202 Mass. 298 | Mass. | 1909
This report brings before us questions founded on the plaintiff’s exceptions to the twenty-fourth, twenty-fifth and twenty-sixth findings of the master in his original report, in connection with the pleadings and other facts in the case. The plaintiff contends that the defendant, the West End Street Railway Company, hereinafter called the West End Company, has become liable to pay the judgments held by the plaintiff against the Malden and Melrose Street Railroad Company, hereinafter called the Malden and Melrose Company, because of. an alleged union and merger of these two
“22. One other claim was made by the plaintiff, namely, that the Malden and Melrose Railroad Company had been consolidated with the West End Street Railway Company, and that therefore the latter is liable for the debts of the former. The West End Street Railway Company conceded that, if there had been such consolidation, it would be liable for such debts; but it denied that there was such a consolidation.
“23. I find that the stock in the Malden and Melrose Railroad Company was gradually acquired by the Middlesex Railroad Company and its successors; that, after the agreement of 1862, the former company took no corporate action except for the choice of officers; that the officers of both companies, in their reports to the railroad commissioners for many years after 1862, stated that the former company was being operated by . the latter company, under the terms of said agreement; that for many years prior to the consolidation of the Middlesex Railroad Company and the Highland Street Railway Company, in 1886, the president of the Middlesex Railroad Company had owned more than a majority of the stock of the Malden and Melrose Railroad Company, which he had acquired since the lease of 1862 ; that after the formation of the West End Street Railway Company, he transferred all of this stock to Henry M. Whitney, the president of the West End Street Railway Company, and the stock was then transferred to the said West End Street Railway Company, which reimbursed Mr. Whitney for the amount paid by him; that after this transfer to the West End Street Railway Company the treasurer of that company reported to the railroad commissioners that they 6 owned the stock and property of the Malden and Melrose Company, — all of it—• and would like to have the Malden and Melrose Company report omitted ’; that the railroad commissioners struck the Malden and Melrose Company from their lists, and reported as follows: ‘ The Malden and Melrose, having been merged in the West End by the purchase of all its capital stock and assets,’ etc.
“ 24. I find that there was no such consolidation as the plaintiff alleges. It was admitted by the plaintiff that the statutory requirements for the consolidation had not been complied with.
It is very plain that, in the absence of a statutory provision on the subject, the acquisition of all the stock, property and assets of a corporation, by an individual or by another corporation, does not of itself make the new holder liable to pay the debts of the corporation. A mere purchase of such capital stock and assets is a taking of a title, which leaves unsecured creditors with no claim against the purchaser, and with no means of collecting their debts except from the corporation itself. Shaw v. Norfolk County Railroad, 16 Gray, 407. Swing v. Composite Brake Shoe Co. 169 Mass. 72. In the present case there is no ground for a claim of direct liability of the West End Company to the plaintiff upon these judgments, outside of the St. 1887, c. 413, which provides for a consolidation and union of the West End Company with any or all of the other street railway companies authorized to run cars in or into the city of Boston, and for such a consolidation and union of each of these other street railway companies with the West End Company, or any other of said companies, and for the purchase and holding of the whole or any part of the property, rights and franchises of any or all of these companies by any of the others. It becomes necessary to consider this statute, to see whether a liability for these judgments has been created under it.
It provides in § 1, that, “ In every case of consolidation as aforesaid, the corporations uniting shall constitute a new corporation under such name as shall be agreed upon in the manner and at the meetings aforesaid; but the calling of the first meeting of said new corporation . . . shall be provided for in its articles of consolidation,” etc. This shows that, in case of a union by consolidation, a new corporation is formed.
In § 1 is this provision: “ But such leases, purchases, sales and consolidations shall be only upon such terms and conditions as shall be agreed upon in the first instance by the directors and then -by a majority in interest of the stockholders of each core
The second section is inapplicable to this case, for the stock of the Malden and Melrose Company was not acquired by giving shares of the preferred stock of the West End Company in exchange for it. The master has found that there was no consolidation, that is, that there was no formation of a new corporation under the statute. But he has also found that the West End Company reported to the railroad commissioners that it “ owned the stock and property of the Malden and Melrose Company — all of it — and would like to have the Malden and Melrose report omitted.” Here is an admission of the company, made many years ago, which shows that the condition is such as that referred to in § 1 of this statute, when the entire property, rights and franchises of one of these corporations has been acquired by another of them. The admission does not state in terms that the mode of acquisition was exactly that prescribed in the statute. The required approval by the railroad commissioners of the terms and conditions upon which this result was reached is found, by implication, in their report, in which they struck the Malden and Melrose Company from their lists, with this explanation \ “ The Malden and Melrose having been merged in the West End by the purchase of all its capital stock and assets,” etc. Since then, this corporation, with all that pertained to it, has been treated by the railroad commissioners as belonging to the West End Company. The latter corporation, for more than twenty years, has treated the property formerly of the Malden and Melrose Company as its own, has acquired new locations in its own name, in place of other locations originally granted to the Malden and Melrose Company, while most of these locations originally so granted have been revoked, some of them on the petition of the West End Company. The Malden and Melrose Company has known of this admission, and of all that has been done by the other company in reference to its property and interests, and seemingly has acquiesced in it.
The most difficult question in the case is whether the acquisition of the entire property, rights and franchises of the Malden and Melrose Company by the other defendant is to be deemed a purchase, upon terms and conditions agreed upon in the first in
It is fair to infer that this business was done lawfully, by an agreement of the directors of the two companies, and was confirmed by corporate action. Indeed, the only way in which it could be legally done was under this statute, and in accordance with its terms. Apart from this statute, the West End Company had no right to buy and hold the stock of another street railway company. Pub. Sts. c. 113, § 18. As it could not become the owner of the “ stock and property of the Malden and Melrose Company — all of it,” except by a purchase of the kind stated in the statute, it is not to be assumed, from a mere failure to present evidence of the particulars of the action, that the acquisition of this stock and property was unlawful, and that all the action of the West End Company for more than twenty years in reference to the property has been contrary to law. There is a similar and perhaps stronger inference to be drawn from the action of the railroad commissioners. As an official board, supervising the conduct of all the street railway companies in the Commonwealth, it knew the law applicable to such companies, and it became satisfied that the West End Company had lawfully acquired all the stock and property of the Malden and Melrose Company. Presumably, this was upon a presentation of evidence that this property had been purchased under the St. 1887, c. 413, upon terms and conditions agreed upon by the directors of each of the two companies and afterwards by a majority of the stockholders of each company, at meetings called for the purpose. In the absence of evidence to the contrary, there
There is nothing in the statute to indicate that such a purchase might not lawfully include the buying of the stock of the corporation whose franchises and property are to be acquired. Indeed, under the second section the union and transfer are accomplished entirely by an acquisition of stock through an exchange of preferred shares of the West End Company for the stock of the other company. It was the purpose of the Legislature that, upon the giving up of its property and franchises in either of the three ways, whether by an exchange of shares under § 2, or by a formal consolidation under § 1, or by a sale and purchase of the entire property, rights and franchises under § 1, the creditors of the selling or consolidated corporations should be protected by obtaining a substituted liability of the new consolidated company, or of the purchasing company. In the present case the West End Company evidently sought to acquire by purchase all the property and valuable rights and interests of the Malden and Melrose Company. It did that which its officers deemed necessary to obtain these under the statute. For more than twenty years it has held and used all the franchises and property of the other corporation as its own. It intended to put itself in a position to have all the advantages which the statute permitted it to obtain, by a purchase in the manner prescribed. That it was ignorant of the existence of these judgments against the Malden and Melrose Company, which had been recovered many years before and which were afterwards renewed by suits, is immaterial to the rights of this plaintiff. These rights are protected by the statute which says that a corporation acquiring such property and franchises of another corporation shall be subject to its liabilities. Having availed itself of the privileges conferred by the statute, this defendant cannot complain because it is held to the accompanying liabilities. Nor should it object to the drawing of inferences from its declarations arid public acts, on which the legality of its corporate conduct in reference to the other corporation depend. Nothing less than strong proof of the negative would justify a conclusion that these two corpora
We understand the master’s finding of an admission “by the plaintiff that the statutory requirements for the consolidation had not been complied' with ” to mean an admission that the requirements for the statutory consolidation mentioned in § 1 had not been complied with, and not an admission that there had not been a union, or a virtual consolidation through the complete ownership of one corporation by the other, obtained in a lawful way.
The master also found that “ after the agreement of 1862 the former company (the Malden and Melrose Company) took no corporate action except for the choice of officers.” We are not certain whether this is intended to cover the period after the enactment of the St. 1887, c. 413; but if it is so intended, it does not indicate that the directors did not agree to the terms, and conditions of a purchase by the West End Company which should give complete ownership and control of the entire property, rights and franchises of the corporation. It is found that the officers of the corporation made reports to the railroad commissioners for many years after 1862, and presumably they took other action as officers.'
If the finding means that this company never agreed to the purchase by the West End Company at a meeting of the stockholders called for the purpose, we are inclined to hold, that this provision of the statute is for the protection of the stockholders, and when the purchaser of all the property and capital stock of the company has for more than twenty "years treated this as a valid purchase, and acted upon it, with its acquiescence, that the corporation cannot now set up its non-compliance with this provision against the validity of the change of ownership. Especially should this be so held when the corporation and its managers, in pursuance of the arrangement, have permitted the use of its property to be enjoyed by the purchasing corporation, and its earnings to be so mingled with the earnings of the purchasing company that it is impossible to follow them. The effect of this conduct of the managing officers of both corporations, and of the corporations themselves, has been to put the earnings of the Malden and Melrose Company beyond the reach of creditors,
The statement in the tenth paragraph of the bill is broad enough to include a union of the West End Company with the Malden and Melrose Company by the purchase of its entire property, rights and franchises, and therefore an assumption of its liabilities under this statute, and a consolidation in fact, although there was not a formal and technical consolidation by the creation of a new corporation. The exception to the twenty-fourth finding of the master is therefore sustained, not because of the statement that there was no technical consolidation, within the meaning of the word as used in the statute, but because
The twenty-fifth finding is not fatal to the plaintiff’s claim to recover for a direct liability of the West End Company under the statute. So far as it purports to conclude that, upon the facts, either with or without an amendment, the bill cannot be maintained, the plaintiff’s exception to it is sustained.
The exception to the twenty-sixth finding is overruled. The grounds of objection on which the exception is founded are not applicable. The mere fact that the West End Company has taken possession of all the assets of the Malden and Melrose Company does not create a liability to the plaintiff. If creditors might follow the assets in equity, this finding has no relation to that subject. Whether the legal proposition stated in this finding can be availed of by the defendant at this stage of the case is a question which is not definitely presented by the report of the single justice. We treat it as a question of law that can be considered apart from the exception.
In reference to the questions intended to be presented by the report of the single justice, we are of opinion that the tenth exception of the defendants to the master’s report on recommittal does not require consideration.
Exceptions to the twenty-fourth and twenty-fifth findings sustained ; case to stand for further hearing.
This exception was “ to the failure of the master to find that in February, 1870, the Middlesex Railroad Company had acquired from the Suburban Railroad Company (formerly the Cliftondale Railroad Company) the right to enter upon and use the tracks of the Malden and Melrose Railroad Company in such mode as might be agreed upon.”
