79 Miss. 330 | Miss. | 1901
delivered the opinion of the court.
Whether the plaintiff had any contract with the American Snuff Company, the new company formed by the consolidation of others or not, is immaterial, since he did have a valid contract with the Geo. W. Helm Company, one of the constituent corporations going to form the new consolidated company. It seems to be conceded that the consolidation was by proper legislative authority, and the deed by which the Geo. W. Helm Company conveyed 1 ‘ all the property, interest and business ’ ’ belonging to it to the new company fully evidences the consolidation. It was not competent for the Geo. W. Plelm Company to consolidate itself with other companies forming this new consolidated company and escape payment of the debts due from it before consolidation. Where there has been consolidation, the new company takes, with notice, the property of the constituent companies, and is not a bona fide purchaser for value. Consolidation is wholly unlike the bona fide sale of the assets of one corporation to another, as to which latter the true rule is stated in 1 Thomp. Corp., sec. 377. This is a case of consolidation. The Geo. W. Helm Company went out of exist
From this clearly correct statement of the law three propositions are deducible: (1) That where consolidation has taken place, the new company is liable for the debts of the old to the extent of the property received from the old; (2) that the remedy may be pursued either at law or in equity, the existence of a legal remedy (where one exists) not being exclusive; (3) that in case of consolidation no constituent company can give away its assets to the prejudice of its creditors; and (4) that the new consolidated company holds the property received from the absorbed company with notice of any trusts attaching to it in favor of creditors, and is therefore not a bona fide purchaser. All these propositions have been settled by recent and abundant authority. The rule is thus stated in 6 Am. & Eng. Ene. L., 815, 818: “When two or more corporations are consolidated into a new corporation with a new name, and the constituent corporations go out of existence, if no arrangements .are made respecting their property and liabilities the consolidated corporations will be answerable for their liabilities, at least to the extent of the property acquired from the constituent corporations whose liability is sought to be enforced against the consolidated corporation. ’ ’ “ The consolidated corporation does not occupy the position of a Iona fide purchaser for value, but takes the property subject to all claims against it which were binding upon the constituent corporation from which the property was acquired.” In Berry v. Railroad Co., (Kan.) 36 Pac., 725 (39 Am. St. Rep., 382), the rule is thus stated: “All of the authorities seem to agree that, unless the statute or article of consolidation makes express provision therefor, the new corporation assumes all the liabilities of the old ones, at least in equity to the extent of the property received by it from the old corporation.” 3 Wood, Ry. L., §486; Brum v.
The foundation of the liability of a consolidated corporation may rest on a statute or on an agreement either expressed or implied. If the statute does not provide that the new company shall assume the debts and liabilities of the constituent companies, and there is no expressed agreement respecting the same, the debts of the original companies follow as an incident of the consolidation, and become by implication the obligations of the new corporation. Railway Co. v. Powell, 40 Ind., 37; Railroad Co. v. Hendricks, 41 Ind., 48; Railroad Co. v. Boney, 117 Ind., 501 (20 N. E., 432; 3 L. R. A., 435); Railroad Co. v. Shirley, 54 Tex., 125. In the latter case it was said: “If neither statute nor agreement make mention of creditors, the consolidated corporation is held to have assumed the liabilities of its constituents.” Jones], Ry. Secur. (2 ed.), in his note to sec. 364, quotes the following from Railway Co. v. Boney, 117 Ind., 501 (20 N. E., 432; 3 L. R. A., 435): “The rule which the authorities support seems to be that where one corporation goes entirely out of existence, by being. incorporated into another, if no arrangements are made respecting the property and liabilities of the corporation that ceases to exist, the corporation into which it is merged will succeed to all its property, and be answerable for all its liabilities.” And, in same case (117 Ind., 433; 20 N. E., 438; 3 L. R. A., 435), it is further said: “ While it is an open question in some jurisdictions, whether or not in the absence of a statute, the debts of the original companies follow as an incident of the consolidation, and become by implication the obligations of the new corporation, it is settled in this state that the act of consolidation involves an implied assumption by the new company of all the valid debts and liabilities of the consolidated companies. Railroad Co. v. Jones, 29 Ind., 465 (95 Am. Dec., 754); Railway Co. v. Powell, 40 Ind., 37; Railroad Co. v. Hendricks, 41 Ind., 48.”
In 2 Mor. on Priv. Corp., sec. 956, the rule is thus stated: £‘After the consolidation of a corporation with another company, the liability^- of the consolidated company is substituted in the place of the liability of each of the original companies to its creditors, at least to the extent of the assets received. The consolidated company takes the assets of the original companies burdened with the obligations which these companies owed their creditors, but not with greater obligations. It cannot willfully divert these assets from the company’s business, or restore the capital to the shareholders in any form, but it may deal with these assets just as the original companies could deal with them.” Mr. Freeman states the rule in the same terms in his note to McMahan v. Morrison, (Ind. Sup.) 79 Am. Dec., 426, 427. A case precisely in point is Thompson v. Abbott, 61 Mo., 177, where the court say: “Now, where
As to the remedy where the constituent company has conveyed everything that it has to the consolidated company, it is obvious that it would be a mere travesty of justice to remit the creditor to the constituent company.
The supreme court of Alabama in Railroad Co. v. Branch, 59 Ala., 130, in the passage cited supra from 1 Thomp. Corp., sec. 376, puts the mockery of such remitting of the creditors to the constituent corporation which had divested itself of all its property in the most emphatic terms. And, finally, Mr. Beach says, in sec. 347: “Judgment against the consolidated company on claims against one of the original corporations may be enforced by levy of execution upon the property of • the latter, notwithstanding its dissolution.5 ’
From these various authorities, it is clear that the principles laid down in the outset and stated in Judge Thompson’s work are in every particular correct. It is also clear, from these
Reversed cmd remanded.