Garvin v. Matthews

• Decision Date: 04 January 1938
• Docket Number: 26712.
• Citation: 74 P.2d 990,193 Wash. 152
• Parties: GARVIN v. MATTHEWS et al.
• Court: Washington Supreme Court

74 P.2d 990

193 Wash. 152

GARVIN v. MATTHEWS et al.

No. 26712.

Supreme Court of Washington

January 4, 1938

Department 2.

Appeal from Superior Court, Spokane County; Fred H. Witt, Judge.

Action by the Great American Indemnity Company against the American Construction & Digging Company, W. H. Matthews, and others wherein Wilmot W. Garvin was appointed as receiver for the American Construction & Digging Company and was substituted as party plaintiff. Wilmot W. Garvin, receiver for the American Construction & Digging Company, as plaintiff, filed an amended complaint naming W. H. Matthews and others as defendants. The application of the Great American Indemnity Company for an order substituting it as party plaintiff in the stead of the receiver was denied, and from a judgment of dismissal the receiver appeals. W. H. Matthews having died W. R. Matthews and another, as executors of the estate of W H. Matthews, deceased, are respondents in his stead.

Cause remanded with directions.

H. Earl Davis, Lawrence H. Brown, and John Huneke, all of Spokane for appellant.

Brown & Weller, M. E. Mack, Dan Danielson, and R. Naccarato, all of Spokane, for respondents.

BLAKE Justice.

Prior to 1930, John Mossuto was engaged in the contracting business, specializing in earth excavation. In that year, he and other members of his family organized the American Construction & Digging Company, of Spokane, to which Mossuto transferred all his equipment. One Jepsen became interest, and until 1933, he and Mossuto conducted and managed the business of the corporation. In the latter year, W. R. Matthews acquired an interest in the company, and became its president and active manager. In July of that year, through the activities of Matthews, a contract for certain road work was awarded to the corporation by Whitman county. The contract price was $9,789.60. To secure performance of the contract, the construction company executed and delivered to Whitman county a bond with Great American Indemnity Company as surety. The job did not prove a financial success, and the surety was called upon to pay some $6,000 or $7,000 on account of claims against the bond.

In 1934, the surety, Great American Indemnity Company, filed a complaint in superior court, naming as defendants American Construction & Digging Company, John Mossuto, W. H. Matthews, W. R. Matthews, Chris Jepsen, and Joseph Mosuto. The defendants other than American Construction & Digging Company were brought in under allegations that they had in their possession assets belonging to the construction company. The prayer was for judgment against American Construction & Digging Company for the amount of claims paid and to be paid by the surety; for the appointment of a receiver; and to require the defendants to deliver to the receiver the assets of the company. A receiver was appointed, but nothing further seems to have transpired until December, 1934, when the receiver filed a report and at the same time asked to be discharged. His application was granted, and Wilmot W. Garvin was appointed receiver. Subsequently there was entered an order 'that Wilmot W. Garvin, receiver * * *, is hereby substituted as party plaintiff in the case of Great American Indemnity Company, a corporation, plaintiff, v. American Construction & Digging Company, a corporation, et al., defendants, being cause No. 94488 now pending in this court.' (In passing, it is to be noted that all proceedings with which we are concerned occurred in the cause bearing No. 94488.)

In September, 1935, Wilmot W. Garvin, receiver for American Construction & Digging Company, as plaintiff, filed in the cause an amended complaint, naming as defendants W. H. Matthews, W. R. Matthews, John Mossuto, Chris Jepsen, and Joseph Mossuto. After alleging that Great American Indemnity Company had been compelled to pay $7,205, on account of claims against the bond, the receiver alleged that W. R. Matthews, W. H. Matthews, John Mossuto, and Chris Jepsen had collected from Whitman county all that became due the construction company under its contract with Whitman county, except $1,550, and had appropriated to their own use the sums collected and other property of the construction company.

The defendants joined issue, and the cause was called for trial May 27, 1936. From the statement of facts, it appears that on June 24th, at the conclusion of the reception of evidence, and after the argument of counsel, the court took the case under advisement. In the transcript we find, filed July 3, 1936, a petition of Great American Indemnity Company for an order substituting it as party plaintiff in the stead of the receiver. (The significance of this petition will appear as we proceed with the discussion.) October 17, 1936, the court filed a memorandum opinion announcing that it would deny the application for substitution, and would enter judgment 'dismissing the amended complaint of the receiver.' Thereafter, the court entered an order denying the application for substitution, made findings of fact, and entered judgment of dismissal. From the order and judgment so entered, plaintiff appeals.

The court found that none of the respondents had in his possession money or property belonging to the construction company. While we do not understand appellant to challenge the findings to this effect, we may say that we think the evidence overwhelmingly supports them. But the court found that, although the road contract was taken in the name of American Construction & Digging Company, the operation was the 'personal business venture of * * * W. R. Matthews; that said corporation in said matter was the mere alter ego of the said W. R. Matthews.' The court further found that W. H. Matthews had no part in the management or control of the operations under the contract, 'his connection therewith being limited to advancing moneys for the carrying out of said operation and receiving reimbursement therefor.'

As we see it, the only question for our consideration is the legal consequence attendant upon the finding that the 'corporation * * * was the mere alter ego of the said W. R. Matthews.' Although respondents challenge the sufficiency of the evidence to support the finding, we think it is sustained by a clear preponderance of the evidence. Appellant urges that a similar finding should have been made with respect to W. H. Matthews. But we do not think the evidence warranted any other finding than that made concerning his connection with the construction company.

To sum up the situation at the close of the trial, we must remember that the action on the amended complaint was brought by the receiver of the construction company to recover assets of the corporation alleged to be in the possession of the individual respondents. The cause of action as alleged failed because of the failure of proof that any of the respondents had in their possession money or property belonging to the construction company. But, as found by the court, the proof did establish the fact that W. R. Matthews used the corporation merely as an instrumentality in the conduct of his own personal business. The amended complaint is therefore to be deemed amended to conform to that proof. Hamilton v. Johnson, 137 Wash. 92, 241 P. 672; Preston v. Littlefield, 176 Wash. 496, 29 P.2d 923.

The legal consequence at this point is that we find a cause of action established against W. R. Matthews. For, the...