Jackson v. Diamond T. Trucking Co.

• Decision Date: 08 March 1968
• Docket Number: No. L--35412,L--35412
• Citation: 100 N.J.Super. 186,241 A.2d 471
• Parties: George J. JACKSON, Plaintiff, v. DIAMOND T. TRUCKING COMPANY, a corporation, Defendant.
• Court: New Jersey Superior Court

Page 186

100 N.J.Super. 186

241 A.2d 471

George J. JACKSON, Plaintiff, v. DIAMOND T. TRUCKING COMPANY, a corporation, Defendant.

No. L--35412.

Superior Court of New Jersey

Law Division.

March 8, 1968.

Seymour B. Jacobs, Newark, for plaintiff (Balk, Jacobs, Goldberger & Mandell, Newark, attorneys).

Frederick A. Frost, Newark, for defendant (Pitney, Hardin & Kipp, Newark, attorneys).

PINDAR, J.S.C.

The issues presented to the Court come before it on motion for summary judgment, R.R. 4:58 et seq. The motion is supported by the pleadings, affidavits, depositions, admissions, answers to interrogatories and certain agreements, the contents of all of which shall be adverted to in the course of this opinion.

Plaintiff, George J. Jackson was an employee of Phillips Specials (Phillips), a New Jersey corporation, wholly owned, however, by a Missouri corporation, Ujay, Inc. (Ujay) which was licensed to do business in this State. Plaintiff sustained a compensable work-related injury for which he received a workmen's compensation award against Phillips for $7,254.21. This award was docketed in the Hudson County Clerk's office on November 9, 1966, pursuant to R.S. 34:15--58, N.J.S.A., and later docketed in the Superior Court on November 23, 1966. The award has not been appealed, nor has it been paid.

Phillips was a trucking company whose principal place of business was on Fisk Street, Jersey City, where its terminal facilities were located. It had as its principal asset in interstate trucking franchise issued by the Interstate Commerce Commission (I.C.C.).

One Wallace T. Taylor desired to acquire the franchise for Diamond T. Trucking (Diamond T), the defendant herein, a Delaware corporation, then with principal place of business in Philadelphia, Pa. Taylor was president, director and principal stockholder of Diamond T.

To effect his purpose Taylor entered into a contract with Ujay to purchase all the capital stock and assets of Phillips. Ujay was owned and controlled by two principal stockholders, William B. Cox and David H. Schleuter, the former acting as secretary-treasurer, the latter as president-vice president of Ujay. Cox and Schleuter were also officers and directors of Phillips.

The contract of sale and its supplementary agreement were executed in St. Louis on March 31, 1966. In the contract Taylor was named as the buyer, although provision was made for the assignment and transfer of the rights and assets covered by the contract to Taylor's corporate nominee, Diamond T. The contract contained the following highlights: $100,000 consideration for the Phillips stock; $12,436 in consideration for its assets; an $80,000 promissory note executed or to be executed by Diamond T and guaranteed by Taylor individually; the creation of a seller's security interest in the I.C.C. operating authority; seller's permission to liquidate, merge or consolidate Phillips; resignations by Phillips' old officers and directors, and releases by them of any claims they might have against the corporation. Ujay further agreed to pay all debts and liabilities of Phillips of any kind, absolute or contingent, existing on the date of closing, March 31, 1966. Furthermore, Ujay agreed to indemnify and save Taylor harmless from all actions, suits, proceedings, demands, assessments, judgments, costs and expenses incident to any failure of Ujay in fulfilling any terms of the sale contract. Attached to the contract and made a part thereof was 'Exhibit D' which listed certain outstanding obligations of Phillips. Included on Exhibit D was plaintiff's compensation claim beneath which Ujay declared its obligation to accept all liability with regard thereto. Finally, the contract was to be governed by the law of Missouri.

Taylor's deposition shows that he operated Phillips until March 7, 1967 when the I.C.C. approved the transfer of the interstate franchise to Diamond T. (Apparently, the I.C.C. originally approved the transfer before the compensation award was rendered as appears from a copy of an I.C.C. order dated September 12, 1966 attached to the moving papers. Plaintiff intervened in these proceedings which probably accounts for the delay in obtaining final approval.)

Taylor's deposition also reveals that he had actual knowledge of plaintiff's claim at the time he purchased the Phillips stock. After the franchise was transferred, all the trucks and other operating equipment were registered in Diamond T's name in Pennsylvania. All operations hitherto performed by Phillips were then and are now performed by and under the name of Diamond T. Phillips has no assets in New Jersey and no longer conducts any activities although it has not been statutorily dissolved because, as Taylor says, 'I was kind of worried about putting it to sleep until everything was squared away.' Although Diamond T now has title to all Phillips' assets and is now operating from the Jersey City terminal facilities, no consideration was paid by Diamond T to Phillips, as is revealed by Taylor's statement that he simply let Phillips' checking account deplete itself after he transferred all the assets.

Before discussing the applicable law, it should be noted that this action has been commenced in the Law Division of the Superior Court against Diamond T. Taylor, Phillips and Ujay are not named in this action and, therefore, nothing in the nature of a personal judgment can be rendered against them.

Plaintiff asks this Court to render a judgment of liability with interest and costs against Diamond T for the workmen's compensation award rendered against Phillips. Plaintiff's theories of recovery are three in number. First, plaintiff asks the Court to pierce Diamond T's corporate veil; or, secondly, find that Diamond T is a continuation in law and fact of Phillips; or, thirdly, to view this proceeding as a garnishment of the indebtedness assumed by Diamond T and owing Ujay for the Phillips stock. The Court feels that the first theory is a procedure generally within the Chancery Division's practice and would be inclined to transfer the case on its own motion were it clear that plaintiff does not also assert a right cognizable at law. See R.R. 4:41--3. See also, O'Neill v. Vreeland, 6 N.J. 158, 165--166, 77 A.2d 899 (1951). As to the garnishment theory, the Court feels such relief would be premature without a full hearing regarding the debt created by the contract and potentially governed by Missouri law. In this light, the Court considers the second expressed theory as a grounds for judgment herein.

While the Court has found New Jersey cases whose facts are sufficiently analogous so as to govern a disposition of the case at bar, none could be found which are direct authority for the theory advanced herein. The law of New Jersey might be considered well settled but unclear in resolving the issue presented. It also seems apparent that there are no theories of recovery as such, but rather factual descriptions or conclusions which have been thought to entitle various kinds of creditors to relief. In this regard, plaintiff's principal claim for relief is for a judgment of individual liability against Diamond T and this Court thinks it is properly brought in the Law Division. Confusion arises, however, from the fact that most of the reported cases have been brought in equity courts. But see, Parsons Mfg. Co. v. Hamilton Ice Mfg. Co., 78 N.J.L. 309, 73 A. 254 (Sup.Ct.1909). This Court agrees with the Louisiana Supreme Court which said in a case not entirely dissimilar to the one at bar that '* * * the properties of a corporation constitute a trust fund for the payment of its debts; and that, where there has been a misappropriation of such funds, or * * * the corporation has been divested thereof by consolidation, merger, reorganization, or 'reincarnation,' not only may the fund be followed, by the aid of equity, for the benefit of the creditor, but he may recover, in an action at law, against the corporation which has taken over such fund, with the business of his debtor.' Wolff v. Shreveport Gas, Electric Light and Power Co., 138 La. 743, 70 So. 789, 794, L.R.A.1916 D, 1138 (Sup.Ct.1916). In any event, because in our practice law and equity have been merged, and because the problem here is fairly susceptible to either characterization, the Court will retain the case in this division for purposes of this motion.

No New Jersey case appears to have been called upon to make a comprehensive statement of the law in the area under investigation, but by weight of reason and authority this Court feels our State would adopt Fletcher's formulation, I.e.,

'Generally where one corporation sells or otherwise transfers all of its assets to another corporation, the latter is not liable for the debts and liabilities of the transferor, except: (1) where the purchaser expressly or impliedly agrees to assume such debts; (2) where the transaction amounts to a consolidation or merger of the corporation; (3) where the purchasing corporation is merely a continuation of the selling corporation; and (4) where the transaction is entered into fraudulently in order to escape liability for such debts.' 15 Fletcher, Cyc. Corporations, § 7122, p. 187 (1961 Perm.Ed.)

To the same effect, 15 A.L.R. 1112, 49 A.L.R. 788; 19 Am.Jur.2d, § 1546, pp. 923--4; 19 C.J.S. Corporations § 1630d.

Not to be overlooked are five older New Jersey cases (referred to before) which, though not authority for the proposition advanced herein, would be dispositive had plaintiff sought a different kind of relief. Couse v. Columbia Powder Mfg. Co., 33 A. 297 (Ch. 1895) (not officially reported); Parsons Mfg. Co. v. Hamilton Ice Mfg. Co., supra; Chorpenning v. Yellow Cab Co., 113 N.J.Eq. 389, 167 A. 12 (Ch. 1933), affirmed, 115 N.J.Eq. 170, 169 A. 691 (E. & A. 1933); Aetna &c. Co. v. International &c. Corp., 117 N.J.Eq. 190, 175 A. 114 (Ch. 1934); Fox v. Radel Leather Mfg. Co., 121 N.J.Eq. 291, 189 A. 366 (E. & A. 1936). Compare, ...