## Facts

- Walter H. Schmidt sued American Leasco in Arizona superior court arising from an agency relationship.
- While the lawsuit was pending, American Leasco merged into Financial Resources Corporation, with Financial Resources as the surviving corporation; the merger became effective March 29, 1982.
- Schmidt obtained a $30,000 judgment against American Leasco: $5,000 compensatory damages and $25,000 punitive damages.
- After learning of the merger, Schmidt sought to collect the judgment from Financial Resources, which denied liability.
- Schmidt filed a separate action against Financial Resources to collect the earlier judgment.

## Issues

1. Whether the surviving corporation in a statutory merger is liable for a judgment entered against the merged corporation.
2. Whether the surviving corporation is liable for the punitive-damages portion of that judgment when the merged corporation committed the underlying misconduct.

## Decision

- The Arizona Court of Appeals affirmed summary judgment for Schmidt.
- The court held Financial Resources, as the surviving corporation, was liable for the full judgment against American Leasco.
- The court rejected any distinction between compensatory and punitive damages under the merger statute and held punitive damages transferred as part of “all liabilities and obligations.”
- Because the material facts (merger and existing judgment) were undisputed and the issue was purely legal, summary judgment was proper.

## Legal Principles

- Under Arizona’s corporate-merger statute, once a merger becomes effective, the surviving corporation is responsible for all liabilities and obligations of each merged corporation.
- A pre-existing judgment debt is a “liability” that passes to the surviving corporation by operation of law upon merger.
- Absent an explicit statutory exception, punitive-damages liabilities are included within “all liabilities and obligations” that transfer in a merger.
- Policy concerns about punitive damages do not override statutory successor liability where excluding punitive awards would allow corporate restructuring to defeat deterrence and avoid judgments.

## Conclusion

The court held that a surviving corporation in a statutory merger assumes the merged corporation’s judgment liabilities in full, including punitive damages, and affirmed summary judgment allowing the judgment creditor to enforce the prior judgment against the surviving entity.


Schmidt v. Fin. Res. Corp., 140 Ariz. 135, 680 P.2d 845 (Ct. App. 1984)