Case Name: IRVINE v. NEW YORK EDISON CO.
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1911-03-10
Citations: 128 N.Y.S. 297
Docket Number: 
Parties: IRVINE v. NEW YORK EDISON CO.
Judges: 
Reporter: West's New York Supplement
Volume: 128
Pages: 297–306

Head Matter:
IRVINE v. NEW YORK EDISON CO.
(Supreme Court, Appellate Division, First Department.
March 10, 1911.)
1. Corporations (§ 590 )—Merger—Consideration—Presumption.
On the assignment of all the property, including the franchise, of a corporation to another corporation, it must be assumed, in the absence of proof, that full value was paid, and that no obligation was imposed on the purchasing corporation, in the absence of agreement to the contrary, to pay the debts of the selling corporation.
[Ed. Note.—For other cases, see Corporations, Cent. Dig. § 2304; Dec. Dig. § 590. ]
2. Corporations (§ • 590 )—Merger—Statutory Provision — Liabilities oe Merged Corporation.
Under Stock Corporation Law (Laws 1896, c. 932) § 58, authorizing any stock corporation lawfully owning all the stock of another stock corporation engaged in a similar business °to merge the latter, “but without prejudice to any liabilities of the other corporation or the rights of any creditor thereof,” the proviso simply preserves the rights of creditors of the merged corporation to maintain an action against it, and if a recovery be had, and the judgment not paid, then to recover assets transferred if full value were not paid therefor.
[Ed. Note.—For other cases, see Corporations, Cent. Dig. § 2364; Dec. • Dig. § 590. ]
3. Corporations (§ 590 )—Merger—Statutory Provision — Liabilities of Merged Corporation.
Under Stock Corporation Law (Laws 1896, c. 932) § 58, authorizing any stock corporation lawfully owning all the stock of another stock corporation engaged in a similar business to merge the latter, the possessor corporation does not, by the merger alone, regardless of the assets received from the merged corporation, assume the liabilities of the latter so as to be liable in action at law to its creditors.
[Ed. Note.—For other cases, see Corporations, Cent. Dig. § 2364; Dec. Dig. § 590. ]
4. Corporations (§ 590 )—Consolidation — Liabilities of Original Corporation.
Under Business Corporation Law (Laws 1892, c. 691) § 12, providing that the right of creditors of any corporation consolidated with others shall not be impaired by the consolidation, but the new corporation shall succeed to all liabilities of each of the corporations consolidated, where a debtor corporation is merged in another and the possessor corporation becomes consolidated with others, where the possessor corporation has not assumed an obligation of the debtor corporation, the consolidated corporation is not made liable therefor.
IT¡>i —For other cases, see Corporations, Cent. Dig. § 2364; Lee. Dig. § 590. ]
Scott, J., dissenting.
Appeal from Trial Term, New York County.
Action by Frederick B. Irvine against the New York Edison Company. From a judgment dismissing the complaint at the close of plaintiff’s case and from an order denying a new trial, plaintiff appeals.
Affirmed.
Argued before INGRAHAM, P. J., and McLAUGHLIN, LAUGH-LIN, SCOTT, and MILLER, JJ.
Martin S. Lynch, for appellant.
Edward W. Hatch,, for respondent.
For other cases see same topic & § number in Dec. & Am. Digs. 1907 to date, & Rep’r Indexes
For other 'cases see same topic & § number in Dec. & Am. Digs. 1907 to date, & Rep’r Indexes

Opinion:
McLAUGHLIN, J.
This action is brought to recover the amounts paid by the plaintiff's assignor, the accommodation maker and indorser, upon a note made and indorsed for the benefit of the Block Lighting & Power Company, a domestic corporation, which in February, 1900, was merged into another domestic corporation, the New York Gas, Electric Light, Heat & Power Company, pursuant to section 58 of the then stock corporation law. Laws 1892, c. 688, as added by Laws 1896, c. 932. The latter company was subsequently consolidated with the Edison Electric Illuminating Company of New York; its ñamé being thereafter changed to the New York Edison Company. This action was brought upon the theory that the defendant is liable for the debts' of the Block Lighting & Power Company, which was primarily liable upon the note which the plaintiff's assignors were compelled to pay. Upon the trial the complaint was dismissed at the close of plaintiff's case and from the judgment entered to that effect, and- from an order denying a motion for a new trial plaintiff appeals.
It appears that on the 13th of December, 1898, the Block Lighting & Power Company assigned and transferred all of its property, including its franchise, to a domestic corporation known as the Manhattan Lighting Company and both of these corporations were on the 1st of February, 1900, merged into and became the New York Gas, Electric Light, Heat & Power Company. It does not appear what was paid for the property and franchise transferred, but, in the absence of proof upon the subject, it must be assumed that full value was paid, and that no obligation was imposed upon the Manhattan Company, in the absence of an agreement to the contrary, to pay the debts or obligátions of the Block Lighting & Power Company. Klein v. East River Electric Light Co., 182 N. Y. 27, 74 N. E. 495; Fernschild v. Yuengling Brewing Co., 154 N. Y. 667, 49 N. E. 151. This transfer, therefore, in no way affects the alleged liability of the defendant in this action. The record fails to disclose any of the particulars connected with or growing out of the merger, except that it was under and pursuant to section 58 of the then stock corporation law. That section provided that:
"Any stock corporation lawfully owning all the stock of any other stock corporation [engaged in a similar business] may file in the office of the Secretary of State a certificate of such ownership and of the resolution of its board of directors to merge such other corporation and thereupon it shall acquire and become and be possessed of all the estate, property, rights, privileges and franchises of such other corporation and they shall be managed and controlled by the board of directors of such possessor corporation and in its name, but without prejudice to any liabilities of such other corporation or the rights of any creditor thereof."
The statute does not prescribe the manner in which creditors of the merged corporation may enforce their rights, and, so far as I have been able to discover, that question has not been judicially determined. The statute provides that the property of the merged corporation shall be held and enjoyed by the possessor corporation in its name, "but without prejudice to any liabilities of such, other corporation or the rights of any creditor thereof." The words quoted simply preserve, as it seems to me, the rights of creditors as. against the merged corporation, enabling them to maintain an action for the recovery of a judgment, and, if a recovery be had and the judgment not paid, then to take such proceedings as may seem proper for the recovery of assets transferred if full value were not paid therefor.
It seems to me quite clear that the possessor corporation does not by the merger alone assume the liabilities of the merged corporation so as to be liable in actions at law to its creditors. The fact that the New York Gas, Electric Light, Heat & Power Company owned all of the stock of the Block Lighting & Power Company, which must be assumed since the merger was under section 58, did not render it liable for the debts of the latter company, and there is nothing in the statute to indicate that such an absolute liability was imposed upon it by the merger,/ irrespective of the assets which it may have acquired. What, if any, assets the New York Gas, Electric Light, Heat & Power Company received from the merged corporation does not appear. No attempt whatever was made upon the trial to show that either it or the defendant received any assets of the Block Lighting & Power Company or the Manhattan Lighting Company.
But is is urged that, when the Electric Light, Heat & Power Company was consolidated with the defendant, it thereupon; under section 12 of the business corporation law (chapter 691, Laws of 1892), became liable for the plaintiff's claim. This section as it then existed provides that:
"The rights of creditors of any corporation that shall so be consolidated ,shall not, in any manner be impaired nor any liability or obligation for the payment of any money due or to become due to any person or persons, or any claim or demand for any cause existing against any such corporation or against any stockholder thereof, be released or impaired by any such consolidation; but such new corporation shall succeed to and be held liable to pay and discharge all such debts and liabilities of each of the corporations consolidated in the same manner as if such new corporation had itself incurred the obligation or liability to pay such debt or damages. "
This statute, while permitting corporations to consolidate, .nevertheless preserves to the creditors of the corporations which are consolidated all their rights unimpaired, and furnishes them a remedy concurrent in its nature. They may enforce the liability either against the corporation whose debt it was, or against the new corporation, whose debt it has become by virtue of the statute. Matter of Utica National Brewing Co., 154 N. Y. 268, 48 N. E. 521; Gale v. Troy & Boston R. R. Co., 51 Hun, 470, 4 N. Y. Supp. 295.
But, if the view already expressed as to the effect of the merger of the Block Lighting & Power Company into the Gas, Electric Light, Heat.& Power Company be correct, then this statute does not aid the plaintiff or make the defendant liable, because at the time the consolidation took effect the Gas, Electric Light, Heat & Power Company, so far as appears, was under no obligation to plaintiff to pay his claim or any claim of the Block Lighting & Power Company. • The consolidation could not, in and of itself, impose any greater obligation than the corporation consolidated was under.
It is suggested that the Block Lighting & Power Company ceased to exist as an entity after the merger with the Gas Company. It is unnecessary to determine this question. If the Block Company as an .entity continued to exist after the merger, then that entity was not, by the consolidation, taken into the defendant. If the entity of the Block Company were merged in the Gas Company, then it ceased to exist after the merger, and was not resurrected by the consolidation.
The judgment and order appealed from therefore should be affirmed, with costs.
INGRAHAM, P. J., and LAUGHLIN and MILLER, JJ., concur.