Opinion
33592, 33593.
DECIDED MAY 23, 1951. REHEARING DENIED JUNE 7, 1951.
Substitution of name; from Fulton Superior Court — Judge Pharr. February 12, 1951. (Application to Supreme Court for certiorari.)
Arnold, Gambrell Arnold, James A. Branch, Thomas B. Branch Jr., for plaintiff in error.
Houston White, contra.
1. ( a) Under the Corporation Act of 1938 (Ga. L. 1937-38, p. 214 et seq., Code, Ann. Supp., §§ 22-1837, 22-1853) providing for mergers and consolidations of two or more corporations into distinct corporate entities and outlining the procedure by which this may be accomplished, pending actions by or against the constituent corporations making up the resulting corporation do not abate but may thenceforth proceed in the name of or against resulting corporations under the particular provisions of Code (Ann. Supp.) § 22-1844 that ". . all debts due on whatever account, and all other things in action of or belonging to each of said corporations shall be vested in the resulting corporation" and "all debts, liabilities and duties of the respective former corporations shall thenceforth attach to said consolidated corporation and may be enforced against it to the same extent as if said debts, liabilities and duties had been incurred by it."
( b) Where, as here, two constituent corporations, one of which had a suit pending against it, were thus consolidated into a resulting corporation and these facts appear without dispute on the hearing of a motion purported to be made on behalf of such constituent corporation ". . insofar as such a motion can be made on its behalf" to strike its name from the record, the trial court properly struck the name of the constituent corporation and substituted the name of the resulting corporation, since the resulting corporation was not a new party within the meaning of the law which requires the issuance of a rule nisi where new parties are sought to be made.
2. Where, as here, the pending action against the constituent corporation is for alleged libel in which additional damages are sought under Code § 105-2002 to deter the wrongdoer from repeating the trespass, said constituent corporation having been, prior to the consolidation, engaged in the newspaper publishing business, and where the resulting corporation is created for the same purpose, the latter is the wrongdoer within the meaning of this Code section and is in position to repeat the trespass. Also, the liability under this Code section becomes attached to the resulting corporation under the express provisions of Code (Ann. Supp.) § 22-1844 that "all debts, liabilities and duties of the respective former corporations shall thenceforth attach to said consolidated corporation and may be enforced against it to the same extent as if said debts, liabilities and duties had been incurred by it."
DECIDED MAY 23, 1951. REHEARING DENIED JUNE 7, 1951.
This is the second appearance of this case in this court. See Atlanta Journal Co. v. Doyal, 82 Ga. App. 321 ( 60 S.E.2d 802). The original action was brought by Doyal as plaintiff against the Atlanta Journal Company and Franklin Nix as defendants and is an action for libel. While the judgment of this court on its former appearance here was one of affirmance in part and reversal in part, it held that the petition stated a cause of action against both defendants as against certain of the demurrers interposed to it. Thereafter the case was returned by this court to the trial court by remittitur. While the case was pending in this court the defendant Atlanta Journal Company and the Constitution Publishing Company consolidated into a new corporation which is the plaintiff in error in this case. After the date of this consolidation proceeding this court rendered its decision. Thereafter, the Atlanta Journal Company filed a motion to rehear which was denied. It then filed a petition for certiorari to the Supreme Court which was denied. Thereafter, after notice, it took depositions of the defendant in error. On February 12, 1951, a date subsequent to all the happenings herein above outlined, the case was called up for trial in Fulton Superior Court and, before proceeding with trial, the defendant Nix "and the other defendant insofar as a motion can be made on its behalf" filed a written motion to strike the name "The Atlanta Journal Company" so as to "eliminate its name as one of the defendants." Evidence was presented by certified copy of the petition for consolidation of the Atlanta Journal Company and the Constitution Publishing Company under the name of "Atlanta Newspapers, Inc.", together with the order of court dated May 31, 1950, granting a charter to the consolidated corporation. After hearing, the court ordered that "Atlanta Journal Company" be stricken and the name "Atlanta Newspapers Inc." substituted for it. Exceptions pendente lite were preserved to this judgment and on March 2, plaintiff in error moved to vacate the same on the ground that it was illegal and that no rule nisi had ever been served upon it to show cause why it should not be made a party. It further moved to strike from the original petition paragraph 35 seeking punitive damages against the Atlanta Journal Company. The petition for consolidation and order thereon were introduced in evidence. R. L. Doyal introduced in evidence the record of the former appeal of this case for the purpose of showing that a rehearing had been filed in this court and petition for certiorari filed and denied subsequent to May 31, 1950. He also introduced depositions of R. L. Doyal taken by the Atlanta Journal Company on January 18 and 19, 1951. It was stipulated that no motion to strike the name of the Atlanta Journal Company had been made prior to February 12, 1951. The motion to vacate was denied, and a continuance was granted.
Error is assigned on the order substituting the name "Atlanta Newspapers Inc." for "The Atlanta Journal Company" and also on the order overruling the motion to vacate the order of substitution insofar as it makes Atlanta Newspapers Inc. a party defendant. Error is assigned in the cross-bill of exceptions on that part of the order of February 12 striking the name "The Atlanta Journal Company" as a party defendant.
1. (a) The Corporation Act of 1938 (Ga. L. 1937-38, p. 214 et seq.; Code, Ann. Supp., §§ 22-1837, 22-1853) provides for the merger and consolidation of two or more corporations into distinct corporate entities and outlines the procedure by which this may be accomplished. Code (Ann. Supp.) § 22-1844 provides that when two or more such corporations are consolidated the separate existence of the constituent corporations shall cease and the consolidated corporation become one corporation; that the consolidated corporation shall, with specified exceptions related to tax matters, be vested with all the real and personal property of the constituent corporations, all choses in action, rights, privileges, powers, franchises and immunities, and shall likewise be encumbered with all the debts, liabilities and duties of the respective former corporations. It also provides in part as follows: "All rights of creditors . . shall be preserved unimpaired, limited in lien to the property affected by such liens at the time of the merger or consolidation; and all debts, liabilities and duties of the respective former corporations shall thenceforth attach to said consolidated corporation and may be enforced against it to the same extent as if said debts, liabilities and duties had been incurred by it."
Code (Ann. Supp.) § 22-1879 provides that if any corporation "becomes dissolved by the expiration of its charter or otherwise" the names of the trustees or receivers of such corporation may be substituted as parties of record, but the action shall not abate. Pending actions are not specifically listed in Code § 22-1844 dealing with the rights and liabilities of consolidated corporations. It is contended by counsel for the plaintiff in error that this action has abated for the reason that the Atlanta Journal Company no longer exists and there is no authority of law permitting the survival of the pending action against Atlanta Newspapers Inc. In the absence of statutory authority, actions in tort abate upon the death of the party. See Davis v. Atlanta Gas Light Co., 82 Ga. App. 460 ( 61 S.E.2d 510). In the absence of statutory authority, the dissolution of a corporation by the expiration of its charter or otherwise pending a suit against it abates the action. See Venable Bros. v. Southern Granite Co., 135 Ga. 508 (1, 2) ( 69 S.E. 822); Trust Co. of Ga. v. Mortgage Bond Co. of N. Y., 203 Ga. 461 (1) ( 46 S.E.2d, 883). In some jurisdictions it has been held that a corporation upon consolidation becomes absolutely defunct, and cannot afterwards continue to prosecute or defend any action in its original name. Kansas, O. T. Ry. Co. v. Smith, 40 Kan. 192 ( 19 P. 636); Wagner v. Atchison c. R. Co., 9 Kan. App. 661 ( 58 P. 1018). However, "it is generally held that, even in the absence of a saving statute, the consolidation of two or more existing corporations under legislative authority will not work a dissolution of such corporations in such a sense as to abate all pending actions by or against them." See 1 C.J.S., Abatement and Revival, § 102; 1 Am. Jur. p. 58, Sec. 55; 10 Cyc. 311; Baltimore S. R. R. Co. v. Musselman, 2 Pa. (Grant) 347; East Tenn. Ga. R. R. Co. v. Washington Evans, 6 Heiskell (Tenn.) 607; Calvert W. B. V. Ry. Co. v. Driskill, 31 Tex. Civ. App. 200 ( 71 S.W. 997). Where the fact of consolidation is not controverted, it has frequently been held that an order substituting the consolidated corporation for the original corporation is not error. Louisville, E. St. L. Consolidated R. Co. v. Summers, 131 Ind. 241 ( 30 N.E. 873); Kinion v. Kansas City F. T. S. M. Ry. Co., 39 Mo. Ct. of App. 382. In cases of consolidation such as this, the new corporation by "vital succession or new creation", as Mr. Justice Bleckley, speaking for our Supreme Court, termed it, takes on a new existence of its own, and the former corporations expire completely, save for such qualified existence as may be provided for by legislative act or the charter of the new company. See State of Ga. v. Atlantic Gulf R. Co., 60 Ga. 269, 276. Where the act of the legislature authorizing the consolidation expressly provides that each consolidating company shall continue liable to third persons for the obligations it had undertaken, substitution as a party defendant of the new company, without notice or opportunity to be heard, is error. Selma, Rome Dalton R. Co. v. Harbin, 40 Ga. 706; Ga. L. 1866, p. 124. But "where two corporations effect a consolidation, and one of them goes entirely out of existence and no arrangements are made respecting its liabilities, the resulting consolidated corporation will, as a general rule, be entitled to all the property and answerable for all the liabilities of the corporation thus absorbed." Atlantic Birmingham Ry. Co. v. Johnson, 127 Ga. 392 ( 56 S.E. 482); Tompkins v. Augusta Southern R. Co., 102 Ga. 436 ( 30 S.E. 992). As stated in the former case, on page 396: "A new corporation is formed, but not in the sense which works a destruction of the rights of action existing against the old one."
Code (Ann. Supp.) § 22-1844 expressly provides that "all debts, liabilities and duties of the respective former corporations shall thenceforth attach to said consolidated corporation, and may be enforced against it to the same extent as if said debts, liabilities and duties had been incurred by it." An agreement ratified by the stockholders of the respective former corporation stockholders and made a part of the petition for consolidation here provides that "all rights of creditors and all liens on the property of either of said former corporations shall be preserved unimpaired. . ." A claim for unliquidated damages in a tort action is a "debt". See Jones v. Womack, 53 Ga. App. 741 ( 187 S.E. 285); 15 C. J. 1374. One against whom slanderous words are uttered is, in legal contemplation, a creditor from the time of their utterance. See McVeigh v. Harrison, 185 Ga. 121, 129 ( 194 S.E. 208). It is thus evident that, under both the general rule in the absence of express provision and also by express provision both by statute and stockholder agreement, Atlanta Newspapers Inc. assumed this debt or liability of the Atlanta Journal Company.
It is conceded by counsel for plaintiff in error that if the present suit abated immediately upon the effective date of the consolidation the action may be re-brought against Atlanta Newspapers Inc. It is contended that the present suit abated because of the death of the Atlanta Journal Company and that the name of Atlanta Newspapers Inc. cannot be substituted because there is no express provision of law for such action and because such substitution is prevented by Code § 81-1303 providing that no amendment adding new and distinct parties shall be allowed unless expressly provided by law. However, it is provided by statute that the debts and liabilities of the former corporations may be enforced against the consolidated corporation to the same extent as though incurred by it. The method pursued in the first instance to enforce this liability was a suit against the Atlanta Journal Company, the corporation which incurred it. However, in view of the consolidation of that corporation with another, this liability has now attached to Atlanta Newspapers Inc. and may be enforced against it to the same extent as though it had been incurred by it. The liability referred to herein is a pending action for damages growing out of an alleged libel which has been adjudicated as stating a cause of action. Provision for its enforcement against the new corporation is specifically made by law. It cannot be thus enforced if it must abate. It nevertheless will abate if it cannot proceed against the corporation to which the liability has attached. It cannot thus proceed if that corporation is not named in the proceeding. It follows, therefore, that this express provision for the enforcement of the liability is ample authority of law for naming Atlanta Newspapers Inc. a party defendant to this action. The action has not abated and the plaintiff in error is the proper party.
(b) It is well settled by our Code § 3-404 that where it becomes necessary or proper to make new parties in a pending suit a rule nisi must first issue. The purpose of this law is to give such new party notice. The plaintiff in error here is not a new party and was in possession of all knowledge it could have acquired had such a rule issued. Where, as in Selma, Rome Dalton Railroad Co. v. Harbin, supra, the new corporation has by statute been absolved from the liabilities of the former corporations, but has by contract nevertheless assumed them, a rule nisi is necessary before the new corporation is made a party, for under such a circumstance both corporations exist simultaneously for different purposes. By statute and charter agreement here, the consolidating corporations continued to exist after May 31, 1951, for purposes of tax exemptions only. In every other respect they ceased to exist. Nevertheless, after May 31, 1951, the newspaper defendant in this libel suit prosecuted a motion for rehearing in the Court of Appeals; it petitioned for writ of certiorari to the Supreme Court, it took depositions of witnesses, and it filed a motion in the trial court seeking to have the Atlanta Journal Company stricken as a party defendant. These things were done in the name of the Atlanta Journal Company (designated in the last mentioned motion only as "the other defendant"), but the Atlanta Journal Company had already ceased to exist as such. It had not become defunct in the manner of a corporation whose charter had expired, but had become, in toto a vital but inseparable part of Atlanta Newspapers Inc. As was said in Atlantic Birmingham Ry. Co. v. Johnson, 127 Ga. 392 (supra), and reiterated in the very comprehensive written opinion of the trial court: "The consolidation of two or more corporations is like the uniting of two or more rivers; neither stream is annihilated, but all continue in existence. A new river is formed, but it is a river composed of the old rivers, which still exist, though in a different form. So it is with a consolidated corporation. A new corporation is formed, but not in the sense which works a destruction of the rights of action existing against the old one." (Italics ours.) Accordingly, the corporate defendant continued to exist, although in a different form, and although its existence as such corporation ceased. Before calling the court's attention to the fact that its form, name and identity had been changed, it undertook to perform several important acts in connection with the defense of this case. The corporation in whose behalf these acts were purported to have been committed had ceased to exist, but the existence of the liability it had incurred was continuous and uninterrupted. The moment the consolidation order was filed terminating the corporation that incurred the liability was the moment that liability became attached to the consolidated corporation. These acts in defense of that liability, therefore, although purported to have been committed in behalf of one of the consolidating corporations, was nevertheless actually committed on behalf of the Atlanta Journal Company was therefore an act the time of the commission of the acts. Every act amounting to a display of existence purported to have been committed on behalf of the Atlanta Journal Company was therefore an act of Atlanta Newspapers Inc., it being the new form into which the Atlanta Journal Company had by its own ex parte action resolved itself. This being so, it cannot be said that the motion filed in the trial court to strike the name "The Atlanta Journal Company" was not a motion filed under authority of Atlanta Newspapers Inc., or that this latter corporation was, for the purposes of this lawsuit, a third party divorced from the proceedings, to whom notice would have to be given. It was impossible here for the right hand to be ignorant of what the left hand was doing in the defense of the lawsuit, it being in fact one entity for this purpose at all times subsequent to the date of consolidation. It was held in Houston v. Redwine, 85 Ga. 130 ( 11 S.E. 662) that since the receiver of a defunct corporation would have had the right to bring an independent action, he should have been allowed to be made a party to a pending action in order to prosecute the case because "wherever there is a right there is a remedy, and wherever the legislature fails to point out a remedy for such right, it is the duty of the court to frame the remedy."
The corporate defendant in this action had the right to bring the consolidation proceedings to the attention of the court and suggest that the name "The Atlanta Journal Company" be stricken. This action could result only in the substitution of the name "Atlanta Newspapers Inc.", the action itself not abating. The motion having been initiated by the corporate defendant, and "The Atlanta Journal Company" having ceased to exist as such, the consolidated corporate defendant cannot complain that it was a bona fide third party entitled to a show-cause order before being brought into court. So far as this lawsuit was concerned, the only change was a change of name. We adopt the view expressed in Kinion v. Kansas City, F. T. S. M. Co., supra, in approving a direct substitution of corporate names in a similar case: "If John Smith is sued and during the pendency of the suit he has his name changed to John Jones, a claim that he, as John Jones, must be brought into court by additional summons would be somewhat novel."
The order of the trial court is not erroneous on the ground that no rule nisi issued previous to its granting.
2. A corporation is subject to death, as is a natural person. It may bankrupt, its charter may expire, or it may be abandoned. As with natural persons, such death does not involve the idea of immediate and visible resurrection, and when it does occur statutory provision against the abatement of pending actions has been made. Code (Ann. Supp.) § 22-1879. When the statute relating to consolidation says that the constituent corporations shall "cease to exist", it does not mean that the corporate powers become absolutely defunct, but that the corporations cease to exist in their previous corporate forms. This fits well with the theory of "vital succession" expressed in State of Ga. v. Atlantic Gulf R. Co., supra, because there is no moment of time in which the corporate business is not being carried on, under one name or the other. The charter of the consolidated corporation indicates that it is empowered to remain in the newspaper publishing business. It is therefore in position to again inflict the same wrong through the same medium. Not only is its position in this regard unchanged, but the statute under which it exists expressly provides that the liability of the former corporation attaches to it and may be enforced against it to the same extent as if it had been incurred by it. As previously pointed out, the liability here is an action for libel, a part of which is based upon Code § 105-2002 authorizing additional damages to deter the wrongdoer from repeating the trespass.
Counsel for the plaintiff in error contends that there is no vested right in a claim for damages in a tort action, including punitive damages, and cites as authority for this position Kelly v. Hall, 191 Ga. 470 ( 12 S.E.2d 881); Carson v. Gore-Meenan Co., 229 Fed. 765 (2); U.S. v. Standard Oil Co. (D.C. Cal.) 21 F. Supp. 645 (26); Standard Oil Co. v. U.S., 107 Fed. 2d, 402; Gibbes v. Zimmerman, 290 U.S. 326 ( 54 Sup. Ct. 140, 78 L. ed. 342); Crane v. Hahlo, 258 U.S. 142 ( 42 Sup. Ct. 214, 66 L. ed. 514); 16 C.J.S., p. 678, § 256. This rule is recognized. However, Code (Ann. Supp.) § 22-1844, supra, when applied to this case, relates to the nature of the liability of the resulting corporation as well as the rights of third persons. It follows, therefore, that although there is as a general rule no vested right in such damages, by the express terms of this statute the liability of the former corporation, whatever it may be adjudicated to be has become the liability of the resulting corporation.
The judgment of the trial court overruling the motion of the plaintiff in error to strike the previous order substituting the name of the plaintiff in error for the Atlanta Journal Company and in refusing to strike paragraph 35 of each count of the petition, was without error.
Judgment affirmed on the main bill of exceptions. Cross-bill of exceptions dismissed. MacIntyre, P.J., and Gardner, J., concur.