Chase v. Michigan Tel. Co.

• Decision Date: 07 November 1899
• Citation: 121 Mich. 631,80 N.W. 717
• Court: Michigan Supreme Court
• Parties: CHASE v. MICHIGAN TEL. CO.

80 N.W. 717

121 Mich. 631

CHASE v. MICHIGAN TEL. CO.

Supreme Court of Michigan

November 7, 1899

Error to circuit court, Ionia county; Frank D. M. Davis, Judge.

Action by Rivington Soule Chase, by his next friend, against the Michigan Telephone Company. From a judgment for plaintiff defendant brings error. Reversed.

Plaintiff in July, 1894, when 16 years of age, was employed by the Telephone & Telegraph Construction Company at Ionia as a night operator and day messenger. He continued in its employ till May 27, 1895, when he was injured. One Miss Kimball was in charge of the office. During his employment he had been sent out with a lineman to assist in placing and repairing the wires. On May 27, 1895, he had climbed a pole, and stepped out upon the cross arms to find a dead wire. He had accomplished his object, and was descending, when he fell and was injured. For that injury he seeks to recover in this case, on the ground of negligence. The Telephone & Telegraph Construction Company had done business in Ionia from 1883 up to August 31, 1895, when it sold and transferred all its property to the defendant. The original declaration was drawn upon the theory that plaintiff was employed by, and was injured while in the employ of, the defendant, and that its negligence caused the injury. Upon the trial, plaintiff was allowed to amend his declaration, charging that plaintiff was employed by the construction company; that the injury occurred through its negligence; that that company had been consolidated, or transferred all its rights, franchises etc., to the defendant; and that the defendant had assumed all the obligations of the former company, including its liability for torts. Three questions are raised in the case (1) Does the record show that defendant assumed all the liabilities of the construction company? (2) Was the construction company guilty of negligence? (3) Was the plaintiff guilty of contributory negligence? It is unnecessary to determine the last two questions, as the case must be disposed of upon the first. The court instructed the jury that the defendant was liable for the torts of the construction company.

Keena & Lightner (Morse & Loeke, of counsel), for appellant.

George E. & M. A. Nichols (A. A. Ellis, of counsel), for appellee.

GRANT C.J. (after stating the facts).

Plaintiff introduced a certified copy of a report made by the construction company, filed with the secretary of state, as the law required, that that company had 'sold and transferred all of its property and franchises, at private sale, to the Michigan Telephone Company.' He also introduced evidence showing that the Michigan Telephone Company owned all but eight shares of the stock of the construction company at and prior to the sale, that all the employ�s of the construction company were continued in the employment of the Michigan Telephone Company after the sale and that the business was conducted in the same manner as before. It appeared, however, that billheads and other stationery were changed from the construction company to the Michigan Telephone Company. This constitutes all the evidence in the record in regard to the sale and transfer from the construction company to the defendant. The fact that the same employ�s were continued in the employment of the defendant after the transfer, and that its business continued to be carried on the same as before, is without significance, and has no tendency to show consolidation, or assumption of the obligations of the old company. Naturally, there would be no change of employ�s upon a bona fide sale and transfer by corporations of this kind to others. The fact that defendant owned a majority of the stock in the construction company does not tend to show consolidation, or an assumption of the obligations of the vendor. There is no testimony tending to show the terms of that sale. For all that appears, the consideration for the sale had been paid into the treasury of the construction company, to pay its debts and to be divided among its stockholders, and it may still possess ample assets to meet all its obligations. Act No. 112 (Pub. Acts 1889) authorizes one corporation to sell to another, and provides that the selling corporation shall not be released from any or all of its liabilities previously contracted. By section 4867, How. Ann. St., a corporation is continued for three years after dissolution, for the purpose of suing and defending suits and for winding up its affairs. The law is well settled in regard to liability of the consolidated or purchasing corporation for the debts and liabilities of the consolidating or selling corporations. Such obligations are assumed when (1) two or more corporations consolidate and form a new corporation, making no provision for the payment of the obligations of the old; (2) when, by agreement, express or implied, a purchasing corporation promises to pay the debts of the selling corporation; (3) when the new corporation is a mere continuance of the old; (4) when the sale is fraudulent, and the property of the old corporation, liable for its debts, can be followed into the hands of the purchaser. Austin v. Bank (Nob.) 68 N.W. 628. Plaintiff produced no evidence tending to bring the defendant within any of these cases. Although one person owns a majority of the stock, or all but two shares, or all of it, he does not thereby acquire the right of acting for the corporation, or as the corporation, independently of the directors. Cook, Stock, Stockh. & Corp. Law,� 709; McLellan v. File Works, 56 Mich. 579, 584, 23 N.W. 321; New Haven Wire Co. Cases, 57 Conn. 352, 18 A. 266; Richmond & I. Const. Co. v. Richmond, N., I. & B. R. Co., 15 C. C. A. 289, 68 F. 105. A corporation, by virtue of being a stockholder in another corporation, is not liable for the acts of the other. Railroad Co. v. Cochran, 43 Kan. 225, 23 P. 151. Nor is that fact evidence of merger. Jessup v. Railroad Co. (C. C.) 36 F. 735. It follows that the defendant, as a stockholder in the construction company, could not act for that company in...