Harlan, Etc., Co. v. Eastern Construction Co.

• Decision Date: 01 May 1934
• Citation: 254 Ky. 135
• Parties: Harlan Public Service Company v. Eastern Construction Company.
• Court: United States State Supreme Court — District of Kentucky

Page 135

254 Ky. 135

Harlan Public Service Company v. Eastern Construction Company.

Court of Appeals of Kentucky.

Decided May 1, 1934.

1. Witnesses. — Where witness has given merely negative evidence or has failed to make statements apparently expected of him, party may not contradict own witness by showing his inconsistent statements.

2. Witneses. — Where witness states facts distinctly prejudicial to party introducing him or favorable to adversary, party may contradict his witness by other evidence or by showing that witness had made statements different from his testimony.

3. Witnesses. — Before other evidence can be offered showing that witness had made different statement to that disclosed by his testimony, he must be inquired of concerning statement with circumstances of time, place, and persons present, as correctly as examining party can present them (Civil Code of Practice, sec. 598).

4. Evidence. — Where agent of corporation had nothing to do with making of contract between corporation and another, his declarations as to making of contract, being hearsay, are incompetent to show what contract was.

5. Evidence. — Adverse statement or admission of agent of corporation is competent against corporation only when it pertains to its business and when made by agent in performance of his authorized duty.

6. Corporations. — Mere ownership of majority of shares of capital stock of subsidiary corporation by another corporation does not make stockholding corporation owner of subsidiary's property, or create identity of corporate interest or relation of principal and agent between corporations.

"Subsidiary corporation" is corporation controlled by another by reason of the latter's ownership of at least a majority of the shares of capital stock.

7. Corporations. — Rule that mere ownership by corporation of majority of stock of subsidiary corporation does not render corporation owner of subsidiary's property or create identity in corporate interest or relation of principal and agent is inapplicable where majority of stock of subsidiary was acquired for purpose of controlling subsidiary as mere agency of owning corporation.

8. Corporations. — Where one corporation owns another or another is merged in it so that second corporation is only name for first, judgment against the second may be enforced against the first.

9. Corporations. — Corporation purchasing assets of another corporation

without consideration or in bath faith to deceive creditors of selling corporation is liable for debts of selling corporation.

10. Corporations. — Corporation purchasing assets of another corporation is not liable for latter's debts where transaction is bona fide and where selling corporation receives money or property equal to fair value of property conveyed.

11. Corporations. — Mere purchase by corporation of property of another does not render it liable to selling corporation's creditors for its debts.

12. Bailment. — In suit against water company's subsidiary for damages to rock crusher loaned to water company, plaintiff had burden of proving allegation of petition that subsidiary was party to contract of lending.

13. Contracts. — To constitute binding contract, minds of parties must meet, and one cannot be bound by contract to which he was not party, nor by uncommunicated terms without his consent.

14. Contracts. — Making of contract must be shown by facts or circumstances showing meeting of minds or consent to pay for benefits.

15. Contracts. — Express contract may be proved by circumstantial evidence.

16. Corporations. — Corporation can only enter into contract through its agents and officers.

17. Corporations. — Where board of directors ratifies acts of officer or agent or acquiesces therein by receiving benefits, corporation may be bound by such acts done in regular course of business, though not specifically authorized by board.

18. Corporations. — In action against subsidiary of water company for damages to rock crusher loaned to water company to construct reservoir, that subsidiary acquired reservoir after its completion did not render it liable to plaintiff, where subsidiary was not party to loaning contract and no relation of principal and agent existed between corporations and subsidiary did not ratify loan or receive benefits thereof.

Appeal from Harlan Circuit Court.

S.S. WILLIS for appellant.

J.B. SNYDER for appellee.

OPINION OF THE COURT BY JUDGE RICHARDSON.

Reversing.

The Eastern Construction Company, a corporation, was the owner of a rock crusher. The decisive question in this case is, whether it was loaned to the Harlan Public Service Company, or the Union Water Works Company, or both of them.

In its petition, the Eastern Construction Company alleged it loaned to the Harlan Public Service Company the crusher for the construction of a reservoir, near the city of Harlan, Ky., for reasonable use; its fair market value at the time of the loan was $700 and it was totally destroyed while being used in the construction of the reservoir. The damage by its use during the period of construction was fixed at $700. An amended petition was filed in which its value was fixed at $900 and the damage at the same amount.

The Harlan Public Service Company, by the first paragraph of its answer, traversed the allegations of the petition; in the second, the terms upon which the crusher was loaned are set out, with the further allegation it was represented to be in a reasonably fit condition for the work necessary to construct the reservoir, and at the time it was received, it was out of repair, and it had expended for repair parts and labor to put it in workable condition $100, and thereafter $200 for like purpose. Later, leave was sought and obtained to withdraw the original, and file an amended and substituted answer. In the amended and substituted answer, it denied it borrowed the crusher and alleged by mistake of counsel it admitted in the original answer it had borrowed the crusher, when in fact it was loaned by the Eastern Construction to, and borowed by, the Union Water Works Company, with which to construct the reservoir used in connection with the waterworks system of the Harlan Public Service Company, which it used in supplying water to the town of Harlan; that the Union Water Works Company, under a contract with the Harlan Public Service Company, agreed to, and did, construct the reservoir with its own necessary labor, materials, machinery, and equipment; in the construction of the reservoir, the Union Water Works Company was an independent contractor, employed, controlled, and discharged its own employees, and furnished and had control of the material and equipment used by it, "free from any let or hindrance" of the Harlan Public Service Company.

The Eastern Construction Company filed a reply, traversing the amended and substituted answer. Thereafter, it filed an amended petition, making the Union Water Works Company, a corporation, a defendant, in which it charged it loaned the crusher to the Harlan Public Service Company and the Union Water Works Company. It iterated the allegations of the original petition respecting the loan of the crusher, so as to constitute a cause of action against both the Harlan Public Service Company and the Union Water Works Company. The Harlan Public Service Company entered a motion to require the Eastern Construction Company to elect as to which of the defendants it would prosecute its action. The motion was overruled; a proper exception was saved to the ruling of the court. The Harlan Public Service Company traversed the amended petition. A judgment, without the intervention of a jury, was rendered against the Union Water Works Company. On the issues formed, a trial was had before a jury, a verdict of $500 was returned against the Harlan Public Service Company and a judgment accordingly entered, from which this appeal is prosecuted. A disposition of the issues requires a review and appraisal of the evidence in the light of those principles applicable and controlling in such cases.

For the Eastern Construction Company, Dr. E.M. Howard testified to the substance of the contract made by him with C.H. Martin. He claims in his conversation with Martin, he offered to loan the crusher to Martin, and at the time informed him as far as he was concerned he could have it, but he "rather" Martin would see Mr. Bowling and if it was agreeable with Bowling it was all right with him. The Eastern Construction Company was a corporation and Dr. Howard and Mr. Bowling were respectively the president and the vice president. The corporation employed a superintendent to look after the road construction in which it was concerned. Dr. Howard, in his testimony, did not claim he knew or had information for whom Martin was obtaining the rock crusher, or that Martin was an agent, employee, or an officer of the Harlan Public Service Company. Dr. Howard was a patron of the old Harlan Water Company which sold out to the Harlan Public Service Company, and, thereafter, the latter issued statements and collected bills from its customers for their use of water. It was his information the Harlan Public Service Company operated the water plant that furnished water to the residents of the city until the same was sold to the city. After the reservoir was completed, the Harlan Public Service Company used it as a part of its water system. Dr. Howard testified he had no idea who paid the freight for the transportation of the rock crusher, or shipped it, to the point where it was used to construct the reservoir; he only loaned it to Martin who said he wanted it for the "water company." Mr. Bowling did not testify. J.H. Brown, local manager of the Harlan Public Service Company, who was a witness of the Eastern Construction Company, disclaimed any connection with the Union Water Works Company, and declared he had no knowledge of the connection of the two corporations. Through his testimony,...