The Daily Missoulian., 1913-04-29
REoRGANlZED NORTHERN Pa
ClFiC RAILWAY COMPANY
MUST PAY OLD DEBT.
SUPREME COURT DECIDES
Judgment Of $125,ooo Against Old
Northern Pacific Railroad Company
Must Be Paid by Its Successor
-Four Of the Supreme Justices Rem
der Dissenting Opinion.

Washington, April 23.-1n decision
of momentous Importance, especially
as to railroads, the supreme court laid
down today the general principle that
a creditor of a corporation, not a party
to it's reorganization, may hold it's sue
cessor for its debt. In this specific
case the court, five to four, in a de-
cision which Justice Lurton, who dis
sented, declared "Was alarming" held
the Northern Pacific Railway company
responsible for $125,OOO judgment
against the Northern Pacific Railroad
company, which it succeeded despite
that no moral wrong doing was to be
found in the reorganization.
Corporation lawyers who heard the
decision declared it was direct blow
at the practice Of reorganizing corpora
tions to get rid of onerous contracts
or escape payment to unsecured cred
itors. Its effect, they thought, would
be far reaching.
The vote. stood to with Justices
Lamar was stated in this language:
The Opinion.
ly embarrassed often find it necessary
to scale their debts. and readjust stock
issues with an agreement to conduct
the same business with the same prop
erty under a reorganization. This may
be done in pursuance to a private con-
tract between bondholders and stock
holders, and though the corporation
property Is thereby transferred to a
new company having the same share
holders, the transaction would be bind
ing between the parties.
But, of course, such a transfer by
stockholders from themselves to them
selves cannot defeat the claim of a
asserting creditor. AS against him,
the sale is void in equity, regardless
of the motive with which it was made.
For, If such contract reorganization
was consummated in good faith and in
ignorance Of the existence of creditor,
yet when he appeared and established
his debt, the subordinate interest of
the old stockholders would still be sub
ject to his claim in the hands of the
reorganized company. There is no
differnce in principle if the reorgani-
cation instead of being effectuated by
private sale, is consummated by mas
ter's deed under a consent decree"
The vote stood 5to with Justices
Holmes, Vandeventer and Chief Justice
White concurring with Justice Lurton's
dissent. The decision, it is said, will
affect in some degree many railroad
reorganizations.
i Joseph H. Boyd of Spokane originally
had a Judgment for $125,O0O against
the Coeur d'Alene Railway & Naviga-
tion company and brought suit against
the Northern Pacific after it bought
the Occur d'Alene company. He sought
to have his judgment against the rail-
property of it's successor, the Northern
Pacific.
when Boyd found the property in
the same hands after the reorganiza-
tion as before he had a right to get
the property for the payment of the
debt, even though there had been a
judicial sale," declared Justice Lamar.
He held that although there had been
no osmoral fraud, yet the decree of sale
of property from the railroad company
to the railway combination was void as
to non-consenting creditor. He added
this was true although the reorganiza-
tion occurred years ago.
Justice IurtOn, in dissenting, held
that the reorganization was not a mere
transfer of the property of the North
ern Pacific railroad stockholders to
themselves as stockholders of the