Smith v. Royal Mfg. Co.

• Decision Date: 17 October 1960
• Citation: 8 Cal.Rptr. 417,185 Cal.App.2d 315
• Court: California Court of Appeals Court of Appeals
• Parties: Flora SMITH, Plaintlff and Respondent, v. ROYAL MANUFACTURING COMPANY, Royal Machine Manufacturing Co., and Louis Wolcher, doing business as 'Royal Manufacturing Company,' Defendants and Appellants. Civ. 18915.

Page 417

8 Cal.Rptr. 417

185 Cal.App.2d 315

Flora SMITH, Plaintlff and Respondent, v. ROYAL MANUFACTURING COMPANY, Royal Machine Manufacturing Co., and Louis Wolcher, doing business as 'Royal Manufacturing Company,' Defendants and Appellants.

Civ. 18915.

District Court of Appeal, First District, Division 2, California.

Oct. 17, 1960.

As Corrected Oct. 18, 1960.

Rehearing Denied Nov. 16, 1960.

Hearing Denied Dec. 14, 1960.

Rhein & Dienstag, Edward Dienstag, Kirk L. Kirk, San Francisco, for appellants.

Knight, Boland & Riordan, Richard J. Kilmartin, San Francisco, for respondent.

McGOLDRICK, Justice pro tem.

This is an appeal by defendants, as garnishees, from a judgment holding that a liquidated damages provision in a contract between Royal Manufacturing Company, defendant and appellant herein, and one A. R. Montgomery, the judgment debtor of plaintiff and respondent herein, was void, and that money retained under said liquidated damages provision was a debt owing to A. R. Montgomery.

On April 23, 1953, A. R. Montgomery entered into a contract with appellants for the purchase of 100 coffee vending machines at a price of $300 per machine. The contract was for a period of one year unless terminated by fulfillment of its terms. It provided that appellants would not sell the coffee machines to anyone but A. R. Montgomery and in no manner distribute said machines in competition to A.R.Montgomery. Under the terms of the contract, A. R. Montgomery deposited $5,100 pursuant to a clause in the contract which provided that in the event Montgomery failed or refused to fulfill the terms of the agreement he was to forfeit to appellants as liquidated damages said sum on deposit. It further provided that if appellants failed or refused to fulfill the terms of the agreement said sum was to be refunded to Montgomery. Thereafter, Montgomery received twenty-four coffee machines and paid for them which gave him a credit balance of $6,350 with appellants made up by the original deposit of $5,100 and an advance payment of deposits of $1,250. In January, 1954, appellants began selling the same type of coffee machine to the Leeder Specialty Company.

In 1953 respondent entered into a contract with one A. R. Montgomery (not a party to the instant action) for the purchase of several ocoffee vending machines, paying him $5,145 on account. No coffee machines were delivered to respondent by Montgomery and on May 6, 1954, respondent recovered a judgment against him for $5,428.08.

In May, 1954, respondent served upon appellants, as garnishees, a writ of execution issued on respondent's judgment against A. R. Montgomery. Appellants, in their answer, denied the indebtedness to Montgomery, claiming the deposit made by him for their own use and benefit. The sole defense relied upon in their answer and amended answer was that the deposit had passed to them under the liquidated damages provision of the contract.

Louis Wolcher gave conflicting statements as to why the sum of $5,100 was settled upon as liquidated damages; i. e., he stated it was difficult to ascertain or estimate damages because the machinery was just being developed. He also stated that this was all he could get out of Montgomery. There was no evidence introduced at the trial to show that Montgomery had breached the contract. It appears that shortly after or about the time of the transaction, Montgomery went to jail. However, there is nothing in the record to indicate that he ceased to fulfill his obligations under the contract or that his incarceration was before appellant commenced to sell the machines to Leeder Specialty Company.

The questions involved on the appeal are as follows: (1) was there substantial evidence to support the finding that defendant Louis Wolcher was an individual doing business under the fictitious name of Royal Manufacturing Company? (2) was there substantial evidence to support the finding that defendant Louis Wolcher entered into the written agreement with A. R. Montgomery? (3) does the fact that appellant proposed these findings bar him from challenging them under the doctrine of invited error? (4) was there substantial evidence to support the finding that appellant and not Montgomery breached the contract? (5) did the trial court abuse its discretion in refusing to reopen the trial to take testimony of Montgomery, one of the parties to the contract? (6) was there an existing right due Montgomery from appellant which could be subjected to garnishment at the time the writ issued? (7) was the provision in the contract for liquidated damages valid or void as a penal forfeiture? (8) was it error for the trial court to exclude evidence of actual damages where appellant had not pleaded them but merely raised the question of his entitlement to keep a deposit as liquidated damages in his answer?

Appellant Wolcher contends that the trial court erred in its finding of fact that he was an individual doing business under the fictitious name of Royal Manufacturing Company. He urges that he could only be held individually under the 'alter ego' theory. In order to invoke the doctrine of 'alter ego,' there must be a unity of interest and ownership of such a nature that separate individual and corporate personalities do not exist and that if the acts are treated as those of the corporation alone, an inequitable result will follow. Automotriz Del Golfo De California S. A. De C. V. v. Resnick, 47 Cal.2d 792, 306 P.2d 1, 63 A.L.R.2d 1042. Moreover, the 'alter ego' argument can only apply if the corporation's existence was established by the evidence.

The only testimony given on this subject was by appellant on his examination under section 2055, Code of Civil Procedure; viz., he refers to the Royal Manufacturing Company as a name he used in business, a company and a corporation. It is axiomatic that where a conflict in the evidence exists the appellate court is bound by the trial court's finding if based upon substantial evidence. Isenberg v. Sherman, 212 Cal. 454, 208 P. 1004, 209 P. 528. There is evidentiary support for the trial court's finding that Louis Wolcher was doing business under the fictitious name of Royal Manufacturing Company or Royal Machine Manufacturing Company.

Appellant proposed this finding of fact and even though it would be without evidentiary support or that the evidence supported appellant's 'alter ego' theory, the doctrine of invited error would apply. The parties must abide by the consequences of their own acts and cannot seek reversal of their own errors which they committed or invited. 4 Cal.Jur.2d § 556, p. 420; Shapiro v. Equitable Life Assur.Soc., 76 Cal.App.2d 75, 172 P.2d 725. This principle applies also to proposed findings as well as instructions. Tucker v. Cave Springs Min. Corp., 139 Cal.App. 213, 33 P.2d 871; Johnson v. Rich, 150 Cal.App.2d 740, 310 P.2d 980. This court is not impressed by appellant's final argument in support of the proposition that the doctrine of invited error will not be strictly applied, where to do so penalizes a party unjustly. It is urged that this proposed finding was prepared in haste by appellant's present attorneys who were substituted following the death of his original attorney. We are unable to conclude that the appellant has established a sufficient showing that he is being unjustly penalized and he, therefore, should be responsible for his own invited errors.

Appellant also contends that there is a lack of evidence to support the court's finding of fact number four cher, entered into the written Royal-Montgomery contract. The contract in question was signed:

'Royal Manufacturing Company

'By /s/ Louis Wolcher

Second Party'

Appellant urges that the form of this instrument shows an intent to bind the principal, and where such intent can be ascertained from the instrument, the agent is not bound. 2 Cal.Jur.2d § 141, p. 830; Haskell v. Cornish, et al., 13 Cal. 45; Hobson v. Hassett, 76 Cal. 203, 18 P. 320; Kerry v. Pacific Marine Co., 121 Cal. 564, 54 P. 89. In cases of contracts signed in the precise manner of this one; viz., where the name of principal and agent are set out, with the preposition 'by' in between, the Restatement of the Law, Agency § 156, states it raises an inference that the principal and not the agent is bound. This contention, however, is unavailing in the instant case since the court found that the appellant was an individual doing business under a fictitious name. Therefore, the manner in which he signed the contract cannot relieve him of personal liability.

The appellant also proposed this finding and for the same reasons herein pointed out is estopped from challenging it under the doctrine of invited error, assuming, of course, that it had no evidentiary support.

One of the main questions on appeal is which party breached the contract. The trial court found that appellant Wolcher did so when he commenced to sell machines which were the subject of the contract to the Leeder Specialty Company during the time the contract was in force and effect. Appellant contends that Montgomery defaulted, which would free it from obligations of the contract. Wilson v. Corrugated Kraft Containers, 117 Cal.App.2d 691, 256 P.2d 1012. Therefore, its subsequent sale to Leeder Specialty Company would not be a breach. However, the appellate court must view the evidence in a light most favorable to the trial court's finding and will indulge all intendments and reasonable inferences which favor sustaining the trier of fact. Berniker v. Berniker, 30 Cal.2d 439, 182 P.2d 557; Estate of Isenberg, 63 Cal.App.2d 214, 146 P.2d 424. There is no evidence to support appellant's contention that A. R. Montgomery breached the contract. The contract provided that appellant would not sell the machines to anyone but Montgomery. Appellant sold the machines to Leeder Specialty Company during the time that the contract was in force and effect and this breached the contract. Montgomery was...