Court Opinion

ID: 5495531
Source: CourtListenerOpinion
Date Created: 2022-01-10 02:51:41.833941+00
Date Added: 2024-06-11T08:33:48.224676
License: Public Domain

Learned, P. J., (dissenting.)
Section 3 of the consolidated act says that on perfecting and filing the agreement “the said corporation parties thereto shall be deemed and taken to be one corporation, by the name provided in agreement and act, but said act of consolidation shall not release said newr corporation from any of the restrictions, disabilities, or duties of the several corporations so consolidated.” We see, then, that the consolidation is not a sale by one corporation to another; but it is an act by which the two become one, and the duties of the two now become the duties of the one. In section 5 the second clause provides that no suit, etc., pending, in which either of the corporations shall be a party, shall be abated, but the new corporation may on motion be substituted as a party. If, then, at the time of consolidation an action at law had been pending against the Troy & Boston Railroad Company on past-due coupons, the present defendant might, after consolidation, have been substituted as a party. This clause seems to show, as does section 3, that the duty of paying its debts, which, before the consolidation, rested on either corporation, now rests on the new; and that such new corporation may be substituted as a party to an action to enforce such duty. Section 4 strips the two consolidating corporations of all their property, and transfers it all to the new corporation. Hot only all existing property and franchises, but all future ability to earn anything, is taken from the old corporation, and given to the new. A mere creditor of one of the old corporations can no longer collect anything from it. It seems to me that it would be quite doubtful whether this could be legally done if the statute did not continue to the creditor against the consolidated corporation the same rights which he had had against either of the old corporations; and as the property formerly belonging to each of the two corporations can to a great extent be no longer kept distinct, but has become blended in one ownership, the new owner is made directly liable for the debts of each of the old corporations. It would seem that this result would almost necessarily follow from the whole structure and provisions of the statute, and from the nature of the two bodies which maybe consolidated under it. But to make this beyond doubt, section 5 provides: “The rights of all creditors * * * of either of said corporations * * * shall be preserved unimpaired. ” How, can the rights of a creditor be said to be unimpaired if there is no longer any person who may be sued in an action at law to recover the debt, and no longer any property, or possibility of future property, subject to execution therefor? Before this consolidation the present plaintiff might have sued on these coupons when payable, and, on recovering judgment, he might have enforced it on any property he could find (other than that mortgaged.) If it be said that everything tangible was mortgaged, he might perhaps have reached debts due the corporation, or he might have had the remedies provided by section 1784 of the Code. But now the defendant insists he can have none of these.
The defendant admits that if the plaintiff were a mere creditor all these rights would remain to him against the consolidated corporation. But it urges that, inasmuch as there is a mortgage given to cover the plaintiff’s debt, his right to sue on the bond and coupons is cut off by the consolidation; and it matters not, on the argument of the defendant, whether the mortgage is practically any security or not. It may be utterly valueless to the plaintiff, but it is very valuable as a protection to the defendant. This view rests on the following clause in the fifth section: “All debts and liabilities incurred *168by either of said corporations, except mortgages, shall henceforth attach to such new corporation, and be enforced against it and its property to the same extent as if said debts and liabilities had been incurred or contracted by it.” Now, it will be seen, as above stated, that if the defendant’s construction of this clause is correct it can be of no consequence whether the mortgage is valuable or not. The defendant says that the phrase “except mortgages” takes out from defendant’s liability all debts to which mortgages are collateral. I cannot construe those words to mean “except that where a debt is secured by a mortgage the corporation shall be liable only for a deficiency. ” That might be a good law, but there is no such thing in the statute. If the words “except mortgages” relieve the defendant from liability, they must do so without any consideration whether the mortgage was a sufficient security for the debt or not. Now, in view of what has been already said in reference to the first clause of this section, and a part of the third section, the defendant’s construction should not be adopted, if any other can be found. These railroad mortgages often have (this one has) a clause for embracing within their lien all after-acquired property. Now, there is made a consolidation of two railroads. Are the mortgages which had been executed by each to be extended, by virtue of such clauses contained in them, so as to embrace the property newly acquired by the consolidation? That is, is the mortgage of the Troy & Boston Railroad Company to extend over the property of the old Fitchburgh Railroad Company, “in the same manner as if it had belonged to” the Troy & Boston Railroad originally? Possibly, to guard against such a construction, “mortgages” were excepted from “all debts and liabilities.” This clause in the mortgage, this agreement for further assurance, might be a liability on which a question might arise. Hence it may be the exception. But, whether that is the intention or not, we ought not to give these two words a meaning at variance with other provisions of the statute, contrary to sound principle, and unjust to creditors. It is plain that strictly a mortgage is not a debt; and it is equally plain that in ordinary language the word is often used to include the debt to which a mortgage is collateral. I think, in construing the phrase here we should rather consider the general scope of the act, and the rights of the creditors of the old corporation. It would seem strange that the legislature should intend to give to a mere creditor an advantage over one who held a worthless fifth mortgage, or that they should intend to deprive one who had sold land to one of the consolidated companies of his right to sue at law for the purchase price, if such price was secured by a mortgage.
But it is argued by defendant that if one corporation were largely indebted on its mortgages, and the other but little, it would be unjust that the bondholders of the former should collect their debts out of property of the new corporation, which had largely belonged to the latter. But that same injustice (if it be such) would exist if the one corporation were largely indebted on debts not secured by mortgage, and the other but little indebted. The truth is that the condition of the two is in every case known and provided for in the consolidated agreement. It is urged by the defendant that it is only by virtue of the clause above cited from the fifth section of the consolidation statute that this defendant is liable for debts of the old corporations; that without it all such debts would be extinguished. Ang. & A. Corp. 750. It is quite immaterial what the common law was on the civil death of a corporation. It has not been the law of this state for many years that such debts were extinguished by the civil death of the corporation. Furthermore, the consolidation statute does not contemplate the civil death of either corporation. On the contrary, it says: “The said corporations, parties thereto, [to the agreement,] shall be deemed and taken to be one corporation.” It does not destroy; it perpetuates under another name,—“thename provided in said agreement. ” Certainly the continued existence of a corporation under a new *169name would not change its liability for existing debts. Therefore, as I think, even without the clause above cited from the fifth section, the two corporations, which are now claimed and taken to be one, continue now, in their united condition, liable for all debts and liabilities existing at the consolidation. There has been no amendment of the charters or dissolution of the corporations. Only the two corporations are become one; and that one, by the very force of the transaction, must succeed to all the rights, and be subject to all the debts, of each. The construction which the defendant gives deprives the plaintiff of all legal remedy on his contract, except so far as it has been already secured by mortgage. If this can be done as to contracts to which a mortgage is collateral, it can be done as to other contracts; and the legislature might declare that the consolidated corporation should not be liable for any of the old debts. Thus they would deprive the party of all legal remedy. But this cannot be constitutionally done. Cooley, Const. Lim. 354. I think the judgment should be affirmed, with costs.