author: PLEASANTS, C. J. PLEASANTS, O. J.

text:
    WILLIAMS et al. v. FREEPORT SULPHUR CO. et al.
    No. 9361.
    Court of Civil Appeals of Texas. Galveston.
    April 4, 1930.
    On Motions to Dismiss, and Withdraw. Opinion, June 17, 1931.

      Samuel B. Dabney, of Houston, and Henry W. Anderson and Thomas B. Gay, both of Richmond, Va., for appellants.
    ■ Follett & Evans, of Angleton, and Andrews, -Streetman, Logue & Mobley, of Houston, for appellees.
   PLEASANTS, C. J.

This suit was brought by appellants as stockholders in the appellee corporations, the Freeport Sulphur Company and the Freeport Texas Company, against the above-named corporations and P. George Maercky, individually and as general manager of the Freeport Sulphur Company, for 'mandamus to compel the defendants to permit an inspectioh by plaintiffs of the properties, books, and records of defendant corporations.

For the purposes of this opinión, the allegations of the petition need not be set out. at length, and will only be stated to the extent necessary in the elucidation of the questions presented by this appeal.

It is alleged, in substance, that the Freeport Sulphur Company is a corporation organized and chartered under the laws of this state, with its domicile and place of business in Bra-zoria county; that P. George Maercky, who resides in Brazoria county, is the general manager of said corporation; that the Free-port Texas Company is a corporation organized undA the laws of the state of Delaware, with its, general offices in the city of New York, where its. president, E. P. Swenson, resides, and that the Freeport Sulphur Company is an agent of the Freeport Texas Company representing and doing business for it in the State of Texas.

It is further alleged that the Freeport Texas Company is a holding, operating, and controlling company," and holds all of the stocky of the Freeport Sulphur Company, except a few shares held by the directors of the last-named company to qualify them for such office, and that “a great proportion of the values owned by the Freeport Texas Company consist of the assets of the Freeport Sulphur Company, the stock of which belongs'to the Freeport Texas Company, with the nominal exceptions stated; and the Freeport Texas Company controls through the stock ownership the Freeport Sulphur Company, upon the success of which and the economic and efficient management of which and the existence of valuable assets, a great part of the values ■of the Freeport Texas Company and the values of its stock depend.” .

The number of shares of stock issued by the ■Freeport Texas Company is alleged to be 729,-844, of no face value, and plaintiffs are alleged to be the owners of 23,200 of these shares, and that “all of these shares have been acquired in good faith and the plaintiffs are the true owners hereof, and each of the plaintiffs now represents that he has no interest in any rival company, or any other producer of sulphur, and that each of them and they together now allege that they bring this suit in good faith and for no purpose of injuring the defendants or any of them, but for the sole purpose of protecting their rights and ascertaining what assets there may be of the Freeport Sulphur Company, and for the purpose of inquiring into its management and methods of operation; and .that, they bring this suit for the benefit of themselves and all other stockholders to the extent of their just rights and for the protection of the interests of the defendants, and not adversely to them, and in assertion of their rights of stockholders and the rights of all other stockholders similarly situated, and who may desire to co-operate with them or receive the benefits of this suit.”

The number of shares of stock of the Free-port Sulphur Company issued and outstanding is alleged to be 2,000, of the par or face value of $100 each’, all of which, with the nominal exceptions before stated, are owned and held by the Freeport Texas Company. '’

It is then alleged that plaintiffs as stockholders in the Freeport Texas Company had on October 23, 1928, through a letter written . by their attorney, Mr. Samuel B. Dabney, to the executive office of defendant corporations at Freeport, Tex., requested permission to have an investigation made of the records and activities of the Freeport Sulphur Company, stating in said letter that this right was absolute and that he “trusted there would be no objection,” and requesting “a reply at the earliest possible moment.” This letter was duly received by fee defendant Maercky, and the request therein contained was referred by him to the president of the company in New York. ■ A copy of this letter of Mr. Dab-ney’s was sent by him to Messrs. Andrews, Streetman, Logue & Mobley, attorneys for defendant corporations at Houston, Tex. On October 26, the defendant attorneys acknowledged receipt of Mr. Dabhey’s letter and informed him that the general manager, Mr. Maercky, had written the president- of the company for instructions. Additional request for a definite reply made by Mr. Dabney on November 2, 1928, brought the infbrmation from Mr. Maercky that the Freeport Sulphur Company declined to permit the investigation requested, and from the attorneys for the defendant corporations “that they had no in- • structions from their principals.” In the meantime, on October 8,1928, “the plaintiff, E. Randolph Williams; for himself and others, signing the letter prepared by him, forwarded a letter from Richmond, Virginia, to E. P. Swenson, President of the Freeport Texas Company, stating that they were all holders of substantial amounts of stock of that company; that they had been unable to get detailed information to check its affairs; and that it was assumed that E. P. Swenson would concur that they were entitled to all information necessary to ascertain with any accuracy the fair value of their stock, which had been declining upon the stock market; that they did not desire to embarrass the management, but were substantially interested, and that they requested (1) the original or a copy of the detailed report of the auditors, including the details of the last audited report for the fiscal year ending November 30, 1927; (2) a 'copy of the reports of the engineers, of which it was understood three had been made for the company in the past two years showing the amount of sulphur reserves in the company’s properties or those in which it is interested ; and (3) a copy of the income tax return to the Federal Government for the year ending December 31. 1927, or if for the fiscal year, then for that ending November 30,1927 ; and also that they be permitted to have a certified public accountant selected by them, satisfactory to the Freeport Texas Company, call at the office of the company and make an examination of the records for the past two years. To this letter E. P. Swenson as President of the Freeport Texas Company, 52 Wall Street, New York City, replied on October 9th, and stated:

“ We regret that we do not feel that it is proper to furnish you with information which is not furnished to all stockholders.’ Signed Freeport Texas Company, E. P. Swenson, President.
“To this last letter E. Randolph Williams replied on October ,11th, stating that it was not his desire or that of other stockholders to receive information which might not be furnished to all stockholders, but to receive information which is in the possession of the officers who are large stockholders of the company, and that ‘those stockholders who do not occupy the favorable position of officers of the company are now without information from which they can base any reasonable judgment as to the value of the stock which they hold.’ He then stated that he repeated that it was not the desire of himself and associates to be given any exclusive statement or privileges, and suggested that the company have prepared and issue a statement in response to the inquiry made, and send the same to all stockholders, and renewed his request of'-October 3rd. To this last demand no answer has been received.”

After being so informed of the refusal of the defendant corporations to permit the requested examination of their records, this suit was filed on December 18, 1928. The petition asks for service upon the defendants, and each of them, and alleges that the defendant Maercky is the local agent of the Freeport Texas Company, “and that the Freeport Sul-phur Company is an acting corporation, acting in Texas and associated with the Freeport Texas Company as its agent”, and that service may be made upon the Freeport Texas Company “by service upon the Freeport Sul-phur Company as an associate and acting corporation in Texas, and as representing and acting for the Freeport Texas Company, as provided by law.” The petition closes with an appropriate prayer for relief.

The defendant Freeport Sulphur Company and P. George Maercky, as general manager of the company, and individually, filed a plea in abatement on the following grounds;

“1. It does not appear from plaintiffs’ pleadings, nor is it alleged by plaintiffs, that they or any of them are stockholders in defendant Freeport Sulphur Company.
“2. It does not appear from plaintiffs’ petition, nor is it alleged therein, that defendant P. George Maercky as General Manager, has any connection with, or that he is employed by-the defendant Freeport Texas Company.
“3. The defendant Freeport Texas Company, a corporation, alleged by plaintiff to be chartered under the laws of the State of Delaware, and having its principal office and place of business in the City of New York, State of New York, has not been properly served with citation in this cause and has filed no answer hex’ein, and said defendant Free-port Texas Company is not doing business in Texas and was not doing business at the time of the filing of this suit, and has not been doing business in Texas at any time since the filing of this suit.
“4. Defendant Freeport Texas Company lias no President in Texas, and has no Vice-President, Secretary, Treasurer or General Manager in Texas, and it has no local agent, traveling agent or traveling salesman in Texas, or agent of any kind in Texas.
“5. Defendant Freeport Texas'Company is a necessary party to this suit and no right of recovery herein exists or can exist against Freeport Sulphur Company in any event in the absence of FVeeport Texas Company as a party before /this court.
“6. Defendant Freeport Texas Company is a necessary party to this suit and no right of recovery herein exists or can exist against P. George Maercky as general manager, and P. George Maercky individually, in any event.
“Wherefore, said defendants pray that the suit of plaintiffs be abated and dismissed and that said defendants recover of plaintiffs and each of them their costs in this behalf expended, and for such other relief as to which they may be entitled, and as in duty bound will ever pray.”

Subject to and conditioned upon the overruling of this plea these defendants answered by a general demurrer and general denial.

The attorneys for the defendants, as friends of the court, filed the following suggestions of want of proper service of citation on the defendant Freeport Texas Company:

“1. Freeport Texas Company, one of the defendants in this cause, has not been properly served with citation herein and is not properly before the court for any adjudication with respect to its rights herein in that pretended service of process upon it has been attempted, according to the return of the sheriff, by the leaving of a copy of citation issued in this cause and the accompanying certified copy of plaintiffs’ petition, at the office of Freeport Sulphur Company, as agent for said ■ Freeport Texas Company, while in truth and in fact said Freeport Sulphur Companyis not the agent, and was not the agent, at the time of such pretended service of Freeport Texas Company.
“2. Freeport Texas Company is not engaged in doing business in this State, and was not so engaged at the time of the filing of this suit, nor since said date, and the facts with respect to all of the matters and things in connection with s?id service, or pretended service, of citation upon said Freeport Texas Company are fully set forth and contained in the affidavit of P. George Maercky, wliieh is attached hereto and made a part hereof for all purposes.
“3. A copy of this suggestion and a copy of said affidavit, have prior to the filing hereof been furnished to Mr. Samuel B. Dabney, attorney of record for plaintiffs herein.
“Wherefore, we respectfully suggest, as friends of the court, that said pretended service upon said Freeport Texas Company should be held for naught and that said defendant should be dismissed from this cause unless further and lawful service of process upon said defendant be evidenced to this court, all of which is respectfully submitted.
■“Follett & Evans
“Andrews, Streetman, Bogue & Mobley
As friends of the Court.
“State of Texas, County of Brazoria.
“Before me, the undersigned authority, on this day personally appeared P. George Maer-cky, who after being by me duly sworn, on oath deposed and made the following statement:
“My name is P. George Maercky. I reside at Freeport in Brazoria County, Texas. I am Vice-President and General Manager of Free-port Sulphur Company, a corporation chartered under the laws of the State of Texas and having its domicile and principal place of business at Freeport in Brazoria County, Texas. The purpose for which Freeport Sulphur Company was incorporated, as stated in its charter, reads as follows:
“ ‘The purpose for which this corporation is formed is the transaction of any manufacturing or mining business and the purchase and sale of such goods, wares and merchandise used for such business.’
“I have been Vice-President and General Manager of Freeport Sulphur Company from a date prior to the filing of the suit of E. R. Williams et al. v. Freeport Sulphur Company et al., now pending in the District Court of Brazoria County, Texas.
“I am'not employed by, and I have no connection with, Freeport Texas Company, one of the defendants in said suit. I am not the President of said Freeport Texas Company, nor am I its Vice-President, Secretary, Treasurer or general manager, nor am 1 the local agent of said Freeport Texas Company, nor its traveling agent or traveling salesman, nor am I its agent for any purpose or in any sense or in any capacity. My salary is paid wholly by Freeport Sulphur Company, and in the conduct of the business of Freeport Sulphur Company and in the management of its affairs I am responsible only to the President of Freeport Sulphur Company, in his capacity as such President, and to the Board of Directors of Freeport Sulphur Company.
“I have never represented Freeport Texas Company in any capacity whatsoever. Free-port Texas Company is not engaged in any business whatsoever in Texas and 'it has no permit to do business in Texas, and it does not do any business in the State of Texas, and was not doing any business in the Staté of Texas at the time of the filing of the above mentioned suit or since that time; said Free-port Sulphur Company is not an agent or representative of Freeport Texas Company and it is not doing business for said Freeport Texas Company, nor is said Freeport Sulphur Company acting for, nor is it associated with, said Freeport Texas Company in the State of Texas. The business of Freeport Sulphur Company is the production and marketing of sulphur, and it produces sulphur only in Brazoria County, Texas, and its selling operations are conducted principally in New York City, where it maintains an office.
“Further this deponent saith not.
“P. George Maereky.”

This affidavit was sworn to and signed before a notary public.

Plaintiffs answered each of these pleadings of defendants by a general demurrer and a general denial and specially excepted to the plea of abatement on the ground that the suit could be maintained against the other defendants without making the nonresident defendant 'a party and having it before the court by proper service.

Upon a hearing in the court below on February 5, 1929, all of plaintiffs’ demurrers and exceptions were overruled, and the suggestion and motion of the friends of the court, and the plea in abatement presented by the answering defendants, were both sustained, and orders made and entered dismissing plaintiffs’ suit, as to all defendants.

While the order of the trial court sustaining the motion of the friends of the court, as it appears in the record, is not clear and definite in its statement of the grounds upon which it is based, the record as a whole conclusively shows that the suit against the Freeport Texas Company was dismissed because in the opinion of the court that defendant was not shown by the evidence to have been doing business in Texas through its alleged agent, the Freeport Sulphur Company, at the time citation in this suit was served upon the Freeport Sulphur Company as its agent, and the question of the sufficiency of the service upon the alleged agent was not decided. This is made clear by the conclusions of fact and law filed by the learned trial Judge, and we do not understand counsel for appellees to contend otherwise.

It follows that the controlling question presented by this appeal is whether the evidence adduced upon the hearing sustains the conclusion of the trial court that the Free-port Texas Company was not doing business in Texas through its agent, the Freeport Sul-phur Company, upon which citation to the nonresident defendant was served.

The friends of the court, after introducing the affidavit of Mr. Maereky attached to their motion, and which has been above set out, rested their case. With permission of the court the plaintiffs were then allowed to call Mr. Maereky to the witness stand and cross-examine him upon the statements made in his affidavit.

• Upon this examination, after repeating the statements in his affidavit as to his residence in Brazoria county and his official position with the Freeport Sulphur Company, he further stated that he received the letter from Mr. Dabney of .October 23, 192S, addressed to the executive officers of the Freeport Sul-phur Company, requesting permission to plaintiffs as stockholders of Freeport Texas Company to 'have an investigation made of “the records and activities of the Freeport Sulphur Company,” and that in reply he wrote Mi. Dabney, on letterhead of the Free-port Sulphur Company, telling him that his request involved a question of policy which was beyond his jurisdiction as general manager of the Freeport Sulphur Company, and that the matter was referred to the president of the company in New York with request for instructions, and that promptly upon receipt of a reply to this request for instructions he would again write Mr. Dabney, and that, upon receipt of a letter from Mr. E. P. Swenson so instructing him, he notified Mr. Dabney that the request was refused.

This witness further testified that Mr. E. P. Swenson of New York was president of both the Freeport Texas Company and the Freeport Sulphur Company, and that Miss F. M. Altz, a resident of New York, was the secretary of both companies; that the two companies had offices together in New York, and that four of the seven directors of the Freeport Sulphur Company reside in New' York; that all of the 2,000 shares of the Freeport Sulphur Company, except 35, held by the directors as qualifying shares, were, as shown by the' records of that company, issued to and held by the Freeport Texas Company ; that the 5 shares held by him as qualifying shares were held “subject to the direction of Swenson, to surrender them whenever he demands it, and if called on he would surrender them to his superior, E. P. Swen-son, in whatever capacity the call was made. That when the Board of the Freeport Sulphur Company met in Freeport, Texas, the Board simply passed on local operating matters, and also ratified the ordinary contracts and agreements and trades which are incidental to the business, which had no connection with the sales end of the business, which was run from the New York office where there was a regular sales organization headed' by S. M. Swenson, Vice-President and Salesmanager of the Freeport Sulphur Company, and the witness assumed that he worked under the supervision of the President. E. P. Swenson is President of both companies.”

lie said that the board at Freeport gave no orders to the sales department, which constitutes a most important branch of the business.

Upon further examination he stated that he received no dividends on the qualifying shares issued to him, and that the certificate for these shares “was endorsed in blank and returned to Mr. Swenson’s organization,” and he assumed each of the-'Other directors did the same thing.

1 In reply to the question of where the hooks, records, and accounts of the Freeport Sulphur Company were kept, the witness stated that they had 'at Freeport “a record of all the expenditures and copies of vouchers, etc., and an exact duplicate of everything made at Freeport is sent to New York; that we do not 'have at Freeport records of out-turn, records of sales,” that -these sales records were kept in New Yorkvand that shipments of sulphur were made on orders from the New York office.

The witness said that the regular order forms for the shipments of sulphur were signed by subordinates in the employ of the Freeport Sulphur Company of New York, but he stated this as on his understanding, and that he did not know it to be a fact; that these orders for sale of sulphur were signed by individuals in the New York offices of the Freeport Sulphur Company; that the orders were on letterheads entitled “Freeport Sulphur Company, 52 Wall Street, N. Y.,” and that the letters were signed, “Freeport Sulphur Company by-1 — ”; that this Wall street office was the headquarters of Mr. Swenson, whose activities are very large, and that witness understood that he was chairman of the board of the National City Bank and was president of both the Free-port Sulphur Company and the Freeport Texas Company, and that the office -of both corporation^. as well as Swenson’s offices, are all there together, and that his (witness’) activities were directed from New Yoi’k by E. P. Swenson, president of the Freeport Sul-phur Company, and that he could bring letterheads and everything of that sort from his office at Freeport so showing, and that he was certain that .everything and every order he got comes on letterheads of the Free-port Sulphur Company, and that the Free-port Texas Company does not give him instructions on the operation of the affairs of the Freeport Sulphur Company, and' gives him no instructions of any sort, but that E. P. Swenson, in writing letter^ on different subjects pertaining to the business as a whole, may use the Freeport Texas Company lettei’heads and that he could dig up such letters in his office.

He was asked:

“Don’t you know that he is directing you as President of 'the holding company? A. 1-Ie writes me as President of the Freeport Sulphur Company.
“Q. Don’t he write you as1 President of the Freeport Texas Company also; now you just said that he writes' you on their letterheads? A. He issues me no instructions as President of Freeport Texas Company.”

This witness then produced the following telegram received by him from Mr. Swen-son in reply to his letter for instructions in the matter of plaintiffs’ request for an examination of the records of the Freeport Sul-phur Company:

“New York, Naw York, October 29th, 1928. “P. G. Maercky, Freeport, Texas.
“Letter 25th, enclosing Dabney correspondence ; Williams and associates are not stockholders of Freeport Sulphur Company; therefore it seems impossible that they have any standing in Texas corporation; as you know all Freeport Sulphur Company stock is owned by Freeport Texas Company, of which latter Williams holds three 'hundred shares; Delaware law under which holding company is incorporated does not grant any right except to inspect stockholders list; resist to the utmost; application is not based on proper motives; he has always attempted to make trouble, but so insignificant as to make his efforts inconsequential. Please inform Mobley of this telegram and advise me further.
“E. P. Swenson, President.”

He next produced a letter from Mr. Swen-son of the same date confirming the telegram. This letter was written on the letterheads of the Freeport Sulphur Company.

Plaintiffs then put in evidence the correspondence in their petition between Mr. E. Randolph Williams, for himself and the other plaintiffs, and Mr. E. P. Swenson, president of the Freeport Texas Company, relative to plaintiffs’ request as stockholders for information as to the business activities of that company disclosed by its records. These letters corroborate the allegations of the petition relative thereto.

On examination by friends of the court. Mr. Maercky testified:

“That his salary was paid from the New York office, by the Freeport Sulphur Company, and that L. Mimms, who was the Assistant General Manager, was also so paid; that there was approximately 900 employees of tpe Freeport Sulphur Company, and all of these, except probably 6 or 8 who áre paid from New York, were paid at Freeport, in Brazoria County, Texas, by the Freeport Sul-phur Company, and none of them were paid by any other Company; that the Freeport Texas Company had no permit to do business in Texas; that S. M. Swenson of New York, is the Sales Manager of the Freeport Sulphur Company, and has several employees working under him and has some sort of a sales ai’rangement with Parsons & Petit, Brokers, at 63 Beaver St., N. Y., and serving the Free-port Sulphur Company as Sales Brokers. Witness 'has seen contract of sales and they are executed in the name of Freeport Sul-phur Company.
“The shipping orders are on printed forms, .bearing the name of the Freeport Sulphur Company, and correspondence on that subject is handled on the stationery of the Free-port Sulphur Company, and in its name, and the witness said he knew of no orders ox-shipping instructions that had come other than those of the Freeport Sulphur Company and that he knew of no instructions ox-directions for the operation of its plants or properties for the pi-oduction of sulphur which had come other than from the officers or directors of the Freeport Sulphur Company, and that as General'Manager of this company, he never had any direction or instruction with reference to the production of sulphur or the management of its producing affairs from any officer of the Freeport Texas Company. Freeport Texas Company has ten directors and the Freeport Sulphur Company seven, three being common directors of both companies.”
On further examination, of Mr. Maer-cky by plaintiffs’ attorney on the hearing of the plea in abatement presented by the answering defendants, he testified that the Free-port Sulphur Company declares dividends to its stockholders of record on recurring dates previous to each such declaration; that the minutes of his company simply specify the stockholders of record, and that actual transfer of the money is handled in New York and “wp see nothing of them at Freeport” ; that essentially the sole source of income of the Freeport Sulphur Company is from its sales department, and that the money is all handled in New York; that the salaries of the witness and other executives are paid from New York, and that he draws on New York for the money to meet the pay roll of the employees of the Freeport Sulphur Company and for betterments, maintenance, and operating expenses.
Before discussing the question of whether the evidence adduced on the hearing is sufficient to sustain the conclusion of the trial coui-t that the Freeport Texas Company was not doing business in Texas through its agent, the Freeport Sulphur Company, when the citation to it was served on the allegeá agent, we will give our views of the rule of law as declared and now interpreted by our higher state and national courts as to the effect courts, in determining such questions, are required to give to the legal fiction of the “separate entity” of corporations. The rule is happily applied and its underlying principle aptly} stated in the following quotation from the opinion of Justice Graves of this court in the tase of B. & T. Corp. v. Life Insurance Co. 233 S. W. 1022, 1024: “To apply the technical ¡rules appertaining to the attributes of corporations contended for by appellants to such a situation as was here developed would, it seems to us, be exalting form above substance, appearance above reality, the very thing equity will not do. In addition to the fact of his ownership of the whole of the stock, the evidence before us justifies the further conclusion that this ‘distinct corporate entity,’ as appellants term it, was but a cloak to shield Hopkins in his individual operations, and that, if the plea of ultra vires had prevailed and this indebtedness been declared null and void as against appellants, he after being undisputedly shown to have received and used all the proceeds of the loan, and despite his admitted liability in propria persona, would yet have been enabled, through the use of this corporate investment, to avoid repayment of the money he had so borrowed and used and also to still retain the property he had pledged as security for it. No principle of either law or equity with which this court is familiar looks with favor upon such legal legerdemain as that.”
As more directly applicable to the question presented in this case, the Supreme Court of this state in the ease of Buie v. Railway Company, 95 Tex. 51, 65 S. W. 27, 31, 55 L. R. A. 861, held that “the authorities cited fully sustain the proposition that, when one corporation makes use of another as its instrument through which to perform its business, «the principal corporation is really represented by the agents of the subcorporation, and its liability is just the same as if the principal corporation had done the business in its own name.”

The question under consideration in the Buie Case was whether upon the facts of that case a railway chartered in this state was but a subsidiary and agent of a railway corporation chartered in another state which thi-ongh such agent was doing business in this state. The court answered this question in the affirmative.

In the case of Peterson v. Railway Company, 205 U. S. 364, 27 S. Ct. 513, 522, 51 L. Ed. 841, the Supreme Court of the United 'States held, upon facts similar to those shown in the Buie Case, that the parent railway company was not doing business in the state in which its subsidiary was domiciled, and that service upon the agents of the subsidiary company did not bring the parent company before the court. This case is cited and largely relied on by appellees to sustain the judgment of the trial court.

We do not think the Peterson Case controls the question here presented. Aside from the fact that the corporation in that case, the separate entities of which was sought to be disregarded were public service corporations, and a question of public policy was therefore involved which is not present in this case, the facts recited in the opinion distinguish it from the instant ease. In the Peterson Case the outside corporation only owned a controlling interest in the stock of the alleged subsidiary corporation. The fact conclusions upon which the decision in that case is based are thus stated in the opinion:

“It is a fact that both companies had common agents and employees to a certain extent, hut the record shows that such employees were paid in proportion to the business done for each company. And that while in the service -of the companies respectively they were under the exclusive management and control of the company in whose service they were engaged, with no power to discharge or employ the one company for the other; and that, although the service was in a sense common, it was kept distinct and separate in the control and payment of the employees while in the separate service of the respective companies.
“It is true that the Pacific company practically owns the controlling stock in the Gulf company, and that both companies constitute elements of the Rock Island system. But the holding of the majority interest in the stock does not mean the control of the active officers and agents of the local company doing business in Texas. That fact gave the Pacific company the power to control the road by the election of the directors of the Gulf company, who could, in turn, elect officers or remove them from the places already hel'd; but this power does not make it the company transacting the local business.
“This record discloses that the officers and agents of the Gulf company control its management. The fact that the Pacific company owns the controlling amount of the stock of the Gulf company and has thus the power to change the management does not give it present control of the corporate property and business.”

The distinction between the two cases seems obvious to us. There were other stockholders of the Gulf Company besides the Pacific Company, and from the statements in the opinion these minority stockholders held an appreciable substantial interest in the Gulf Company. In such circumstances, the mere unexercised power of control in the Pacific Company did not destroy .the separate entity of the Gulf Company.

In addition to this, thq evidence affirmatively showed that no control of the activities and operations of the Gulf Company was exercised or attempted to be exercised by the Pacific Company.

Ih the case made by the record before us, the appellee Freeport Texas Company is the sole owner of the stock of the Freeport Sulphur Company. The entity of a corporation, as separate and distinct from that of its stockholders, is fixed and recognized in law for the benefit of both the stockholders and the public when the purpose of the corporation is one in which the public has a direct interest, but, when there is no public interest involved, this artificial entity is created and preserved primarily for the benefit of the stockholders in carrying on the business of the corporation.

The operation and activities " of a purely private corporation can be only lawfully exercised in the interest and for the benefit of its stockholders. This record shows that the only creature, natural or artificial, having a beneficial interest in the Free-port Sulphur Company, is the Freeport Texas Company for its stockholders. Then on what sound reason or theory can it be held that the business done by the Freeport Sulphur Company in this state was not done for the Free-port Texas Company? To hold otherwise, we must assume that the directors and manager of the Freeport Sulphur Company 'were, in violation of every legal and moral obligation, not carrying on the business of the company for or in the interest of its owners and stockholders, an assumption not only unsus-tained but negatived by all the testimony in the case. In this situation, it was not necessary for appellants to prove that the Freeport Texas Company dominated and controlled the business of the Freepbit Sulphur Company ; such domination being inherent in its ownership of all the stock of the sulphur company.

Appellees’ attempted refutation of this prima facie domination and control of the business of the sulphur company, if such issue could be raised under the pleadings and the undisputed evidence as to the stock ownership, was not raised by any evidence adduced upon the hearing.

Mr. Maercky’s testimony, upon which ap-pellees rely in support of theii- contention that the sulphur company was not- dominated and controlled by the Texas Company, is insufficient to raise that issue. The veracity of this witness may not be questioned, nor his sincerity in the statement that the Texas Company was not doing business' in Texas and had within his knowledge no agent in 'lexas. This statement was but his legal cuivmsion based upon undisputed facts which, in our opinion, do not sustain such conclusion. His further testimony that all of the instructions given him by -Mr. Swenson as to the conduct of the business of the sulphur company were written on letterheads of the sulphur company, and that none of these letters were signed by Mr. Swenson as president of the Texas Company, are wholly immaterial under the other undisputed facts in this ¡case. Neither the letterheads nor the official signature used by the president of both; companies can change or affect the fact shown by the undisputed evidence.

Just Low it is possible for the officers of a corparation, all the stock of which is owned by one person, not to be, in lawfully transacting- the business of the corporation, the agent of the sole stockholder by whom they are elected or appointed, does not occur to us, and the situation is the same whether the sole stockholder be an individual or another corporation.

The use by Mr. Swenson, the president of both corporations, of letter sheets with the name of the sulphur company inscribed on their heads, and signing his letters directing the business of the sulphur company as president of that company, cannot change or affect the undisputed fact that he and the nominal board of directors of the sulphur company and all the nominal agents of that company were the agents of the Texas Company and transacting its business in this state.

The authorities fully sustain the proposition that courts should disregard the legal fiction of corporate entity in any case in which the recognition of such entity would protect fraud or a violation of public or private obligations, or when one corporation is organized, exists, and operates as a mere instrumentality of another.

The denial by the Texas Company of the right of its stockholders to an inspection of its books and records is a violation of its duty to plaintiffs enjoined both by the common law and -the statutes of this state. Revised Statutes, art. 1328. And it cannot, upon the undisputed evidence disclosed by the record, prevent the courts of this state from compelling the performance of that duty, by setting up the legal fiction of the separate entity of the'sulphur company.

If our conclusion that the sole ownership by the Texas Company of the stock of the sulphur company makes the sulphur company a mere subsidiary .and agent of the Texas Company is not sound, we think the evidence of Maercky clearly shows that the sulphur company was dominated and controlled by the Texas Company in ail of its business activities. The fixing and payment of the salaries of the officers, the amount of dividends declared, and their payment, and the custody and disposition of all of the income of the sulphur company, was held and exercised by officers of the Texas Company in the office of that company in New Xork. The officers of the Texas Company, who alone had absolute knowledge of whether the Texas Company dominated and controlled the business activities of the sulphur company, made no affidavit on this question, and rested their case upon the statements of Maercky, who admittedly had no knowledge of the facts and was only able to give his con-elusion that so far as he knew the Texas Company was not doing business in this state and had no agent hero,

The failure of' the defendants to produce on this hearing the testimony of witnesses who could testify from positive knowledge whether such domination and control existed, when it was in their power to produce such testimony, adds probative force to the reasonable inference to be drawn from Mr. Maer-cky’s testimony, that such domination and control was exercised by the Texas Company. When all these facts are considered, we do not think the conclusions of Mr. Maer-cky that the Texas Company was not doing business in this state and did not within his knowledge have any agent here, raise any issue as to such domination and control.

In addition to the authorities before cited, the following authorities, among many others, sustain our conclusions upon the questions discussed in this opinion: Chicago, M. & S. P. Ry. Co. v. Minn., etc., 247 U. S. 490, 38 S. Ct. 553, 62 L. Ed. 1229; Costan v. Manila Electric Co. (C. C. A.) 24 F.(2d) 383; People v. Bell Telephone Co., 246 Mich. 198, 224 N. W. 438; Berkey v. Third Ave. Ry. Co. et al., 244 N. Y. 84, 155 N. E. 58, 50 A. L. R. 599.

It is no answer to appellants’ suit in the courts of this state to say that suit could be more conveniently brought in New Xork where the principal office of the Texas Company is located. The appellants have the right to choose the jurisdiction in which to sue when the defendant can be sued on the cause of action asserted in more than one state.

Upon the question of the sufficiency of the service upon the sulphur company as agent of the Texas Company, which was not decided by the trial court, we are of the opinion that the service shown by the record was sufficient.

We are not required to determine the question of whether appellants were entitled to mandamus1 against the sulphur company even if the trial court was correct in the holding that the Texas Company was not doing business in this state, because in our opinion the undisputed evidence shows that the Texas Company absolutely owned the sulphur company and was using that company as its subsidiary and agent in the transaction of the business of the Texas Company in this state.

' These conclusions require that the judgment of the court below sustaining the motion of the friends of the court and the plea in abatement presented by defendants be reversed, except as to the defendant Maercky individually, and that judgment be here rendered accordingly.

Affirmed in part ; reversed and rendered in part.

On Joint Motions tp Dismiss, and Withdraw Opinion.

PLEASANTS, O. J.

While a motion for rehearing filed by-appellees was pending in this court, the appellants, by election of the stockholders of appellee Freeport Texas Company, were placed in control of the business affairs of that corporation and thereby came into possession of the books, the right to the inspection of which constituted the subject-matter of this suit.

In this situation, the attorneys for appellants and appellees, and the attorneys appearing as friends of the court, filed motions to dismiss the suit because its subject-matter had ceased to exist and the controversy now presents only moot questions.

The parties further ask that the opinion and judgment of this court reversing the judgment of the trial court and rendering judgment for appellants be withdrawn.

It is obvious that upon the facts disclosed-in the motion the questions' in the case have become moot, and the suit should therefore be dismissed. Southwestern Tel. & Tel. Co. v. Galveston County (Tex. Civ. App.) 59 S. W. 589; McWhorter v. Northcut, 94 Tex. 86, 58 S. W. 720.

The motion to dismiss has been granted, but after due consideration we have reached the conclusion that the request to withdraw our opinion and judgment should be refused.

Under the now existing facts neither the reasoning nor the conclusions expressed in our original opinion can by any proceedings in this suit reach the Supreme Court for final determination, and therefore our conclusions cannot be regarded as settled rules of decision in this state. But we do not feel that the conclusions expressed in the opinion, except as hereinafter indicated, are unsound or will harmfully affect the jurisprudence of the state. In so far as the parties ,to this controversy are concerned, their immediate rights which constituted the subject-matter.of the suit have been fortuitously settled just as the judgment of this court fixed them. In these circumstances, the court feels constrained to refuse the motion to withdraw the opinion. We deem it permissible and proper, however, to make corrections, or modifications, and additions to the conclusions of fact and law contained in our original opinion.

In their motion for rehearing appellees somewhat vigorously complain of the statement in our opinion' that “the fixing and payment of the .salaries of the officers, the amount of dividends declared, and their payment, and the custody of all of the income of the Sulphur Company, was held and exercised by officers of the Texas Company in the office of that company in New York.”

In this statement we did not intend, and we do not think it can. be fairly interpreted, to go beyond the facts testified to by appellees’ witness Maercky. The officers of the Texas Company who exercised the authority to determine the matters mentioned in the statement did act'upon such matters in the New York office of the Texas Company. These officers of the Texas Company were also officers of the sulphur company, but the only ground upon which Mr. Maercky based his conclusions that in determining these ques>-tions they wore acting as officers of the sul-phur company rather than the Texas Company was that when the result of such decisions was made known to him the communication was written on a letterhead bearing the name of the sulphur company, and the dual officer in New York who signed these communications, and who was an officer of both companies, signed as an official of the sulphur company. It seems to us that upon the facts in this case set out in our original opinion the capacity in which these dual officers acted in directing the affairs of the sulphur company should not rest upon the name of the company appearing on the head of the letter communicating to their subordinate the decision of questions determinative of the control and domination of the sulphur- company by the Texas Company, nor upon the official designation which the writer saw fit to append to his signature to the letter. The domination and control of the business of the sulphur company by the Texas Company was determinative of the question of whether the Texas Company was doing business in this state through its agent, the sulphur company. Mr. Maereky’s testimony discloses that he did not and could not know the truth of this matter, but the facts within his knowledge and to which he testified were, in our opinion, sufficient to raise the issue of such domination and control. It is clear from the record that the fact vel non of such domination and control was within the knowledge of Mr. Swenson, who was the president of both companies, and of other dual officers of the two companies; and when in these circumstances they kept silent and failed to disclose the true facts, the courts should give probative force to their silence, and this, added to the other circumstances shown by the record, leads this court to the irresistible conclusion that the business of the sulphur company was wholly/ dominated and controlled by the Texas Com-^ pany.

We were not unmindful when our original opinion was written that the Supreme Court of this state had seemingly entirely repudiated the decision in the case of Buie v. Railway Company, 95 Tex. 51, 65 S. W. 27, 55 L. R. A. 861. But we thought, and still think, that the Peterson Case, 205 U. S. 364, 27 S. Ct. 513, 51 L. Ed. 841, which caused such repudiation, is distinguishable upon its facts from the instant case.

Upon further consideration, however, we feel constrained to withdraw the holding in that opinion that because of the sole ownership of the stock of the sulphur company by the Texas Company, it was unnecessary ior the facts to otherwise show the control and domination by the Texas Company of the sul-phur company.

The legal fiction of the separate entity of a corporation as distinct from that of the owner or owners of its stock cannot be generally disregarded without destroying the primary object and purpose of such organization, but such legal fiction should be disregarded when necessary for the prevention of fraud or to protect the legal rights of third parties. • The fiction of separate entity is not so sacred that a court of equity, looking through forms to-the substance of things, may not ignore it to circumvent fraud or wrong to innocent parties. This rule seems to be well settled when the wrong complained of is the violation of a clear statutory or common-law right of the complainant. United States v. Reading Co., 253 U. S. 26, 40 S. Ct. 425, 64 L. Ed. 760; United States v. Del. Lack. & Western R. R., 238 U. S. 516, 35 S. Ct. S73, 59 L. Ed. 1438; Chicago, M. & St. P. Ry. v. Minn. Civic Ass’n, 247 U. S. 490, 38 S. Ct. 553, 62 L. Ed. 1229.

In the Reading Case, which arose under the Commodities Clause of the Hepburn Act (49 USCA § 1 (8), a holding company owned the capital stock of a coal mining company and of a carrier which transported the coal.' The Commodities Clause forbade a carrier to transport a commodity “mined, or produced by it, or under its authority,” or which it owned “in whole or in part,” or in which it had “any interest, direct or indirect.” After stating that the mere ownership of stock in a coal company by a carrier which transported the former’s1 product did not violate the clause, the Supreme Court held that even if the carrier in the instant ease did not own any stock in the coal company, they were both controlled by the holding company that the evidence showed that the holding company used them both as a mere “instrumentality,” that the coal was both mined and transported under the same “authority,” and that the clause had therefore been violated. A similar holding was made in the other cited cases.

In cases of this kind the courts generally substitute the rule or theory of identity for that of the separate entity of the corporations involved in the controversy. United States v. Lehigh Valley R. R. Co., 220 U. S. 272, 31 S. Ct. 387, 55 L. Ed. 458; Luckenbach S. S. Co. v. W. R. Grace & Co. (C. C. A.) 267 F. 676.

The rule which gives immunity to the stockholders of a corporation being based upon the legal fiction of the separate entity of the corporation, when the justice and equity of a particular case require ’that this fiction be ignored, there can be no sound objection to the substitution therefor of the legal fiction of identity.

It seems to us that the law should resolutely set its face against corporate wrong and injustice inflicted through improper manipulation by parent corporations of their subsidiaries, and to accomplish this end restrictive technicalities should not be permitted to st;and in the way.

Motion to dismiss granted.

Motion to withdraw opinion refused.


source: Caselaw Access Project

author: BARCUS, J.

license: Public Domain

text:
    DR. PEPPER BOTTLING CO. et al. v. RAINBOLDT et al.
    No. 1036.
    Court of Civil Appeals of Texas. Waco.
    June 4, 1931.
    Rehearing Denied July 9, 1931.

      E. C. Gaines, of Austin, and Jos. W. Hale, of Waco, for appellants.
    Bryan, Maxwell & Dardnne, of Waco, for appellee.
   BARCUS, J.

Appellee, I. N. Rainboldt, for himself individually and as next friend for his six year old girl, instituted this suit against appellants, Dr. Pepper Bottling Conrpany, a corporation, Henry Schroeder and E. A., Graham, to recover damages in the sum of $50,000 for personal injuries suffered by his child, Wanda Louise Rainboldt, and $S,000 doctors, medicine, and hospital hills which appellee, I. N. Rainboldt, alleged he had become obligated to and had in part paid. The cause was tried to a jury, submitted on fifty-four special issues, and resulted in judgment being entered for the child for $30,000 and for I. N. Rain-boldt for $7,753.

It appears that Dr. Pepper Bottling Company was engaged in the manufacture of various 'bottled drinks; that it sold same by wholesale through certain agencies, the general plan being that it fixed the price at which the goods could be sold and to whom credit would be extended, and it employed salesmen or truck drivers who owned their own trucks, allotted to each salesman certain territory and paid a commission of seven and one-half cents when each ease of bottled goods was sold and seven and one-half cents when the empty case with bottles was returned. Each truck driver or salesman had the privilege of employing such help or helpers as he might deem wise. Henry Schroeder had been so employed by Dr. Pepper Bottling Company for about seven years; his route covered certain designated towns in McLen-nan county. He drove his own truck on which the sign “Dr." Pepper Bottling Company” had been painted in large letters at the expense of Dr. Pepper Bottling Company. The company had no interest in the truck, and, under the contract of employment, Schroeder was to furnish the truck and pay for its upkeep and the expenses incident to running same. His entire wage consisted of the fifteen cents per case of goods when sold, and the empty bottles returned. Schroeder employed his son-in-law, F. A. Graham, to assist him in selling and delivering the merchandise, which fact was known to Dr. Pepper Bottling Company. Graham had been working for Schroeder for about a year and a half. Each morning Schroeder and Graham would go to the Dr. Pepper Bottling Company’s office and load the truck for the day’s sale; what goods were not sold, together with all the empty cases of bottles, would be returned in the afternoon to the Bottling Company, and j;he cash sales .accounted for, and the credit slips delivered td the company for the sales made on a credit.

Schroeder and Graham each testified that on. February 4, 1930, which was a cold, rainy day, they made their usual run; that as they entered the city limits of Waco on the return trip, about 3:30 in the afternoon, Schroeder who had been driving the truck, requested Graham to and he did take hold of the wheel, and was driving the truck down North Fifth street, one of the busy thoroughfares of the city, in the center of which was a street car track: that the street was about forty-five feet wide; that they were on the right-hand side; that they each saw the child, Wanda Louise Rainboldt, jump off the sidewalk on the opposite side of the street and start running in a diagonal direction across the street with her raincoat over her head, coming directly toward the truck, and, before same was stopped, it ran over the child’s body and caused the injuries of which complaint is made.

In answer to special issues, the jury found that the injuries received were not the result of an unavoidable accident; that Schroeder was an employee of Dr. Pepper Bottling Company; that the truck was in his charge; that Graham drove the truck with the knowledge and consent of Dr. Pepper Bottling Company ; that the truck was being operated for the use and benefit of Dr. Pepper Bottling Company; that Dr. Pepper Bottling Company was interested in the arrangement which Schroeder made with Graham. After making the above findings, the- jury found that under the contract between the Dr. Pepper Bottling Company and Henry Schroeder, Schroeder represented the will of Dr. Pepper Bottling Company only as to the result of his work, and not as to the means by which it was accomplished. The jury further found that Graham failed to sound the horn as the child appro'aehed the truck, which was negligence and was a proximate cause of the injuries; that Graham failed to apply the brakes on the car, which was negligence and was a proximate cause of the injuries; that Graham discovered the perilous position of the child just prior to the collision and realized said perilous position, and that he could have, by the use of ordinary care with the means at his command, avoided the collision, and that he failed to use such care, and that same was a proximate cause of the injuries; that Graham knew that the child was entering a -position of imminent danger just prior to the collision, and th.at he realized said fact in time to have avoided the collision by the use of ordinary care with the means at his command, and that his failure so to do was negligence, which was a proximate cause of the injuries.

.Appellant Dr. Pepper Bottling Company by various propositions contends that the trial court should have given a peremptory instruction in its favor, its contention being that Schroeder was an independent contractor and that it was not in any way responsible for the acts of Graham, the driver of the truck, and that there was no evidence of negligerice on the part of the driver. All of these propositions depend fundamentally on the question as to whether the evidence shows as a matter of law that Schroeder was an independent contractor, or that there was no negligence on the part of Graham, the driver of the automobile which caused the injuries, or whether Dr. Pepper Bottling Company was in any event responsible for the acts of Graham. All of these propositions are overruled. Without further comment, we think the testimony was sufficient to raise said issues. Maryland Casualty Co. v. Kent (Tex. Civ. App.) 271 S. W. 929; Id. (Tex. Com. App.) 3 S.W.(2d) 414; United States Fidelity & Guaranty Co. v. Lowry (Tex. Civ. App.) 231 S. W. 818; Woodward-Wanger Co. v. Nelson (Tex. Civ. App.) 11 S.W.(2d) 371; Texas Employers’ Ins. Ass’n v. Owen (Tex. Civ. App.) 291 S. W. 940; Id. (Tex. Com. App.) 298 S. W. 542; Shannon v. Western Indemnity Co. (Tex. Com. App.) 257 S. W. 522; Ætna Life Ins. Co. v. Culvahouse (Tex. Civ. App.) 10 S.W.(2d) 803 (error dismissed).

We do not agree with the propositions of appellant Dr. Pepper Bottling Company that in no event would it be liable for the acts of Graham in driving the truck at the time of the injury. If it knew that Graham was working with Schroeder and that he drove the truck a part of the time, and if Schroeder was an employee of Dr. Pepper Bottling Company and not an independent contractor, and if tlie truck was being operated for tbe Joint use and benefit of Schroeder and Dr. Pepper Bottling Company at the time of the collision, then clearly Dr. Pepper Bottling Company would be liable for the negligent acts of the driver that caused the injury. Mann v. Cook (Tex. Civ. App.) 23 S.W.(2d) 860; Prince v. Taylor (Tex. Civ. App.) 171 S. W. 826 (error refused); Solan & Billings v. Pasche (Tex. Civ. App.) 153 S. W. 672 (error refused).

Appellants further complain of the action of the trial court in overruling their plea in abatement, their contention being that Mr. Rainboldt could not maintain the suit as next friend for his minor child for injuries which she had received, and in the same action maintain suit for himself for the doctors’ and medical bills which he had become oblD gated to pay. Wo overrule this proposition. The record shows that the plea in abatement was filed after the general demurrer. It was specifically held in Humble Pipe Line Co. v. Kincaid (Tex. Civ. App.) 19 S.W.(2d) 144 (error dismissed), that a suit by the parents for themselves, and as next friend for their minor child for injuries, could be maintained in one and the same action. In Becker v. Becker (Tex. Civ. App.) 218 S. W. 542, it was held that a plea in abatement for misjoinder of parties was waived, where same was not filed prior to the filing of a general demurrer. In this case the minor child is only six years of age. She could only maintain the suit by her parents as next friend or guardian. The doctors’ and medical bills were all occasioned by the injury. The same facts were necessary to be shown to entitle a recovery for the expenses as were necessary to entitle a recovery by the min’or through her next friend. Our courts abhor a multiplicity of suits.

Appellants complain of the action of the trial court, in permitting appellee, I. N. Rainboldt, to testify to the amount of doctors’, medicine, nurses’ and hospital bills that he had paid or become obligated to pay. At the time said testimony was given, counsel for appellees stated that they would show the reasonableness of said amounts. Thereafter it was shown without controversy by physicians that each of the bills, as testified to by Rainboldt, was reasonable. Under this state of the record, we do not think there was any error in the court’s action. Before the reasonableness of the bills could be determined, it was necessary that it be shown that he had paid same or had become obligated to pay same.

Appellant Dr. Pepper Bottling Company contends that since the jury found that Schroeder represented it only as to the result of his work, and not as to the means by which it was accomplished, that said finding amounts, as a matter of law, to a finding that Schroeder was an independent contractor, and that the trial court therefore erroneously refused to enter judgment for'it on said finding. It further contends that, if said finding does not amount to a finding that Schroeder was an independent contractor, the trial court committed error in refusing to submit its special requested issue No. 38, which asked the jury to determine whether the relationship between Dr. Pepper Bottling Company and Schroeder was that of an employer and independent contractor.

The record shows that appellant requested a number of different issues presenting in different forms the question as to whether Schroeder was an independent contractor. The trial court seems, from the •number so submitted, to have selected the one that was submitted, and in reply to which the jury found that Schroeder represented the will of Dr. Pepper Bottling Company only as to the result of his work, and not as to the means by which it was accomplished. While said issue as submitted does not embrace all of the essential elements of an independent contractor, it was at least a sufficient submission thereof to prevent the trial court rendering a judgment contrary thereto. North v. Atlas Brick Co. (Tex. Com. App.) 13 S.W.(2d) 59; Ablowich v. Greenville Nat. Bank, 95 Tex. 429, 67 S. W. 79, 881; Waller v. Liles, 96 Tex. 21, 70 S. W. 17; Citizens’ Nat. Bank v. Graham & Co. (Tex. Civ. App.) 25 S.W.(2d) 636; Massie v. Hutcheson (Tex. Com. App.) 270 S. W. 544; Henne & Meyer v. Moultrie, 97 Tex. 216, 77 S. W. 607; Hart v. Wilson (Tex. Com. App.) 288 S. W. 133. If same did not properly submit the question as to whether Schroeder was an independent contractor, clearly the other issues presented by" appellants did properly request said issue to be submitted.

The jury, in answer to other issues, found that Schroeder was an employee of Dr. Pepper Bottling Company and that the truck was being operated by Schroeder for the use and benefit of Dr. Pepper Bottling Company. Under these findings, the legal effect was to make Schroeder an employee of Dr. Pepper Bottling Company rather than an independent contractor, and thereby creates an irreconcilable conflict with the finding of the jury in effect that Schroeder was an independent contractor. The findings of the jury being irreconcilable on this material issue, the trial court was not authorized to enter a judgment for either party and should have set the findings aside and ordered a new trial. The law seems to be well settled that where the jury’s findings are contradictory and irreconcilable on a material issue, no judgment can be entered. Appellee" contends that there is no conflict because the issue as submitted and answered by the jury did not, as a matter of law, fix the relationship between Dr. Pepper Bottling Company and Schroeder as that of employer and independent contractor. As above suggested, if tbis be concéded, tbe judgment of tlie trial court would necessarily have to be reversed, because the trial court failed and refused to submit the issue requested by appellant, which, in effect, asked the jury whether Schroeder was an independent contractor.

For the error indicated, the judgment of the trial court is reversed, and the cause remanded.


author: FUNDERBURK, J.

text:
    MAGNOLIA PETROLEUM CO. v. WINKLER.
    No. 875.
    Court of Civil Appeals of Texas. Eastland.
    June 12, 1931.
    Walace Hawkins, of Dallas, and Thos. K. Smith, and L. W. Sandusky, both of Colorado, for appellant.
    J. M. Harris, of Snyder, and Brooks & Woodward, of Big Spring, for appellee.
   FUNDERBURK, J.

On January 24, 1930, Magnolia Petroleum Company was engaged, among other things, in operating in its business, heavy trucks and motor vehicles over the Bankhead Highway in Mitchell and Howard counties. On that date a large truck alleged by plaintiff to be “such as is ordinarily used by oil companies in the transportation of heavy machinery, equipment and supplies,” and being at the time heavily loaded with machinery of some sort, was in sole charge of, and operated by, G. L. Nelson for said company, in discharge of the latter’s duties as employee. As the truck left Big Spring to go to latan, about twenty miles distant, the driver, in response to a solicitation from one, Oscar Winkler to be given a ride, consented and permitted him to get upon the truck., On approaching latan, according to the contention of Winkler, and. the findings of the jury in accordance therewith, Nelson, the driver, while the truck was in motion, commanded Winkler to jump off, which he did, and was injured. In this suit said Winkler recovered judgment for damages resulting therefrom, and the defendant has appealed.

Appellant’s first proposition asserts that plaintiff’s petition was subject to general demurrer, in that the alleged acts of negligence, if committed, were done and performed by the driver of the truck while and during the time he was acting beyond the scope and out of the course of his employment, and not in the performance of any duty to the defendant. The question thus sought to be presented is not one, we think, that properly arises upon a consideration of the sufficiency of plaintiff’s pleading, as tested by a general demurrer. It was alleged that the injuries and damages complained of were caused “by the wilful and wanton negligence of the defendant through its agent, the said Nelson, while he was in the course of employment for the defendant,” etc. (Italics ours.) As against a general exception, the pleading is thought to be not subject to the criticism urged. Although the allegations were general, we think the proper construction is that Nelson, the driver, in commanding plaintiff to jump off the truck, did so in the course of his employment.

By its third proposition, appellant contends that the evidence not only failed to show that the truck driver’s alleged willful acts, proximately causing plaintiff’s injuries, were committed as a servant of, or in the performance of any duty, actual or implied, for the defendant, but on the contrary established that his acts were the independent acts of the truck driver acting in his own behalf, or in privity with the plaintiff. This point has been given our most careful consideration. The undisputed evidence shows that Nelson had no authority to permit the plaintiff to ride on the truck. There was nothing in the design or the use of the truck to raise a reasonable inference that it was being operated for the transportation of passengers. Clearly then, the driver, in permitting plaintiff to get upon the truck, and in transporting him from Big Spring to latan, was not acting within the scope of his employment. No question, however, arises regarding the liability-of the defendant for permitting the plaintiff to ride upon the truck. Plaintiff was not injured as a result of being permitted to enter the truck, or to ride upon same. He was injured because he jumped off the truck while it was in motion. His sole contention, as limited by the verdict of the jury and made the basis of the judgment, was that Nelson, the truck driver, commanded him to jump off, and, because of that command, he jumped.

To ascertain the existence or not of defendant’s liability, it is well to look for a duty, if any, which it was owing the plaintiff, and which it failed to discharge. Unless there was a duty, there could be no liability.

No duty arose because of the immaturity and want of discretion in the plaintiff, because he was eighteen years, nine months and twenty-one days old; had done various kinds of work, including that of being manager of a grocery store; and he had experience in riding upon and alighting from trucks. Therefore, the principles of liability which were controlling in such cases as Cook v. Navigation Co., 76 Tex. 353, 13 S. W. 475, 18 Am. St. Rep. 52; Missouri, K. & T. Ry. Co. v. Rodgers, 89 Tex. 675, 36 S. W. 243; Smith Bros. v. Williams (Tex. Civ. App.) 294 S. W. 309, and Texas Co. v. Blackstock (Tex. Civ. App.) 21 S.W.(2d) 13, have no application. The principle of liability in those and like cases seems to be one analogous in some respects to that of discovered peril. Blossom Oil, etc., Co. v. Poteet, 104 Tex. 230, 136 S. W. 432, 35 L. R. A. (N. S.) 449.

Neither did any duty arise based upon the principles of discovered peril as applied to adults. The evidence does not suggest that, independently of the act of plaintiff in jumping off the truck, he was in a perilous position. Even if he was, such fact had nothing to do with his injury. If_ the principle of discovered peril could be extended so as to include the command to jump off, and the act of the plaintiff in jumping, plaintiff’s own evidence negatives the existence of any imminent peril. He testified that Nelson had slowed down the truck from twenty-five or thirty miles an hour to twelve or fifteen miles, tie further testified that one could have alighted from the truck going ten miles an hour. If, therefore, there was danger in jumping off the truck while moving at the rate of twelve to fifteen miles an hour, it was not, we think, that obvious and imminent danger upon which liability under the doctrine of discovered peril is predicated. Cockrell v. Texas & N. O. Ry. Co., 36 Tex. Civ. App. 559, 82 S. W. 529. As already said, to make it such, there would have to be added the fact of plaintiff’s immaturity and lack of discretion, which have no existence in this case.

Whether defendant could be guilty of negligence and therefore liable (unless excused by other facts), based upon the theory that Nelson, by giving the command in question, breached some duty which defendant owed to plaintiff, may be determined, we think, by tbe answer to a single question. That is: Was tbe driver, in commanding plaintiff to jump off tbe truck, by that very act, as distinguished from bis operation of tbe truck, performing a duty of bis employment, or, on tbe contrary, was be acting for bimself or the plaintiff? It may at once be taken for granted that, if be was acting for tbe defendant in giving such command, it was not in pursuance of any express authority. If tbe authority to give tbe command for the defendant existed at all, it was an implied authority. We assume, without deciding, that Nelson, tbe truck driver, occupied a position in tbe service of defendant analogous to tbe conductor of a. freight train in tbe' service of a railroad company, and that, as such, be had implied authority to eject trespassers from tbe truck. Denison, etc., Ry. Co. v. Carter, 98 Tex. 196, 82 S. W. 782, 107 Am. St. Rep. 626; Galveston H. & S. A. Ry. Co. v. Zantzinger, 93 Tex. 64, 53 S. W. 379, 47 L. R. A. 282, 77 Am. St. Rep. 829. Did Nelson command plaintiff to jump off in order to free the truck of bis presence as one not entitled to be thereon? Or was it for the purpose of completing tbe transaction by which be bad, without authority of his employer, used tbe truck to accommodate tbe plaintiff in giving him a ride from Big Spring to latan, tbe destination of tbe truck? Or was such command given for the purpose of preventing the employer from knowing that the employee bad permitted plaintiff to ride? It is wholly unimportant in tbe present inquiry that Nelson, in driving the.truck and controlling tbe operations thereof, was doing so in tbe discharge of his employer’s business. This we take to be an undisputed fact in tbe case. It is necessary to defendant’s liability that, in commanding plaintiff to jump off, that act must have been done in furtherance of tbe master’s business, and for tbe accomplishment of the object for which tbe servant was employed. International & G. N. Ry. Co. v. Anderson, 82 Tex. 516, 17 S. W. 1039, 27 Am. St. Rep. 902; International & G. N. Ry. Co. v. Yarbrough (Tex. Civ. App.) 39 S. W. 1096. The command to “jump off” was of tbe same nature as respects tbe question of defendant’s liability as tbe act of the engineer and fireman in discharging tbe hot water upon Cooper in International & G. N. Ry. Co. v. Cooper, 88 Tex. 607, 32 S. W. 517, 518. In that case “tbe fireman and engineer were, at tbe time the injury was inflicted, in tbe employ of Campbell, receiver, and were engaged, in the performance of a service to Mm; that is, they were operating a locomotive, each performing his duty as engineer or fireman.” (Italics ours.) So was Nelson in this case, as respects tbe operation of tbe truck. But, just as in that case, tbe injury “did no't occur from anything done in tbe performance of such duty,” so it may or may • not be true in this case, tbe question being dependent upon a proper interpretation of tbe facts. It is just as essential in this case that the act of Nelson, in- commanding plaintiff to jump off the truck, “must have been done in tbe course of the employment of the servant and for the purpose of forwarding tbe business of the master,” as it was necessary in the case cited that “the act itself of discharging tbe hot water must have been” so done. When the facts are undisputed, and but one reasonable inference can be drawn from same, the question should be determined as one of law, as was done in International & G. N. Ry. Co. v. Cooper, supra. If not, then “tbe question of authority or not is one of fact to be determined by tbe jury like any other issue, and not a matter of law to be decided by the court.” Galveston H. & S. A. Ry. Co. v. Zantzinger, 93 Tex. 64, 53 S. W. 379, 381, 47 L. R. A. 282, 77 Am. St. Rep. 829.

In this connection it is to be observed that no such issue was submitted to the jury in this ease. Unless the fact was established by uncontroverted evidence as a matter of law that Nelson, in commanding the plaintiff to jump off, did so in discharge of tbe duties of his employment, then all other issues in tbe case were immaterial. Were it necessary for us to determine whether, for this reason, tbe verdict may not be insufficient to support the judgment, a very difficult question in tbe present state of tbe authorities would be presented.

But, passing this over, let us examine tbe evidence to see if an issue was presented which should have been submitted to tbe jury. It is not arguable, we think, that as a matter of law tbe employee, in giving the command to jump off tbe truck, was acting for bis employer. Plaintiff testified that tbe big Mack truck with a Magnolia sign on it, equipped with an oil wench like all oil trucks, loaded with machinery, was in control of the truck driver at tbe wheel; that, when near latan, Nelson told him nobody was “allowed to ride on tbe truck; to get on around him so bis boss would not see anybody riding on the truck; that he would lose bis job.” That when he “got on the running board be (Nelson) told me to jump off, and I jumped off because be told me to.” As to bow plaintiff came to be on the truck, be testified: “I hollered at him and kinda motioned to him to slow down. I was standing there hollering at him and asked him if be was going down tbe road. He said be was going about twenty miles to a Magnolia camp and would help me out; (italics ours) I did appreciate that.” After plaintiff had ridden from Big Spring to latan, tbe truck driver said “I would have to get off because be was not allowed to haul anybody and that he would get caught. I did not want him to lose his job and I was perfectly willing to get off. * * * He did help me, yes, and I wxls perfectly willing to help him. ⅜ ⅜ ⅜ It did not make any difference to me where I got off. No, I would have gotten off at one point as quiets, as another. Yes, he said, ‘Jump off, this is as far as I am going.’ (Italics ours.) That is what he said, the very words.”

Plaintiff’s own testimony, we think, conclusively shows that Nelson, in commanding him to jump off, did so in pursuance of his agreement to transport the plaintiff “down the road about twenty miles,” and, if not solely in pursuance of such purpose, then to prevent his employer from learning that, contrary to instructions, he had permitted plaintiff to ride upon the truck. Nelson had, for plaintiff’s benefit, committed an offense against the defendant in permitting the plaintiff to ride. He had thereby violated the instructions of his employer. This was known to the plaintiff at least when he was commanded to jump off. The command was given as the culminating act in carrying out the joint purpose of Nelson and plaintiff to make use of defendant’s truck in conveying plaintiff to latan, or if not that purpose alone, then in addition thereto, for the purpose of preventing the defendant from learning of Nel-sonis violation of the rule against carrying passengers. That the latter would not be an act in the discharge of the master’s business is well illustrated in Grahn v. International & G. N. Ry. Co., 100 Tex. 27, 93 S. W. 104, 105, 5 L. R. A. (N. S.) 1025, 123 Am. St. Rep. 767, wherein, of an alleged wrongful ejection of one from a train whereon he had procured an employee, without authority, to let him ride, the court said: “His motive in driving plaintiff off the train while in motion might have been, not to serve his master, [italics ours] but to cover up his offense against his master.” The last case is authority for the proposition that “if there is any doubt as to that, the doubt must be resolved against the wrongdoer.” This would naturally result from the fact that plaintiff has the burden of pleading and proving that an alleged negligent act is within the scope of the employee’s authority.

We are forced to the conclusion, however, that either or both of the purposes of the said Nelson in commanding plaintiff to jump off the truck, as shown by plaintiff’s own evidence, was entirely outside of his employment with the defendant. As to that question, the evidence raised no issue for the jury. The trial court should, therefore, have granted appellant’s request for a peremptory instruction in its favor.

We are also unable to see if Nelson, the truck driver, should have foreseen an injury to plaintiff as the natural and probable consequence of his jumping off the truck, why the plaintiff should not also have foreseen the same consequence. There is no evidence that the plaintiff, in jumping off, was acting under any character of coercion or fright produced from the command. So far as we can see, he was in just as good, if not a better, position than the driver to judge whether it was safe to jump. He didn’t even request that the truck be further slowed down. If, in view of the speed of the truck at the time, it was negligence on the part of Nelson to command the plaintiff to jump off, we think it equally certain that it was negligence for the plaintiff to jump off.

It is the contention of appellee that contributory negligence was no defense, since the jury found that the command of Nelson to plaintiff to jump off the truck was. willful negligence. Treating “wilful negligence” as synonymous with gross negligence, which the definition, given by the court and not complained of, shows to be the sense in which the words were used, there was an entire absence of any testimony to sustain such a finding. Sufficient facts have already been recited, borne out by plaintiff’s own testimony, to negative any inference of willful or wanton conduct, or of gross negligence.

Por the reasons discussed, it is our opinion that the 'judgment of the trial court should be reversed, and, since it appears that the case was fully developed and an instructed verdict should have been- given, it is our opinion that judgment should be here rendered for the defendant, which is accordingly so ordered.