding that the bankrupt should bo be permitted to retain tho thin Insurance In In- In which because of ot advancing years ears or declining health it might be Impossible for him to replace It I i Is the twofold purpose of the bankruptcy act to convert tho the estate of tho the bankrupt Into cashi cah and distribute It k m among creditors among and then give Ivo the bankrupt a a. fresh Cresh start with start such rights and Property as the statute left ler untouched Tho The supreme court will wil hear hear ar u- u meat ment on no m more rc cases this term after Ma May 9 and will recess front from wJ May 12 to Ma May fa 26 6 G I |
