Lawndale Sash & Door Co. ex rel. Silverman v. West Side Trust & Savings Bank, 207 Ill. App. 3 (1917)

June 11, 1917 · Illinois Appellate Court · Gen. No. 22,479

207 Ill. App. 3

Lawndale Sash & Door Company for use of Joseph Silverman, v. West Side Trust & Savings Bank et al. Joseph Silverman, Plaintiff in Error, v. North Side Sash & Door Company et al., Defendants in Error.

Gen. No. 22,479.

(Not to be reported in full.)

Abstract of the Decision.

1. Cobpobations, § 170 ^* — When sale and purchase of business of corporation by stockholders is made with sufficient authority. The sale of the business of one corporation to another corporation and the purchase thereof are made with sufficient authority where the sale and purchase of the stock by the respective corporations are made by stockholders who are in fact the owners of the stock, the outstanding shares in each corporation by nonparticipating stockholders being held merely for the purpose of organizing the boards of directors.

Error to the Municipal Court of Chicago; the Hon. John E. Stems, Judge, presiding. Heard in this court at the October term, 1916.

Affirmed.

Opinion filed June 11, 1917.

Statement of the Case.

Action of garnishment by the Lawndale Sash & Door Company for use of Joseph Silverman, plaintiff, against West Side Trust & Savings Bank and others, defendants, the North Side Sash & Door Company, intervening petitioner. From a judgment finding the garnisheed funds to be in the intervening petitioner, and dismissing the suit as against the garnishees, Silverman brings error.

Samuels & Samuels, for plaintiff in error.

Samuel W. Newman, for North Side Sash & Door Company.

* See Illinois Notes Digest, Yole. XI to XV, and Cumulative Quarterly, same topic and section number.

* See Illinois Notes Digest, Vols. XI to XV, and Cumulative Quarterly, same topie and section number.

Mr. Justice Dever

delivered the opinion of the court.

2. Fraudulent conveyances — toben sale of business of corporation is valid as against third person becoming creditor of seller. A contract for the sale of the business of a corporation to another corporation entered into between stockholders of the respective corporations holding all of the corporate stock except that held by others for the sole purpose of organizing the boards of directors, under the terms of which the purchaser agrees to take over all of the physical assets of the selling corporation for their then market value, and to pay all debts and receive all accounts receivable, is, where entered into and carried out in good faith, valid as against a third person who becomes a creditor of the seller after the sale.

-3. Fraudulent conveyances, § 186 ^* — who is not a creditor. One who leases premises to a corporation is not a creditor of a corporation at the time of the sale of the business of the corporation to another, where there is no rent due under the lease at the time of the sale.

4. Corporations — when evidence is sufficient to show ratification of sale and purchase of business by corporation through stockholders. Evidence held sufficient to show a ratification by the respective corporations of the sale of the business of one corporation to another and of the purchase thereof, effected by stockholders of the respective corporations holding all of the shares of the stock in such corporations, except shares held merely for the purposes of organization of the respective boards of directors.

5. Fraudulent conveyances, § 180* — mho are other persons within statute. The use of the term “other persons” in Rev. St. ch. 59, sec. 4 (J. & A. IT 5870), providing that in every conveyance made with the intent of disturbing, hindering or defrauding creditors or other persons shall be void as against such creditors and other persons, refers to persons having a substantial existing claim against parties or property sought to be brought within the terms of the statute.

6. Fraudulent conveyances, § 15* — when Bulk Sales Act is inapplicable. The Bulk Sales Act [Callaghan’s 1916 St. Supp. If 10021(1) et seq.J has no application where a person is not a creditor at the time the sale of the business of a corporation is effected.