Morrison v. American Snuff Co.

• Decision Date: 02 December 1901
• Citation: 30 So. 723,79 Miss. 330
• Court: Mississippi Supreme Court
• Parties: DANIEL J. MORRISON v. AMERICAN SNUFF COMPANY

30 So. 723

79 Miss. 330

DANIEL J. MORRISON v. AMERICAN SNUFF COMPANY

Supreme Court of Mississippi

December 2, 1901

FROM the circuit court of, first district, Hinds county. HON ROBERT POWELL, Judge.

Morrison the appellant, was the plaintiff in the court below; the American Snuff Company, appellee, was, after the suit had been dismissed as to another, the sole defendant there. From a verdict and judgment in plaintiff's favor for a sum much less than that demanded, he appealed to the supreme court.

The Geo. W. Helm Company, manufacturers of tobacco and snuff entered into a contract with D. J. Morrison, a traveling salesman, for his services as salesman for the year 1900. After this contract was made, there was a consolidation of a number of snuff manufacturing companies, including the Geo W. Helm Company, forming the American Snuff Company, and to this corporation the Helm Company conveyed all its property, real, personal and mixed. The American Snuff Company refused to carry out the contract of the Helm Company with Morrison, and he brought this suit by attachment against the Helm Company and the American Snuff Company, as foreign corporations, and garnished Jones Bros. & Co., who answered that they owed the defendant, the American Snuff Company, a sum in excess of the amount sued for. The suit was upon an open account for wages and expenses under the contract with the Helm Company, and some other items. It was dismissed before trial as to the Helm Company. After plaintiff had introduced all his evidence and rested, defendant, the American Snuff Company, moved the court to exclude all the evidence from the consideration of the jury relative to the items in the account for salary and expenses under the contract. The court sustained this motion, to which plaintiff excepted. There were verdict and judgment for plaintiff for the remainder of the account.

Reversed and remanded.

Williamson, Wells & Croom, for appellant.

The American Snuff Company being a new company, formed by the stockholders of the Helm Company, by consolidation with it and several others, the new company's assets being all the property of the old, with its franchises, etc., is liable for the debts of the Helm Company, and by its contracts made prior to the consolidation. In view of all the circumstances shown in the record as to the manner in which the Helm Company was merged into the new corporation and wholly absorbed by it, the new company became indebted to Morrison under the contract with the old, even though there was no written assumption of the liability. The proof shows that the new company is composed of the same parties, has the same officers, owns the same property and the same business, conducted under a new name. Can a corporation avoid its debts or liability, or its contracts by a simple change of its name and a change of its domicile?

The Helm Company was solvent when the sale to the new company took place, or when the consolidation with the new corporation was effected. The very goods sold to Jones Bros. & Co., the garnishees in this case, and for which the garnishee owed the money to the appellee, was the property of the Helm Company.

It is well settled that a creditor of an old corporation may follow the property into the hands of a consolidated company, to which it was transferred and stock therefor issued to the old stockholders. Martin v. Zellerbach, 36 Cal. 300 (21 N.E. 364; 6 N. Y. Suff., 459); Slatterly v. St. Louis, etc., Co., 4 S.W. 179; Cook's Corporation L., 643 (2 Ed.); Hancock v. Halbrook, 3 So. Rep., 351; Pullman, etc., Co. v. Rosco, 115 U.S. 351; Railroad Co. v. Hall, 23 L. R. A., 231 and notes.

The property of the old corporation is a trust fund in the hands of the new, just as unpaid subscriptions are a trust fund for the benefit of creditors, and either may be reached by attachment and garnishment at law. Cook's Corporation Law, (2 Ed.) secs. 201, 203, note 1, and authorities cited on p. 211 and note on p. 204; Savings Ass'n v. O'Brien, 51 Hun., 45; Freeman v. Winchester, 16 Miss. 577; Railroad Co. v. Boney, 3 L. R. A., 435; Thompson v. Abbott, 61 Mo. 176 (23 L. R. A., 231.

The fact that the property of the Helm Company, in the hands of the American Snuff Company, is a trust fund for creditors of the Helm Company and has been appropriated by the new company and is mingled with its assets, is no reason in law, equity or justice, why the creditors may not proceed in law or in equity, by attachment or otherwise, to collect his debt out of any money or property of the new company, which can be reached by the process of the court, especially where the new company is composed of the very same persons as the old. The new company is under an implied promise to pay the debts of the old company on the same principle of law that the purchaser of property on which there is a landlord's lien, can be sued at law, in assumpsit, for the value of the property.

McWillie & Thompson, for appellee.

The statute of frauds is a complete bar to all that part of Morrison's demand which was denied him in the court below. The statute (code 1892, § 4225) provides: "An action shall not be brought whereby to charge a defendant or other party upon any special promise to answer for the debt or default or miscarriage of another person, . . . unless . . . the promise or agreement upon which such action may be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith, or some person by him or her thereunto lawfully authorized."

Morrison is estopped to claim that the Helm Company and the American Company are the same, having sued them as distinct corporations; besides the evidence shows conclusively that they were not the same, but different corporations. It is true the Helm Company, on May 24, 1900, sold all of its property, including debts due to it, to the American Snuff Company, but there was no assumption, in the deed or otherwise, by the latter company of the former's debts. Because the American Snuff Company purchased all the property of the Helm Company, and obtained the same subject to the rights of the creditors of the Helm Company to subject the property to their debts, it does not follow at all that Morrison, although we regard him as a creditor of the Helm Company, can maintain this suit, an attachment at law, against the American Company. The American Company is not liable for the debts of the Helm Company, even if the property purchased can be subjected. There is no personal liability. If Morrison has a right as a creditor of the Helm Company against property, it is an equitable one. He might by a suit in equity in New Jersey obtain jurisdiction of the property and enforce his right against it, but he cannot make a personal obligation out of the transaction, nor can he maintain this suit. This suit cannot be maintained, because no personal obligation of the American Company was shown. Section 147 of the constitution deprives the supreme court alone of power. A circuit court may and should dismiss a suit for want of jurisdiction. Carbolineum, etc., Co. v. Meyer, 76 Miss. 586.

Argued orally by C. M. Williamson for appellant, and by R. H. Thompson for the appellee.

OPINION

WHITFIELD, C. J.

Whether the plaintiff had any contract with the American Snuff Company, the new company formed by the consolidation of others or not, is immaterial, since he did have a valid contract with the Geo. W. Helm Company, one of the constituent corporations going to form the new consolidated company. It seems to be conceded that the consolidation was by proper legislative authority, and the deed by which the Geo. W. Helm Company conveyed "all the property interest and business" belonging to it to the new company fully evidences the consolidation. It was not competent for the Geo. W. Helm Company to consolidate itself with other companies forming this new consolidated company and escape payment of the debts due from it before consolidation. Where there has been consolidation, the new company takes, with notice, the property of the constituent companies, and is not a bona fide purchaser for value. Consolidation is wholly unlike the bona fide sale of the assets of one corporation to another, as to which latter the true rule is stated in 1 Thomp. Corp., sec. 377. This is a case of consolidation. The Geo. W. Helm Company went out of existence, and conveyed everything of every kind belonging to it to the new consolidated company. The new company is not a bona fide purchaser. Says Judge Thompson (1 Thomp. Corp., sec. 375): "Where several corporations are united in one, and the property of the old companies is vested in the new, the latter is liable in equity for the debts of the former, at least to the extent of the property received from them; and, if it is also liable at law, the legal remedy is not exclusive. The governing principle here is that a corporation cannot give away its assets to the prejudice of its creditors, but that a court of equity will follow such assets as a trust fund into the hands of any new custodian, the same not being a creditor or bona fide purchaser. It is scarcely necessary to add that in such a case the consolidated corporation holds the property received from the absorbed company with notice of any trust attaching to it in favor of its creditors, and cannot claim the rights of a bona fide purchaser without notice." And in sec. 376 he says: "A statute which provides for a consolidation by the purchase by one company of the stock of another, and the issue of its own stock for the same, and which adds that 'the purchase herein provided for, or the surrender of the franchises, shall in no way affect the rights of the creditors of the company'--that is, of the absorbed...