panies, with a view to operating their roads as branch lines, does not ordinarily constitute a consolidation.16

§ 4662. - Merger distinguished from consolidation. While the word "merger" is often used as synonymous with "consolidation," both in the decisions, textbooks, and also in agreements effecting a combination of corporations,17 a merger, rightly understood and ac cording to its strict legal meaning, is clearly distinguishable from a consolidation such as is authorized by statutes in most of the states.18 A merger, using the word in its strict legal sense, exists only where one of the constituent companies remains in being, absorbing or merging into itself all the other constituent companies, 19 while in the case of a consolidation a new corporation is created and generally

16 Pingree v. Michigan Cent. R. Co., 118 Mich. 314, 53 L. R. A. 274, 76 N. W. 635.

17 See Chicago & E. I. R. Co. v. Doyle, 256 Ill. 514, 100 N. E. 278.

18 United States. Lee v. Atlantic Coast Line R. Co., 150 Fed. 775, 787. Alabama. Alabama, T. & N. Ry. v. Tolman, 76 So. 381.

Illinois. Chicago & E. I. R. Co. v. Doyle, 256 Ill. 514, 100 N. E. 278.

Indiana. Ramsey v. Hicks, 44 Ind. App. 490, 89 N. E. 597, 87 N. E. 1091.

Mississippi. Adams v. Yazoo & M. Val. R. Co., 77 Miss. 194, 60 L. R. A. 33, 28 So. 956, 24 So. 200, 317.

Missouri. See Powell v. North Missouri R. Co., 42 Mo. 63.

New York. In re Bergdorf's Will, 149 App. Div. 529, 133 N. Y. Supp.

1012.

But see Central University of Kentucky v. Walter's Ex'rs, 122 Ky. 65, 90 S. W. 1066.

19 In a federal case the court said: "The results of a merger are entirely different from those of a consolidation. Ordinarily, when corporations of two or more states 'consolidate,' in the technical sense of the term, the old corporations are dissolved and a new corporation comes into being in each state.

*

mergas in

However, when two corporations unite by way of er, the result is not the same case of consolidation. In the case of merger the one is absorbed by the other, and when we come to ap ply the true test as to whet her, under a given statement of facts, there has been a merger, it becomes necessary to ascertain whether the existence of one of the corporations, as such, has been preserved, and other has ceased to exist." Lee v. Atlantic Coast Line R. Co., 150 Fed. 775, 787.

the

22

all the consolidating companies surrender their separate existence.20 As said in one case, it is in the interest of clearness of definition that "consolidation" should be limited to signify such union of two or more corporations as necessarily results in the creation of a new corporation; 21 and the term "consolidation" as used in this chapter will be limited to such combinations of corporations. Moreover, a statute authorizing merely a consolidation does not authorize a merger.2 There is a consolidation rather than a merger where the statute authorizes "the consolidation of the stocks of the two companies, thus making one capital stock in place of two," and where it is contemplated that the "separate capital of each company should go out of existence as the capital of that company." 23 In a later case, the distinction is further clarified, by the following statement: "It is impossible to conceive of a corporation existing without stock, or certificates representing the interests of the corporators in the organization. Now, if the act provides that these certificates shall be surrendered, and certificates in another company issued in their place, what becomes of the prior companies? Who are their stockholders who their officers? If the stock in the new company is sold, what interest in the prior companies passes by the sale? There can be but one answer to these questions. The property and franchises of the prior companies are gone as much as if they had formally surrendered their charters. The new company may doubtless. receive by transmission from its constituent companies their property, rights, privileges, and franchises, including any immunity from taxation; but it receives them as an heir receives the estate of his ancestor, or as a grantee receives the estate of his grantor, by inheritance, succession, or purchase. The result is not a mere union or partnership of two companies, nor the merger of the franchises of one in another, but the extinguishment of one and the creation of another in its place."' 24

In an Illinois case, it is held that where the statutes authorize a consolidation and the creation of a new corporation, but not a merger, it is immaterial that the combination agreement is in the form and

20 Lee v. Atlantic Coast Line R. Co., 150 Fed. 775, 787, and see § 4661, supra.

21 Adams v. Yazoo & M. Val. R. Co., 77 Miss. 194, 60 L. R. A. 33, 28 So. 956, 24 So. 200, 317.

22 Chicago Title & Trust Co. v. Doyle, 259 Ill. 489, 47 L. R. A. (N. S.) 1066, 102 N. E. 790; Adams v. Yazoo

VII Priv. Corp.-62

& M. Val. R. Co., 77 Miss. 194, 60 L. R. A. 33, 28 So. 956, 24 So. 200, 317.

23 Atlantic & G. R. Co. v. Georgia, 98 U. S. 359, 362, 25 L. Ed. 185, distinguishing Central Railroad & Banking Co. v. Georgia, 92 U. S. 665, 23 L. Ed. 757.

24 Keokuk & W. R. Co. v. Missouri, 152 U. S. 301, 309, 38 L. Ed. 450.

language of a merger rather than of a consolidation, and hence a new corporation is created notwithstanding the language used in the agreement.25 In short, this Illinois decision holds that if a combination of corporations is attempted under a statute authorizing a consolidation of companies and the creation of a new corporation, then it is immaterial that the agreement under which the corporations combined provided in effect for a mere merger with the continuation of the one company and the absorption of the other, but that a new company is created on the theory, as stated in the decision, that "the effect of the consolidation must be answered by a consideration of the terms of the statute under which the consolidation took place, and not what the parties resolved or did not resolve as to such effect.' And this decision was rendered notwithstanding a decision of the same court a short time before holding that a merger was effected rather than a consolidation under a like agreement but pursuant to another statute construed to authorize a merger rather than a consolidation.26 If a statute provides merely for a merger, it must be construed using that term in its strict sense so as not to create a new corporation, in the absence of any provisions to the contrary.27 However, according to some decisions, the combination of two or more corporations is deemed a consolidation, where one goes out of existence, without regard to whether a new corporation is created thereby or whether one of the original companies continues in existence and absorbs the other company or companies.28 This is undoubtedly true if the word "consolidation" is used in a broad sense; but if the word is used in its strict legal sense, as above stated, there is a

25 Chicago Title & Trust Co. V. Doyle, 259 Ill. 489, 47 L. R. A. (N. S.) 1066, 102 N. E. 790.

26 Chicago & E. I. R. Co. v. Doyle, 256 Ill. 514, 100 N. E. 278.

27 In re Bergdorf's Will, 149 N. Y. App. Div. 529, 133 N. Y. Supp. 1012. 28 Central Railroad & Banking Co. v. Georgia, 92 U. S. 665, 23 L. Ed. 757; Meyer v. Johnston & Stewart, 64 Ala. 603, 656; People v. People's Gaslight & Coke Co., 205 Ill. 482, 98 Am. St. Rep. 244, 68 N. E. 950; Chicago, S. F. & C. R. Co. v. Ashling, 160 Ill. 373, 43 N. E. 373; Pingree v. Michigan Cent. R. Co., 118 Mich. 314, 338, 53 L. R. A. 274, 76 N. W. 635.

"When the rights, franchises, and

merger and not a consolidation where one corporation remains in existence and absorbs the other corporation or corporations without the creation of any new corporation. Of course, statutes may provide for a combination of corporations which is called a consolidation but which, because of its terms, really provides for a merger and the continued existence of one of the companies without the creation of any new corporation,29 but in such a case there is merely a misuse of the term "consolidation" in a statute which in reality provides for a merger rather than a consolidation.30

An agreement is generally construed to create a merger rather than a consolidation, although it uses both words, where it provides that no new corporation is or will be created, but that the corporate existence of one of the companies shall continue.31

A purchase of the property of one corporation by another, may, by its terms, constitute a merger, where that is the evident intention,32 although ordinarily such a purchase is not a merger.33 A fortiori, a transfer of part of its assets by one corporation to another does not constitute a merger.34

There is no merger merely because existing corporations which are separately created bear the same name, deal in the same commodities, and have identical stockholders and officers.35 So identity of officers, and stock control of one company by another, does not constitute a merger.36

29 See Central Railroad & Banking Co. v. Georgia, 92 U. S. 665, 23 L. Ed. 757.

30 See, as supporting this conclusion, Chicago Title & Trust Co. v. Doyle, 259 Ill. 489, 492, 47 L. R. A. (N. S.) 1066, 102 N. E. 790, where it is stated that if the legislature simply authorizes a consolidation, without stating its effect on the status of the combining companies, a new corporation is created, but the legislature may authorize the "merger' of one corporation into another and the continuance in existence of the latter.

31 Chicago & E. I. R. Co. v. Doyle, 256 Ill. 514, 100 N. E. 278.

32 Atlanta, B. & A. R. Co. v. Atlantic Coast Line R. Co., 138 Ga. 353, 75 S. E. 468.

Sometimes a purchase of the prop

erty and stock of another corporation is deemed a merger rather than a consolidation. Chicago Title & Trust Co. v. Doyle, 259 Ill. 489, 47 L. R. A. (N. S.) 1066, 102 N. E. 790.

33 Louisville & N. R. Co. v. Hughes, 134 Ga. 75, 67 S. E. 542, and see § 4666, infra.

The purchase of one corporation by another has been held not a merger from the standpoint of the state in its right to levy tax. Minneapolis & St. L. R. Co. v. Koerner, 85 Minn. 149, 88 N. W. 430.

34 De Shelter v. American Spring Water Supply Co., 182 Ill. App. 403.

35 Koch v. Speedwell Motor Car Co., 24 Cal. App. 123, 140 Pac. 598, 600.

36 Kentucky Title Sav. Bank & Trust Co. v. Day, 174 Ky. 105, 191 S. W. 886.

§ 4663. Reorganization. A transaction, somewhat resembling a consolidation, is where the new corporation is in effect a mere continuance of the old corporation under a different name, as where the majority stockholders of a corporation organize a new corporation and sell or transfer all the property of the old corporation to the new corporation.37 However, there is no consolidation where one corporation forms another and transfers its property to the new corporation.38 In fact, a reorganization is not a combination of several corporations at all but is merely a substitution of one corporation for another.

§ 4664. Amalgamation. "Amalgamation" is the term used in England to designate what in this country is called a consolidation or merger, although whether it is the one or the other or includes both is involved in doubt, since even the English courts themselves admit that the term has not been exactly defined,39 although in one case in this country the conclusion was reached that the word is used in the English decisions as equivalent to merger rather than consolidation.40

§ 4665. Combinations in general distinguished from consolidation or merger-In general. There may be a combination of two or more corporations without any resulting consolidation or merger, using the latter terms in their strict sense.41 This word "combination" although it is not used in the decisions or by text-writers with any precise meaning, is here used to designate an alliance or confed

eration or sale or other transaction between two or more

corpora

corporations, by virtue of which neither corporation loses its separate existence and which does not result in the formation of any new tion taking the place of the old corporations. It includes mere transfers of all the property of one corporation to another, a lease of all the property of one corporation to another, where the lessor company