CENTRAL OF GEORGIA RY. CO. v. PAUL, 93 F. 878

After reciting tbe foregoing, the opinion of the court was delivered by PARDEE, Circuit Judge. There is no substantial dispute that the appellee, Mary P. Paul, was and is a creditor of the Central Railroad & Banking Company of Georgia, and the question is whether the Central of Georgia Railway Company is liable for her demand.

The case shows that the sale of the railway properties under the foreclosure at the suit of the Central Trust Company, the' sale of the collateral securing the floating debt claims, and the sale of the “overflow property,” all were in pursuance of a reorganization plan, which was carried out, and resulted in the transfer of all the property and assets of the Central Railroad & Banking Company of Georgia to the Central of Georgia Railway Company; and the active participating reorganizers were not only the creditors of the Central Railroad & Banking Company of Georgia, secured by mortgage and otherwise, but included as well the stockholders of said company; so that, for the purposes of the present case, it is an indisputable fact that, notwithstanding all the sales of property and other transactions in liquidation, the stockholders of the Central Railroad & Banking Company of Georgia retained their interest and rights, and by virtue thereof are now either stockholders of the new reorganization, Central of Georgia Railway Company, or are otherwise provided for, and that the new company has acquired, and now holds, all the former property and assets of the old company.

It would seem from this state of facts'that the appellee has the right to look to the new company for the ‘payment of her claim. Railroad Co. v. Howard, 7 Wall. 392, is directly in point.

As epitomized in the syllabus, it is as follows: “A sale under foreclosure of mortgage on an insolvent railroad company, expedited and made advantageous by an arrangement between tbe mortgagees and tbe stockholders, under which arrangement tbe mortgagees, according to their order, got more or less of their debt (100 to 30 per cent.), and the stockholders of the company the residue of the proceeds, a fraction (16 per cent.) of the par of their stock, held fraudulent as against general creditors not secured by the mortgage; and this although the road was mortgaged far above its value, and on a sale in open market did not bring near enough to pay even the mortgage debts, so that in fact, if there had been an ordinary foreclosure, and one independent of all arrangement between the mortgagees and the stockholders, the whole proceeds of sale would have belonged to the mortgagees.” In other adjudged caaes we find principles declared as follows: “Equity regards the capital stock and property of a corporation as held in trust for the payment of the debts of the corporation, and recognizes the right of creditors to pursue such properties into whosesoever possession the same may be transferred, unless the stock or property has passed into the hands of a bona fide purchaser; and the rule is welPsettled that stockholders are not entitled to any share of the capital stock, nor to any dividend of the profits, until all the debts of the corporation are paid.”, Scammon v.

Kimball, 92 U. S. 362, 367. “The property of a corporation is doubtless a trust fund for the payment of its debts, in the sense that when the corporation is lawfully dissolved, and all its business wound up, or when it is insolvent, all its creditors are eniüiod, in equity, to have their debts paid out of the corporate property before any distribuí ion thereof among the stockholders. It is also true in the case of a corporation, as in that of a natural person, that any conveyance of property of the debtor, without authority of law, and in fraud of existing creditors, is void as against them. Story, Eq.

Jur. § 1252; Curran v. Arkansas, 15 How. 304; Graham v. Railroad Co., 102 U. S. 148, 161; Railroad Co. v. Howard, 7 Wall. 392; Goodin v. Canal Co., 18 Ohio St. 169.” Railway Co. v. Ham, 114 U. S. 587, 594, 5 Sup. Ct. 1081. “Any device by which the assets of an insolvent corporation are to he parceled out between shareholders, leaving creditors unpaid, is a fraud of which creditor's affected may complain. That such creditors may follow the purchase money thus wrongfully paid into the hands of stockholders is very clear.

That shareholders have only a right to the surplus after all debts are paid is familiar law.” Railroad Co. v. Evans, 14 C. C. A. 116, 128, 66 Fed. 822. In one of the many orders issued by the court in the liquidation proceedings was an invitation to the general creditors of the Central Railroad & Banking Company of Georgia to intervene and assert their claims against the funds derived from the sale of the “overflow property,” in pursuance of which the present appellee intervened, asserting her claim.

To recover the entire amount of her demand from the; new company, on the view herein presented, she might have been driven to a bill in equity; but as there lias been a full hearing in ihe present proceeding, and the appellant has been permitted to make a full defense, and as the decree appealed from does full equity between the parties, it may well be affirmed without further pleading.

Taking this view of the case, it is unnecessary to consider whether there is any trust or other fund still under control of the court out of which appellee can be paid, or whether the appellee’s claim is entitled to consideration as one in which a special or general deposit to her credit was made in the hanking department of the Cení ral Railroad & Banking Company of Georgia. The decree appealed from is affirmed.