Court Opinion

ID: 3878389
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:10:41.353007+00
Date Added: 2024-06-11T13:51:45.535791
License: Public Domain

This case was heard at the fall term, 1924, by the Court then composed of Chief Justice Gary, and Associate Justices Watts, Fraser, Cothran, and Marion. After the death of Justice Fraser, Acting Associate Justice Purdy participated in the decision.
On June 14, 1926, an opinion prepared by me, and concurred in by Justice Marion and Acting Associate Justice *Page 17 
Purdy, was filed as the judgment of the Court, reversing the judgment of the County Court and remanding the case for judgment in favor of the defendant under Rule 27. Thereafter a petition for a rehearing was granted, and at the January term, 1927, the appeal was heard by the Court, then consisting of Associate Justices Watts, Cothran, Blease, and Stabler and Acting Associate Justice Purdy.
The decision was suspended pending the disposition by the Supreme Court of the United States of the case ofAmerican Railway Express Company v. Kentucky, which was supposed to involve the same question. On February 21, 1927, the Supreme Court of the United States handed down its opinion deciding against the Adams Express Company. By an examination of that opinion it will appear that the decision was based solely upon the validity and nonreviewableness of the State decision. (Let it be reported.)1
I think, therefore, that this Court is not bound by that decision and is entitled to exercise its independent judgment in the matter.
I further am of opinion that under the circumstances of this case the conclusion announced by Justice Stabler comes within the inhibition expressed by Justice McReynolds in his opinion in the above-stated case: "We cannot interfere unless the judgment * * * is in clear conflict with the fundamental principles which have been established in our systems of jurisprudence for the protection and enforcement of private rights" — and that the judgment should be reversed for the following reasons:
On February 23, 1920, the plaintiff instituted in the County Court of Richland County four separate actions against the Southern Express Company, each containing a *Page 18 
number of separate causes of action, based upon the alleged failure of the company to account for the proceeds of C. O.D. shipments made by the plaintiff, and for the penalty of $25 upon each of the shipments, under Sections 3888, 3889, Code, 1922, Vol. 3.
The four actions involved 259 shipments, upon which were claimed the amounts of the bills, interest, and penalties, aggregating about $10,000, the dates ranging from August 17, 1916, to June 29, 1918. In each of the four actions the summons and complaint were attempted to be served upon the then sole defendant Southern Express Company. On March 30, 1920, that company, appearing specially for the purpose of the motion, gave notice of a motion in each action for an order setting aside the service of the summons and complaint, upon the ground that it was no longer doing business in this State. The motion was heard by his Honor, County Judge Whaley, who on April 15, 1920, passed an order refusing the motions. From that order the defendant appealed to this Court, which in an opinion filed March 12, 1921 (125 S.C. 198; 118 S.E., 628), affirmed the order of Judge Whaley. Its connection with the American Express Company was not considered. The defendant then sought to have the judgment reviewed by the Supreme Court of the United States, which, however, dismissed the writ of error, December 11, 1922, 260 U.S. 707;43 S.Ct., 165; 67 L.Ed., 474, upon the ground of want of jurisdiction, there having been no final judgment. Thereafter the plaintiff moved to amend the summons and complaint in each of the four actions, by making the American Railway Express Company a party defendant, and by adding an additional paragraph to each cause of action, as follows:
"That American Railway Express Company on or about the 22d day of June, 1918, became incorporated under the laws of Delaware, and has continued to be a corporation of *Page 19 
that State; that on or about the 9th day of August, 1918, said American Railway Express Company became domesticated under the laws of South Carolina and has continued to be a domesticated corporation of South Carolina; that during the times mentioned above, American Railway Express Company has engaged in business in Richland County, S.C. as a common carrier for hire, handling express, and since the 1st day of July, 1918, has had and still has agents and agencies in said Richland County; that since the 1st day of July, 1918, American Railway Express Company has been the agent of Southern Express Company for the purpose, among others, of adjusting, settling, compromising, and paying the claims, and outstanding and unpaid C.O.D.'s of Southern Express Company, its co-defendant, including the claim and outstanding and unpaid C.O.D. mentioned and referred to above in this cause of action, and for the purpose of defending suits brought to enforce payment of the same; and American Railway Express Company having bought out Southern Express Company, with knowledge of the outstanding liabilities of Southern Express Company, including the one mentioned in this cause of action, and with knowledge that Southern Express Company was disposing of all of its property except treasury assets, and contemplated going out of business and of winding up its affairs and liquidating, is liable for the debts of Southern Express Company, including the indebtedness mentioned and described in this cause of action."
The motion to amend was granted by an order dated May 25, 1923, in what may be designated as "action No. 1." Similar motions were made in actions 2, 3, and 4, and were granted by orders dated June 8, 1923.
As the four actions are practically identical, the determination of the legal principles involved in one will be conclusive of the other three. A consideration of the first action is therefore all that is necessary. *Page 20 
The complaint in this action contained 24 separate causes of action, and as to each it is alleged that the Southern Company received the shipment, delivered it to the consignee, collected the C.O.D. bill, and has failed to account therefor; that accordingly for the reasons stated it is liable to the shipper for the amount of the bill, with interest, and for the penalty under the statute, of $25.
The defendant Southern Company answered with a general denial, and set up the special defenses that a claim in writing had not been made within four months after delivery, and that suit had not been instituted within two years and one day after delivery, as required by the "Uniform Express Receipt," applicable.
The defendant American Company answered with a general denial, and as special defenses set up the history and purpose of its organization as hereinafter explained; that after July 1, 1918, and up to April 1, 1919, it acted as agent for the Southern Company in the adjustment and payment of claims against it arising out of transactions prior to July 1, 1918, but that that agency had been revoked on April 1, 1919; that it had never assumed the payment of any claims against the Southern, and was in no way obligated thereto; that to hold it liable for them would constitute a taking of its property in violation of the Federal Constitution. The same defense as to filing claims and bringing suit which was interposed by the Southern Company was also interposed by the American.
The case was tried before his Honor, Judge Whaley, of the Richland County Court, and a jury, on October 29, 1923, and resulted in a verdict in favor of the plaintiff, against American Railway Express Company alone for $774.12, made up as follows: *Page 21 

      Items ..................................  $  284.92
      Interest ...............................     114.20
      Penalties ..............................     375.00
                                                 ________
                                                $  774.12

The other three cases were tried to a jury December 11, 1922, and resulted similarly in verdicts against the American Railway Express Company alone, the verdicts being composed of the same elements, and being as follows:
      Action No. 2 ...........................  $ 2,750.20
      Action No. 3 ...........................    2,285.55
      Action No. 4 ...........................    2,939.62
      Which, with the verdict in action No. 1       774.12
                                                __________
      Make a total of ........................  $ 8,749.49

From the several judgments entered upon these verdicts, the American Railway Express Company has appealed to this Court.
The appeals in the four cases were heard together.
There are many questions raised by the exceptions, but the appeal turns really upon a disposition of the two following propositions:
(1) There was no evidence in the case tending to show that the American Railway Express Company, expressly or impliedly, assumed the outstanding obligations and liabilities of the Southern Express Company; the motion of the American Railway Express Company for a directed verdict should therefore have been granted.
(2) Conceding that there was some evidence tending to show that the American Railway Express Company, expressly or impliedly, assumed the outstanding obligations and liabilities of the Southern Express Company, the fact that the verdicts exonerated the Southern Express Company *Page 22 
from liability on account of the delicts alleged against it in the complaint, and charged the American Railway Express Company alone, constitutes in law an exoneration of the latter company; the judgment should therefore be reversed on this account.
The First Proposition. — That there was no evidence in the case tending to show that the American Railway Express Company, expressly or impliedly, assumed the outstanding obligations and liabilities of the Southern Express Company; the motion of the American Railway Express Company for a directed verdict should therefore have been granted.
I adopt the very clear and fair statement of the undisputed facts of the case, contained in the argument of the counsel for the appellant American Company as follows:
"For many years prior to December 27, 1917, the Southern Express Company, Adams Express Company, Wells Fargo  Co., and American Express Company, carried on the business of transporting express matter, for hire, over the railroads throughout the United States. The transportation carried on by these companies was both intrastate and interstate. The Southern Express Company was and is a corporation of the State of Georgia, and it carried on business throughout the southern states and had, in most of those States, practically a monopoly of the express transportation business. Its business was profitable and valuable. None of these companies owned the railroads over which their transportation was conducted, nor the engines which hauled the trains, nor the express cars into which the express matter transported was loaded. They all operated under and by virtue of exclusive contracts which they entered into, from time to time, with the several railroad companies which owned the various lines of railroad over which the several express companies carried on business. (See a history of the development of the express business *Page 23 
in the Express Cases, 117 U.S. 1; 6 S.Ct., 542, 628;29 L.Ed., 791.)
"On December 27, 1917, the President of the United States, acting under authority of an Act of Congress, and in order to unify all of the railroad systems in the United States under one management, with a view to increasing the efficiency of our transportation system and in furtherance of the war against Germany, issued his Proclamation, effective on December 28, 1917, and on that day took the railroads of the country out of the possession of their owners, the several railroad companies, and placed their operation under the direction and control of the Director General of Railroads. This drastic action, taken as a war measure, had the effect of rendering the railroad companies powerless to carry out their several contracts with the express companies, and the latter were impotent to conduct their transportation business without the assistance of the Director General. He refused to carry out the contracts which the railroad companies had made with the express companies, and he also refused to enter into new contracts with those companies, but agreed that if the express business should be unified into a single company, he would enter into a contract with that company. The Southern Express Company did not desire to enter into this arrangement, because its territory, being practically exclusive, its business was more remunerative, comparatively, than the business of the other express companies. It was forced, however, by pressure of the circumstances, to yield to the inevitable. A contract was, therefore, entered into between the United States and four express companies named above, on the 21st day of June, 1918, and thereafter and pursuant to the terms of said contract, the American Railway Express Company was incorporated under the laws of the State of Delaware, on the 22d day of June, 1918, and, immediately upon its incorporation, the Director General of Railroads, on the 26th *Page 24 
day of June, 1918, entered into a contract with that company whereby he employed that company as the exclusive agent of the Director General, to conduct the express transportation business over all railroads under federal control. This contract took effect on July 1, 1918, and at midnight on June 30, 1918, the Southern Express Company ceased absolutely to do any express transportation business.
"Upon the incorporation of the American Railway Express Company, and under and pursuant to the terms of the contract between the United States and the express companies, the four old companies transferred to the Delaware corporation all of their operating property which had been used by them in the express transportation business. This transfer was at a valuation fixed by the Director General of Railroads, and the Delaware corporation paid for the property transferred and conveyed to it by issuing its stock in exchange thereof. For its property thus sold and transferred to the American Railway Express Company, the Southern Express Company was paid in stock of the new company, and now owns ten (10) per cent. of the stock of the American, out of a total authorized issue of $40,000,000. The Southern Express Company did not cease to exist and did not transfer its treasury assets, or its real estate not used in the business. These assets amount to about $1,000,000, in addition to the stock which it owns in the American.
"While it was engaged in the express transportation business in South Carolina, and between the 17th day of August, 1916, and the 29th day of June, 1918, the Southern Express Company handled the 259 separate shipments mentioned and described in the four actions comprised in this appeal. The American Railway Express Company was not incorporated until the 22d day of June, 1918, and did not begin business until July 1, 1918, and did not handle a single shipment involved in these four actions." *Page 25 
In the case of Brown v. American Railway Express Co.,128 S.C. 428; 123 S.E., 97, the Court held that there wasevidence tending to establish all of the facts upon which the conclusion in the case of McAlister v. American RailwayExpress Co., 179 N.C. 556; 103 S.E., 129; 15 A.L.R., 1090, was rested; that these facts were admitted in the McAlistercase; and that "the conclusion reached upon the admittedfacts in that case is sound"; but that in the Browncase, then under consideration, "the proof of those facts was not conceded," and that consequently the Circuit Judge did not commit error in refusing the defendant's motion for a directed verdict. The irresistible conclusion is that ifthose facts paralleling the admissions in the McAlister casehad been conceded, the case would have taken the courseadopted in the McAlister case — a directed judgment in favorof the express company.
If it can be demonstrated that in the case at bar the facts upon which the McAlister case was rested have been conceded, the result must parallel the result in the McAlistercase.
Counsel for the respondent opens his printed argument with this statement:
"The most authoritative and comprehensive statement of the facts and circumstances surrounding the transaction of June, 1918, between American Railway Express Company and its constituent companies, is found in the statement of the same by the Interstate Commerce Commission, 59 Interest. Com. Com'n R., 459 (attached as an appendix to his brief). Other clear statements will be found in the opinion of the Supreme Court of Kentucky, reported in190 Ky., 636; 228 S.W. 433; 30 A.L.R. page 543 and annulated cases."
This statement cannot be otherwise interpreted than that the statements of fact contained in these references were adopted by him as "authoritative, comprehensive, and clear." *Page 26 
In addition to this counsel further states in his printed brief: "The facts of the McAlister case were identical towith (?) the facts of this case."
It would be tedious and unnecessary to set forth a detailed comparison of the admitted facts in the McAlister case with the facts stated in the references of counsel (the I.C.C. report and the Kentucky case); but upon an investigation, which is so readily at hand, it will be seen that every substantial fact contained in the McAlister case is supported by references of counsel. With the documentary evidence in the case, the uncontradicted testimony of the witnesses acquainted with the facts and the sweeping, comprehensive admission of counsel for the plaintiff, the facts upon which the McAlister case was rested appear in the case at bar, established beyond doubt.
The circumstances attending this arrangement between the constituent corporations and the American Company, are without parallel in the judicial history of the world. The government was at war with Germany and its allies; it had taken over the railroads of the nation and was operating them under a Director General; the express companies all had contracts with the railroad companies in connection with the express transportation business; the government did not act with the express companies as it had done with the railroads, but virtually took them over under an arrangement which was in effect the same as if it had put them under the same administration as the railroads; it did not ask the consent of the express companies, but compelled them to organize a new corporation which was to operate all of the express companies as the agent of the Director General of Railroads.
It was an emergency proposition and was expressly limited by the contract between the Director General and the express companies, to that emergency, as appears from the following provision of the contract: *Page 27 
"Wherefore it is agreed that the express companies shall maintain their independent corporate existence, and that upon the termination of federal control the property herein agreed to be conveyed by each of them to the new corporation (or the equivalent of such property) shall be reconveyed to it by the new corporation (back to them) at a valuation to be agreed upon or in the event of disagreement to be fixed by the Interstate Commerce Commission."
It is exceedingly questionable whether this action could have been maintained against the American Company, which was by the conditions of its organization, the agent of the Director General, if seasonable objection had been made. It certainly could not have been maintained against the Director General, who was in no wise responsible for the contracts or torts of the constituent express companies prior to his practically taking them over, and it is difficult to perceive how his agent could have been held responsible for them.
While the decision in the Brown case, under the peculiar circumstances which are identical with those of the present case, is unquestionably correct, it should not be extended to all cases of a purchase by one corporation of the assets of another. I agree to the general proposition advanced in the Virginia and Kentucky cases (Am. Ry. Ex. Co. v.Downing, 132 Va., 139; 111 S.E., 265; Am. Ry. Ex. Co.v. Royster, 141 Va., 602; 126 S.E., 678; Am. Ry. Ex. Co.v. Kentucky, 190 Ky., 636; 228 S.W. 433; 30 A.L.R. 543), that a corporation which purchases the business and assets of another which has sufficient tangible assets in the State to pay its debts, by merely issuing its capital stock to the selling corporation, leaving it no property within the State which can be subjected to the payment of its debts, is bound to satisfy such debts; it becomes a trustee for the creditors of the selling corporation to the extent of the assets so purchased. The decision in the Brown case should therefore *Page 28 
be so limited by the circumstances of that case as not to impair this statement of the general rule. I think that the Courts mentioned have not been advertent to the differentiating circumstances of the Brown case and of the case at bar. The question, however, is concluded by the decision in the Brown case, unless this Court as now organized is prepared to overrule it, which it is not.
See, also, Harbison v. McFarland, 156 Ky., 44;160 S.W., 798; Otis v. Ohio Mines, 15 Ariz., 264; 138 P., 777;Hurd v. New York, etc., Laundry Co., 167 N.Y., 89;60 N.E., 327; Peters v. Ex. Co. (Mo.App.), 236 S.W. 100;Northern Pac. R. Co. v. Boyd, 228 U.S. 482;33 S.Ct., 554; 57 L.Ed., 931; Bank v. Esau, 74 Okla. 45;176 P., 514; Auglaize Co. v. Hinton, 100 Ohio St., 505;126 N.E., 881; Chicago, I.  S.R. Co. v. Taylor, 183 Ind., 240;108 N.E., 1; Love v. Bracamonte (Ariz.), 240 P., 351;Jackson v. Knights, 101 Kan., 383; 167 P., 1046.
As demonstrated in the opinion of Mr. Justice Marion in the Brown case, that of Brabham v. Exp. Co., 124 S.C. 157;117 S.E., 368, is not in conflict with the conclusions arrived at in the Brown case. Inasmuch as where the new company is held to have assumed the debts of the old company, it is held that that assumption extends only to the value of the assets of the old company acquired by the new, as a trustee, the question might arise whether the action of the creditor should not be in equity and not at law. Luedeckev. Cabinet Co., 140 Iowa, 223; 118 N.W., 456; 32 L.R.A. (N.S.), 616. As may be observed, the thread which runs through the warp and woof of all cases holding the new corporation liable for the debts of the old is a species of high finance, in fraud of the rights of the creditors. How the old companies involved here can be suspected of machination in entering into an arrangement which they did not desire but were compelled by the vis major to enter into is beyond my comprehension. *Page 29
The Second Proposition. — Conceding that there was some evidence tending to show that the American Railway Express Company, expressly or impliedly, assumed the outstanding obligations and liabilities of the Southern Express Company, the fact that the verdicts exonerated the Southern Express Company from liability on account of the delicts alleged against it in the complaint, and charged the American Railway Express Company alone, constitutes in law an exoneration of the latter company; the judgment should therefore be reversed on this account. It must not be lost sight of that this action was first instituted against the Southern Express Company. That company moved to have the service of the summons and complaint set aside upon the ground that it no longer had an agent, or was transacting any business in this State. The motion was resisted by the plaintiff, and the Southern Company was held in the case, by the decision of the lower Court, affirmed by this Court. The plaintiff then moved for an amendment, not substituting the American Company as a party defendant in the place of the Southern, but making the American an additionalparty defendant, which motion was granted over the protest of both companies.
The case then came on for trial under the complaint which alleged causes of action against both companies; that the Southern Company had breached its several transportation contracts by collecting the C.O.D. bills and not accounting for them, thereby subjecting itself to a suit for the recovery of the collections and for the penalties under the Statute; and that the American Company was responsible to the plaintiff for all that the Southern Company owed it, upon the ground that the connection of the American Company with the matter constituted an assumption of all of the liabilities of the Southern Company. It is clear therefore that, conceding such assumption, the liability of the American Company necessarily depends upon the establishment of *Page 30 
a liability on the part of the Southern; by the very terms of the complaint the American Company is not liable upon its assumption, unless the Southern is found liable; the liability of the American is secondary; but if primary it is conditioned upon the liability of the Southern. The verdict was against the American Company alone; the Southern was exonerated; hence the liability of the Southern, upon which the liability of the American was predicated, is judicially determined not to have existed, and the verdict against the American Company is without legal foundation.
It is unquestionably true that if the American Company assumed the liabilities of the Southern, it was not necessary to sue both of them; the plaintiff might have sued the American alone; but it did not do so, and vigorously opposed the proposition to leave the Southern out of the case. Having prevailed in this opposition, and the jury having exonerated the Southern from liability, there is no escape from the conclusion that the American has also been exonerated.
It has been consistently held by this Court in the following cases that where an action is brought against both master and servant, based solely upon the negligence of the servant and the consequent imputed liability of the master, a verdict against the master alone, exonerating the servant, will not be allowed to stand, as being logically and legally without foundation: Sparks v. Atlantic Coastline R. Co., 104 S.C. 266;88 S.E., 739; Jones v. Southern R. Co., 106 S.C. 21;90 S.E., 183; Spigener v. Seaboard Air Line R. Co.,111 S.C. 405; 98 S.E., 330; Beauchamp v. WinnsboroR. Co., 113 S.C. 527; 101 S.E., 856; Howell v. SouthernR. Co., 114 S.C. 21; 102 S.E., 856; Durst v. Southern R.Co., 130 S.C. 165; 125 S.E., 651; Jenkins v. Southern R.Co., 130 S.C. 180; 125 S.E., 912.
The same principle is applied in the case of principal and agent: Rookard v. Atlantic  C. Air Line R. Co., 84 S.C. 190;65 S.E., 1047; 27 L.R.A. (N.S.), 435; *Page 31
137 Am. St. Rep., 839; Callahan v. Graves, 37 Okla. 503;132 P., 474; 46 L.R.A. (N.S.), 350. It would seem that the same principle would apply in the case of obligor and guarantor. It is generally held that it applies in the case of principal and surety. Note 5 A.L.R., 594.
In the case of lessor and lessee this Court has applied the same principle, where a judgment in favor of the lessor has been held to bar an action against the lessee based upon the negligence of the lessor.
In Jenkins v. Atlantic Coast Line R. Co., 89 S.C. 408;71 S.E., 1010, the plaintiff first sued the lessor company for damages on account of a personal injury while a passenger on a train operated by a lessee company. Judgment in favor of the lessor company was rendered. Thereafter the plaintiff brought a second action upon the same cause of action against the lessee company. The defendant pleaded the judgment in favor of the lessor company in bar of the second action. The plea was sustained by this Court:
"As the liability of the C.N.  L. [the lessor company, first sued] is predicated upon that of the defendant [the lessee company, held to have been the agent of the lessor company], and as it would be liable for anything for which the defendant is liable, in respect to the matter complained of, the logical conclusion necessarily is that if the C.N. 
L. [lessor], is not liable, the defendant is not. Now, as between the plaintiff and C.N.  L., it has been conclusively adjudicated that the C.N.  L. is not liable. Therefore the defendant is not, and the former judgment is a bar to this action."
That case is direct authority for the proposition that a judgment in favor of a master or principal is res adjudicata
in a subsequent suit against the servant or agent based upon the identical cause of action upon which the principal or master was first sought to be held. The converse of that proposition is equally true, as has been shown. *Page 32 
The Court further said:
"In Logan's case [82 S.C. 522; 64 S.E., 515], and also in Rookard's case, 84 S.C. 190; 65 S.E., 1047
[27 L.R.A. (N.S.), 435; 137 Am. St. Rep., 839], it is stated that a judgment on the merits in favor of a lessee railroad company [the agent of the lessor company], would bar an action against the lessor for the same cause, because the liability of the lessor is predicated upon that of the lessee. In other words, if the operating company, the one that actually does the injury, is held not to be liable, it follows that the lessor, upon whom the law imposes liability only for the acts of the lessee, cannot be liable."
In the case at bar it is not contended that there is the slightest evidence of an express assumption by the American Railway Express Company of the outstanding obligations of the Southern Express Company; the contention is, as disclosed in the amendment of the complaint, that there is an implied assumption arising out of the facts that the American Company bought out the Southern with knowledge of its outstanding obligations, with knowledge that it was disposing of all of its property except treasury assets and contemplated going out of business and of winding up its affairs and liquidating. This as clearly demonstrated in the Brown case was not sufficient; but concede that it was, at best it amounted to the implied assumption of what the Southern owed. As between the two companies the American Company may be considered the primary obligor, but as between the claimant and the two companies the Southern had not altered its position as the primary obligor, and in analogy to the instance of secondary liability above cited, it is inevitable that the exoneration of the primary obligor must be held to have exonerated the secondary.
Reverting to the necessary elements for charging the buying corporation with the debts of the selling, set forth in the Brown case, it is interesting to note that whatever *Page 33 
may have become of the other constituent companies under the provision in the contract above quoted, it appears that after the emergency had passed the Southern Express Company, still alive, attempted to take advantage of that provision, and were met with the information that the Southern Railway Company over whose lines it had been operating under the contracts which had been canceled, had entered into contracts with another express company; and though in a position to resume operations were unable to do so without fault upon its part. So much for the alleged consolidation and merger of the Southern Express Company with the American Company and its going out of business.
Let the amended complaint, the answer of the defendant American Railway Express Company, and the opinion of the Interstate Commerce Commission, appendix to respondent's brief, be incorporated in the report of the case.*
The judgment of this Court should be that the judgment of the County Court in each of the four actions herein be reversed and that the cases be remanded to that Court that judgments may be entered therein in favor of the defendant under Rule 27.
1 See 273 U.S. 269; 71 L.Ed., 639; 47 S.Ct., 353.
* See appendix in this volume for amended complaint and answer.