STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

THRU-CONTAINER INTERNATIONAL, ) INC., )

)

Petitioner, )

)

vs. ) CASE NO. 83-282

) DEPARTMENT OF STATE, DIVISION ) OF CORPORATIONS, )

)

Respondent. )

)

RECOMMENDED ORDER

This cause came before the undersigned upon the parties waiving their right to a formal hearing, and submitting a stipulated record and memoranda of law in support of their respective positions.

The proceeding was initiated when Petitioner, Thru- Container International, Inc., filed a request for a formal hearing pursuant to Subsection 120.57(1), Florida Statutes, on December 9, 1982, seeking Respondent, Department of State, Division of Corporations, to invalidate articles of merger previously approved for Petitioner and two other corporations and to issue a certificate of good standing for Petitioner. The matter was referred to the Division of Administrative Hearings by Respondent on January 31, 1983, with a request that a hearing officer be assigned to conduct a formal hearing. By notice of hearing dated March 11, 1983, the matter was scheduled for a final hearing on April 13, 1983, in Tampa, Florida. At the request of Petitioner, the matter was continued on April 8, 1983. Thereafter, the parties agreed to waive a formal hearing and submit a stipulated record and memoranda of law. Such were filed on May 17 and 20, 1983, and have been considered by the undersigned in the preparation of this order.

On March 21, 1983, Petitioner filed a motion for leave to amend its petition. This motion was granted by order dated March 31, 1983. As reflected in the amended petition, the issues herein are (1) whether the purported merger of Petitioner and two other corporations was unlawful and therefore invalid, and

1. whether Petitioner should be issued a certificate of good standing in its name alone.

   
   

   Based upon the stipulated record and pleadings filed herein, the following Findings of Fact are determined:

   
   

   FINDINGS OF FACT

   
   

   1. On December 26, 1980, Petitioner, Thru-Container International, Inc., a Florida corporation, entered into an agreement of merger with Imperial Van Lines, Inc., West ("IVL"), a Washington corporation, and Thru-Container Movers, Inc. ("TCM") a Maryland corporation, providing for the merger of the three

      corporations. Under the terms of the agreement IVL would be the surviving corporation.

      
      

   2. When the agreement was executed by the corporations, TCM lacked the power to enter into the transaction. This was because its charter had been annulled by the State of Maryland on January 25, 1975, for failure to file required reports and pay taxes as required by Maryland law. The charter had not been reinstated as of March, 1983. Petitioner and IVL were apparently not aware that TCM's charter had been annulled when they executed the agreement.

      
      

   3. Paragraph 13 of the agreement of merger provides that the merger may be abandoned or terminated (a) by mutual consent of the Board of Directors of the corporations, or (b) by the Board of Directors of any one of the corporations in the event of failure or inability to obtain necessary authorization and approvals of any governmental agencies.

      
      

   4. IVL and TCM failed to file articles of merger with their respective states of incorporation, and therefore failed to obtain the necessary authorizations to merge.

      
      

   5. On August 26, 1981, Petitioner filed articles of merger with Respondent, Department of State, Division of Corporations, which became effective in the State of Florida that date.

      
      

   6. On a later undisclosed date, the Board of Directors of the three corporations elected to exercise their rights under paragraph 13 of the agreement of merger and to terminate the merger.

      
      

   7. By letter dated December 9, 1982, Petitioner requested Respondent to invalidate the articles of merger previously filed and to issue a certificate of good standing for Petitioner. Respondent declined to do so on the ground it had no legal authority to do so. The denial prompted the instant proceeding.

      
      

      CONCLUSIONS OF LAW

      
      

   8. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties thereto pursuant to Subsection 120.57(1), Florida Statutes.

      
      

   9. Subsection 607.234, Florida Statutes, prescribes the conditions and requirements for merging a Florida corporation with a foreign (non-Florida) corporation. It reads as follows:

      
      

      607.234 Merger or consolidation of domestic and foreign corporations.--

      
      

      1. One or more foreign corporations and one or more domestic corporations may be merged or consolidated in the following manner, if such merger or consolidation is permitted by the laws of the jurisdiction under which each such foreign corporation is organized:

         1. Each domestic corporation shall comply with the provisions of this chapter with respect to the merger or consolidation, as the case may be, of domestic corporations,

            and each foreign corporation shall comply with the applicable provisions of the laws of the jurisdiction under which it is organized.

         2. If the surviving or new corporation, as the case may be, is to be governed by the laws of any jurisdiction other than this state, it shall comply with the provisions of this chapter with respect to foreign corporations if it is to transact business in this state, and in every case it shall file with the Department of State of this state an agreement that it will promptly

            pay to the dissenting shareholders of any such domestic corporation the amount, if any, to which they shall be entitled under the provisions of this chapter with respect to the rights of dissenting shareholders.

            
            

      2. The effect of such merger or consol- idation shall be the same as in the case of the merger or consolidation of domestic corporations if the surviving or new corpora- tion is to be governed by the laws of this state. If the surviving or new corporation is to be governed by the laws of any juris- diction other than this state, the effect

         of such merger or consolidation shall be the same as in the case of the merger or

         consolidation of domestic corporations except insofar as the laws of such other jurisdiction provide otherwise.

         
         

      3. At any time prior to the filing of the articles of merger or consolidation, the merger or consolidation may be abandoned pursuant to provisions therefor, if any, set forth in the plan of merger or consolidation.

      
      

   10. Respondent has denied the request because it contends (a) Florida law does not allow it to reverse a merger once it is lawfully filed, and (b) if an abandonment is to be valid, it must be done prior to the filing of the agreement with the Department. Petitioner counters that the relief requested is appropriate because (a) the merger was prohibited by Florida law since it was also prohibited by Maryland law, (b) the affected corporations have validly terminated and abandoned the merger, and (c) the foreign corporations cannot comply with the laws of their respective states which is a condition precedent to the effectiveness of any merger under Florida law.

       
       

   11. Petitioner should prevail for two reasons. First, Subsection 607.234(1), Florida Statutes, provides that domestic and foreign corporations may be merged "if such merger. . . is permitted by the laws of the jurisdiction under which each such foreign corporation is organized." Therefore, the merger in question must be lawful under both Maryland and Washington law in order to be valid in Florida. Here the legal existence of the Maryland corporation had ceased, and TCM had no power to merge under Maryland law. Moreover, it was without legal authority to enter into any contract or take any other action

       pertaining to the merger. Atlantic Mill & Lumber Realty, Co. v. Keefer, 179 Md. 496, 20 A.2d l78 (1941). Because Subsection 607.234(1) allows a merger to occur only if the conditions precedent therein are complied with, and such conditions were not met, there could be no lawful merger in the case at bar.

       
       

   12. Secondly, paragraph (a) of Subsection 607.234(1), Florida Statutes, requires that "each foreign corporation. . . comply with the applicable provisions of the laws of the jurisdiction under which it is organized." Accordingly, a foreign corporation must comply with the laws of its own state in order to accomplish a merger, including the filing of articles of merger with that state. Such compliance with the laws of one's own state is clearly a condition precedent to the effectiveness of any merger under Florida law. Here, neither TCM nor IVL has filed articles of merger with its respective state. As such, the requirement prescribed in paragraph (a) has not been met, and the merger has never occurred.

       
       

   13. Such a construction of Subsection 607.234(1) is required in order to avoid the incongruity of having a merger become effective in one state while articles of merger have not yet been filed and taken effect in the other states. To hold otherwise would permit foreign corporations to abandon a merger without leaving any remedy available to the Florida corporation. Respondent's contention that it has no authority to reverse a merger is rejected. Such a view creates a vacuum in the administration of the statute. While the Department cannot remove the articles of merger from its official records, it clearly has the inherent authority to place upon the records a notice that the purported merger has been cancelled, and that Petitioner's certificate of incorporation has been reinstated in full force and effect. Therefore, it is concluded that the request of Petitioner should be granted, and notice of such relief filed in the official records of the State.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Division of Corporations file a notice in its records

reflecting that the purported merger of Thru-Container International, Inc., Imperial Van Lines, Inc., West add Thru-Containers Movers, Inc. approved on August 26, 1981, has been cancelled, and Petitioner's certificate of incorporation reinstated in full force and effect.

DONE and RECOMMENDED this 25th day of May, 1983, in Tallahassee, Florida.

DONALD R. ALEXANDER

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 25th day of May, 1983.

COPIES FURNISHED:

William S. Stevens, III, Esquire General Counsel

Department of State The Capitol

Tallahassee, Florida 32301

Wayne A. Wirtz, Esquire Honorable George Firestone

Post Office Box 3542 Secretary of State St. Petersburg, Florida 33731-3542 The Capitol

Tallahassee, Florida 32301

Docket for Case No: 83-000282

Orders for Case No: 83-000282