#### Murphy v. Winham.

Opinion delivered October 17, 1927.

*19 Will Steel, for appellant.

Frank S. Quinn and Shaver, Shaver $ Williams, for appellee.

Kirby, J.

Appellants insist that the chancellor adopted an erroneous method for determining, the liability of Milton Winham, and that the corporation losses for each of the years or seasons for which he executed the stockholders’ agreements should have been taken into consideration proportionately to the entire amount of indebtedness incurred by the corporation during its operation under the stockholders’ agreements and remaining unpaid upon its liquidation. The stockholders’ agreement, however, did not bind the members executing it to the payment of the losses of the corporation during the particular season, but only to liability for contribution to the payment of the losses of the indorsers on the corporation paper suffered by reason of their indorsements.

The undisputed testimony shows that the total losses sustained in operating the plant for the years during which the stockholders’ agreements were executed to liquidation amounted to $179,940.93; that, after crediting the proceeds of the sale of the plant made in liquidation, $100,000, there remained an unpaid indebtedness incurred during the period of operation under the stockholders ’ agreements, $139,934.23, which had not accrued in any particular year. The notes or indebtedness being renewed from year to year until the liquidation of the corporation, and also that the defendants, appellants, paid the said balance.

Winham signed the stockholders’ agreements for each of the three seasons, the 1921-22 season being the last, and the indorsed notes outstanding, executed and *20renewed, for the corporation indebtedness, at the end of that period, for contribution to the payment of which the signers of the stockholders’ agreements were liable upon its payment by the indorsers, Winham among the number, amounted to $141,733.34. While it is true that, during the season of 1922-23, for which Winham did not sign the stockholders’ agreement, the last signed by him being for the season of 1921-1922, the corporation earned only ¡a small profit of $2,502.37, it is also undisputed that the amount of the indorsed notes outstanding, executed and renewed, for which he was liable to contribution upon payment under the last stockholders’ agreement executed by him, had been reduced to $130,351.15, in the amount of $16,500, without loss to or payment thereof by the indorsers, necessarily relieving' him from liability to contribution under the stockholders’ agreement to the payment of the said sum of the reduction for which the indorsers could not suffer a loss.

Each stockholders’ agreement signed by Winham provided that the liability to contribution to payment of the notes and indebtedness secured by indorsements should continue to all renewals and until their discharge. The last agreement executed bound him to contribution to the payment of the losses suffered by the indorsers of the amount due thereunder to the end of the term, less the amount of reduction of said indebtedness thereafter made by the corporation. He could not, of course, be held for contribution under the stockholders’ agreement to the payment of indebtedness incurred in the operation of the plant after the termination of the last contract signed by him.

The court correctly held that the sale of the assets of the corporation was duly made and free from fraud, and that the price obtained, $100,000, was. the reasonable value thereof, and also that that amount constituted the fair market value of the assets of the corporation at the termination of the last stockholders’ agreement executed by Winham. Deducting the amount of said sale price, $100,000, with the amount of reduction of the *21indorsed liability for the season of 1922-23, $16,500, from the whole amount of the indorsed indebtedness existing at the end of the last season for which Winham executed the stockholders’ agreements, $141,733.34, leaves a balance of $25,083.34, for which Winham is liable to contribution and must pay his proportionate share as fixed by said stockholders’ agreement, amounting to $2,219.25, with interest, as held by the lower court.

Appellees insist that the method of liquidation of the old corporation and of payment of its indebtedness by the indorsers amounted to but a reorganization of the corporation with the liability of the new corporation to the payment of the old indorsed indebtedness, no part of which they claim has, in fact, been paid by the indorsers; and that therefore appellants are not entitled to any contribution from Winham and the other signers of the stockholders’ agreement for any losses alleged to have been sustained by reason of their indorsements of the old corporation’s notes, for contribution to the payment of which by the indorsers Winham bound himself by the execution of the stockholders’ agreement. We find no merit in this contention.

The circumstances of the organization of the new corporation are not such as to warrant the conclusion that it is not a separate and distinct corporation, but merely a continuation of the old corporation. It did not in express terms or by reasonable implication assume the payment of the debts or liabilities of the old corporation. While it is true that some of the former stockholders of the liquidated debtor corporation, through a trustee, purchased its entire property and assets at the liquidation sale, which the court properly held duly made and free from fraud, and organized a new corporation, taking stock therein to the amount of the cash contributed by each to the payment of the $100,000 fund used in its purchase, there was no such taking over of the entire property, rights and franchise of the old by the new corporation, nor any such continuation of the business or adoption of the contracts of the old corporation, *22as warrants the conclusion that the old corporation was reorganized into the new.

Although the property and assets of the old corporation, purchased by their trustee at the liquidation sale for the individuals, who were some of its stockholders, with the $100,000 contributed by them to the purchase fund, was conveyed directly to the new corporation organized by the said purchasers of the assets of the old corporation by their direction, for convenience in saving a transfer through the trustee to the new corporation, it constituted, under the circumstances of this case, no reorganization of or continuation of the old corporation.

The indorsers on the paper of the old corporation, liable to the payment of its debts as such, and for loss to whom by such indorsement the stockholders’ agreement for contribution was made, paid off all the indebtedness for which they were liable by substituting notes signed by the new corporation and indorsed by them individually, taking up the old notes and discharging their liability thereunder by the new notes, which were accepted by the holders in payment of the old. This amounted to a satisfaction and payment of the indebtedness, of the old corporation for payment of which they were liable upon their indorsement, and for which loss because thereof appellees were liable to contribution, so far as they are concerned. As to them, those liable to contribution, said debts were paid and extinguished, the holders having consented thereto and accepted the new obligations in lieu of the old surrendered and delivered to the makers. Viser v. Bertrand, 14 Ark. 267; Elkins v. Voght Machine Co., 125 Ark. 6, 187 S. W. 663; and Harrison v. Walker, 124 Ark. 555, 188 S. W. 17.

It can make no difference in allowing the credit of the sale price of the assets of the corporation realized upon its liquidation, $100,000, the sale having occurred more than two years after the expiration of the last stockholders’ agreement signed by Winham, from the amount of the indebtedness of the corporation in *23ascertaining the amount for which Winham was liable to contribution under the stockholders’ agreement, since the undisputed testimony shows that said amount was the fair and reasonable market value of the assets of the corporation at that time. We find no error in the record, and the decree is accordingly affirmed.