United States v. Safeway Stores, 2775.

• Decision Date: 08 February 1944
• Docket Number: No. 2775.,2775.
• Parties: UNITED STATES v. SAFEWAY STORES, Inc. (TEXAS) et al.
• Court: U.S. Court of Appeals — Tenth Circuit

140 F.2d 834 (1944)

UNITED STATES v. SAFEWAY STORES, Inc. (TEXAS) et al.

No. 2775.

Circuit Court of Appeals, Tenth Circuit.

February 8, 1944.

Holmes Baldridge, Sp. Asst. to the Atty. Gen. (Wendell Berge, Asst. Atty. Gen., George H. West, U. S. Atty., of Kansas City, Kan., and Kenneth L. Kimble, Horace L. Flurry, and Philip Marcus, Sp. Assts. to the Atty. Gen., on the brief), for appellant.

Louis R. Gates, of Kansas City, Kan. (Mitchell T. Neff, of San Francisco, Cal., and Henry N. Ess, of Kansas City, Mo., on the brief), for appellees.

Before PHILLIPS and BRATTON, Circuit Judges, and VAUGHT, District Judge.

VAUGHT, District Judge.

Three corporations were organized under the name Safeway Stores, Inc., one in Texas, one in California, and one in Nevada. Dwight Edwards Company and The Lucerne Cream and Butter Company were corporations organized under the laws of California. Sanitary Grocery Company, Inc., was a corporation organized under the laws of Delaware. All of them were subsidiary corporations of Safeway Stores, Inc., a corporation organized under the laws of Maryland. Each of such subsidiary corporations was duly dissolved pursuant to the laws of the state in which it was organized and created. Thereafter, indictments were returned against such subsidiary corporations charging violations of sections 1 and 2 of the Act of Congress of July 2, 1890, entitled "An act to protect trade and commerce against unlawful restraints and monopolies" 26 Stat. 209, 15 U.S.C.A. §§ 1, 2, commonly known as the Sherman Act. The trial court ordered the proceedings abated as to such dissolved subsidiary corporations. The United States has appealed.

The indictments contained two counts. Count one charged appellees with a combination and conspiracy to restrain interstate trade and commerce in food products in violation of section 1 of the Sherman Act. Count two charged appellees with a combination and conspiracy to monopolize a substantial part of the interstate trade and commerce in food and food products in certain areas in violation of section 2 of the Sherman Act.

Motions were filed on behalf of each of the appellees by certain individuals as former directors of said appellee corporations, to vacate the criminal citations issued pursuant to the indictments, to quash the service of the citations, and to abate the indictment as to them. The sole ground of the motions is that prior to the return of the indictment, appellees had been dissolved in accordance with the laws of the respective states of their incorporation, and by reason thereof, could not be prosecuted.

The corporations were legally dissolved in compliance with the laws of their respective states prior to January 20, 1943, the date of the return of the indictment. The dissolutions were completed as follows: two on December 31, 1942; one on January 5, 1943; two on January 12, 1943; and one on January 16, 1943. The appellant demurred to the motion of the appellees on the ground that such dissolution did not terminate their existence or their liability to prosecution under the indictment. The district court overruled the demurrer holding that the corporate existence of each of such dissolved corporations having been completed prior to the return of the indictment, such dissolved corporations, and each of them, were civilly dead upon the date the indictment was returned, and by reason thereof the appellees could not be prosecuted. The court thereupon sustained the motions of appellees, vacated the citations, quashed the service, and treating the motions as pleas in abatement, ordered the indictment abated as to each of the appellees.

The appellant contends that the court erred in holding that the appellees could not be prosecuted for the reason that their corporate existence had terminated prior to the return of the indictment, and that the statutes of the states, where the appellees were incorporated and dissolved, permit the prosecution on the indictment returned in court.

It is well settled at common law and in the federal courts that a corporation which has been dissolved is as if it did not exist. The result of dissolution cannot be distinguished from the death of a natural person in its effect. As the death of a natural person abates all pending litigation to which he is a party, dissolution of a corporation at common law abates all litigation to which the corporation is a party, unless it is continued by the law of the state where it is dissolved for the purpose of prosecuting or defending civil suits or criminal actions. Thus the question, as to whether a corporation is continued for the purpose of prosecuting or defending civil suits or criminal actions, depends upon the law of the state of its incorporation. Oklahoma Natural Gas Co. v. State of Oklahoma, 273 U.S. 257, 47 S.Ct. 391, 71 L.Ed. 634; Chicago Title & Trust Co. v. Forty-One Thirty-Six Wilcox Building Corporation, 302 U.S. 120, 58 S.Ct. 125, 82 L.Ed. 147; State v. Arkansas Cotton Oil Co., 116 Ark. 74, 171 S.W. 1192, Ann.Cas.1917A, 1178; Mason v. Adoue et al., 30 Tex.Civ.App. 276, 70 S.W. 347; Miller Management Co., Inc., v. State, 140 Tex. 370, 167 S.W.2d 728.

If the statutes of the state where the corporation is incorporated and dissolved do not give authority to maintain such a prosecution, it does not exist. Then we must examine the pertinent statutes of the various states where appellees were created and dissolved.

Sec. 399, Civil Code of California 1941, in part provides:

"§ 399. Continuation of corporation after dissolution: A corporation which is dissolved by the expiration of its terms of existence, by forfeiture of existence by order of court, or otherwise, nevertheless shall continue to exist for the purpose of winding up its affairs, prosecuting and defending actions by or against it, and enabling it to collect and discharge obligations, dispose of and convey its property, and collect and divide its assets, but not for the purpose of continuing business except in so far as necessary for the winding up thereof. No action or proceeding to which a corporation is a party shall abate by the dissolution of such corporation or by reason of proceedings for dissolution and winding up thereof. * * *" Article 1374, Vernon's Anno. Civil Texas Stat. Vol. 3, reads as follows:

"Art. 1374. Abatement of suit. — Any action or cause of action for any fine, forfeiture or penalty that the State of Texas has, or may have, against any corporation chartered under the laws of this or any other state, territory or nation, shall not abate or become abated by reason of the dissolution of such corporation, whether voluntary or otherwise, or by the forfeiture of its charter or permit."

Article 1388, Id., reads as follows:

"Art. 1388. Liquidation by officers. — Upon the dissolution of a corporation, unless a receiver is appointed by some court of competent jurisdiction, the president and directors or managers of the affairs of the corporation at the time of its dissolution shall be trustees of the creditors and stockholders of such corporation, with power to settle the affairs, collect the outstanding debts, and divide the moneys and other property among the stockholders after paying the debts due and owing by such corporation at the time of its dissolution, as far as such money and property will enable them after paying all just and reasonable expenses; and for this purpose they may in the name of such corporation, sell, convey and transfer all real and personal property belonging to such company, collect all debts, compromise controversies, maintain or defend judicial proceedings, and exercise full power and authority of said company over such assets and property. Said trustees shall be severally responsible to the creditors and stockholders of such corporation to the extent of its property and effects that shall have come into their hands."

Article 1389, Id., in part reads as follows:

"Art. 1389. Extension of existence. — The existence of every corporation may be continued for three years after its dissolution from whatever cause, for the purpose of enabling those charged with the duty, to settle up its affairs."

Article 1391, Id., reads as follows:

"Art. 1391. Suit on claim. — When no receiver has been appointed for said corporation, suit may be instituted on any claim against said corporation, as though the same had been dissolved, and service of process may be obtained on the president, directors, general manager, trustee, assignee, or other person in charge of the affairs of the corporation at the time it was dissolved, and judgment may be rendered as though the corporation had not been dissolved, and the assets of said corporation shall be liable for the payment of such judgment just as if said corporation had not been dissolved."

Section 1954, Rev.Code of Delaware 1915, in part reads as follows:

"Continuation of Corporation After Dissolution, for Purposes of Suit, &c: — All corporations, whether they expire by their own limitation, or are otherwise dissolved, shall nevertheless be continued for the term of three years from such expiration or dissolution bodies corporate for the purpose of prosecuting and defending suits by or against them, * * *."

Section 2074, Rev.Code 1935, Section 42 of Delaware Corporation Law, as amended by the Laws of Delaware 1941, pp. 457, 458, 43 Del. Laws c. 132, § 11, in part reads as follows:

"Continuation of Corporation After Dissolution for Purposes of Suit, Etc.: — All corporations, whether they expire by their own limitation, or are otherwise dissolved, shall nevertheless be continued for the term of three years from such expiration or dissolution bodies corporate for the purpose of prosecuting and defending suits by or against them, * * *."

Section 2078, Section 46 of Delaware Corporation Law, in part reads as follows:

"Dissolution; No Cause for Abatement of Actions; Suggestion on Record; Action Continued Against Trustees or Receivers: — If any...