National Hotel Co. v. Motley

• Decision Date: 09 December 1938
• Docket Number: No. 1858.,1858.
• Citation: 123 S.W.2d 461
• Parties: NATIONAL HOTEL CO. et al. v. MOTLEY.
• Court: Texas Court of Appeals

123 S.W.2d 461

NATIONAL HOTEL CO. et al. v. MOTLEY.

No. 1858.

Court of Civil Appeals of Texas. Eastland.

December 9, 1938.

Rehearing Denied January 13, 1939.

Appeal from District Court, Gregg County; D. S. Meredith, Jr., Judge.

Personal injury action by Mecia Motley against the National Hotel Company and others. From judgment for plaintiff for $17,680, defendants appeal.

Judgment reversed and judgment rendered that plaintiff take nothing against the defendant National Hotel Company, and judgment against defendant Texas Hotel Company of Longview reversed and cause remanded.

Wynne & Wynne, of Longview, and Touchstone, Wight, Gormley & Price, of Dallas, for appellants.

Hurst, Leak & Burke, of Longview, for appellee.

FUNDERBURK, Justice.

In the trial court, Mecia Motley was plaintiff, and Texas Hotel Company, of Longview, Texas, and National Hotel Company, both corporations, were defendants. The suit is one to recover damages for injuries sustained by plaintiff by jumping from a third story window on the occasion of the burning of the Hotel Longview, on March 29, 1934. The claim of liability was based upon the tort of negligence.

The verdict of the jury upon special issues submitted, found facts as follows:

That "on or about March 29, 1934, Mecia Motley sustained injury to her body on the occasion of the fire in question." That "Texas Hotel Company of Longview on March 29, 1934, was not in good faith running and operating said Hotel Longview as an independent corporation." That "The Texas Hotel Company of Longview was under the management and control of the National Hotel Company on March 29, 1934." That "The Texas Hotel Company of Longview was the agent of the National Hotel Company in the operation of the Hotel Longview on March 29, 1934." That "the employees of Hotel Longview failed to immediately call the fire department upon discovering that said hotel was afire." That such failure was negligence. That such negligence was a proximate cause of plaintiff's injuries. That "upon discovery of the fire by the employees of Hotel Longview that said employees failed to warn the plaintiff." There was no verdict upon issues submitted calling for findings (1) as to whether such failure to warn was negligence; and (2) whether, if so, such negligence was a proximate cause of plaintiff's injuries.

It was further found that the "fire originated * * * in the porter's closet under the stairway on the east side of the lobby." That "said porter's closet was under the exclusive control of the Hotel Longview, its agents, servants or employees." That "there was negligence on the part of the management of the Hotel Longview in the operation of said porter's closet on March 29, 1934." That such "negligence * * * was a proximate cause of the injuries * * * sustained by Mecia Motley." That "the management of the Hotel Longview permitted the fire in question to start in the hotel." That "permitting of the fire to start, by the management of the Hotel Longview, * * was negligence." That such negligence was a proximate cause of the injury to plaintiff. That "the starting of the fire on the occasion in question was not the result of an unavoidable accident." That "the fire in question was sudden and fierce" but "the suddenness and fierceness * * * of said fire was" not "the sole proximate cause of the injury * * * to plaintiff * * *."

Issues of contributory negligence were found in favor of the plaintiff. Damages were found in the sum of $17,680. The appeal is from the judgment, entered upon said verdict.

The first question we find it convenient to consider is whether or not defendant National Hotel Company was entitled to an instructed verdict in its favor, independently of questions affecting alike both the defendants. It was alleged that the National Hotel Company, chartered about May 15, 1933, was the successor to the Southern National Hotel Corporation, the charter of which latter had been forfeited for failure to pay franchise taxes, and that it owned and controlled a majority of the stock of the Texas Hotel Company of Longview. That the directors and incorporators of the Texas Hotel Company of Longview were officers or directors of the National Hotel Company, or its predecessor, or were employees of the said companies and "the stock of the Texas Hotel Company of Longview is owned and held by the National Hotel Company and that the Texas Hotel Company of Longview was organized and operated as a mere tool or conduit of the Southern National Hotel Corporation originally, and upon its forfeiting its charter rights by its successor The National Hotel Company. That the National Hotel Company and its predecessor, the Southern National Hotel Corporation, received all the revenues derived from the operation of the Hotel Longview, which supposedly was operated by the Texas Hotel Company of Longview, but which in truth and in fact and in reality was operated by the Southern National Hotel Corporation and The National Hotel Company. That the manager, clerks and employees of the Hotel Longview were employed by The National Hotel Company and were assigned to duty at the Hotel Longview. That the Texas Hotel Company of Longview while separately incorporated, was in truth and in fact merely a dummy corporation created and organized by The National Hotel Company and its predecessor for the purpose of holding title to the property known as the Hotel Longview and by the ostensible operation of said hotel, but that in truth and in fact The National Hotel Company and its predecessor actually did control and operate said Hotel Longview through the medium of its dummy corporation Texas Hotel Company," etc.

The question at issue involves the applicability to the facts of one or the other of two legal propositions. One is that stated in Davis v. Alexander, 269 U. S. 114, 46 S.Ct. 34, 70 L.Ed. 186, the particular facts there considered involving railway corporations, as follows: "Where one railroad company actually controls another and operates both as a single system, the dominant company will be liable for injuries due to the negligence of the subsidiary company * * *." A good statement of the other is to be found in the note to Berkey v. Third Avenue Ry. Co N.Y., 50 A.L.R. 599, 611, as follows: "It may be stated as a general rule that the fact that a corporation owns the controlling stock of another does not destroy the identity of the latter as a distinct legal entity, and unless it be shown that such separate corporate existence is a mere sham, or has been used as an instrument for concealing the truth or perpetrating fraud, or where the organization and control of the subsidiary are shown to be such that it is but an instrumentality or adjunct of the dominant corporation, no liability may be imposed upon the latter for the torts of the subsidiary corporation." Without considering the soundness of the first proposition, it is not believed to be applicable here. In order for it to be applicable, it would be necessary for plaintiff to prove that the National Hotel Company in excess of its charter powers was engaged in the business of maintaining or conducting the Hotel Longview. We say, in excess of its charter powers because such powers were "to subscribe for, purchase, invest in, hold, own, assign, pledge and otherwise deal in, and dispose of, shares of capital stock, bonds, mortgages, debentures, notes and other securities, obligations, contracts and evidences of indebtedness of foreign or domestic corporations not competing with each other in the same line of business." In other words, its charter powers were limited to those strictly of a holding company. It had no authority to own or conduct a hotel business. If it had had such authority, then facts and circumstances in evidence might reasonably have been inferred as relating to such ownership or control of the business, which, in the absence thereof, cannot be said to justify any such inference. There was no evidence, we think, to show that National Hotel Company as a corporate entity did own or conduct a hotel business. It may be said as a matter so self-evident as to require no discussion, that there was no evidence to justify any inference to the effect that, within the meaning of the proposition above stated, the Texas Hotel Company of Longview was a "mere sham" or that it was being "used as an instrument for concealing the truth or perpetrating fraud." The theory set forth in plaintiff's pleading to the effect that the National Hotel Company, in order to escape liability likely to result from conducting a fire-trap hotel, organized the Texas Hotel Company of Longview as an insolvent corporation to effect such purpose, when considered in connection with the undoubted legal rights granted by our laws authorizing the incorporation of companies, is entirely without support by any of the evidence.

The only debatable question is: was there any evidence to support an inference that "the organization and control of" the Texas Hotel Company of Longview was such that "the corporation was but an instrumentality or adjunct of" The National Hotel Company, "as the dominant corporation?" We think it may be fairly said that every fact and circumstance in evidence relied upon to support the affirmative of that question was equally consistent, if not more consistent, with the inference that certain individuals and/or corporations, other than the Texas Hotel Company of Longview, or the National Hotel Company, and who were referred to in some of the evidence along with the two last named companies, as the "Moody interests"; procured the incorporation and organization of both said companies, and neither one, through or as the instrumentality or adjunct of, the other. There is a total absence of evidence, we think, to justify an inference that the acts of directors, officers or employees of National Hotel Company with reference to the incorporation, organization or conduct of the business of...