*1
«17
v. Heard
App.)
Heard
Civ.
(Tex.
App.)
wife’s mutations, invested, sold, proceeds yet preserve its resold, reinvested, and long separate character, can she trace so ’ belonging well funds her. And appreciated due to value settled size; growth, market, increased natural like, hers, not become remains and does prop part erty. community her as increase of very carefully record examined We have substantially case,
in supports same and find the judgment the trial which is affirmed. J.,
SMITH, in the result concurs et FREEPORT al. v. SULPHUR
WILLIAMS et al. CO.
No. 9361. Appeals of Texas. Galveston. of Civil
Court April 1930. Dismiss, Opinion, Motions
On Withdraw. 17, 1931. June *2 Compa-
ny an Texas is of the ny representing for it and Texas. the State of alleged Tex- It is further that the operating, Company holding, a and con- is trolling company," stocky and holds all of the except Freeport Sulphur Company, of the the last- few shares held the directors of qualify of- them for such named fice, great proportion of the val- and that “a Company Freeport Texas ues owned consist of the Sulphur assets of the belongs'to Company, the stock of which Freeport exceptions Company, nominal with the Texas stated; Texas through owner- the stock controls Company, upon Sulphur ship effi- and the of which economic success management the existence cient of which and assets, great part of the values of valuable n ofthe and the val- depend.” ues of its stock . by the stock issued number of shares of n 729,- alleged be value, plaintiffs al- are of no face 23,200 leged these of of the owners to be shares, have shares “all these plaintiffs good acquired faith Henry Houston, Dabney, of B. Samuel hereof, each of owners true Gay, B. and Thomas both of Anderson represents plaintiffs no in- he has now Richmond, Va., appellants. for any other rival terest n Andrews, Evans, Angleton, producer sulphur, and that each of them & Follett they Houston, bring Mobley, Logue they together allege -Streetman, for purpose appellees. good for no faith and this suit them, injuring but defendants or purpose protecting rights their sole PLEASANTS, C. J. may ascertaining assets there what by appellants brought This suit Sulphur and for of the appellee corporations, stockholders Freeport management inquiring purpose into its the and methods of Sulphur and the operation; .that, against the above-named cor- bring themselves for the benefit of this suit Maercky, George porations ly individual- and P. to the extent other stockholders and all manager general of the protection just rights of the and for the their compel Sulphur 'mandamus to defendants, adverse- and not of the interests inspectioh permit an defendants rights ly them, their assertion of and in books, properties, plaintiffs and records rights other stock- corporations. defendant similarly situated, and who de- holders allega- opinión, purposes For the co-operate them or receive the with sire to petition at need not be set tions of the out. suit.” benefits only length, and be stated to the extent will The number of shares of stock Free- necessary questions in the elucidation port Sulphur Company issued outstand- appeal. presented alleged 2,000, par ing is to be or face substance, alleged, in It that the each’, which, all of with the $100 value organized corporation is a exceptions stated, nominal before are owned state, laws under the chartered '’ and held place business in Bra- its domicile and with alleged plaintiffs Maercky, county; George It is then as stock- that P. who zoria county, general holders is the in Brazoria resides 23, 1928, corporation; manager letter written on October that the Free- . of said attorney, organ- Dabney, B. Samuel their Delaware, corporations defendant the executive officeof laws the state ized undA the its, city Freeport, Tex., requested general permission offices of New with at York, sides, investigation president, E. P. of the records where its. Compa- and that the activities of the Randolph was ab- “To this stating last letter Williams letter that said replied ,11th, stating would be it was there October that he “trusted solute and reply objection,” requesting not his or that of “a desire other stockholders no earliest might was to possible receive information which This fur- moment.” Maercky, stockholders, duly and nished to all but to fee defendant receive received possession request formation was referred which is therein contained the by *3 company large in officers who are stockholders of the him to the n copy company, letter of Mr. Dab- A and that ‘those stockholders who New York. ney’s Andrews, position occupy Messrs. do not the favorable was sent him officers attorneys Mobley, company Streetman, Logue for de- of the are now without information & Houston, they corporations any On Tex. from which can base reasonable fendant attorneys judgment they 26, acknowl- as to value of the defendant which October edged stock Dabhey’s receipt repeated letter and hold.’ of Mr. that He then stated he manager, general Mr. that it him was not formed that the desire and as- himself president- given any Maercky, company of the sociates to be had written exclusive statement request privileges, suggested company Additional or for instructions. that the Dabney prepared reply by Mr. on have and issue a for a definite in re- statement sponse brought inquiry 2, 1928, made, infbrmation same November send the Maercky stockholders, request to all that the renewed from investigation permit of'-October 3rd. To this declined to last no an- demand attorneys requested, for the de- swer and from has been received.” they corporations had “that no in- fendant being After so informed refusal of principals.” (cid:127) In the from their structions corporations permit the defendant plaintiff, meantime, 8,1928, “the October on quested records, examination of their others, Williams; Randolph signing himself for pe- suit filed on December 1928. The by him, prepared forwarded the letter defendants, tition asks for service Richmond, Virginia, to E. P. a from them, alleges each of that the defend- Freeport Swenson, Company, Texas President of the Maercky agent Freeport ant Texas is the local stating they all were holders Company, Freeport “and that the Sul- of stock of that com- substantial amounts phur Company acting corporation, is an act- they get pany; de- been unable to had ing in Texas and with associated affairs; and check its information tailed agent”, Texas as its serv- and that E. P. Swenson would that it assumed ice be made Texas they to all informa- entitled concur that tion “by service Sul- any necessary accuracy with ascertain phur Company acting as an associate and cor- and stock, had been fair value of their which poration Texas, representing in and as market; they declining upon the stock acting Texas management, desire embarrass did not but they provided by petition law.” The closes with an substantially interested, and that appropriate prayer for relief. (1) original copy requested a or Freeport Sulphur Company The defendant auditors, including report of the the detailed Maercky, general George manager and P. report for the of the last audited details individually, filed year ending (2) a November fiscal following grounds; in abatement on the engineers, reports 'copy which appear plaintiffs’ “1. It not from does was understood been made for it the the amount pany’s properties three pleadings, alleged by plaintiffs, nor is it years showing past two any they or of them are stockholders in de- in reserves com- Sulphur Company. fendant in is in- those appear plaintiffs’ (3) peti- ; copy “2. It does not the income tax re- terested turn ending tion, therein, alleged year nor is that defendant Federal Government George Maercky Manager, as General has P. any or if for the fiscal December 31. 30,1927 ; with, year, ending connection or that November is then for employed by-the permitted defendant Texas also and certified satisfactory by them, public selected accountant Compa- “3. The defendant Texas Texas alleged by plaintiff ny, corporation, to be the office make call at laws of the of Del- under the State chartered aware, place past records for two examination having principal office and years. P. To this letter E. the Swenson Presi- City York, of business of New Company, 52 Wall dent of York, properly has not of New State City, replied 9th, Street, on October in this cause and has filed with citation served stated: hex’ein, said answer defendant Free- no “ regret not not feel is We we do that it is you proper business at time furnish with information and was which Texas suit, filing Signed and has not been do- to all stockholders.’ is furnished any ing time Texas at since E. P. filing suit. President. naught be held for “4. Defendant that said defendant Texas, no Vice- should dismissed from this unless lias no President President, Manager traveling agent cause Secretary, process upon or General lawful Treasurer further and said service Texas, no local it has defendant be evidenced to this traveling respectfully in Tex- of salesman submitted. n “Follett Evans as, & Texas. kind Mobley “Andrews, Bogue Streetman, Texas'Company “5. Defendant As friends of the Court. necessary party suit and a recovery Freeport Sulphur Company to this against exist herein exists or can Texas, County “State of of Brazoria. event in me, authority, George undersigned “Before FVeeport as a absence day appeared personally P. Maer- party before court. /this cky, being by duly sworn, after me who deposed following “6. Defendant oath state- made the *4 necessary party of and no a to this suit ment: recovery against P. exist herein exists or can “My Maercky. George name is P. reside I manager, George Maercky general P. and as Freeport County, in I at Brazoria am Texas. any George Maercky individually, event. in Manager Free- Vice-President and General of “Wherefore, pray said defendants port Company, Sulphur corporation a char- plaintiffs and dismissed of abated suit and that said defendants Texas tered under the laws of the of State plaintiffs of recover having principal place its and business domicile and of in this behalf of them and each their costs Freeport County, at in Tex- Brazoria expended, relief as to and for other Sulphur purpose Freeport as. for which duty they may entitled, in and as Company incorporated, in its as stated pray.” will ever bound charter, reads as follows: “ purpose upon ‘The for which Subject this over- to and conditioned any is the manufactur- ruling by general formed transaction of answered of this these defendants ing mining purchase and or business and the general a denial. demurrer and goods, of such wares sale and merchandise defendants, following suggestions attorneys as for friends for used such business.’ court, filed the of of “I been have Vice-President and General proper citation on want of service of Freeport Manager Sulphur Company of from Company: Freeport Texas defendant prior filing a Williams date of the suit of R. Freeport Company, Freeport Sulphur Company of the Texas one al. v. “1. et prop- al., pending cause, et in not in of defendants erly District Court County, herein is not Brazoria Texas. with citation served any adjudication employed by, “I am'not properly for the court and I no con- before have with, pre- Freeport Company, respect rights in nection herein to its Texas one with tended process has been at- of defendants in I of suit. am not service said Freeport Company, according tempted, of return sher- President said Texas copy Vice-President, leaving Secretary, nor iff, citation issued I a of am its Treas- general manager, accompanying urer certified or nor am 1 local in this cause copy Freeport Freeport agent petition, Freeport plaintiffs’ Company, at the office of said nor nor Texas agent traveling agent Company, Sulphur salesman, traveling for said its or n agent any purpose any Company, am in truth and I while for in Texas any capacity. My Freeport Sulphur Companyis salary paid sense or in wholly by Freeport not in fact said agent, Sulphur at was not the the time the of Company. Freeport pretended Freeport in Texas the conduct of service of business of Sulphur Company management and in responsible Company engaged only is not am “2. Texas affairs I Presi- State, Sulphur Company, in was not so dent of in engaged business in his filing suit, capacity President, time of the as such Board date, respect Sulphur with since said nor Directors things represented in of the matters and connection “I never to all have Texas service, service, pretended any Company capacity of cita- in with tion whatsoever. Free- s?id engaged said in not fully set forth and contained affidavit whatsoever in business 'it has George Maercky, permit Texas, P. wliieh is attached here- do business in it does part purposes. Texas, made a for all hereof not do in State copy suggestion copy doing any “3. A of Staté affidavit, prior filing filing said been torney hereof of Texas at the time of above Dabney, time; to Mr. furnished Samuel B. at- suit or since Free- mentioned said plaintiffs port Sulphur Company for herein. record an is not “Wherefore, respectfully suggest, representative pretended friends of the said serv- and it is business for said said nor ice should Texas is said Upon examination, repeating (cid:127) with, after for, Company acting nor associated is it his residence statements in his affidavit as to State Texas business said position county Sulphur in Brazoria and his official Texas. The marketing Freeport Sulphur Company, fur with ther production is the only produces stated that he received the sulphur, 23, 192S, oper- Dabney selling Texas, Mr. addressed County, of .October and its Brazoria principally executive Sul- officers are conducted ations phur Company, permission requesting City, maintains office. where it plaintiffs deponent as stockholders not. saith “Further this Maereky.” investigation George to 'have an “P. “the records and activities of the signed be- sworn This affidavit Sulphur Company,” reply he and that notary public. fore Dabney, wrote Mi. Free- letterhead pleadings port these each Plaintiffs answered telling his him that general request and a of general plea demurrer policy defendants involved a excepted specially beyond jurisdiction denial and general was ager man ground on the of abatement against the other suit defendants without maintained presi could be the matter was referred to making nonresident dent of New York with re party having the quest defendant it before up 'a instructions, promptly and that by proper receipt court service. reply request in of a to this again Dabney, Upon hearing structions he would and Feb- write below on court *5 that, receipt upon ruary plaintiffs’ from Mr. of a letter all of demurrers him, E. overruled, instructing exceptions P. suggestion Swenson he notified so the were request Dabney court, Mr. the refused. that was the and motion the friends of of by presented an- in abatement the the This witness further that Mr. testified sustained, defendants, swering were both P. Swenson of New was plain- dismissing and entered orders made tiffs’ both the suit, all defendants. as to that Miss While order trial court sustain- the Altz, York, F. M. resident the New was court, ing the motion of the friends the secretary companies companies; of both that the two appears record, as it is not clear together York, had offices in New grounds upon definite in its statement of the and that four of the seven directors the based, which it is clusively Freeport the record as whole con- Freeport Sulphur Company reside in New' against that the suit shows the York; 2,000 that all of the shares the be- dismissed was Freeport Sulphur Company, except 35, held cause in defend- the of the court that by were, shares, qualifying the as directors by have ant was to not shown evidence as shown the' records of that is through been leged its al- sued to and held Texas Com agent, Sulphur pany ; qual that as shares held him the 5 citation in the time this suit served “subject ifying shares to the direc were held upon Freeport Sulphur Company Swenson, tion of to surrender them when agent, question sufficiency it, if ever he surrender them to his he would demands called on alleged upon the service superior, E. P. Swen- decided. sions of This is clear the conclu- son, capacity in whatever call made. law fact and trial filed learned Sulphur That when the Board Judge, and do not understand counsel for Company Freeport, Texas, Board met appellees to contend otherwise. simply passed matters, operating local on ordinary also agreements ratified contracts controlling question It that follows trades which are incidental presented appeal by this evi is whether the business, no connection had hearing dence adduced sustains business, with the sales end conclusion of the trial court the Free- that was run from the New York office where was not regular organization sales head there was a in Texas Sul- Swenson, by M. Vice-President ed' phur which citation Freeport Sulphur Salesmanager of the Com nonresident defendant was served. pany, assumed he and the witness introducing friends of after supervision under the worked of the Presi Maereky of Mr. affidavit attached dent. E. P. Swenson is President motion, their and which has been above set companies.” out, permission rested case. With their of to Freeport gave plaintiffs the court lie the board at said that were allowed then department, Maereky call sales which con- Mr. no orders to the witness stand important busi- cross-examine him stitutes most branch the statements made in his ness. affidavit. you said that their Upon he writes' letterheads? stated examination he further qualifying A. President He me no instructions as on the issues dividends received he Company.” him, that the certificate shares issued to for these shares returned and endorsed blank “was produced following This then witness organization,” telegram Swenson’s by him from Mr. received Swen- directors he each of the-'Other assumed reply son in instructions thing. did the same plaintiffs’ request ex- matter for an reply the amination of records of the Sul- of where In phur Company: hooks, records, accounts kept, witness were York, 29th, York, 1928. “New October Naw they “a record stated that 'at Maercky, Freeport, “P. G. Texas. vouchers, copies expenditures and all the 25th, Dabney correspond- enclosing “Letter everything duplicate etc., and an exact ; ence Williams and associates are not stock- York; made at we do not 'have at turn, is sent to Freeport Sulphur Company; holders of out- records of impossible therefore seems sales,” rec -these sales records any standing corporation; you in Texas ship kept in New ords were Yorkvand know stock sulphur made on ments of the orders by Freeport is owned office. New York which latter Williams holds three 'hundred regular order shares; holding witness said that Delaware law under which shipments incorporated forms for grant does not employ signed of the right except inspect list; subordinates York, Sulphur Company of New utmost; application sist is not understanding, he always attempted but and that stated this as on his proper motives; fact; trouble, insignificant not know to he did make but so sulphur were for sale of inconsequential. these orders make Please his efforts signed offices New York individuals Mobley telegram form me and advise Sulphur Company; further. “Freeport orders were on letterheads entitled “E. P. President.” *6 Street, Y.,” Company, Sulphur 52 Wall N. produced He next letter from Mr. Swen- “Freeport signed, that the letters were confirming telegram. son of the same date by-1 ”; Sulphur Company that Wall — This written on the letterheads headquarters street of Mr. office was the Freeport Sulphur Company. of the large, very Swenson, activities are whose witness understood put Plaintiffs then he and that chairman Bank and was port Sulphur that evidence the corre- spondence City petition in their board the National between Mr. E. of the president Randolph Williams, er of both the Free- oth- and the himself plaintiffs, Swenson, Freeport presi- and Mr. E. P. and the the Swenson’s Tex dent of the that office-of cor both rela- as plaintiffs’ request offices, tive to information as to the poration^. as well as as stockholders for (witness’) together, that his ac there business activities of by allegations E. that tivities directed from Yoi’k disclosed its records. These pe- P. Sul- letters corroborate of the phur Company, bring he tition and that let relative thereto. could everything terheads of that sort from On examination friends of the court. showing, office so and that his he was at Maercky testified: every .everything certain or salary paid “That his from the New got on der he comes letterheads of Free- office, by Sulphur Com- port Sulphur Company, Free- and that pany, Mimms, L. and that who was the As- port give in him does Manager, paid; sistant General was also so operation of structions on the the the affairs of approximately employees that there was 900 gives and' Freeport Sulphur tpe and all any sort, him no instructions P. but that except these, probably paid 8or who áre Swenson, writing on different letter^ York, paid Freeport, from New at subjects pertaining to the as a County, Texas, by Brazoria Sul- whole, use phur Company, by any paid and none of them were dig up could lettei’heads and he Company; other in his office. letters permit Texas in had no to do business was asked: He Texas; York, S. M. Swenson of New you you directing know that is “Don’t Manager he Freeport Sulphur is the Sales holding company? 'the A. Company, as President of 1-Ie employees and has several work- writes as me President ing under him and sort has some of a sales Company. Sulphur ai’rangement Petit, Brokers, with Parsons St., “Q. you Y., serving of the N. Free- Don’t he as1President 63 Beaver write just Sulphur port you also; as Sales Brokers. by appellants corporations contended for contract of sales Witness 'has seen developed would, such situation as was here Sul- name of are executed us, exalting phur seems to form above sub very reality, stance, appearance above forms, printed shipping “The orders are thing equity will not do. In addition Sulphur .bearing the name of the ownership whole fact of his of the Company, ject correspondence sub- on that justifies stock, fur before us the evidence stationery Free- is on the handled corporate ther conclusion that this ‘distinct name, Sulphur Company, its entity,’ appellants Hopkins it, term was but a cloak ox- witness orders the shipping said he knew opera in his individual shield other instructions that had come that, tions, plea vires if of ultra Freeport Sulphur than those Com- prevailed de and this indebtedness been pany and that he knew of no instructions ox- against appellants, null and void as clared plants operation its directions for the being undisputedly re he after to have shown properties sulphur pi-oduction of for the loan, proceeds ceived used all the which had come other than from officers liability propria despite his admitted Com- directors of the yet enabled, persona, would pany, General'Manager of this and that as investment, through corporate the use of he never had direction money repayment had so avoid production struction with reference to the borrowed and still retain used also to produc- management or the of its property pledged security he had for it. ing officer of the affairs principle equity No which this law or of either with Company. Freeport is familiar favor court looks with directors has ten legerdemain legal that.” Company seven, being directors three common directly applicable As more companies.” presented case, Supreme Court examination, of On Mr. Maer- further Railway this state the ease Buie v. Com- hearing cky by plaintiffs’ attorney 27, pany, A. R. 95 Tex. 55 L. presented an- in abatement fully held authorities cited “the swering defendants, Free- he testified that the proposition that, sustain poration when cor- one port Sulphur Company dividends to declares use of another as instru- makes recurring record on dates its stockholders of business, perform ment «the which to previous declaration; each such really repre- principal company simply specify the of his minutes agents subcorporation, sented record, actual trans- just liability and its as if same money fer of handled in New York principal corporation had done the business “wp nothing Freeport” ; see of them at in its own name.” essentially sole source of income *7 question The under consideration in the Freeport Sulphur Company the sales from its upon Buie Case was whether the facts that department, money and the is all railway was case but chartered in this state York; handled in New the salaries of subsidiary agent railway cor- of a and paid the witness and other executives are poration chartered in another state which York, from on New draws doing thi-ongh such was business in this money pay for the roll of the to meet question state. The court answered in employees Freeport Sulphur the of the Com- the affirmative. pany maintenance, betterments, for Railway expenses. operating Peterson v. In the case of 513, 522, L. Ct. 205 U. discussing question Before the of whether Supreme Court the Ed. the United hearing on the adduced the is suffi evidence held, upon facts similar to shown 'States those to sustain the conclusion of trial cient the railway parent Case, in Buie the the Company was coui-t that the company in was not the state in not business Texas its subsidiary domiciled, and in which its was ci the when the agents subsidiary the that service company the allegeá agent, on tation to it was served we will the parent company bring not the did give of law our the rule views This the court. case cited and before interpreted higher our declared state and largely judgment appellees relied on sustain the national courts as to effect the trial of the court. determining questions, courts, re in are give legal quired “sep not think Peterson Case controls fiction of the We do the the entity” presented. corporations. question from here the The is the Aside arate rule corporation case, underlying principle happily applied in its fact that following sought separate disregarded aptly} quotation to be of which was in the entities stated corporations, public in were service of Justice Graves of this court public policy Corp. therefore was B. v. Insurance and a the tase of & T. Life case, present apply is not in this 1024: the tech which “To involved S. W. Co. 233 opinion distinguish appertaining in the it attributes recited nical ¡rules In the from the instant ease. Peterson Case for the benefit of both the stockholders only public purpose corpora- a con- the outside owned when the of the trolling alleged public in stock interest tion is one in a direct subsidiary corporation. upon interest, but, public The conclusions fact there is no when involved, entity in which the that case is decision terest this artificial created opinion: preserved primarily stated in thus for the benefit of carrying in on the business companies a fact that had com- “It is corporation. of the extent, agents employeesto a mon certain " employees the record shows that hut operation The and activities of proportion paid in the business done purely only private corporation can law company. And that while in for each fully exercised in and for the the interest respectively they companies service -of the benefit of shows record its stockholders. This management and were under the exclusive only creature, natural or arti company in whose service control of the ficial, having a beneficial interest Free- discharge power engaged, with no were or and port Sulphur Company, is the other; company employ for the one Company for stockholders. Then what that, although the service theory sound reason or can it be held that the common, kept sepa- it was distinct and sense rate in ployees done Com payment control the em- pany in this state was not Free- done separate of the service while Company? otherwise, To hold respective companies. manager must assume that directors and company prac- “It is true that the Pacific Company 'were, of violation of tically controlling in the Gulf owns the stock every legal obligation, moral companies company, and that both constitute carrying company not the business system. But the Rock Island elements for stockholders, in the interest of its owners majority holding stock interest only assumption not unsus- offi- mean the control the active does not testimony negatived tained but the case. In agents company doing cers business cific local situation, neces gave Pa- Texas. That fact sary appellants prove company power road to control the Texas the business of the dominated and controlled the election the directors of the Gulf Freepbit Sulphur Com could, turn, company, who elect officers pany ; being such domination in its inherent places already hel'd; them from the remove ownership of all the stock of com power company but does make it the pany. transacting the local business. attempted Appellees’ refutation “This record discloses the officers and prima facie domination and control of the agents agement. company of the Gulf control man- sulphur company, is- business of sue could be the if such fact that the Pacific pleadings under raised controlling owns the the Gulf change management amount of stock undisputed the stock own- evidence power has thus the ership, ad- not raised evidence give pres- does not hearing. duced corporate property ent control Maercky’s testimony, ap- business.” pellees rely support of theii- contention that distinction between the sulphur company two cases was not-dominated us. Gulf obvious There other seems stock- controlled is insuffi- *8 Company the holders besides the veracity of cient to that issue. raise The Company, and from questioned, Pacific the statements in witness not be nor sin- his opinion minority cerity pany held the an these stockholders in the statement that the Texas Com- appreciable doing substantial interest was not in business' Company. circumstances, knowledge Gulf In agent such the had within his no 'lexas. power legal mere unexercised Pacific of control in the This statement was but cuivmsion his Company destroy separate did not upon undisputed which, in our .the entity Company. opinion, the Gulf of not sustain such do conclusion. His testimony further all instructions this, thq In addition to evidence affirma- given by as him Swenson to the conduct -Mr. tively no showed control of the activities sulphur company operations Company and ercised or of the Gulf ex- was sulphur written letterheads of the com- attempted by to be exercised the pany, and that none these letters were Pacific signed by president Mr. Swenson as of the by wholly Ih the case made the record before Texas are immaterial un- us, appellee Freeport undisputed the is der the other facts in this ¡case. sig- sole owner of the stock of the the Neither nor the letterheads the official Sulphur Company. entity corpora by president both; The of a nature the used com- tion, separate panies change by as and distinct from that of can or affect the fact shown stockholders, recognized undisputed is fixed and in law the evidence.
825
possible
Just Low it is
of a
the officers
elusion that
far
so
as
knew the Texas Com-
corparation,
pany
doing
the stock of which
owned
was not
business in this state and
hero,
by
ing-
person,
be,
lawfully
agent
one
not
transact-
had no
corporation,
agent
the
business of
pro
The
of'
failure
defendants
by
of
elected or
and
are
sole stockholder
whom
hearing
testimony
duce on this
es who could
of witness
us,
appointed,
does not occur to
testify
knowledge
positive
situation is the same whether the sole
existed,
whether such
domination
control
stockholder be
individual or another cor-
power
produce
when was in their
such
poration.
testimony,
probative
adds
rea
force
by
The
use
sonable
cky’s
inference
be drawn from Mr. Maer-
corporations,
both
testimony,
of letter sheets with the
domination
sulphur company
by
name of the
inscribed on control was exercised
Texas Com
directing
heads,
signing
pany.
considered,
their
his letters
When all these facts are
pres-
sulphur company
the business of the
we do not think the
Maer-
conclusions of Mr.
change
cky
ident
cannot
that the Texas
was not
undisputed
affect the
fact
that he
business in
did
within
state
not
sulphur
nominal
company
knowledge
any
board
directors of
agent here,
have
raise
agents
all the nominal
issue
to such domination and control.
company
agents
were the
of the Texas Com-
cited,
In addition to the authorities before
pany
transacting
in this
its business
following authorities,
many others,
among
state.
questions
sustain our
conclusions
opinion: Chicago,
discussed in
M. & P.
fully
prop
The authorities
sustain the
Ry.
Minn., etc.,
490,
Co. v.
S. Ct.
247 U. S.
38
disregard
legal
osition that courts should
553,
L.
62
Ed.
Costan
Elec
v. Manila
corporate entity
fiction of
case
(C. A.)
F.(2d) 383; People
tric Co.
C.
24
v.
recognition
entity
which
protect
would
Telephone Co.,
Bell
Mich.
246
224 N.
public
pri
fraud
violation
438; Berkey
Ry.
al.,
v. Third
Ave.
Co. et
obligations,
vate
or when one
N. Y.
155 N. E.
A.
L. R. 599.
organized, exists,
operates
as mere
instrumentality of another.
appellants’
It is
answer
suit in the
say
courts
state to
suit
could be
by
denial
the Texas
conveniently brought
more
where the
pany
in New Xork
right
inspection
the
of its books and
to an
principal
officeof the Texas Com
of its
records is
violation
appellants
is located. The
enjoined
duty
plaintiffs
the com
jurisdiction
to choose the
in which to
mon law
-the
statutes
state. Re
sue when the defendant can
sued on
Statutes,
cannot, up
vised
art. 1328. And it
cause of action
one
asserted
more than
undisputed
on the
evidence disclosed
state.
record, prevent the courts of this state from
Upon
sufficiency
compelling
performance
duty,
of that
sulphur
setting up
agent
legal
service
separate
fiction of the
entity
the'sulphur
company.
not decided
opinion
the trial
we are of the
ownership
If our conclusion that the sole
shown
service
the record
suffi-
the Texas
of the stock of the cient.
sulphur company
sulphur
makes the
com-
required
ques
We
determine the
pany
subsidiary
a mere
.and
the
think the
appellants
tion of whether
mandamus1
were entitled
sound,
Texas
evidence
is not
against
sulphur company
even
Maercky clearly
shows that
holding
if
trial
court was correct
sulphur company
was dominated and con-
that the Texas
ness in this
busi
trolled
the Texas
in ail of its
state,
because
our
fixing
payment
activities.
undisputed evidence shows that
the Texas
officers,
the salaries
the amount of
Company absolutely
owned the
com
declared,
dividends
payment,
and their
pany
using
and was
as its sub
custody
disposition
of all of
*9
sidiary
agent in
the transaction
the
sulphur company,
come of the
was
held
business of the Texas
in this state.
exercised
officers of the Texas
'
require
judg-
company
These conclusions
office of that
the
in New Xork.
sustaining
The
alone had
ment of the court below
tion of the
in abatement
versed,
individually,
officers of the Texas
the mo-
who
knowledge
friends
the court
absolute
and the
of wheth-
presented by
er
the Texas
defendants be dominated and con-
except
Maercky
as to the
trolled
sulphur
the
defendant
business activities of the
judgment
company,
and that
be
question,
made
here
ren-
affidavit on this
accordingly.
upon
dered
and rested their case
the statements of
Maercky,
admittedly
knowledge
who
part ;
had no
Affirmed
reversed and rendered in
only
facts and
give
the
was
part.
able to
his con-
intend,
tp Dismiss,
this statement we did
Withdraw
Motions
On Joint
In
fairly
Opinion.
not think
inter
and we do
can.
go beyond
preted,
to
to
the facts testified
PLEASANTS, O. J.
appellees’
Maercky.
witness
officers of
by-
rehearing
filed
a motion for
While
the author
the Texas
who exercised
ap
court,
pending
ity
appellees
the
in
in
to determine
matters mentioned
the
pellants,
act'upon
election
the
statement did
such matters
the
the
These officersof
officers of the
appellee
York
New
office of
the
placed
affairs of
control of
the
thereby
the Texas
also
pos
sulphur
only
into
came
that
session of
tion which
but the
inspec
books,
ground upon
Maercky
the
Mr.
subject-matter
ques>-
determining
constituted
conclusions that
tions
these
acting
of this suit.
as officers
the sul-
wore
phur company
than the Texas Com
rather
attorneys
appel-
situation,
In this
pany was that
when the result of
deci
appear-
attorneys
appellees,
lants and
sions was
known
him communica
ing
motions to
filed
as friends of the
bearing
tion was written on a letterhead
subject-matter
dismiss
suit because
sulphur company,
name
the dual
controversy
now
ceased to exist and the
had
signed
officer in
who
these com
only
presents
questions.
moot
munications, and who was an officer of both
opinion
parties
further ask that
companies, signed
sulphur
an officialof the
judgment
reversing
judgment
of this court
company.
upon
It seems
us that
facts
judgment
rendering
of the trial court and
original opinion
in this case set out in our
appellants be withdrawn.
capacity in which
dual officersacted in
these
disclosed-
facts
It is obvious that
directing
company
sulphur
the affairs of the
questions' in
in
become
motion
case
company
should not rest
the name of the
moot,
therefore
and the suit should
appearing on the head
the letter communi
Co. v.
Tel.
Tel.
Southwestern
dismissed.
Galveston
cating to their subordinate the decision of
questions determinative of the control and
App.)
County (Tex.
Civ.
Northcut, 94 Tex.
v.
McWhorter
sulphur- company by
domination of the
W. 720.
desig
Texas
nation which the writer saw fit to
his
and
nor
the official
grant
been
The motion
dismiss
append
ed,
we have
after due consideration
signature
but
domination
the letter. The
request to
conclusion
sulphur
reached
withdraw our
control of the business of the
judgment
opinion
should be
was deter
refused.
minative of
of whether the
in this
state
existing
neither the
Under
company.
sulphur
expressed
reasoning nor
conclusions
Maereky’s testimony
any proceedings
opinion
that he did not
original
discloses
can
our
matter,
Supreme
for final
Court
and could not know
suit reach
the truth
in this
determination,
knowledge
conclusions
our
and therefore
but the facts within his
which
regarded
opinion,
of decision
rules
were,
settled
cannot be
in this state.
clusions
hereinafter
testified
in our
suffi
the con-
But
not feel
do
cient to raise the
domination
issue
except
opinion,
expressed
clear
It is
from the record
control.
indicated,
unsound
will
are
non
control
fact vel
of such domination and
jurisprudence
harmfully
affect the
knowledge
of Mr.
was within the
parties
this con-
far as
,to
In so
state.
companies,
who was the
of both
rights
troversy
concerned,
immediate
their
companies;
dual officers of
two
of other
subject-matter.of
which constituted the
they kept
in these
and when
circumstances
just
fortuitously
as the
settled
suit have
facts,
failed
to disclose the true
silent
the courts
In these
them.
judgment
fixed
this court
probative
give
should
force to
circumstances,
feels constrained
court
silence,
this,
added to the other
their
opinion.
withdraw the
motion
refuse
record,
shown
leads this
circumstances
however,
proper,
permissible and
deemWe
conclusion that
to the irresistible
court
business
modifications,
corrections,
ad-
make
wholly/
con-
fact and law
conclusions of
ditions
tained
controlled
the Texas
dominated and
original opinion.
in our
Com-^
pany.
rehearing appellees
motion for
their
In
original
complain
our
vigorously
not unmindful when
We were
of the state-
somewhat
Supreme
fixing
opinion'
was written that the
Court
in our
“the
ment
seemingly entirely repudi-
officers,
state
payment
the of this
of the .salaries
pay-
declared,
the decision
the case Buie v. Rail-
and their
ated
way
of dividends
amount
*10
27,
51,
custody
95 Tex.
65 S.
55
ment,
income of
L.
of all of
thought,
think,
we
and still
But
A. 861.
exercised R.
held
364,
Case,
205 U. S.
27
office
the Peterson
S.
in the
officers
513,
841,
51 L. Ed.
caused
which
Ct.
New York.”
8271
pudiation,
distinguishable
corporation being
holders of a
legal
separate entity
fiction of
instant case.
corporation,
justice
equity
when the
however,
Upon
consideration,
further
particular
require
a
ignored,
case
’that
fiction
holding
feel
to withdraw the
constrained
objection
there can be no
sound
opinion
own
that because
the sole
legal
the substitution therefor of the
fiction
company by
ership
of the stock of the
identity.
unnecessary
ior
it was
It seems to us that
the law should reso-
facts to otherwise show the control
the
domination
lutely
against corporate wrong
set its face
Company of the sul-
the Texas
injustice
through improper manipula-
inflicted
phur company.
by parent corporations
tion
aries,
of their subsidi-
legal
entity
separate
The
fiction of the
accomplish
and to
this end restrictive
as distinct from that of the own
st;and
permitted
technicalities should not be
generally
er or owners of its stock cannot be
way.
disregarded
primary
destroying
without
granted.
Motion to dismiss
object
organization,
purpose
but
of such
disregarded
legal
when
such
necessary
fiction should
Motion to withdraw
refused.
prevention
or to
of fraud
(cid:127)
protect
rights
parties.
legal
The
third
separate entity
is not so sacred
fiction of
looking through
equity,
a court
forms to-
things,
ignore
the substance of
it to
par
wrong
circumvent
or
to innocent
fraud
when
ties. This
seems to be well settled
rule
wrong complained
DR. PEPPER
BOTTLING CO. et al. v. RAIN
of is
violation of
statutory
BOLDT et al.
a clear
or
common-law
Co.,
complainant.
Reading
v.
United States
No. 1036.
26,
425,
760;
253 U. S.
64 L. Ed.
40
Ct.
Appeals
Court of Civil
of Texas. Waco.
R.,R.
United
v. Del. Lack. & Western
States
S73,
1438;
4, 1931.
516,
June
L.
35 S. Ct.
59
Ed.
238 U. S.
Ass’n,
Ry.
Chicago,
v. Minn.
M. & P.
Civic
St.
Rehearing
July 9,
Denied
1931.
Ed. 1229.
62 L.
Ct.
247 U. S.
Reading Case,
arose under
In the
which
Hepburn
(49
Act
Clause of
Commodities
USCA
(8), holding
owned the
§
mining company
capital
a coal
stock of
transported
which
of a carrier
the coal.'
forbade a
Commodities Clause
carrier
commodity “mined,
transport
by
produced
authority,”
it,
or under
which it
which it
part,”
“in whole or in
owned
interest,
“any
direct or indirect.” After
stating
ownership
mere
of stock in
company by
a coal
ported
a carrier
trans
product
the former’s1
violate
did
clause,
Supreme Court
held that
even if
carrier in the instant
ease did not
own
stock
the coal
holding company
controlled
were both
that
company
holding
the evidence showed that
as a
used them both
mere “instru
mentality,”
coal was both
that the
mined
“authority,”
transported
the same
under
clause had therefore been violated.
holding
A
was made
the other cited
similar
cases.
generally
of this kind the courts
In cases
theory
identity
rule or
substitute
separate entity
corporations
controversy.
United States
involved
Valley
Co.,
Lehigh
R. R.
220 U. S.
v.
387, 55 L. Ed.
Luckenbach S. S.
S. Ct.
(C. A.)
R.
W. Grace Co.
C.