Associated Vendors, Inc. v. Oakland Meat Co.

Decision Date17 December 1962
Citation210 Cal.App.2d 825,26 Cal.Rptr. 806
CourtCalifornia Court of Appeals Court of Appeals
PartiesASSOCIATED VENDORS, INC., a California Corporation, Plaintiff and Appellant, v. OAKLAND MEAT CO., Inc., a California Corporation, Oakland Meat & Packing Co., a California Corporation, L. F. Zaharis, James R. White, A. E. Lafayette, Arthur R. Frueh, Defendants and Respondents. Civ. 20302.

Robert C. Burnstein, Sandra J. Shapiro, Oakland, for appellant.

Connella, Sherburn & Myers, San Francisco, for respondents.

MOLINARI, Justice.

Nature of the Case

Appellant, Associated Vendors, Inc., brought this action against respondents Oakland Meat Co., Inc., (hereinafter referred to as Meat Co.), Oakland Meat & Packing Co., (hereinafter referred to as Packing Co.), and several individuals, to collect unpaid rental on property leased by appellant to respondent Packing Co., and to recover the difference between the rental provided in the lease with Packing Co. and the rental now being paid by a new tenant. Appellant alleged that, upon Packing Co.'s default in payment of rent and vacation of the premises, appellant re-let the premises to one Frank H. Black, on Packing Co.'s behalf, at a monthly rental which was less than the rental Packing Co. was obligated to pay under the terms of the lease. Appellant sought to impose liability upon the Meat Co. and the individuals on the theory that Packing Co., the lessee under the lease, was the alter ego of the other respondents. Appellant also sought attorneys' fees and an injunction against respondents restraining them from selling or otherwise transferring certain obligations incurred by Frank H. Black.

Following a trial on the merits, the court found in favor of appellant as against Packing Co., and in favor of the other defendants to the action. Appellant appeals from the judgment.

The sole issue on appeal is whether the trial court erred in holding that Packing Co. was not the alter ego of respondents.

Statement of Facts

The appellant, as lessor, leases market space in the Housewives Market in Oakland. In November 1956, one of the appellant's tenants, Clarence Klieman, went into bankruptcy. The appellant thereupon entered into the negotiations hereinafter set forth for a lease of the premises formerly occupied by Klieman. At the time of said negotiations Meat Co. was an established meat wholesaler. The directors and officers of Meat Co. were Zaharis, Lafayette, White and Frueh. Zaharis was its president and the owner of 26 per cent of its stock. He had been an officer, director and shareholder since it was formed. Lafayette owned 26 per cent of the stock, while White and Frueh owned 24 per cent each. The preliminary negotiations for said lease were held at a meeting in November of 1956.

Allan Schulman, president of the appellant corporation, testified concerning said meeting as follows: that he, in his then capacity as secretary-treasurer of appellant, and Phil Davidson, one of its directors, met with respondents, Zaharis and Lafayette, at the office of Meat Co. to discuss the possible lease to Meat Co. of the meat department premises formerly occupied by Klieman; that Zaharis and Lafayette stated to him that 'they' wanted to lease said department in order to recoup certain losses which they had sustained in sales of meat to Klieman; that he (Schulman) stated the rent would be $3,000 for the first month, and $1,500 every month thereafter, for a term of eight years; that he further stated that $4,500 was to be paid in advance, $1,500 thereof being lease security; and that no mention was made of the name of the person who would appear as lessee on the lease. Davidson's testimony regarding this meeting was substantially the same as Schulman's. He testified that at said meeting there was no mention of a lease to anyone other than Meat Co., and that he was of the opinion, then, that Associated Vendors was dealing with Meat Co.

Zaharis testified as follows with reference to the said meeting: That it was held on November 20, 1956, in Davidson's office, and not at that of the Meat Co.; that present, besides himself, were Davidson, Klieman, and Arthur Weikert. (Weikert was General Manager of the market.) That there never was any meeting between Schulman, Davidson, Lafayette and himself; that at said meeting he (Zaharis) stated that he was interested in purchasing the fixtures which were being foreclosed, running the retail business, and signing a lease, providing the officers of Meat Co., who were meeting the next day, were interested; that he 'was not interested in personal liability' and that he asked Weikert and Davidson if he 'could use the name Housewives Meat Company for the new business as a new corporation'; that they said 'no, it was too similar to the Housewives Market,' and that then he (Zaharis) stated: "If you are interested in me signing a lease it will have to be a separate corporation." Zaharis testified further as to the terms of the proposed lease. (These were the same as those specified above by Schulman.) Lafayette denied being present at any such meeting.

Klieman testified that such a meeting was held, and that present were the same persons mentioned by Zaharis. Klieman testified further that at this meeting Zaharis stated that 'he would have to have a new corporation because he wanted no personal liability on himself' or the Meat Co. Weikert denied being present at the meeting and stated that he did not meet Zaharis until 1959.

The evidence discloses that contemporaneously with these negotiations Zaharis had been in contact with a Mr. Stanley Whitney concerning the acquisition of a corporation known as Town & Country Farms, which was organized for the purpose of developing real estate, had not issued any stock and had never commenced doing any business. Whitney was the attorney for said corporation and pursuant to negotiations with Zaharis undertook to amend the articles and certificate of said corporation by changing its name to Oakland Meat & Packing Company (referred to herein as Packing Co.).

Zaharis testified, further, that the day after the aforesaid meeting, Weikert phoned him for 'his answer'; that he told Weikert he 'personally was interested in it' and that he 'told them that if they wanted me to form a new corporation, sign the lease, that I wanted no personal liability, I would be glad to do it'; that Weikert said he would discuss it with the officials of appellant, and that if they agreed that they would make a lease and bring it to him; that a 'day or two after the market was opened' he received another telephone call from Weikert wherein Weikert stated that 'the officials of the corporation at the Housewives Market was interested in getting the lease signed because we were operating without a lease'; that he replied that he 'couldn't sign the lease until the corporation papers were back from Sacramento'; that a similar conversation was had one or two days later; and that the day following the last conversation the papers were obtained. Zaharis also testified that 'we were operating for two or three days before there was a lease signed.'

Copies of the lease in question had, in the meantime, been prepared by Robert C. Burnstein, attorney for appellant, who forwarded them to Whitney with a letter of transmittal specifically requesting that the lease be signed by an authorized officer of Packing Co. and that the seal of said corporation be impressed upon it. Whitney had continued to act as attorney for Packing Co., and upon the change of name becoming effective, proceeded to make application for a permit to issue stock under the new name. Both copies of the lease were subsequently signed in Whitney's office by Zaharis and White as president and secretary-treasurer, respectively, of Packing Co. and its seal was affixed thereto. Whitney then brought both copies of the lease, together with Packing Co.'s check for $4,500 representing the first month's rent and the security deposit, to the appellant's premises where they were signed by two officers of the appellant. The said lease designates the appellant as lessor and Packing Co. as lessee, and bears an execution date of December 3, 1956.

Whitney testified that he never represented Meat Co. and did not know of its existence until the time he was engaged to effect the said change of name. After the lease was signed, Whitney negotiated on behalf of Packing Co. for the purchase of certain fixtures from a certain Al Weikert (brother of the Weikert hereinbefore referred to). A conditional sales contract was entered into between said Al Weikert, as seller, and Packing Co., as purchaser. This contract was signed by Zaharis and White in their capacities as officers of Packing Co. Whitney testified that when he delivered the contract to Al Weikert it bore these signatures and Packing Co.'s seal. The terms of said contract provided for a down payment of $1,032.89, and a time balance of $14,787.08.

Pursuant to a permit for the issuance of stock, Zaharis became the sole shareholder of Packing Co. by the acquisition of 80 shares of its stock for which he paid $8,000. A certificate for said stock to Zaharis was issued on April 24, 1957. The officers and directors of Packing Co. were Zaharis, White and Frueh. Zaharis was elected its president. According to the testimony of both Zaharis and Lafayette the latter was not in any way affiliated with Packing Co.

Schulman testified, further, that at the time said lease was being negotiated he was familiar with Meat Co.; that it had a good reputation and credit; and that he had not heard that a new company was being organized. He testified that he first heard of Packing Co. in November of 1958, and that prior to that time he did not know that there was a difference between Meat Co. and Packing Co., and that although he knew the lease was in Packing Co.'s name he did not know that this identified an...

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