Court Opinion

ID: 9550982
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:46:09.898872+00
Date Added: 2024-06-11T15:22:51.397763
License: Public Domain

Grady, J.
(dissenting)—I am not in accord with the views expressed in the majority opinion to the effect that RCW 23.40.010 (Rem. Rev. Stat. (Sup.), § 3803-42 [P.P.C. §443-15]) contemplates a merger of two corporations, one of them merely colorable and not created to perform any business function, but the whole arrangement being to enable the going concern to give an option for the purchase of all of its corporate stock and property, which could not otherwise be accomplished without the consent of all of its stockholders.
The statute relating to merger and consolidation of domestic corporations is as follows:
“Any two or more domestic corporations formed for any purpose for which a corporation might be formed under the *306provisions of this title or any such domestic corporations and any foreign corporations authorized by the laws of the government under which they were formed to effect such a merger or consolidation and which have authority to carry on any business for the conduct of which a corporation might be organized under this title, may be:
“(1) Merged into one of such domestic corporations; or
“(2) Consolidated into a new corporation to be formed under the provisions of this title.”
The whole theory of merger of two corporations is that they may combine their activities and thus render better service to their patrons and enhance the interests of their respective stockholders. When a merger is spoken of, one has in mind corporations having some business purpose as we ordinarily understand that term, and such is contemplated by the statute authorizing the formation of corporations. One does not think of a business corporation merging with one organized by a group of its stockholders not to transact any business, but to attain a nonbusiness objective. Corporations may be organized to carry on a lawful business. I do not think the legislature used the word “business” to include the purposes for which Snowy, Incorporated, was incorporated.
Stripped of all artificial dressing, we have this situation: Ziebarth Corporation was engaged in the business of manufacturing and selling a powdered bleach. The business was not a financial success. Ziebarth had invested considerable money in the enterprise. He owned and controlled a majority of the corporate stock. He desired to give an option to purchase all of the common stock of the corporation to Gold Seal and enter into its employ upon a substantial salary. Matteson, a minority stockholder, objected to the giving of the option for the consideration’the stockholders other than Ziebarth would receive. This blocked Ziebarth’s plan. He then caused Snowy to be incorporated, not to engage in any “lawful business” as contemplated by statute, but merely to have a paper corporation with which Ziebarth Corporation might merge, and thus, by the machinery provided by statute, force Matteson to sell his stock or lose his *307investment. It does not seem to me the statute authorizing a merger of corporations contemplates such a transaction as the one Ziebarth is trying to carry out. If we say the Ziebarth Corporation and Snowy, Incorporated, can be merged in order to carry out the contemplated sale to Gold Seal, we open the way to a new method of freezing out minority stockholders merely because they disagree with the majority on questions of corporate policy. To use such words as fraud, conspiracy, or bad faith is somewhat harsh and serves no useful purpose, but this whole deal has a bad odor and I cannot subscribe to its approval.
May 29, 1952. Petition for rehearing denied.