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AGO 1961 No. 66 - September 29, 1961
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John J. O'Connell | 1957-1968 | Attorney General of Washington


OFFICES AND OFFICERS ‑- STATE ‑- SECRETARY OF STATE ‑- MERGER AGREEMENT ‑- AUTHORITY TO FILE RESCISSION THEREOF.

Two domestic corporations, after having entered into a merger agreement which had been duly approved and filed by the secretary of state, may not rescind such agreement by a contract of mutual rescission and thereby become entitled to reinstatement by the secretary of state as separate corporations.

                                                              - - - - - - - - - - - - -

                                                              September 29, 1961

Honorable Victor A. Meyers
Secretary of State
Legislative Building
Olympia, Washington

                                                                                                                Cite as:  AGO 61-62 No. 66

Dear Sir:

            By letter previously acknowledged you have requested the opinion of this office upon a question which we paraphrase as follows:

            May two domestic corporations, after having entered into a merger agreement which has been duly approved and filed by the secretary of state, rescind such agreement by a contract of mutual rescission and thereby become entitled to reinstatement by the secretary of state as separate corporations?

            We answer your question in the negative.

                                                                     ANALYSIS

            Initially, we wish to point out that we are not here concerned with the power of such corporations to initiate a legal action to have a merger judicially set aside.  The question posed relates solely to the power of such corporations to rescind a merger by mutual agreement independent from a court decree.

            Like other corporate powers, the power to merge and the legal effect thereof is governed solely by the statutes of the state which create the corporation seeking to exercise such power.  See, Fletcher, Cyclopedia of the Law of Private Corporations, Perm. Ed., Vol. 15, p. 26, § 7048.  Chapter 23.01 RCW, known as the Uniform Business  [[Orig. Op. Page 2]] Corporation Act, is the applicable law of this state.  It grants domestic corporations the express power to merge and sets forth the method of accomplishing the merger in considerable detail.  However, there is no express provision authorizing the rescission of a merger so as to restore the participating corporations to their original status as individual corporate entities.  Nor do we think such authority can be implied.  On the contrary, we are of the opinion that the statutes pertaining to merger render such corporations legally incapable of entering into a contract of mutual rescission after the merger agreement has been filed with the secretary of state.

            RCW 23.01.490 provides in material part:

            "(1) A merger of one or more corporations into a domestic corporation shall be effective when the joint agreement has been filed in the office of the secretary of state."

            It is then provided in RCW 23.01.500:

            "Upon the consummation of the merger or consolidation as provided in RCW 23.01.490, the effect of such merger or consolidation shall be:

            "(1) That the several parties to the joint agreement shall beone corporation, which shall be

            "(a) in the case of merger, that one of the constituent corporations into which it has been agreed the others shall be merged and which shall survive the merger . . .

            "(2)The separate existence of the constituent corporations shall cease, except that of the surviving corporation in the case of merger;

            "(3) The surviving or new corporation, as the case may be, shall possess all the rights, privileges and franchises possessed by each of the former corporations so merged or consolidated except that such surviving or new corporation shall not thereby acquire authority to engage in any business or exercise any right which a corporation may not be formed under this chapter to engage in or exercise;

            "(4) All the property, real, personal and mixed, of each of the constituent corporations, and all debts due on whatever account to any of them, including subscriptions for shares and other choses  [[Orig. Op. Page 3]] in action belonging to any of them shall be taken and be deemed to be transferred to and invested in such surviving or new corporation, as the case may be, without further act or deed;

            "(5) The surviving or new corporation shall be responsible for all the liabilities and obligations of each of the corporations merged or consolidated, in the same manner as if such surviving or new corporation had itself incurred such liabilities or obligations;but the liabilities of such constituent corporations or of their shareholders, directors or officers shall not be affected, nor shall the rights of the creditors thereof, or of any persons dealing with such corporations be impaired by such merger or consolidation, and any claim existing or action or proceeding pending by or against any of such constituent corporations may be prosecuted to judgment as if such merger or consolidation had not taken place, or the surviving or new corporation may be proceeded against or substituted in its place."  (Emphasis supplied.)

            The "consummation of the merger . . . as provided in RCW 23.01.490" is the filing of the joint agreement in the office of the secretary of state.  As a direct result thereof, it is clear from the foregoing provisions that the merging corporation ceases to exist as such, although under the terms of RCW 23.01.500 (5),supra, it is constructively continued for the limited purposes therein enumerated.  But this does not continue the corporation for any other purpose than those expressly stated.  State v. National Power & Light Co., 16 N.J. 486, 109 A. (2d) 607 (1954);State v. Maine Central, 66 Maine 488 (1877) [[66 Me. 488]].

            In 12 Am.Jur. Contracts, § 431, it is stated:

            ". . . As a contract is made by the joint will of two parties, it can be rescinded only by the joint will of the two parties.  It is obvious that one of the parties can no more rescind the contract, without the other's express or implied assent, than he alone can make it. . . ."

            In the instant case, one of the parties to the merger agreement no longer exists.  The merging corporation is not constructively continued by the statute for general contractual purposes.  It follows  [[Orig. Op. Page 4]] therefrom that the merger agreement is no longer subject to rescission by contract.

            We trust that the foregoing will be of assistance to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

DUANE S. STOOKEY
Assistant Attorney General

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