[No. 18745. Department Two. December 5, 1924.]
S. F. PLATT, Respondent, v. BRADNER COMPANY,
Appellant. «1»
CORPORATIONS (188) - AGENTS - POWERS - CONTRACTS AND
INDEBTEDNESS - PLEDGING CREDIT - GUARANTY AND SURETYSHIP. Where
an affiliated corporation represented in a letter to customers of
a subsidiary corporation (having the same president and stock
control) that it owned all the stock of the latter, and "hereby
guarantee" the payment for all milk sold to it, and thereby
induced producers of milk to sell their produce to it for a period
of two years, the letter, though insufficient, under the statute
of frauds, to create a liability, is material and relevant as an
admission against interest; and in connection with the fact that
the contracting company kept no books or records, and had the same
stock control, is sufficient to warrant the courts in disregarding
their separate entity and treating the two corporations as one,
and liable for the milk sold.
Appeal from a judgment of the superior court for
King county, Frater, J., entered February 16, 1924,
upon the verdict of a jury rendered in favor of the
plaintiff, in an action on contract, after trial on the
merits. Affirmed.
«1» Reported in 230 Pac. 633.
574 PLATT v. BRADNER CO.
Opinion Per HOLCOMB, J. 131 Wash.
Grinstead, Laube & Laughlin and Harry A. Rhodes,
for appellant.
Elias A. Wright and Sam A. Wright, for respondent.
HOLCOMB, J. - A motion, made and argued in the
briefs to dismiss the appeal on the ground that one of
the interested parties bound by the judgment was not
served with notice of appeal, is denied, since the record
has been supplemented to show that the ground of the
motion is unfounded.
The action is one by a dairy farmer, suing in his
own behalf and as assignee, for the purpose of collection,
of sixteen other dairymen in the vicinity of Issaquah,
Tolt, Redmond, and Snoqualmie, to recover on
seventeen causes of action aggregating the sum of $2,130.40.
The action was brought against The Bradner
Company, a corporation, appellant, and the Canyon
Milk Products Company, a corporation, jointly, upon
the theory that they were both liable.
Appellant is a corporation, doing business in Seattle,
Washington, whose business consists of selling and
handling eggs and dairy products. It was incorporated
on June 28, 1916, by C. G. Bradner, Lucy F. Bradner,
C. F. Bradner, L. C. Bradner, and Esther Bradner. Its
capital stock consisted of $300,000, divided into three
thousand shares of the par value of $100 each. Later
there were some transfers of stock, so that a corporation
called the Bradner Investment Company became
the owner of 1,400 shares, and Messrs. Bloomquist,
Cunningham, Cooper, Pease, and Rosenfeld became
the owners of stock aggregating 1,266 shares; and it
will be noted that the Bradner family still maintained
control of appellant company by the ownership of a
large majority of the stock.
From the organization and up to and including the
year 1923, L. C. Bradner continued to be president and
PLATT v. BRADNER CO. 575
Dec. 1924 Opinion Per HOLCOMB, J.
treasurer of appellant company, and C. F. Bradner
secretary.
On January 31, 1919, the defendant Canyon Milk
Products Company was organized with a capital stock
of $50,000, divided into five hundred shares of the par
value of $100 each, one hundred shares of which were
denominated "preferred" and four hundred shares
"common" stock, the incorporators of the company
being L. C. Bradner, C. F. Bradner, F. S. Inches, J. L.
Tuttle, and A. J. Rhodes. Of this stock, the entire
$10,000 of preferred stock was originally subscribed by
the Bradner Company by L. C Bradner, president, but
this stock was issued to L. C. Bradner personally, and
paid for by him. Of the common stock, F. S. Inches
subscribed for 810,000 worth, J. L. Tuttle $5,000 worth,
L. C. Bradner $100 worth, A. J. Rhodes $100 worth,
and Cleo Bradner, who is shown to be the wife of L. C.
Bradner, $19,700 worth.
All of the stock is shown to have been paid for on
the books of the company except the stock of Inches
and Tuttle, who seem neither to have paid, nor to have
been required to pay, anything. Cleo Bradner gave her
proxy to L. C. Bradner to vote all shares of stock of
the Canyon Milk Products Company standing in her
name at all annual and special meetings of the stockholders
of the company, and to do all things necessary
and proper to carry the proxy into effect. Inches,
Tuttle, L. C. Bradner, C. F. Bradner, and A. J. Rhodes
were elected the first trustees of the corporation, and
qualified as such on February 11, 1919. L. C. Bradner
was made president of the Canyon Milk Products Company,
J. L. Tuttle secretary, and F. S. Inches, treasurer.
No minutes of any proceedings of the stockholders
or trustees of the Canyon Milk Products Company
were entered on the books of the company after
a resolution dated "2-18-19," which authorized Inches
576 PLATT v. BRADNER CO.
Opinion Per HOLCOMB, J. 131 Wash.
as treasurer to make deposits in the Union National
Bank of Seattle, and to draw and endorse checks upon
the account in that bank, and authorizing L. C. Bradner,
president, to do the same thing. From that time
on, minutes of that corporation seemed unnecessary.
Inches seemed to have had the management of the
business of buying milk products for the Canyon Milk
Products Company, at Issaquah and elsewhere in King
County. It seems that the milk producers in the vicinity
of the place of business of the Canyon Milk Products
Company were reluctant to sell their products to
it, not being sure of receiving pay therefor. Accordingly
Inches procured from L. C. Bradner, as president
of appellant company, an instrument as follows:
3-29-19
Mr. Bert Vandermeer, Pres.
Grange Merc. Assn., Issaquah.
Dear Sir:
This is to certify that the Canyon Milk Products
Co., operating the condenser at Issaquah, is owned
and controlled by the Bradner Co., and we hereby
guarantee the payment for all milk sold to the
Issaquah plant.
Yours very truly,
THE BRADNER COMPANY
By L. C. Bradner, Pres.
This writing was upon stationery bearing the heading:
THE BRADNER COMPANY
Wholesale
BUTTER, EGGS AND CHEESE
Manufacturers
JERSEY CREAMERY BUTTER.
It was signed by the Bradner Company in typewriting,
and by L. C. Bradner, president, in handwriting.
Some doubt was attempted to be cast upon the authenticity
of the signature of L. C. Bradner to the instrument
at the trial, but there can be no doubt, after
examining his signatures in the record, as well as the
PLATT v. BRADNER CO. 577
Dec. 1924 Opinion Per HOLCOMB, J.
testimony of expert witnesses, that the signature was
that of L. C. Bradner. This writing was exhibited by
Mr. Vandermeer to respondent, and his several assignors.
It was likewise posted in the place of meeting
of the members of the farmers Grange, where it remained
for some time, and thereafter it was deposited
with the president of the Issaquah Bank for safekeeping
and for inspection by the various farmers with
whom the Canyon Milk Products Company was dealing,
or expected to deal. As soon as this instrument
was signed and delivered to the president of the
Grange, the milk producers lost their reluctance to sell
to the Canyon Milk Products Company, and thereafter
sold large quantities to it. At the time the Canyon
Milk Products Company became insolvent and discontinued
business, and Inches had disappeared from the
community, these parties had sold and delivered something
over $6,000 worth of farm products, which had
been reduced by payments to the amount involved in
this suit.
It appears from the account book of the Canyon
Milk Products Company that appellant had advanced
large sums of money to the Canyon Milk Products Company
for the purpose of meeting pay-rolls and paying
for products that company had bought, and otherwise
keeping it going. Appellant company produced no
record of its transactions with the Canyon Milk Products
Company except the records of the Milk Products
Company itself, appellant's president testifying
that their books had not been kept for so long a time,
and that the books of the Canyon Milk Products Company
showed the reverse entries of the transactions
with Canyon Milk Products Company, which would
have been shown in their books.
The theory of respondent at the trial, and now is,
578 PLATT v. BRADNER CO.
Opinion Per HOLCOMB, J. 131 Wash.
that the oral testimony produced at the trial, the books
of the companies, and the written instrument set forth
above, establish such connection between appellant and
the Canyon Milk Products Company as to show that
the Canyon Milk Products Company was nothing but a
subsidiary company or an adjunct to that of appellant;
that the Canyon Milk Products Company was so dominated
and controlled by the principal and dominating
stockholders of appellant, and was made use of for
appellant's own purposes to such an extent as to render
appellant itself liable.
The principal contention of appellant is as to the
materiality and effect of the writing above set forth.
It is vigorously contended that a mere inspection of
the writing makes it apparent that it is not a sufficient
writing, under the statute of frauds, to answer for the
debt, default or miscarriage of another person; and
that, in any event, it is not shown to have been
authorized by the appellant company, and if its president
executed and delivered it without such authority it is
not binding upon appellant. It is also contended that
there is no fraud or fraudulent intent shown on the
part of appellant in its dealings with respondents, or
holding out of the Canyon Milk Products Company as
its agent or subsidiary.
We concede that the instrument set out above lacks
authority by any corporate act of appellant to bind it
as a contract in writing under the statute of frauds.
Indeed respondent disclaims any such character in
the instrument. It was not sued upon as a contract.
But under the circumstances here, we think that this
instrument was certainly material and relevant as a
declaration against interest which the president of
appellant could make either orally or in writing, and thus
bind the company when others acted upon it to their
PLATT v. BRADNER CO. 579
Dec. 1924 Opinion Per HOLCOMB, J.
prejudice. There can be no doubt in this case that
others acted upon this instrument to their prejudice.
It is well-settled law that the president of such a
corporation may bind it by his declarations and admissions,
where it involves matters within the scope of his
duties, and are pertinent to the issues involved.
2 Thompson on Corporations, SS 1629; Same, Cumulative
Supplement 1922, SS 1629.
From September 10, 1917, to December 27, 1919, or
over two years, there never was a meeting of the
stockholders, L. C. Bradner continued in office as president
and treasurer, thus manifestly being the guiding spirit
and manager of appellant. The writing in question
was given March 29, 1919.
It is also well settled law that, while, in general, a
corporation is a separate legal entity, nevertheless
when one corporation so dominates and controls another
as to make that other a simple instrumentality
or adjunct to it, the courts will look beyond the legal
fiction of distinct corporate existence, as the interests
of justice require; and where stock ownership is resorted
to not for the purpose of participating in the
affairs of the corporation in the customary and usual
manner, but for the purpose of controlling the subsidiary
company so that it may be used as a mere
agency or instrumentality of the owning company, the
court will not permit itself to be blinded by mere
corporate form, but will, in a proper case, disregard
corporate entity, and treat the two corporations as one.
1 Fletcher Cyc. of Corporations, p. 63, SS 45; Same,
1921, Supplement Vol. 10, p. 11 SS 45; Spokane Merchants'
Association v. Clere Clothing Co., 84 Wash. 616,
147 Pac. 414; Clere Clothing Company v. Union Trust &
Savings Bank, 224 Fed. 363; Advance-Rumely
Thresher Co. v. Geyer, 40 N. D. 18, 168 N. W. 731. See
580 PLATT v. BRADNER CO.
Opinion Per HOLCOMB, J. 131 Wash.
also In re Eilers Music House, 270 Fed. 915, Id., 274
Fed. 330; Luckenbach S. S. Co. v. W. R. Grace & Co.,
267 Fed. 676; Hunter v. Baker Motor Vehicle Co., 225
Fed. 1006.
The above cases cite many other cases sustaining
the principle here announced, but they are too numerous
to extend this opinion by citing them all. We have
our own cases of Mitchell v. Lea Lumber Co., 43 Wash. 195,
86 Pac. 405, 10 Ann. Cas. 231, 9 L. R. A. (N. S.)
900. Roberts v. Hilton Land Co., 45 Wash. 464, 88 Pac.
946. These cases follow the same principle as was followed
in the Clere Clothing Co. case, supra.
The cases cited by appellant from this court, Crown
Paving & Construction Co. v. Walla Walla County,
122 Wash. 144, 210 Pac. 357; Parr v. Pacific Storage
Warehouse, 124 Wash. 26, 213 Pac. 677; and Mansfield
State Bank v. Leslie Hardware Co., 126 Wash. 562,
219 Pac. 15, 222 Pac. 901, are not in point, these cases
being cases where the writings executed by an unauthorized
officer were sued upon as such; and in the
last cited case it was mere accommodation paper, or
paper executed for an unlawful purpose, and as was
pointed out, no one had been injured by reliance
thereon.
We feel bound to conclude that, in this case,
respondent made a case to go to the jury upon the writing in
evidence as a declaration or admission against interest,
and the other evidence introduced, making appellant
liable for the debts of the Canyon Milk Products
Company to respondent and his assignors.
That being the case, the instructions given by the
trial court and complained of by appellant were correct.
The judgment is affirmed.
MAIN, C. J., TOLMAN, MACKINTOSH, and BRIDGES, JJ.,
concur.