CHAPTER XV.

CONSOLIDATION.

$185. Definition.

5 186. Power to consolidate.

187. Construction of statutory power.

5 188. Assent of stockholders.

$189. Effect on former companies.

$ 190. Effect upon property of former companies.
$191. Effect as to liabilities of new company.

§ 192. Of corporations created in different states.

§ 185. Definition.-The term "consolidation," as applied to corporations in American law, is "a surrender of the old charters by companies, the acceptance thereof by the legislature, and the formation of a new corporation out of such portions of the old as enter into the new."1 Where three companies were consolidated, the effect of the consolidation was said to be a "dissolution of the three corporations named, and, at the same instant, the creation of a new corporation, with property, liabilities, and stockholders derived from those then passing out of existence." In England, the terin "amalgamation" is employed instead of "consolidation," and an amalgamation is assumed to be where both companies agree to abandon their regulations and articles of association, and to register themselves under new articles as one body.8

1 State v. Bailey, 16 Ind. 46; Launan v. Lebanon etc. R. R. Co. 30 Pa. St. 42; and compare Shields v. Ohio, 95 U. S. 319; Railroad Co. v. Georgia, 98 id. 359; Railroad Co. v. Maine, 96 id. 499; 66 Me. 488; Clearwater v. Meredith, 1 Wall. 25, 40; Miller v. Lancaster, 5 Cold. 514.

2 McMahan v. Morrison, 16 Ind. 172. Compare Powell v. North Mo. Railw. Co. 42 Mo. 63.

3 In Re Bank of Hindostan etc. 2 Hen. &. M. 666; and see Re Empire Assu. Corp. Law R. 4 Eq. 341; Clinch v. Financial Corp. Law R. 4 Ch. 117.

§ 186. Power to consolidate.-The assent of the legislature, by express grant or necessary implication,1 is

essential, in order to render consolidation effective and valid. The amalgamation of companies, in the absence of authority clearly conferred, is ultra vires, not merely of the directors, but of the company. And the directors of a railway company may be restrained, at the suit of a shareholder, from carrying into effect an agreement with another company to amalgamate their lines, without the sanction of the legislature. But the power of the legis lature to confer authority upon companies to consolidate or amalgamate is unquestioned; 5 and this authority may be conferred in the original charters, or by the provisions of a general or special act passed prior to consolidation, and after the organization of the original corporations, or even by an express sanction of an unauthorized agreement to consolidate.8

1 Clearwater v. Meredith, 1 Wall. 25; Canal Co. r. Fulton Bank. 7 Wend. 412; Johnson v. Shrewsbury etc. Railw. Co. 3 DeGex M. & G.914. 2 Fisher v. Evansville etc. R. R. Co. 7 Ind. 407; London etc. Railw. Co. v. Goodwin, 3 Ex. 320.

3 Era etc. Assu. Co. 1 DeGex J. & S. 29; and see Black v. Del. etc. Canal Co. 24 N. J. Eq. 455; Blatchford v. Ross, 5 Abb. Pr. N. S. 434; 54 Barb. 42.

4 Charlton v. New Castle etc. Railw. Co. 5 Jur. N. S. 1097; and see Manderson e. Commercial Bank, 28 Pa. St. 379; Ware v. Grand Junction Water Works Co. 2 Russ & M. 470; Watson v. Harlem etc. Nav. Co 52 How. Pr. 348.

5 Clinch . Financial Corp. Law R. 5 Eq. 450; Black v. Del. etc. Ganal Co. 22 N. J. Eq. 130; 24 id. 455; Clearwater v. Meredith, 1 Wall. 25. 6 Nugent v. Supervisors etc. 19 Wall. 241.

7 Black v. Del, etc. Canal Co. 22 N. J. Eq. 130; 24 id. 455; and see Bishop v. Brainerd, 23 Comm. 239; Southalle. British etc. Assu. Soc. Law R. 11 Eq. 65; Pearce v. Madison etc. R. R. Co. 21 How. 441.

8 See Mead v. New York etc. R. R. Co. 45 Conn. 199; Mozley v. Alston, 1 Phill. Ch. 790; McAuley v. Columbus etc. R. R. Co. 83 Ill. 348; Shrewsbury etc. Railw. Co. v. Stone Valley Railw. Co. 2 DeGex M. & G.866.

§ 187. Construction of statutory power.-Under an authority to consolidate, but without express provision as to the mode, the consolidation may be effected in the usual mode of corporate action.1 Power given to one railroad company to consolidate with any other, authorizes whatever other company it selects for a union to unite with it. A railway company merely "associating, ally.

ing, and connecting itself" with another, is not thereby equitably "amalgamated" with the latter. And merely organizing a corporation under a general law, of the same name as a previously existing masonic lodge, is not a merger of such lodge in the corporation. One railroad company may be formed by the consolidation of several, and constituted a legal incorporation by filing its certificate of consolidation with the secretary of state, under the Pennsylvania statute.5 In general, precedent formalities must be observed and completed, or the consolidation will fail to be perfect. But, in some of the states, great liberality is allowed to sustain the validity of proceedings to consolidate, had under general statutes."

1 See Black v. Del. etc. Canal Co. 22 N. J. Eq. 130; 24 id. 155.

2 Re Prospect Park etc. R. R. Co. 67 N. Y. 371. But compare State v. Consolidation Coal Co. 46 Md. 1.

3 Shrewsbury etc. Railw. Co. v. Stour Valley Railw. Co. 2 De Gex M. & G. 866. Compare Great North. Railw. Co. v. Manchester etc. Railw. Co. 5 De Gex & S. 138; Lancashire etc. Railw. Co. v. East Lancashire Railw. Co. 5 H. L. Cas. 792.

4 Mason v. Finch, 28 Mich. 282.

5 Commonw. v. Atlantic etc. Railw. Co. 53 Pa. St. 9.

6 Tuttle v. Mich. etc. R. R. Co. 35 Mich. 247; Mansfield etc. R. R. Co. v. Duuker, 30 id. 124.

7 Dimpfel v. Ohio etc. R. R. Co. 8 Reporter, 641.

§ 188. Assent of stockholders.-As a general rule, the consent of every stockholder is necessary for consolidation, and those who dissent cannot be compelled.1 There is no power to force a dissenting stockholder to join the new corporation, and to receive stock in it on the surrender of his stock in the old company.2 And a consolidation without his consent, relieves him from liability on his subscription, or entitles him to recover his interest. But a subscription to stock in the new corporation may be deemed a sufficient consent to the consolidation; and if the subscriber knows, at the time of subscribing, that a consolidation may take place, as where authority is given in the charter, or in an act passed before the subscription, he will be bound.5 And it is well settled that the legis

lature may, by the exercise of the right of eminent domain, grant authority to consolidate corporations having duties to perform to the public, without the consent of stockholders; but provision must be made for a just compensation for the shares of such stockholders as dissent," and they can enjoin the consolidation until such compensation is made.

1 Black v. Del. etc. Canal Co. 24 N. J. Eq. 455; Kean v. Johnson, id. 401; Fisher v. Evansville etc. R. R. Co. 7 Ind. 407; Blatchford v. Ross, 5 Abb. Pr. N. S. 434; 54 Barb. 42; Chapman v. Mad River etc. R. R. Co. 6 Ohio St. 119; and see Re Empire Assu. Corp. Law R. 4 Eq. 341.

2 Clearwater v. Meredith, 1 Wall. 25; and see McMahan v. Morrl Bon, 16 Ind. 172; Mowry v. ludiana etc. R. R. Co. 4 Biss. 78.

3 Shelbyville etc. Turnp. Co. v. Barnes, 42 Ind. 498; Lauman . Lebanon Valley R. R. Co. 30 Pa. St. 42; Illinois Grand Trunk RR. Co. v. Cook, 29 11. 237. Compare Cork etc. Railw. Co. v. Paterson, 18 Com. B. 414; Midland etc. Railw. v. Leech, 3 H. L. Cas. 872.

4 Fisher. Evansville etc. R. R. Co. 7 Ind. 407.

5 Nugent v. Supervisors etc. 19 Wall. 241; and see Gardner v. Hamil ton Ins. Co. 33 N. Y. 421; Ottawa etc. R. R. Co. v. Black, 79 Ill. 262; Mowrey v. Ind. etc. R. R. Co. 4 Biss. 78; Hamilton Ins. Co. v. Hobart, 2 Gray, 543; Hanna v. Cin. etc. R. R. Co. 20 Ind. 30.

6 Black v. Del. etc. Canal Co. 24 N. J. Eq. 455; and see Crosby. Hanover, 36 N. HI. 404; Eastern Union Railw. Co. v. Cockrane, 9 Ex. 197; Purnell v. Wolverhampton etc. Co. 10 Com. B. N. S. 576.

7 McCray v. Junction Railw. Co. 9 Ind. 358; Shelbyville etc. Turnp. Co. v. Barnes, 42 id. 498; Lauman v. Lebanon Valley R. R. Co. 30 Pa. St.

42.

8 Lauman v. Lebanon Valley R. R. Co. 30 Pa. St. 42.

§ 189. Effect on former companies.-Whether a consolidation works a dissolution of the former companies, and the creation of a new one, is held to depend upon the intent of the statute under which consolidation takes place. But generally speaking, except so far as the contrary may be provided by the act,2 the effect of consolidation is to dissolve all the old corporations and create a new one; and the new body assumes the liabilities and succeeds to the rights of the old. Where the act provided that the new body was to "have the powers, privileges, and immunities possessed by each of the corporations" united in it, and these had somewhat different powers, etc., the provision was construed so as to give the new body those only which each of the previous corporations possessed. A new corporate body, formed by the consoli

dation of two corporations chartered before, but consolidated after, the enactment of a general law reserving to the legislature the right to alter or repeal all corporate charters, was adjudged to come into existence subject to such general law.

1 Central R. R. etc. Co. v. Georgia, 92 U. S. 665; 54 Ga. 401; and see Muller v. Dows, 94 U. S. 444; State v. Greene County, 54 Mo. 540: Southwestern R. R. Co. v. Georgia, 92 U. S. 676 n.; County of Scotland v. Thomas, 94 U. S. 682.

2 Chicago etc. R. R. Co. v. Moffit, 75 Ill. 524; Zimmer v. State, 30 Ark. 677; Thompson v. Abbott, 61 Mo. 176.

3 Paine v. Lake Erie etc. R. R. Co. 31 Ind. 283; § 285, ante.

4 Zimmer v. State, 30 Ark. 677; Robertson v. City of Rockford, 21 Ill. 451; Miller v. Lancaster, 5 Cold. 514.

5 State v. Maine Cent. R. R. Co. 66 Me. 488; 96 U. S. 499. Compare Tomlinson v. Branch, 15 Wall. 460; Phila. etc. R. R. Co. v. Maryland, 10 How. 376; Fisher v. N. Y. etc. R. R. Co. 46 N. Y. 644; New Jersey etc. Railw. Co. v. Strait, 35 N. J. L. 322; Gould v. Langdon, 43 Pa. St. 365; Rowe etc. R. R. Co. v. Ontario etc. R. R. Co. 16 Hun, 445.

6 Shields v. Ohio, 95 U. S. 319.

§ 190. Effect upon property of former companies. In the absence of express provision to the contrary, the new corporation will be entitled to all the property of the extinguished ones.1 A patented invention which both the former companies had been licensed to use, may be used by the new company, in case of consolidation. So, the right to subscriptions by towns and counties in aid of a railroad company passes, with other rights and privileges, to the new corporation. But the new corporation cannot claim the position of a bona fide purchaser for value, where no money is paid by either party, and it takes the property of the extinguished corporation subject to any existing liens.1

1 Columbus etc. R. R. Co. v. Powell, 40 Ind. 37; Thompson ♥. Abbott, 61 Mo. 176.

2 Lightner v. Boston etc. R. R. Co. 1 Low. Dec. 338; and see Hubbard v. Chappel, 14 Ind. 601; Bishop v. Brainerd, 28 Conn. 289.

3 See County of Scotland v. Thomas, 94 U. S. 682; State v. Greene County, 54 Mo. 540; Nugent v. Supervisors etc. 3 Biss. 105; 19 Wall. 241. 4 The Key City, 14 Wall. 653; and compare Bouffer v. Great Western R. R. Co. 25 Ill. 353.

§ 191. Effect as to liabilities of new company. The new company may not only enforce the rights of the BOONE CORP.-24.