Good v. Ferguson & Wheeler Land, Lumber & Handle Co.

• Decision Date: 17 February 1913
• Citation: 153 S.W. 1107,107 Ark. 118
• Parties: GOOD v. FERGUSON & WHEELER LAND, LUMBER & HANDLE COMPANY
• Court: Arkansas Supreme Court

153 S.W. 1107

107 Ark. 118

GOOD v. FERGUSON & WHEELER LAND, LUMBER & HANDLE COMPANY

Supreme Court of Arkansas

February 17, 1913

Appeal from Clay Circuit Court, Western District; W. J. Driver Judge; reversed.

Reversed and remanded.

G. B Oliver, for appellant.

1. If the appellant was young, inexperienced and without warning placed in a dangerous place to work, and was injured by sand getting into his eye through the negligence and carelessness of Phillips in failing to adjust a proper nose-piece with a proper-sized shoulder to grind the handles, etc., there was liability on the part of the Western Handle Company at least. In determining whether the court was authorized in taking these questions from the jury, that view of the evidence will be taken which is most favorable to the losing party, the appellant. 149 S.W. 90.

2. Wheeler filed no answer and made no defense. The directed verdict was erroneous as to him.

If the Western Handle Company is liable, the Ferguson & Wheeler Land, Lumber & Handle Company is also liable.

A new corporation may become responsible for the liabilities of the old, where the circumstances are such as to warrant the conclusion that the new corporation is but a mere continuation of the old; or where, in express terms, or by reasonable implication, it assumed the debts of the old corporation, or where the assets of the old corporation remain liable in the hands of the new one, the circumstances being such as to render the transaction a division of corporate property as a trust fund for the payment of creditors, or a conveyance for the purpose of hindering delaying or defrauding creditors. 10 Cyc. 286-288; Thompson on Corp., §§ 6542-6543, 6545, 6547; Id., §§ 265, 266; 23 Am. & Eng. Enc. of L. 773, 775; 86 Ark. 300-303; 30 Am. & Eng. Enc. of L. 887; 87 N.W. 656.

Basil Baker, for appellee.

The evidence shows that the two corporations are not the same in law or in fact. The fact that some of the stockholders were interested in both corporations does not make of them one corporation. 69 Ark. 85; 94 Ark. 461.

As to whether the new corporation will be responsible for the liabilities of the old, it is a question of intent to be determined from the terms of its articles of association. 5 Thompson on Corp., § 5983; 63 S.W. 776.

Where there is no statute fixing liability upon a corporation which succeeds another in property rights for the debts or liabilities of the first, and no contract or agreement that successor will assume such liabilities, as is the case in this State, then there is no liability except for contractual obligations, and then only in chancery wherein the corporate assets are bound as a trust fund, or where the transaction is fraudulent and with intent of cheating creditors. 10 Cyc. 287 et seq.; 9 Am. & Eng. Enc. of L. (2 ed.) 608, 609, 619; 15 How. 304; 8 Peters, 284; 37 Ark. 23; Id. 17; 59 Ark. 562.

OPINION

MCCULLOCH, C. J.

This is an action instituted by the plaintiff, Herbert Good, against two Missouri corporations, the Western Handle Company, and the Ferguson & Wheeler Land, Lumber & Handle Company, George B. Wheeler and William Ferguson, to recover damages for personal injuries received while at work in the service of the first of the above-named corporations.

The Western Handle Company seems not to have been served with process, and did not appear in the action. The same may be said of William Ferguson, another of the defendants.

The Ferguson & Wheeler Land, Lumber & Handle Company answered all of the allegations of the complaint, and the case went to trial upon the issues thus made.

Defendant Wheeler, though having been served with process, did not file an answer.

Upon the testimony adduced by plaintiff, the court gave a peremptory instruction in favor of the defendants. Judgment was entered accordingly in defendants' favor, and plaintiff appealed.

Counsel for plaintiff insist, in the first place, that there should have been a judgment by default against defendant, Wheeler. But as plaintiff did not move for such judgment, and went to trial upon the answer of the other defendant, which presented a defense in some respects common to all the defendants, it is too late now to complain that the court treated the defense as a common one, and directed a verdict against the plaintiff in favor of all of the defendants. If, therefore, the testimony adduced at the trial was not sufficient to warrant a verdict against Wheeler, or the other defendants served in the action, the court was correct in taking the case from the jury and rendering a judgment against the plaintiff.

The case is presented here principally on the question of the responsibility of the Ferguson & Wheeler Land, Lumber & Handle Company for the liabilities of the other corporation, including its liability, if any is established, for the plaintiff's injury. We will direct our attention, therefore, to that question.

The testimony concerning the status of the two corporations, their relations to each other, and the amount of property and liabilities of each, is confined to the testimony of Mr. George B. Wheeler, who was one of the organizers and officers of each corporation as well as a member of the partnership composed of himself and William Ferguson under the style of Ferguson & Wheeler, which owned substantially all the stock in both corporations. The firm of Ferguson & Wheeler had its principal offices in Poplar Bluff, Missouri, but owned considerable property in Arkansas as well as in Missouri. It owned about 3,000 acres of timber land and operated two or more plants in Arkansas for the manufacture of lumber and its products. It also owned and operated a mercantile establishment at Corning, Arkansas. In the spring of the year 1907, the members of the firm of Ferguson & Wheeler organized and incorporated the Western Handle Company, the members of that firm owning the stock except a few qualifying shares issued to its employees. Another person, Angus McNeill, was to be an equal stockholder, but he didn't pay for any of his stock, and the shares were not issued to him. The handle factory near Corning, at which plaintiff was working when he received his injuries, was operated in the name of the Western Handle Company, but it was, in fact, owned by the firm of Ferguson & Wheeler. The intention was for the partnership to convey the property to said corporation, but that was never done. Plaintiff received his injuries on December 20, 1907, while the plant was being operated in the name of the Western Handle Company. During the operation of the business of that corporation all the debts contracted by it were guaranteed by the members of the firm of Ferguson & Wheeler. Mr. Wheeler testified positively as to that fact. In April, 1908, it was found that the Western Handle Company was considerably involved in debt, as was also the firm of Ferguson & Wheeler, though neither of the concerns were shown to have been insolvent. Both concerns were heavily in debt, and the business condition brought about by the panic of 1907 made it necessary for a change to be made in the business. The Western Handle Company was incorporated in the sum of $ 30,000, and the idea was conceived by the members of the Ferguson & Wheeler firm to organize a new corporation with a much larger capital and take over the property and business of the Western Handle Company, and also that of the firm of Ferguson & Wheeler, in order that a new loan could be floated sufficient to cover all of the old indebtedness. This idea was carried out by the organization of another corporation named the Ferguson & Wheeler Land, Lumber & Handle Company, which was incorporated with a capital stock in the sum of $ 300,000. The stock was all taken by the two members of the firm except one qualifying share issued to its bookkeeper. Ferguson was president of both corporations and Wheeler was treasurer of both. Upon the organization of the new corporation, the Western Handle Company conveyed all of its property to the firm of Ferguson & Wheeler, who, in turn, conveyed it to the new corporation. The partnership, by separate deeds, conveyed its real estate to the new corporation, and the testimony of Mr. Wheeler shows that all the property of the old corporation and all the property of the partnership except the stock of goods at Corning was turned over to the new corporation. All of the transactions with respect to these changes took place simultaneously, or substantially so, that is, within a few days of each other. The deed from the Western Handle Company to Ferguson & Wheeler recited that "in consideration of value received," the corporation conveyed "all the personal property and effects of this company" to Ferguson & Wheeler, a partnership composed of William Ferguson and George B. Wheeler; and the deed from Ferguson & Wheeler to the new corporation, the Ferguson & Wheeler Land, Lumber & Handle Company recited that "in consideration of value received," said firm conveyed "all personal property and effects" to the new corporation. The last deed contained the following clause with reference to the property conveyed, which was substantially in the words of the clause in the deed from the Western Handle Company to the partnership, towit: "It being intended hereby to convey, and the grantor herein has conveyed, to said corporation all of the personal property and effects of the grantor, of every kind and character and wheresoever located, consisting of goods, wares and merchandise, finished and unfinished logs, lumber, accounts, bills receivable, etc. , as evidenced by their books March 1, 1908."

Mr Wheeler testified that these changes were merely for the purpose of convenience of himself and Mr. Ferguson, who were the real owners of all the property, and of all...