Ewing v. Composite Brake-shoe Co.

• Decision Date: 16 June 1897
• Citation: 47 N.E. 241,169 Mass. 72
• Parties: EWING v. COMPOSITE BRAKE-SHOE CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

169 Mass. 72

47 N.E. 241

EWING v. COMPOSITE BRAKE-SHOE CO.

Supreme Judicial Court of Massachusetts, Suffolk.

June 16, 1897

COUNSEL

H.J. Jaquith and

W.R. Bigelow, for plaintiff.

Chas Allen Taber, for defendant.

OPINION

LATHROP J.

The plaintiff was a creditor of a Maine corporation to the amount of $787. This corporation ceased to do business, and the stockholders, together with at least one other person, formed a new corporation, with a different name, under the laws of Massachusetts. The new corporation is the defendant in this case. It took all of the assets of the old corporation except its books, but it did not assume to pay all of the debts of the old corporation, although there was evidence that one Whitcomb, who was the manager of both of the corporations told the plaintiff that the new company would be liable for the debts of the old. It is obvious, however, that where a new corporation is formed the creditors of the old corporation do not, without something further being done become creditors of the new corporation. They have an equitable right to follow the assets of the old corporation but they cannot maintain an action at law against the new corporation, for there is no privity of contract. To render the new corporation liable, there must be a new contract made, such as will amount to a novation. See Mor.Priv.Corp. (2d Ed.) § 808 et seq. If a new contract is made between a creditor of the old corporation and the new corporation, the latter is liable only on the new contract. In the case at bar, according to the plaintiff's testimony, the new contract which he made with the manager was that he should receive $200 in cash and five shares of the capital stock of the new corporation at the par value of $100 a share in full payment of his claim of $787. He received the money and a certificate of five shares of the capital stock. He now seeks to rescind the new agreement, on the ground that the capital stock of the new corporation was not fully paid in before it began business. But, even if this is so, he cannot hold the new corporation for the original debt, as it never contracted to pay it, except in the manner in which the agreement has been performed.

There is an independent ground, which leads to the same result. The plaintiff has tendered only the five shares of stock, and has not offered to return the $200 which he received. If a person enters into a contract, and afterwards...