N. Valley Mall, LLC v. Longs Drug Store S Cal., LLC

*600 At issue in this case is whether the court should "go behind" the form of a corporate reorganization in order to alter contractual obligations, when the corporation utilized the type of reorganization it used in order to avoid altering its contractual obligations. The type of reorganization used in this case is a common one, and is referred to as a reverse triangular merger. 1 The usefulness of such a merger is to leave the target corporation intact as a subsidiary of the acquiring corporation where the target corporation has contracts or assets that are not easily assignable.

We conclude that where the form of reorganization was not chosen to disadvantage creditors or shareholders, we will not ignore the form of reorganization chosen by the corporation. We will affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

In 1968, Longs Drug Stores, Inc. (Longs) and F. H. & C. Enterprises, Inc. (FHC) entered into two agreements. Pursuant to the first agreement, the construction agreement, Longs agreed to construct a drug store on property it had purchased from FHC and to continuously operate the building as a drug store for a period of 10 years. If Longs did not construct and…