Court Opinion

ID: 4500082
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:16:45.705355+00
Date Added: 2024-06-11T14:54:17.785453
License: Public Domain

Trxtssbel,
dissenting: I am unable to agree with the conclusion reached in the foregoing opinion and decision. We have here four corporations; three of them operating companies and the fourth a holding company, holding substantially all of the stock of two of the operating companies, while a large majority of the third operating company is held by one of the other operating companies. For many years these corporations had existed in a complexity of stock and security ownership and interrelationship of business and operating transactions. The situation appears to have led to confusion and to financial embarrassments, and finally the four corporations, together with their controlling stockholders, join in the appointment of a reorganization committee. This committee determines that the solution of their difficulties lies in the consolidation of all the four companies into one corporate entity. To bring about this result the reorganization committee, together with the four corporations and their controlling stockholders, enter into a written agreement of consolidation, the general terms of which provided that all the assets of each of the operating companies be inventoried, appraised, and valued, and that all of such assets be thrown together into a single aggregate of physical assets valued in accordance with the appraisal; that the stock and security holders of the three operating companies deposit their stock and securities with the reorganization committee and receive in exchange from such committee the stock of the reorganized consolidated company. In carrying this propose into effect the reorganization committee selected the charter *357of one of the operating companies; caused it to be modified and amended in such manner as to accommodate it to the requirements of the consolidated enterprise. Then, when substantially all the stock and securities of the three operating companies had been deposited with the committee, the stock of the consolidated company was caused to be issued, deposited with the reorganization committee and by such committe distributed to the depositing stock and security owners, thus bringing into existence an entirely new corporate enterprise. The fact that the reorganization committee chose to make use of the charter of one of the old operating companies after having procured its modification and amendment, can not be interpreted to mean that the reorganized enterprise was simply a continuation of the former operating company whose charter was amended and used, nor can it defeat the purpose of the reorganization in effecting its intent to bring into existence a new corporate enterprise. Cf. Yazoo & M. V. Ry. Co. v. Adams, 180 U. S. 1.
I am of the opinion, under the circumstances shown in the record of this case, that the reorganized and consolidated Eeading Hardware Co. acquired, in 1911, a new grant of corporate franchise, separate and distinct from the entity formerly existing under that name, and that the assets of all of the companies constituting the reorganized corporate entity were paid in for stock upon the values fixed by the appraisal of such assets and accepted by the reorganization committee and the controlling owners of all of said companies, and that for the purpose of this action the computation of invested capital must start with the asset values paid in for stock of the consolidated enterprise.