Friedenwald Co v. Asheville Tobacco Works & Cigarette Co

• Decision Date: 23 December 1895
• Citation: 23 S.E. 490,117 N.C. 544
• Court: North Carolina Supreme Court
• Parties: FRIEDENWALD CO. v. ASHEVILLE TOBACCO WORKS & CIGARETTE CO.

23 S.E. 490

117 N.C. 544

FRIEDENWALD CO.

v.ASHEVILLE TOBACCO WORKS & CIGARETTE CO.

Supreme Court of North Carolina.

Dec. 23, 1895.

Corporations — Reorganization — Liability of New for Contracts of Old — Complaint — Amendment—Fraud—Necessary Parties.

1. Where a corporation transfers all its property, rights, and franchises to a new company incorporated with the same stockholders and directors as the old, and the new corpora tion adopts the contracts and assumes the liabilities of the old, the merger of the old into the new corporation creates a novation of the debts of the old company, though the creditors have not assented to the change.

2. Where, by merger of an old into a new organization, a novation of the debts of the old corporation is created, a complaint against the new corporation, alleging indebtedness on its part growing out of contracts of the old corporation, may be amended by alleging the facts showing the merger, without being subject to the objection that it states a new cause of action.

3. Code, § 667, providing for the continuance of a corporation for three years after its charter expires, to close its business, does not apply where an old corporation is, by a transfer of all its property rights and privileges, merged into a new company, with the same stockholders and directors as the old, which assumes all liabilities and contracts of the old corporation.

4. Where, by merger of an old into a new corporation, a novation of the debts of the old corporation is created, the new corporation will be liable in the same cause of action for breaches of its own contracts and those of the old corporation.

5. Code, § 683, requires contracts of corporations creating a liability exceeding $100 to be in writing, with the corporate seal attached, or signed by an officer. Held, that in an action against a corporation for specific performance of a contract the defense that the contract does not comply with the statute must be taken by plea.

6. The officers of a corporation sought to be charged as fraudulently in possession of the assets of another corporation, to which it succeeded, are not necessary parties to the action.

Appeal from superior court, Buncombe county; McIver, Judge.

Action by the Friedenwald Company against the Asheville Tobacco Works & Cigarette Company for breach of contract. From a judgment for plaintiff, defendant appeals. Affirmed.

Plaintiff's amended complaint in this action, by the first four paragraphs, sought to recover of the new corporation, the Asheville Tobacco Works & Cigarette Company, damages for breach of contracts of sales of merchandise to the old corporation, the Asheville Tobacco Works, and in the fifth, sixth, and seventh paragraphs for breach of contracts of sales to the new corporation, as a single cause of action.

Defendant's demurrer thereto was as follows:

"(1) That there is a defect of parties defendant in the omission of the corporation named In the first paragraph of said amended complaint, to wit, the Asheville Tobacco Works. If the said the Asheville Tobacco Works was dissolved, and its charter in any manner annulled, on or about the 23d day of March, 1892, as alleged in the third paragraph of said amended complaint, said corporation is nevertheless still a corporation by force of the provisions of section six hundred and sixty-seven (667) of the Code of North Carolina, and a necessary party to the first cause of action alleged in said amended complaint.

"(2) That several causes of action have been improperly united. In paragraphs one to four, inclusive, of the first part of said amendedcomplaint, the plaintiff has alleged certain contracts, promises, and agreements between the Asheville Tobacco Works and himself, but has not, in any one of said paragraphs, or elsewhere in said amended complaint, alleged, with respect to any of said contracts,. promises, and agreements, that the defendant was in privity with the plaintiff, or that the defendant had at any time, upon any consideration whatever, in any manner whatever, made to the plaintiff a promise to assume in any manner, or in any wise to become liable or answerable to the plaintiff for or upon any of said contracts, promises, and agreements between said the Asheville Tobacco Works and said plaintiff. * * * That said causes of action alleged in paragraphs one to four, inclusive, of said first part of said amended complaint, in so far as they affect this defendant, if they affect it at all, are not, nor is either of them, founded on contract, and are not in form ex contractu as regards the defendant, but lie in tort, and are improperly united with the causes of action stated in the fifth, sixth, and seventh paragraphs of said first part of said amended complaint, and the causes of action stated in said fifth, sixth, and seventh paragraphs are improperly united with the causes of action stated in said paragraphs one to four, inclusive.

"(3) That said complaint, in respect of the causes of action set forth in paragraphs one to four, inclusive, of the first part of said amended complaint, does not state facts sufficient to constitute a cause of action. The first and second of said paragraphs allege contracts between the plaintiff and the Asheville Tobacco Works. The third of said paragraphs alleges that the Asheville Tobacco Works transferred all its assets, etc., to the defendant, and by resolution, etc., 'dissolved the said corporation the Asheville Tobacco Works, and that the defendant agreed to and did assume the debts and liabilities of the said Asheville Tobacco Works, including the debt or liability of the latter to this plaintiff, and is therefore in law, as he is advised, under the circumstances of said transfer to it (the defendant) of the property and assets of the Asheville Tobacco Works, bound for the payment of all the debts and liabilities of the Asheville Tobacco Works, without the said the Asheville Tobacco Works & Cigarette Company formally having assumed the same.' it appears upon the face of the complaint that the Asheville Tobacco Works is, and has ever since its creation been, a corporation; that it has not been dissolved or annulled in any manger allowed by law. It is not alleged in the complaint that the plaintiff was ever in any manner notified by the Asheville Tobacco...