Am. Ry. Express Co v. Downing
| Decision Date | 16 March 1922 |
| Citation | 111 S.E. 2 |
| Court | Virginia Supreme Court |
| Parties | AMERICAN RY. EXPRESS CO. v. DOWNING. |
Error to Circuit Court, Accomac County.
Action by J. W. Downing against the American Railway Express Company. Judgment for plaintiff, and defendant brings error. Affirmed.
This is an action brought by the defendant in error, J. W. Downing, against the plaintiff in error, the American Railway Express Company, to recover certain alleged damages occasioned by the loss, in transit, of 840 pounds of Paris green, a portion of a shipment of that commodity which, it is alleged, the Adams Express Company, on the —— day of June, 1918, received at Kensington, Ill., as the property of and undertook to transport to the said Downing at a certain station, in Virginia, on the New York, Philadelphia & Norfolk Railroad.
The respective parties to the action will be hereinafter referred to as plaintiff and defendant in accordance with their positions in the trial court.
The Adams Express Company was engaged in the express transportation business, as a common carrier, from said place of shipment in Illinois to said place of destination in Virginia, at the time of said shipment and up to June 30, 1918, inclusive. On the last-named day the Adams Express Company terminated its said business, not only between said points, but also throughout Virginia and the United States; and the defendant, on and after July 1, 1918, undertook, as a common carrier, to carry on, throughout the United States, the express transportation business theretofore transacted by the Adams Express Company, the American Express Company, the Wells-Fargo Express Company, and the Southern Express Company.
The defendant, the American Railway Express Company, is a corporation, incorporated under the laws of the state of Delaware on June 22, 1918, and as such authorized to engage in and carry on throughout the states, territories, and possessions of the United States and in the District of Columbia and in adjacent foreign countries, the express transportation business, as a common carrier; the authorized capital stock of the defendant being $40,000, 000 divided into 400,-000 shares of the par value of $100 each, the minimum capital stock with which the corporation was authorized to commence business being $33,000, 000.
The undertaking aforesaid, on the part of the defendant, the American Railway Express Company, on and after July 1, 1918, to carry on throughout the United States the transportation business theretofore transacted by the Adams, the American, the Wells-
Fargo, and the Southern Express Companies, was entered into in pursuance of an agreement between the four companies last mentioned and the defendant. That agreement was entered into some time in June, 1918, prior to July 1, 1918. There is no copy of such agreement in the record of the case before us, and what are or are not some of its provisions may be said to be left in some doubt. At any rate, one of the subjects of controversy in the instant case is whether such agreement on the part of the defendant expressly stipulated that it would be liable for and would pay all of the unsecured indebtedness of the Adams Express Company existing on July 1, 1918.
There are other provisions of said agreement and certain facts attending the organization and the beginning of the business of the defendant on July 1, 1918, and the passing into its hands on that day of certain property of the Adams Express Company, about which, however, there is no controversy in the case and which appear from the record before us. These are as follows:
The defendant began its business aforesaid on July 1, 1918. Prior to that date it owned no property whatever. On that date, in pursuance of said agreement between it and the four other express companies aforesaid, the defendant took over from such four other express companies certain property theretofore belonging to such other companies, at a valuation of $30,000, 000, to be paid for by the issuance of capital stock of the defendant of the par value of that amount and delivery of such stock to such four other express companies. The property of the Adams Express Company which was thus acquired by the defendant was the whole of the tangible property then owned and used by the Adams Express Company in its express business aforesaid throughout the United States, including all of such property in Virginia, which was considerable in quantity; and this property was taken over, as aforesaid, at its book value, i. e., its value as carried at the time on the books of the Adams Express Company. What this precise value was, or what was the precise amount of the stock of the defendant which was given therefor to the Adams Express Company, does not appear from the record before us; but it does appear from the record that this value and stock amounted to a great many millions of dollars—far more than sufficient to pay the plaintiff's claim.
At the time the property aforesaid of the Adams Express Company was taken over as aforesaid, on July 1, 1918, and the defendant agreed to issue its stock therefor as aforesaid, the defendant knew that an indefinite number and amount of unliquidated claims against and unsecured obligations of the Adams Express Company, of the character of the claim of the plaintiff, were in existence, outstanding and unsatisfied.
At the time of the trial the defendant, as a matter of fact, had issued and delivered to the Adams Express Company only about 75 per cent. of the stock which was to be issued to it as aforesaid, in payment for the property of the Adams Express Company taken over by the defendant as aforesaid.
After June 30, 1918, the Adams Express Company had no agent in Virginia on whom process could be served so as to commence a suit or action in Virginia against it; nor any property in Virginia which could be attached. It appears that on and after July 1, 1918, the Adams Express Company did own some property, located elsewhere than in Virginia, and other than that which was turned over to the defendant as aforesaid; but what was the character or value of such other property, or just where it was or is located, does not appear.
So far as appears from the record, the Adams Express Company, on and after July 1, 1918, has engaged in no business, other than that of winding up its affairs, including the liquidation of its outstanding liabilities and obligations; and for that purpose has had an office in New York City, with its official organization intact, consisting of its president, secretary, treasurer, general counsel, and its claim departments.
Other material circumstances are referred to in the opinion of the court.
Stewart K. Powell, of Onancock, for plaintiff in error.
S. James Turlington, of Accomac, for defendant in error.
SIMS, J., after making the foregoing statement, delivered the opinion of the court.
The following is the chief question presented for our decision by the assignments of error, namely:
1. Is the defendant answerable to the plaintiff for the liability of the Adams Express Company to the plaintiff which existed at the time the defendant took over tbe entire business of the Adams Express Company as a going concern and all of the tangible property of the latter theretofore used in its business, because of the circumstances that the entire existence of the Adams Express Company as a going concern was consolidated or merged in the defendant; that the liability existed at the time of such consolidation or merger, and was actually or constructively known to the defendant to so exist; that the property so taken over was more than sufficient to pay the liability; and that the defendant did not undertake to pay anything for the property except its own capital stock?
This question must be answered in the affirmative.
As said in 6 Am. & Eng. Enc. Law (2d Ed.) p. 818, § 4:
As pointed out, however, in the valuable work just quoted, the essential elements of the liability of the new corporation in such case, and the basic reasons therefor, are: First, that only by a transfer for value can the property of a corporation or other debtor be transferred, so as to defeat the claims of creditors (Id., pp. 819, 822); and, secondly, that the new corporation does not occupy the relation of a purchaser for value of the property of the old company, where it gives nothing for the property but its own capital stock.
If, indeed, the property of the old company is acquired by the new corporation by actual bona fide purchase for value, it is well settled that the new corporation is not liable for claims against the old company which do not constitute liens upon the property purchased. Id., p. 819.
Concerning a similar situation to that under consideration in the case in judgment, this is said in Young v. The Steamboat Key City. 14 Wall. 653, 20 L Ed. 896:
"* * * Neither the stockholders of" (the old company) "nor of the new corporation have ever parted with or paid any money or other thing of value for" (the property), "otherwise than by this consolidation of the companies into one; and it is not apparent, nor even a reasonable presumption, that if the new company has to pay the libelant's debt in this case, they will be the losers, but it is nearly certain the loss will fall where it should, on the stockholders coming in through the" (old company).
As said in 5 Thomp. on Corp. (2d. Ed.) § 6083:
" * * * The consolidated corporation as a rule, even in the absence of statute, or agreement, assumes all the...
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