Lindstrom v. Sauer

• Decision Date: 23 March 1936
• Docket Number: 16214
• Citation: 166 So. 636
• Court: Court of Appeal of Louisiana — District of US
• Parties: LINDSTROM v. SAUER

166 So. 636

LINDSTROM v. SAUER

No. 16214

Court of Appeal of Louisiana, Orleans.

March 23, 1936

Rehearing denied April 20, 1936.

Theodore H. McGiehan, of New Orleans, for appellant.

Wm. H Talbot, of New Orleans, for appellee.

OPINION

McCALEB Judge.

During the year 1933, C. F. Sauer & Co., Inc., a Louisiana corporation, was engaged in the motorcycle and bicycle business in the city of New Orleans. Charles F. Sauer was the president of the corporation, and owned practically all of the stock. The only other shareholders were Sauer's wife and one Frigole. The business was really that of Mr. Sauer, and the purpose of its corporation is not disclosed by the record.

This company was the agent for Harley-Davidson motorcycles in New Orleans. Its agency contract with the Harley-Davidson Motorcycle Company expired on July 1, 1933.

During the spring of 1933, Frank T. Egloff, a traveling sales representative of the Harley-Davidson Company, called upon Mr. Sauer. Upon that occasion Mr. Sauer requested Egloff to find a buyer for his (Sauer's) motorcycle business. Thereafter, during the month of June, 1933, Egloff called again to see Sauer, and at that time Sauer was still anxious to sell out the business. Egloff communicated with the head office of the Harley-Davidson Company regarding the matter, and was informed that a man named Harvey Lindstrom, from Milwaukee, Wis., was interested in purchasing Mr. Sauer's business.

On August 18, 1933, Lindstrom arrived in New Orleans and immediately contacted Sauer. The better part of that day was devoted by Lindstrom and Sauer in negotiations regarding the sale and purchase of the business. Sauer wanted $ 3,200 for his tools and equipment, and $ 1,000 for the good will of the company. Lindstrom did not want to pay for the good will, and was of the opinion that the value placed upon the tools was too high. Finally, on the next day, August 19, 1933, it was agreed that the price of the tools would be reduced to $ 100 and that the purchase price would be $ 3,000 for the equipment; $ 100 for the tools, and $ 1,000 for the good will of the business, or a total consideration of $ 4,100. The parties repaired to the office of a notary public, where their agreement was reduced to writing. The bill of sale shows that for the sum of $ 4,100 cash, C. F. Sauer & Co., Inc. conveys to Lindstrom the following:

"1. All (Used) Motor-cycles,

"2. All (New and Used) parts of Motor-cycles, including all accessories and tools, all of which is well known to the parties hereto who herewith dispenses with a detailed list thereof,

"3. Also the good will of said Motor-cycle business, now and formerly conducted by the said C. F. Sauer & Co., Inc., at No. 627 St. Charles Street, New Orleans, La.,

"It being agreed and understood by and between said vendor and purchaser that the said C. F. Sauer & Co., Inc., will not engage in the motor-cycle business as long as the said purchaser shall remain in said business in the City of New Orleans, State of Louisiana."

The contest here arises by virtue of an alleged breach by Sauer of the conveyance of the good will of the motorcycle business of C. F. Sauer & Co., Inc.

Lindstrom, the plaintiff, filed a petition against Sauer individually, alleging that while the act of sale shows a purchase by him of the good will of the business of C. F. Sauer & Co., Inc., that in truth he purchased the good will of the business of Charles F. Sauer, because Sauer was the real owner of the business and was incorporated only for purposes of convenience. He further avers that the good will as purchased was never actually conveyed to him for the reason that Sauer did not go out of business, as he promised to do, but, on the contrary, remained actively engaged in the motorcycle business at the same address at which he had conducted the affairs of C. F. Sauer & Co., Inc.; that he (Sauer) advertised under the name of C. F. Sauer & Co., Inc., and other similar names, informing the public that he, Sauer, was still actively engaged in the motorcycle business, all to the damage and injury of the plaintiff. He prayed for a judgment in the sum of $ 1,267.90, which he alleges was the value of the good will of the business, but the evidence shows that this good will was valued by the parties at $ 1,000.

Plaintiff further prayed, in the alternative, that should it be found that he was without a contractual remedy, then in that event the defendant was responsible to him for damages "Ex Delicto," because the defendant had fraudulently used the name of the corporation, C. F. Sauer & Co., Inc., and other similar names, in such manner as to deprive the plaintiff of business to which he was justly entitled by virtue of his purchase of the good will of Sauer's business. Plaintiff fixes this damage at $ 2,000, and prays for an accounting.

In short, the main cause of action is for damages resulting from breach of contract, and, alternatively, a plea for damages because of injury suffered by him because of the unfair competition and practices of the defendant.

To this petition the defendant, Sauer, filed an exception of no cause of action. The exception is founded upon the theory that the petition on its face shows that plaintiff made a contract with a corporation, which is a separate and distinct entity from the persons who compose it; that while the good will of the corporation was conveyed to the plaintiff, this fact did not give plaintiff the right to use the name of the corporation in his business, and that the defendant was justified in using the name of the corporation and always had the inherent right of going into business in his own name. The exception of no cause of action also brings up for consideration the question of the validity of that part of the sale contract whereby it was agreed by the corporation, C. F. Sauer & Co., Inc., that it would not engage in the motorcycle business in New Orleans as long as the plaintiff remained in said business.

In passing upon the soundness of the exception of no cause of action, we are confronted with the proposition that the plaintiff made a contract with a corporation and is now attempting to hold one of the members, an officer and stockholder of that corporation, liable individually for breach of that contract. We are pressed to hold that a corporation is a legal entity separate and distinct from the persons who compose it, and that no member or shareholder of the corporation is responsible for the liabilities of such corporation over and above the amount of his unpaid subscription to the stock of the same.

This contention is undoubtedly a statement of the general rule, but the petition alleges, in no uncertain terms, that the business owned by C. F. Sauer & Co., Inc., was, in truth and in fact, the business of C. F. Sauer individually; that he, Sauer, was the owner of all of the stock of the corporation, and the obvious purpose of the formation of the corporation was for convenience only.

The courts of Louisiana have had occasion to pass upon this question in a number of cases and the jurisprudence seems to be well settled that, where an individual forms a corporation, of which he is the sole and only stockholder, or owns such control of the stock that, to all intents and purposes, the act of the corporation is his own, then he may not use the screen of corporate entity to absolve him from responsibility. See Wilson v. Lagasse, 12 La.App 704, 127 So. 17; Price v. Florsheim et al., 174 La. 945, 142 So. 135; ...