Couse v. Columbia Powder Manuf'g Co.

• Decision Date: 11 November 1895
• Parties: COUSE et al. v. COLUMBIA POWDER MANUF'G CO. et al.
• Court: New Jersey Court of Chancery

33 A. 297

COUSE et al.

v. COLUMBIA POWDER MANUF'G CO. et al.

Court of Chancery of New Jersey.

Nov. 11, 1895.

Bill by Emily Couse and another against the Columbia Powder Manufacturing Company and others to set aside fraudulent conveyances, and for a receiver. Heard on demurrer to bill. Overruled.

Aaron E. Johnston, for complainants.

Warren Dixon, for defendant Smith.

EMERY, V. C. The bill in this case is filed by the complainants in their right as attaching creditors of the Columbia Powder Manufacturing Company, a nonresident corporation, in aid of their lien under the attachment upon the real and personal property of that company. The bill alleges that the property attached as the property of the Columbia Company under the writ had been conveyed by that company to another nonresident corporation, called the Maxim Powder Manufacturing Company, previous to the issuance and execution of the writ. On the 23d day of December, 1893, the stockholders and incorporators of the Columbia Company passed a resolution directing the sale of all the property, real and personal, of the Columbia Company to the Maxim Powder Company, upon the terms that the Maxim Company should assume and pay all debts and liabilities of the Columbia Company, guarantying in writing to save the latter harmless from all liability by reason thereof, and as further payment or consideration for the transfer should issue and deliver to the stockholders and certificate holders of the Columbia Company one share of stock in the Maxim Company for each share of stock in the Columbia Company. The officers of the company were directed to make the transfer, and Nathan Kellogg and John Claffy were appointed, as trustees for the stockholders of the Columbia Company, to exchange the stock on the deposit of all the shares of stock and the execution of the agreements of sale. The bill further shows that on the same day and at the same place the Maxim Company, which is alleged to be composed in the main part of the same officers, stockholders, and incorporators as the Columbia Company, passed resolutions on its part for the purpose of carrying out the sale. The resolutions of the Maxim Company, set out in full in the bill, substantially provide as follows: After reciting that the Columbia Company is willing to sell all its property and assets, including patent rights, to the Maxim Company, and to receive in full consideration therefor $250,000 of the capital stock of the Maxim Company, provided the Maxim Company guaranties and saves harmless the Columbia Company from all indebtedness of every kind, and further reciting that the value of the property so purchased, in actual cash value, after deducting the said indebtedness, largely exceeds the sum of $250,000, then directs the issue of $250,000 full-paid capital stock of the Maxim Company to Nathan Kellogg and John Claffy, who are appointed trustees for the purpose, "to be delivered to the Columbia Company, or such certificate holders or stockholders as they may direct, in exchange for the stock of the Columbia Company to the amount of $250,000, to be canceled, and upon the delivery to this [the Maxim] company of proper transfers of all the assets, property, and patent rights of the Columbia Company." The resolution authorized the proper officers to execute the necessary papers, particularly the written guaranty. The bill then further alleges that on or about the 23d day of December the Columbia Company, by deeds of that date, transferred its lands and personal property (being the property afterwards attached) to the Maxim Company, and that on that day the Maxim Company executed an agreement (set out in the bill) by which the Maxim Company "hereby agrees to assume, and does hereby assume and agree to pay, any and all debts or liabilities lawfully existing against the said the Columbia Company, and hereby agrees to indemnify and save harmless the said Columbia Company of and from all costs and liability therefor or thereunder." On or about the 23d day of December, as appears by the bill, the Columbia Company also conveyed to the Maxim Company certain patent rights and interests to which the Columbia Company were entitled under an agreement with one Hudson Maxim, dated January 14, 1892, and which agreement is set out in full in the bill. On December 27, 1893, Maxim confirmed these rights so assigned to the Maxim Company, and gave additional rights by an agreement of that date also set out in the bill. The bill further charges as matter of fact that no consideration was paid for these conveyances and transfers by the Columbia Company, except the issuing of stock to the stockholders of the Columbia Company under the agreement, and also charges that by reason of these conveyances it is unable to obtain the benefit of the attachment, or enforce it against the property attached. As to the intent with which the conveyances were made, the bill alleges that they were made "either for the purpose of conveying said lands and transferring said personal property in trust for the payment of the debts of the said Columbia," etc., "Company, and in particular for the payment of said debts of your orators, or for the purpose of defrauding their creditors and your orators in particular, and delaying them in collecting their debts," etc. Having stated these substantial facts as to the transfer, the complainants make their statement of their legal effect, and in this statement of the legal effect they present them in an alternative aspect, and base their right to relief either upon one ground or the other. The transfer to the Maxim Company, say complainants in the first place, was upon the trust to pay the debts of the Columbia Company, including complainants' debts, and the Maxim Company should be decreed to hold the property in trust for that purpose, and, if not held on that trust, then the conveyances are alleged to be fraudulent against the creditors of the Columbia Company. Discovery is asked as to the terms of the transfer, the debts are prayed to be charged on the property, and, on allegations of insolvency of the Columbia Company, and the perilous condition of the property, a receiver is prayed for the property conveyed by the Columbia to the Maxim Company.

By reason of this double—or, as he claims, triple—aspect of the bill, the defendant Arthur H. Smith demurs specially for multifariousness, as well as generally for want of equity. Smith's status...