Cunningham Hardware Co. v. Gama Transportation Co.

• Decision Date: 04 April 1912
• Citation: 4 Ala.App. 561,58 So. 740
• Parties: CUNNINGHAM HARDWARE CO. v. GAMA TRANSPORTATION CO. ET AL.
• Court: Alabama Court of Appeals

58 So. 740

4 Ala.App. 561

CUNNINGHAM HARDWARE CO. v. GAMA TRANSPORTATION CO. ET AL.

Court of Appeals of Alabama

April 4, 1912

Appeal from Law and Equity Court, Mobile County; Saffold Berney Judge.

Action by Cunningham Hardware Company against the Gama Transportation Company and another. From a judgment upon a nonsuit after the sustaining of demurrers to the complaint plaintiff appeals. Reversed and remanded.

Count 1 is as follows:

"The plaintiff claims of the defendants two hundred and five dollars and forty-seven cents ($205.47), due by promissory note made by the Gama Transportation Company, a corporation, on, to wit, the 12th day of September, 1910 and payable 90 days after date, with interest thereon from said 12th day of September, 1910, which said promissory note was indorsed by the Bay City Lumber Company, a corporation, and, not being paid at maturity, was duly protested, of which both of the defendants had due notice. The said note, with the damages and interest thereon, is still unpaid. Plaintiff avers that the Gama Transportation Company was organized as a transportation corporation by practically the same persons as the stockholders of the Bay City Lumber Company, a corporation, and that said Gama Transportation Company was organized for the purpose of logging the timber lands owned by the Bay City Lumber Company and the Sullivan Timber Company, which said lands were situated in Monroe county, Alabama; that the said Gama Transportation Company was operated and absolutely controlled by stockholders of the Bay City Lumber Company, a corporation, and was in effect merely a subsidiary corporation; that the incorporators and only stockholders of the said Bay City Lumber Company were J. T. McKeon, Helen McKeon, and Henry L. Glover, while the incorporators and only stockholders of the said Gama Transportation Company were J. T. McKeon, Helen McKeon, and George E. Glover, the said George E. Glover being a son of the said Henry L. Glover; that practically the whole of the right of way over which the Gama Transportation Company operated was owned by the said Bay City Lumber Company, and that the steel rails on the said right of way, and the logging cars, locomotives, and other rolling stock used in its business by the Gama Transportation Company, were owned by the said Bay City Lumber Company, or were leased or otherwise obtained by the said Bay City Lumber Company, and furnished by the said Bay City Lumber Company for the use of the said Gama Transportation Company; that the note above described was given by the Gama Transportation Company to the plaintiff, Cunningham Hardware Company, for the purchase price of materials and supplies furnished by plaintiff to the Gama Transportation Company, for use on the logging railroad equipment and logging railroad of the said Bay City Lumber Company, which was being used by the said Gama Transportation Company, which said equipment was used almost exclusively in hauling logs belonging to the Bay City Lumber Company, or logs in which the Bay City Lumber Company had an interest, as above set out; that it was necessary for the said Gama Transportation Company to obtain the said supplies and materials so furnished by the plaintiff in order to be enabled to haul the logs belonging to the Bay City Lumber Company, and that it was this relation between the two corporations which caused the Bay City Lumber Company to indorse the said note; that the said Gama Transportation Company did practically no other business than to haul logs belonging to the Bay City Lumber Company, and logs in which the said Bay City Lumber Company owned a half interest; that, as stated above, the said Gama Transportation Company was in effect a subsidiary corporation to the Bay City Lumber Company, and practically its entire business consisted in conducting the logging department of the Bay City Lumber Company, and that the said Gama Transportation Company was organized in part by stockholders of the Bay City Lumber Company, and operated in furtherance of the business of the said Bay City Lumber Company, and for the purpose of conducting the logging business of the said Bay City Lumber Company, and that the indorsement of said note was made by the said Bay City Lumber Company in furtherance of their own business; that by the terms of the certificate of incorporation filed by the Bay City Lumber Company the general purposes of the corporation were: 'The manufacturing, purchasing, selling, exporting, handling, and dealing in lumber, timber, and all other wood goods and products, * * * and the purchasing of lands for the purpose of cutting timber thereof, and the purchasing and acquiring of timber rights, * * * and the building, constructing, and operating of wharfs, booms, tramways, ditches, and canals, as well as the erection of all necessary buildings, the owning, hiring, or leasing of vessels and water craft required in the operation of the proposed business, the buying, leasing, or otherwise acquiring, holding, and owning of all necessary real estate, mills, factories, and other personal property to effectuate the purposes of the said company, and appropriate to its business or any part thereof.' That by the terms of the certificate of incorporation filed by the Gama Transportation Company among its general purposes were: 'The building and operating of trams, tramways, and railways connected with the waters flowing into Mobile Bay and making all necessary contracts in and about the same,' etc. That although said Bay City Lumber Company was authorized to operate railroads for the purpose of hauling its logs, the said company did not operate a logging railroad, but had this part of their business transacted by the said Gama Transportation Company, which, as above alleged, was in effect merely a subsidiary corporation to the said Bay City Lumber Company."

The second count is the same as the first, except as to the amount due, which is claimed to be $285.18, due the 30th day of September, 1910.

The demurrers are that "the complaint is a mere conclusion; (2) the law recognizes no such situation or entity as an auxiliary corporation, each corporation in law being a separate entity; (3) the alleged connection, one with the other, of the two defendant corporations, fails to reveal anything which would make binding an indorsement by the Bay City Lumber Company on the Gama Transportation Company's obligation, upon the sole consideration that some of the stockholders of the lumber company are stockholders of the transportation company."

Inge & McCorvey, of Mobile, for appellant.

Stevens & Lyons, of Mobile, for appellees.

WALKER, P.J.

The effort in this case is to charge the Bay City Lumber Company a corporation, with liability on its indorsement of two promissory notes made to the plaintiff (the appellant here) by the Gama Transportation Company, another corporation, the notes being for the purchase price of materials and supplies furnished by the plaintiff to the Gama Transportation Company. The complaint avers at some length the relations existing between the maker and the indorser of the notes, and the circumstances under which the indorsements were made. The contention of the appellant is that the indorsements, made under the circumstances stated in the complaint as amended, were so supported by a valuable consideration moving to the indorser as to impose upon it enforceable obligations, and that the complaint as amended was not subject to objection on either of the grounds assigned in the demurrers to it. The main contention of the appellees, on the other hand, is that the averments of the amended complaint fail to show that the Bay City Lumber Company had any connection with the notes sued on other than that of a mere accommodation indorser, and that therefore it cannot be held liable on those indorsements.

If the complaint as amended is subject to this construction, it is plain that it discloses no right of recovery against the indorser, as "although a corporation has implied power to make and indorse negotiable notes and bills in carrying on its lawful business, yet it is well established, as a general rule, by the great weight of authority, that it has no power to make, indorse, or accept, for the mere accommodation of others, notes and bills in which it has no interest, unless such power is expressly conferred, or is incidental to some other power expressly conferred." Steiner & Lobman v. Steiner Land & Lumber Co., 120 Ala. 128, 140, 26 So. 494, 497. The question then is whether the averments of the complaint as amended show that the indorsements were made under such circumstances as to impose liability on the corporation in the name of which they were made.

The complaint as amended discloses the following state of facts the maker and indorser of the notes being hereinafter referred to, respectively, as the Transportation Company and the Lumber Company: The...