"Shares" means a share or shares of stock in a corporation organized under the laws of this state or of another state whose laws are consistent with this act. "State" includes state, territory, district and insular possessions of the United States. "Transfer" means transfer of legal title. "Title" means legal title and does not include a merely equitable or beneficial ownership or interest. "Value" is any consideration sufficient to support a simple contract. An antecedent or pre-existing obligation, whether for money or not, constitutes value where a certificate is taken either in satisfaction thereof or as security therefor. (2) A thing is done "in good faith" within the meaning of this act, when it is in fact done honestly, whether it be done negligently or not. Section 23. The provisions of this act apply only to certificates issued after the taking effect of this act. Section 24. All acts or parts of acts inconsistent with this act are hereby repealed. Section 25. This act may be cited as the Uniform Stock Transfer Act.1 1 The Uniform Stock Transfer Act has been adopted in Connecticut, Illinois, Louisiana, Maryland, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, South Dakota, Tennessee, Wisconsin, and Alaska. CHAPTER V THE RELATION OF CREDITORS TO THE CORPORATION Section 1. Rights of Corporation Creditors Against a Purchaser of the Assets. of the Debtor Company. 2. Priorities Among the Various Classes of Creditors in General. 3. Current Operating Expenses to be Paid out of Current Earnings in Preference to Claims of Secured Creditors. 4. Rights of Unsecured Creditors Arising upon Reorganization 5. Rights of Creditors Against Stockholders. SECTION 1.-RIGHTS OF CORPORATION CREDITORS AGAINST A PURCHASER OF THE ASSETS OF THE DEBTOR COMPANY ZIEMER v. C. G. BRETTING MFG. CO. (Supreme Court of Wisconsin, 1911. 147 Wis. 252, 133 N. W. 139, Action by W. W. Ziemer against the C. G. Bretting Manufacturing Company. Judgment for defendant. Plaintiff appeals. * * TIMLIN, J. * * * It appeared that C. G. Bretting carried on a foundry business, under the name of the C. G. Bretting Manufacturing Company, at Ashland, Wis., prior to his death, which occurred in A. D. 1904. * * *C. G. Bretting left surviving him his widow and three sons, Ralph Bretting, William Henry Bretting, and Henry L. Bretting. These four may be said to have owned the foundry plant and business as widow and heirs of C. G. Bretting, deceased. On or about March 16, 1907, Jane Bretting, Sam Wheeler, and C. A. Lamoreaux executed articles of incorporation of the C. G. Bretting Manufacturing Company, and caused the same to be duly filed with the Secretary of State and recorded with the register of deeds of Ashland county. This corporation was empowered by such articles to carry on a similar business to that carried on by the natural per- · sons aforesaid, under the same name, and at the same place. * * The plaintiff was employed as a molder by the C. G. Bretting Manufacturing Company in April, 1907, and on June 19, 1907, while in that employment, was injured by reason of alleged defective appliOn September 12, 1907, Jane Bretting and her three sons executed a transfer of this property to the corporation. The corporation used the same books of account as its predecessor, continuing the same accounts, without rest or break. ances. * * * The question is whether the corporation is liable to an employé, injured in consequence of a defective appliance on June 19, 1907. ** There is a line of authority which may be fairly said to hold that where copartners or other joint owners of a solvent going business transform themselves into a corporation, to which the joint property is transferred in exchange for shares of stock, there must, in order B.& B.BUS.Law-93 to bind the new corporation for the liabilities of the former partnership, be an express assumption by the corporation of such liabilities. * * * There are also cases which hold that no such express agreement need be shown, but seem to go upon the presumption that such liabilities are assumed under these circumstances. * * A third line of cases holds that the assumption of liabilities may be express or implied, and the latter rule has been established for this court in Pratt v. Oshkosh Match Co., 89 Wis. 406, 62 N. W. 84. * * This agreement on the part of the corporation may be proven, like any other fact, by any competent evidence which will establish either an express or an implied valid agreement to assume the liabilities. * * * The evidence of assumption in the instant case is as follows: (1) The identity in name; (2) the almost complete identity of interest; (3) the continuation of the same business at the same place; (4) the identity of property; (5) the use of the old books, without break or rest in the accounts; and (6) the resolution to take the property of the former associates as of date of April 1st. This last is very significant. In order to take the property as of April 1st, the corporation would necessarily acquire all increase or increment accruing after that date, and be subject to all diminution or loss occurring after that date in the ordinary vicissitudes of business. If the copartners sold goods or merchandise after April 1st on credit, the account, including the profit on the transaction, would go to the corporation. If, by reason of breach of warranty on this sale, a liability accrued to the purchaser, the corporation would be chargeable with this liability. No other reasonable effect could be given to the resolution to take the property as of date of April 1st. * The plaintiff was not in the employment of the corporation at the time he was injured, but was in the employment of the precedent managers and owners of the business; and, assuming that there was an outstanding liability of such manager and owners to the plaintiff, incurred in the operation of this business and accruing on June 19, 1908, when the corporation took over this property as of April 1, 1908, and continued the same account books under the same name, at the same place, for the purpose of continuing the same business, it assumed by this form of resolution the liability to the plaintiff if any such liability existed. It follows that the judgment of the circuit court must be reversed, and the cause remanded for a new trial. LUDECKE v. DES MOINES CABINET CO. et al. (Supreme Court of Iowa, 1908. 140 Iowa, 223, 118 N. W. 456, DEEMER, J. Plaintiff recovered judgment against the Des Moines Cabinet Company December 31, 1900, in the sum of $325 for breach of a contract of employment. The cabinet company was a corporation organized under the laws of this state, and at all times material to our inquiry the entire stock of the corporation was owned by defendant Hartung. On the 15th day of August, 1900, and after plaintiff had commenced his suit against the cabinet company, Hartung, as president of that company, sold and transferred to the Wells & Antes Undertaking Company, also an Iowa corporation, all the assets of the cabinet company, the consideration named being $3,500. Instead of cash Hartung individually received 35 shares of the stock of the un dertaking company, which he immediately hypothecated for his private account. Plaintiff, after obtaining his judgment, caused execution to issue against the cabinet company, which was returned no property found. He thereupon brought this suit in equity, alleging that when the undertaking company purchased the property, it knew of plaintiff's claim, and with intent to hinder, delay, and defraud him it took possession of all the assets of the cabinet company, and converted the same to its own use without other consideration than the issuance of its own stock in payment therefor; that by reason of the transfer the undertaking company became possessed of all of the assets of the cabinet company, leaving nothing for the payment of its debts. Upon the trial plaintiff withdrew all charges of fraud and deceit, "except such fraud as may arise from the transaction between the parties at law." As we understand it, plaintiff relies upon a single proposition in this case, and that is that, where one corporation transfers all its assets to another corporation, and thus practically ceases to exist without having paid its debts, the purchasing corporation takes the property subject to an equitable lien or charge in favor of the creditors of the selling corporation, and this without reference to the question of actual fraud. If the affirmative of this proposition be held, it must be upon the theory that the assets of a corporation are in the nature of a trust fund for the payment of its debts, and that a sale of the entire property works a dissolution of the selling corporation, and justifies an accounting at the suit of creditors. Plaintiff also claims that under the facts disclosed by this record he became entitled to a judgment against the undertaking company and its successor in interest for the amount of the judgment he obtained against the cabinet company. The trial court was evidently of this opinion, for it rendered judgment against all the defendants personally, and also established a lien to the amount of the judgment against the property of the cabinet company sold by Hartung to the undertaking company, and directed its sale under special execution. Appellants challenge that part of the decree rendering personal judgment against the undertaking company, the successor to the assets of the cabinet company, and we are constrained to sustain them in this position. In order to render the purchasing company personally liable for the debts of the selling corporation, it must appear that (a) there be an agreement to assume such debts; (b) the circumstances surrounding the transaction must warrant a finding that there was a consolidation of the two corporations; or (c) that the purchasing corporation was a mere continuation of the selling corporation; or (d) that the transaction was fraudulent in fact. None of these things appear in this case, and in our opinion the court was in error in rendering a personal judgment against the purchasing corporation. * * * Little is said specifically of that part of the decree which establishes plaintiff's judgment against the cabinet company as a lien upon the property purchased by the undertaking company, although we assume that appellants' counsel are adopting the same theories with reference. thereto that they urge against the personal judgment. The cases they cite do not go to this extent, however, although there are some which sustain the proposition that the purchasing corporation takes the property free from all debts or claims against the selling one. A great many authorities in this country hold to the doctrine that, if one corporation transfers all its assets to another, and thus practically ceases to exist, without having paid its debts, the purchasing corporation takes the property subject to an equitable lien or charge in favor of the creditors of the selling corporation. Some courts announce a modified doctrine declaring that the principle has no application to a sale made in the usual course of business, nor to a bona fide sale for a full consideration in cash or its equivalent. Although announcing in general terms the first proposition, we are probably committed to the modified one in Warfield v. Marshall Canning Co., 72 Iowa, 666, 34 N. W. 467, 2 Am. St. Rep. 263. It has been broadly asserted by courts of the highest standing that the capital stock of a corporation is a fund for the payment of its debts. "It is a trust fund of which the directors are trustees. * The capital stock paid in, and promised to be paid in, is a fund which the trustees cannot squander or give away." Upton v. Tribilcock, 91 U. S. 45, 23 L. Ed. 203. This modern or so-called American doctrine has never been recognized in England, nor does it exist at common law; and, while at one time quite generally adopted in this country, it is now believed to be unsupported to its full extent by any considerable number of courts. Indeed the court which first announced it has largely receded from its former position, and now says that no trust in its true sense exists; that all that was intended by the previous expressions was to announce the existence of an equitable right, which will be enforced whenever a court of equity, at the instance of a proper party, has taken possession of its assets. "It is never understood that there is a specific lien or a direct trust." See Hollins v. Iron Co., 150 U. S. 371, 14 Sup. Ct. 127, 37 L. Ed. 1113. We have recently gone over this matter in the case of State Trust Co. v. Turner, 111 Iowa, 664, 82 N. W. 1029, 53 L. R. A. 136, and have repudiated the trust-fund doctrine as broadly announced in some of the earlier cases in this country. The creditors of a corporation in a proper case have an equitable right or lien upon the assets of a corporation. But a corporation, like a partnership, may transfer its property in good faith to a bona fide purchaser, and such purchaser will hold it free from the debts of the corporation. The statutes of this state, however, prohibit the diversion of corporate funds to other objects than those mentioned in its articles, * * and it is a wellsettled rule of the common law that the stockholders of a corporation cannot divide its property or assets among themselves without first paying the corporate debts. The rules thus announced have been stated very clearly in McIver v. Young Hardware Co., 144 N. C. 478, 57 S. E. 169, 119 Am. St. Rep. 970. * ** The instant case seems to call for a rather full discussion of the so-called "trust-fund" doctrine, and we have perhaps said enough to indicate our view of the matter. * * * Going now to the facts of the case, it will be observed that the exact point for decision is a narrow one. Plaintiff was a creditor of the Des Moines Cabinet Company, holding an unliquidated demand against it, which was in suit when the cabinet company sold its assets to the undertaking company. The undertaking company acquired practically all of the assets of the cabinet company by purchase, and it issued in payment there for certain of its shares of stock, not to the cabinet company for proper distribution, but to Hartung individually, who immediately pledged the same as security for his individual debts, leaving nothing from which plaintiff could collect his judgment, which he ob |