Thomson v. L. C. Roney & Co.

• Decision Date: 25 July 1952
• Citation: 112 Cal.App.2d 420,246 P.2d 1017
• Court: California Court of Appeals Court of Appeals
• Parties: THOMSON et al. v. L. C. RONEY & CO., Inc. et al. Civ. 19014.

Page 1017

246 P.2d 1017

112 Cal.App.2d 420

THOMSON et al. v. L. C. RONEY & CO., Inc. et al.

Civ. 19014.

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

July 25, 1952.

Hearing Denied Sept. 18, 1952.

Franklin W. Peck, Los Angeles, for appellant.

Freda B. Walbrecht and Holbrook & Tarr, Los Angeles, for respondent.

FOX, Justice.

Southwestern Development Company, a corporation, appeals from an order adding its name as a judgment debtor to a final judgment previously rendered against the initial defendant, L. C. Roney, Inc., a corporation.

In July, 1949, plaintiff commenced an action against defendant L. C. Roney, Inc., and others for the recovery of money arising out of certain business transactions dating from July, 1946. Judgment in plaintiff's favor for $6,002.26, plus interest and costs, was entered against L. C. Roney, Inc., on March 23, 1951. No appeal was taken and the judgment became final.

Thereafter plaintiff obtained an order for examination of L. C. Roney, Inc., as a judgment debtor pursuant to which Edward D. Neuhoff, secretary of the judgment debtor corporation, was examined on June 8, 1951. Mr. Neuhoff's examination disclosed the following: all the outstanding shares of defendant L. C. Roney, Inc., had been owned by the Southwestern Development Company since December, 1946; A. B. Ruddock and Edward D. Neuhoff were respectively president and secretary of both corporations; the members of the board of directors of both corporations were substantially identical; on August 31, 1948, L. C. Roney, Inc., had transferred all its assets to the appellant Southwestern Development Company, which, on the following day, filed a certificate that it was conducting business under the fictitious firm name of L. C. Roney, Inc. On the basis of this information, plaintiff filed with the trial court a petition for an order to show cause why the court should not add to the files and records of the action previously tried, and to the judgment therein, the name of appellant as a judgment debtor. Appellant filed petitions for a writ of prohibition in the District Court of Appeal and the Supreme Court upon the ground that the trial court lacked jurisdiction of the subject matter and was without power under the circumstances to modify its final judgment. Both petitions were denied.

Plaintiff's order to show cause was heard on November 19, 1951, at which time plaintiff introduced a transcript of the testimony given by Mr. Neuhoff on June 8, 1951, and additional testimony was received. The evidence showed that on November 20, 1945, appellant Southwestern Development Company purchased 80 percent of the stock (2,000 shares) of L. C. Roney, Inc., and acquired the remaining 20 percent (500 shares) on December 5, 1946, all of which it still retains. Appellant is a family corporation with 9,000 shares of stock outstanding with a par value of $100, of which A. B. Ruddock owned 4,999 shares, Billings Kirk Ruddock and Merritt Kirk Ruddock owned 2,000 shares each, and a single share was owned by Margaret Kirk Ruddock. The 500 shares of stock in L. C. Roney, Inc., acquired in December, 1946, were purchased by A. B. Ruddock and assigned to the Southwestern Development Company, although no authorization for the transaction appears in the minutes of the Southwestern Development Company. At the time of the original trial the directors of the Southwestern Development Company were A. B. Ruddock, Billings K. Ruddock and Edward D. Neuhoff, and its officers consisted of A. B. Ruddock, president, Billings K. Ruddock, vice president, and Edward D. Neuhoff, secretary and treasurer. At the time of the transfer of assets by L. C. Roney, Inc. to the Southwestern Development Company on August 31, 1948, A. B. Ruddock, R. N. Jones and Edward D. Neuhoff served as officers and directors of the Southwestern Development Company and occupied the same positions as officers and directors of L. C. Roney, Inc.

Subsequent to the time that Southwestern Development Company became the majority shareholder in L. C. Roney, Inc., it made loans to L. C. Roney, Inc., of large sums of money to enable the junior corporation to carry on its business operations as manufacturers of liquified petroleum gas equipment. The minute book of L. C. Roney, Inc., disclosed resolutions were passed in 1946 authorizing the borrowing of $348,000 from the Southwestern Development Company. However, the evidence does not disclose the existence of any resolution in the minutes of meetings by the directors of the Southwestern Development Company authorizing the making of loans to L. C. Roney, Inc. On August 9, 1948, an agreement of sale was executed between L. C. Roney, Inc., as seller and the Southwestern Development Company as buyer wherein it is recited that in partial cancellation of an indebtedness to buyer of $577,652.20 (plus interest of $31,275.14), which sums were advanced by buyer to seller for operating expenses and in consideration of buyer's agreement to discharge an indebtedness of $130,000 owed by L. C. Roney, Inc., to the Security-First National Bank of Los Angeles, L. C. Roney, Inc., agreed to sell all of its assets to the Southwestern Development Company as of August 31, 1948. The value of the seller's assets was listed at $705,000. This agreement was signed by A. B. Ruddock in behalf of the Southwestern Development Company and by R. N. Jones and Edward D. Neuhoff for L. C. Roney, Inc. A notice of intended sale in compliance with section 3440 of the Civil Code was published on August 13, 1948, and the transfer of assets was consummated on August 31, 1948. On September 1, 1948, Southwestern Development Company filed a certificate that it was conducting a business under the fictitious name of L. C. Roney, Inc., and it has continued to operate the business so acquired from L. C. Roney, Inc., under that name as a division of its own operations. This phase of the Southwestern Development Company's operations was carried on at the same address as before, using stationery carrying the letterhead of L. C. Roney, Inc., and selling equipment and manufactured parts bearing the stamp 'L. C. Roney, Inc.' Mr. Neuhoff testified that the principal reason for the adoption of the fictitious name L. C. Roney, Inc., was to facilitate the use of the operating supplies and finished parts of the transferred business, which in large part bore the insignia of the predecessor corporation and which would entail substantial expense to change.

Plaintiff, who resided in Texas during the period involved in this action, had no actual notice of the transfer of assets or the filing of a certificate to do business under such fictitious name. Plaintiff had no business relations with L. C. Roney, Inc., after the transfer of the assets, although in all correspondence between the parties, L. C. Roney, Inc., used letterhead stationery identical with that used by Southwestern Development Company doing business as L. C. Roney, Inc., a fictitious firm name. On June 30, 1949, L. C. Roney Inc., through R. N. Jones and Edward D. Neuhoff, filed with the Secretary of State a certificate of election to wind up and dissolve, with the written consent of the holder of all its stock, Southwestern Development Company, given through its officers R. N. Jones and Edward D. Neuhoff. When plaintiff instituted its action on July 27, 1949, against defendant corporation, its answer was filed by Mr. Neuhoff, who was also its attorney in addition to being an officer and director of both defendant and appellant and the answer was verified by A. B. Ruddock, president of both defendant and appellant corporations. Mr. Neuhoff testified that he was under a general retainer as counsel for the Southwestern Development Company, and that he expected the costs of the litigation would be subsidized by Southwestern Development Company. It was on the basis of these facts, none of which were before the court in the original trial, that the order of November 29, 1951 was made adding appellant's name to the judgment previously entered.

In challenging the validity of the trial court's order amending its earlier judgment, appellant urges: (1) the trial court acted in excess of its jurisdiction in adding the name of the Southwestern Development Company to a final judgment, and (2) no showing was made that would warrant a disregard of the separate corporate existence of L. C. Roney, Inc., and support a finding that it was the alter ego of appellant. We are unable to agree with these contentions.

The rule is clearly established that the power of a court to correct clerical errors in a final judgment may not be used as a springboard to rectify its judicial errors. Bowman v. Bowman, 29 Cal.2d 808, 178 P.2d 751, 170 A.L.R. 246; Stevens v. Superior Court, 7 Cal.2d 110, 59 P.2d 988; Barkelew v. Barkelew, 73 Cal.App.2d 76, 166 P.2d 57. But that principle is not here involved. The order here under consideration does not effect an enlargement of the original judgment nor is it a modification thereof to correct a supposed error of law. It is simply an amendment whose purpose is to designate the real name of the judgment debtor. Mirabito v. San Francisco Dairy Co., 8 Cal.App.2d 54, 47 P.2d 530; In Mirabito v. San Francisco Dairy Co., 1 Cal.2d 400, 35 P.2d 513 (decided previous to the case last cited, which is an outgrowth of the same litigation), plaintiff recovered a judgment against a corporation known as the San Francisco Dairy Company for personal injuries sustained as a result of negligence by an employee. During the trial evidence was adduced that all the assets of the San Francisco Dairy Company had been acquired by the Dairy Delivery Company, which acknowledged that the San Francisco Dairy Company was merely a nonoperating subsidiary and constituted in effect merely a business name for the Dairy Delivery Company. The judgment was affirmed on appeal to the Supreme Court, which found also upon a review of the evidence that...