56 F.2d 614 | S.D.N.Y. | 1929
The learned special master, in a report which discloses a thorough and careful con
That a corporation may procure the incorporation of a subsidiary as a branch of its business to purchase its products and resell them, may completely dominate and control the commercial and financial activities of such a subsidiary, and may exercise such control through individuals who are at the same time engaged in conducting similar branches or departments of its business which are unincorporated, without in legal sense engaging in the business conducted in its interest by the subsidiary, is settled by the decision of the Supreme Court in Cannon Mfg. Co. v. Cudahy Co., 267 U. S. 333, 45 S. Ct. 250, 69 L. Ed. 634. See, also, Selbert v. Lancaster Chocolate & Caramel Co., 23 F.(2d) 233 (C. C. A. 6). In the Cudahy Case the fact was emphasized that the existence of the subsidiary as a distinct corporation was in all respects observed, and that the corporate separation, though perhaps merely formal, was real and was not pure fiction. Cases dealing with substantive rights and liabilities arising between the parent corporation and third parties from transactions with its subsidiary were held to be inapplicable. This decision turned, not upon dominance and control, or upon identity of personnel charged with managerial responsibility, but upon the reality of corporate separation as between the parent corporation and its subsidiary. Intangible as the distinction may appear to be, it has been recognized and applied in cases arising under the commodities clause of the Hepburn Act (June 29, 1906, c. 3591, 34 Stat. 584, 49 USCA § 1 (8). Cf. U. S. v. Delaware & Hudson Co., 213 U. S. 366, 29 S. Ct. 527, 53 L. Ed. 836, and U. S. v. Lehigh Valley R. R. Co., 220 U. S. 257, 31 S. Ct. 387, 391, 55 L. Ed. 458. Of course, it must not be forgotten that the question is always one of fact, and that in its determination one must look “not at the legal title only but at the facts beneath forms.” U. S. Grain Corp. v. Phillips, 261 U. S. 106, 113, 43 S. Ct. 283, 286, 67 L. Ed. 552. In this ease the inquiry is whether the parent corporation has a regular and established place of business within the district, and whether the person served was its agent engaged in conducting its business. It has said as much to those who do business with the persons in charge of the New York office. Furthermore, it has used its power of control so as to commingle the affairs of the two companies to such an extent “as by necessary effect to make such affairs practically indistinguishable, and therefore to cause both corporations to be one for all purposes.” U. S. v. Lehigh Valley R. R. Co., supra.
In view of the facts found by the special master, which are fully sustained by the evidence, I can find no reality in the corporate separation of the business of the Virginia corporation conducted in the state of