Consolidated Sun Ray, Inc. v. Oppenstein

• Citation: 335 F.2d 801
• Decision Date: 17 August 1964
• Docket Number: No. 17437,17536.,17437
• Parties: CONSOLIDATED SUN RAY, INC., Appellant, v. Michael OPPENSTEIN, Appellee. CONSOLIDATED SUN RAY, INC., and Berkson Brothers, Inc., Appellants, v. Michael OPPENSTEIN, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

335 F.2d 801 (1964)

CONSOLIDATED SUN RAY, INC., Appellant, v. Michael OPPENSTEIN, Appellee.

CONSOLIDATED SUN RAY, INC., and Berkson Brothers, Inc., Appellants, v. Michael OPPENSTEIN, Appellee.

Nos. 17437, 17536.

United States Court of Appeals Eighth Circuit.

August 17, 1964.

Richmond C. Coburn, of Coburn, Croft & Kohn, St. Louis, Mo., made argument for Consolidated Sun Ray, Inc., and filed brief with Alan C. Kohn, of Coburn, Croft & Kohn, St. Louis, Mo., F. Philip Kirwan and Charles W. Medley, of Margolin & Kirwan, Kansas City, Mo., and Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa.

David Skeer, of Sheffrey, Ryder & Skeer, Kansas City, Mo., made argument for appellee and filed brief.

Before VOGEL, MATTHES and BLACKMUN, Circuit Judges.

VOGEL, Circuit Judge.

This suit, originally commenced in the Circuit Court of Jackson County, Missouri, at Kansas City, sought a declaratory judgment by Michael Oppenstein against appellant Consolidated Sun Ray, Inc., (Consolidated) and Berkson Brothers, Inc., (Berkson), with respect to a lease entered into on December 4, 1939, by Oppenstein and his since deceased brothers as Lessors and Berkson as Lessee. Oppenstein asked judgment declaring Consolidated liable under the lease on the theory that Berkson was the wholly owned subsidiary of Consolidated, under its complete domination and control beginning in June 1955 and continuing thereafter, and was accordingly the alter ego of Consolidated and as a result thereof Consolidated was liable on the lease as though it were in fact a named lessee. Diversity of citizenship and the amount involved justified removal to federal court.

Between March 18 and March 21, 1963, the case was tried solely on the issue of liability with a jury empaneled to decide Berkson's liability and to determine Consolidated's liability on an advisory basis only. The jury returned a verdict against Berkson and an advisory verdict against Consolidated. On March 27, 1963, judgment was entered against Berkson on the jury's verdict with the provision that it would become final upon entry of judgment on the claim against Consolidated. On April 5, 1963, the court made its Findings of Fact and Conclusions of Law¹ and, based thereon, entered a declaratory judgment holding Consolidated also liable on the lease. Such judgment was entered on that date against both Berkson and Consolidated.² On July 12, 1963, Oppenstein filed a "Motion for Further Relief Based on a Declaratory Judgment" by which he sought a determination of the amount of damages which had accrued to July 1, 1963. On October 22, 1963, before submitting the case to a jury, the District Court entered an interlocutury order holding, as a matter of law, that Oppenstein was under no duty to mitigate damages. On October 24, 1963, the case again went to trial before a jury and on October 25, 1963, the jury returned a verdict in favor of Oppenstein and against Consolidated and Berkson in the sum of $102,674.73 as appellee's damages to July 1, 1963, plus attorneys' fees in the sum of $10,000. Judgment of $112,674.73 was entered thereon, from which judgment Consolidated and Berkson noticed appeals to this court. On December 23, 1963, this court directed that the appeals be consolidated for briefing and submission.³

At the threshold we are met with Oppenstein's motion, filed by mailing on January 22, 1964, to dismiss the appeals because Consolidated had filed a "fraudulent supersedeas bond" by a company neither qualified nor authorized to write supersedeas bonds by which delay was purposely obtained and that the appellants therefore come into this court of equity with unclean hands. We have reviewed the record with reference thereto, have considered the arguments of the parties as to the merits of the motion to dismiss, and, noting that Consolidated did, after the abortive attempt to file an improper bond, file a proper bond which was duly authorized and approved by the District Court, we hereby direct that the motion to dismiss be denied.

Appellant Consolidated bases this appeal upon the following grounds:

"1. The District Court erred in holding that the separate corporate entity of Berkson should be disregarded and that Berkson was the alter ego of Consolidated.

"2. The court below erred in refusing to admit relevant evidence relating to damages and Oppenstein\'s failure to mitigate."

The lease or contract between Oppenstein and Berkson was executed in the State of Missouri, was to be performed there and pertained to property located therein. Accordingly, the case is to be determined by the substantive law of Missouri.

Preliminarily, it is urged by the appellant that this court has broad discretion in reviewing the "alter ego" issue which was tried to the court with an advisory jury, citing United States v. Mississippi Valley Barge Line Co., 8 Cir., 1960, 285 F.2d 381, 388; Sun Insurance Office Limited of London v. Be-Mac Transport Co., 8 Cir., 1942, 132 F.2d 535; United States v. Mitchell, 8 Cir., 1939, 104 F.2d 343, 346. In the cases relied on by Consolidated, the issues presented were either on fact stipulations, documentary evidence or without conflict thereon. This case was presented to the court and the advisory jury, not only with documentary evidence but a number of witnesses who testified personally. The court on April 5, 1963, filed its Findings of Fact and Conclusions of Law based upon disputed testimony. This court is bound by Rule 52 of the Federal Rules of Civil Procedure, 28 U.S.C.A., and the often-cited remarks of the late Judge John Sanborn in Cleo Syrup Corp. v. Coca-Cola Co., 8 Cir., 1943, 139 F.2d 416, at page 417, 150 A.L.R. 1056, wherein he said:

"* * * This Court, upon review, will not retry issues of fact or substitute its judgment with respect to such issues for that of the trial court. Storley v. Armour & Co., 8 Cir., 107 F.2d 499, 513; Gasifier Mfg. Co. v. General Motors Corporation, 8 Cir., 138 F.2d 197, 199; Travelers Mut. Casualty Co. v. Rector, 8 Cir., 138 F.2d 396, 398. The power of a trial court to decide doubtful issues of fact is not limited to deciding them correctly. Thompson v. Terminal Shares, Inc., 8 Cir., 89 F.2d 652, 655; Pittsburgh Plate Glass Co. v. National Labor Relations Board, 8 Cir., 113 F.2d 698, 701 (affirmed 313 U.S. 146, 61 S.Ct. 908, 85 L.Ed. 1251); Travelers Mutual Casualty Co. v. Rector, supra. In a non-jury case, this Court may not set aside a finding of fact of a trial court unless there is no substantial evidence to sustain it, unless it is against the clear weight of the evidence, or unless it was induced by an erroneous view of the law. Aetna Life Ins. Co. v. Kepler, 8 Cir., 116 F.2d 1, 4, 5; Gasifier Mfg. Co. v. General Motors Corporation, 8 Cir., 138 F.2d 197, 199; Travelers Mutual Casualty Co. v. Rector, supra. The District Court, in making its findings, was under no misapprehension as to the applicable law. See Kann v. Diamond Steel Co., 8 Cir., 89 F. 706, 707; My-T Fine Corporation v. Samuels, 2 Cir., 69 F.2d 76, 77; Armstrong Paint & Varnish Works v. Nu-Enamel Corporation, 305 U.S. 315, 335, 336, 59 S.Ct. 191, 83 L.Ed. 195. In determining whether there is a sufficient evidentiary basis for the court\'s findings of fact, we must take that view of the evidence and the inferences deducible therefrom which is most favorable to the plaintiff."

The District Court, in its Findings of Fact, which, after examination, we conclude were based upon substantial evidence in the record, found that all of the stock of Berkson was owned by Consolidated; that on December 4, 1939, Oppenstein leased certain property to Berkson for a term of 26 years and 11 months ending June 30, 1967; that prior to June or July 1955 Berkson was the sole obligor as lessee under the lease; that after June or July 1955 Consolidated made certain changes in its dealings with its wholly-owned subsidiary Berkson, such as (a) eliminated Berkson's control of money received from its retail store which was operated at the leased premises and reserved to Consolidated alone the right to issue checks on the bank account deposited in the Commerce Trust Company in Kansas City; (b) in 1959 closed the bank account, opening a new one in Consolidated's name so that thereafter Berkson operated without an account in its own name; (c) pledged Berkson's accounts receivable as security for a loan Consolidated negotiated for itself from Walter Heller and Company; (d) took from Berkson its former independent buying discretion and merchandising policies, buying merchandise for Berkson in New York and warehousing it in its own building in New York and directed complete retail price details; (e) changed fire and liability insurance on the leased premises from the name of Berkson to Consolidated; (f) prepared in New York and completely controlled all advertising; (g) arranged so that the directors and officers of Berkson were persons employed by Consolidated and were the same persons who were directors or officers of Consolidated, and no director or officer of Berkson lived in the Kansas City, Missouri trade area, and the local store manager was not a director or officer of Berkson; (h) charged against Berkson a share of the cost of Consolidated's accounting and warehousing operations; (i) in 1956, just after the change-over, Consolidated entered into a Chapter XI Reorganization Plan under the Bankruptcy Laws. At the same time Berkson's operating costs increased despite reductions in personnel; (j) in 1956 Berkson's sales dropped $224,000 and its merchandise cost for inventory was reduced by Consolidated in the amount of $220,000; (k) many of the corporate minutes of Berkson were printed forms apparently used by Consolidated for all of its subsidiaries, with the name "Berkson's" typed in; (l) all correspondence pertaining to the business of the lessee under the lease, whether written to the lessor, to third parties or to agents of Consolidated, was on Consolidated's letterhead and was for the...