Case Name: JACK GORDON, Respondent, v. AZTEC BREWING COMPANY (a Corporation), Appellant
Court: Supreme Court of California
Jurisdiction: California
Decision Date: 1949-02-28
Citations: 33 Cal. 2d 514
Docket Number: L. A. No. 20783
Parties: JACK GORDON, Respondent, v. AZTEC BREWING COMPANY (a Corporation), Appellant.
Judges: 
Reporter: California Reports
Volume: 33
Pages: 514–533

Head Matter:
[L. A. No. 20783.
In Bank.
Feb. 28, 1949.]
JACK GORDON, Respondent, v. AZTEC BREWING COMPANY (a Corporation), Appellant.
Eugene S. Ives and Schell & Delamer for Appellant.
Mitchell & Gold, Samuel A. Rosenthal and Leonard G. Ratner for Respondent.

Opinion:
SHENK, J.
This is an action arising out of injuries suffered when a bottle of beer exploded.
The plaintiff operated a café in the city of Los Angeles. He was transferring a bottle of ABC beer, a product of the defendant, from its case to an icebox in his café when the bottle exploded in his hand, resulting in blindness in his right eye. The defendant was the bottler. From a judgment on a verdict in favor of the plaintiff the defendant appeals.
The first question to be determined is whether on the facts presented the plaintiff was entitled to an instruction on the doctrine of res ipsa loquitur; and if so whether the particular instruction given by the trial court was prejudicially erroneous.
In Escola v. Coca Cola Bottling Co., 24 Cal.2d 453 [150 P.2d 436], it was pointed out that a sound bottle of carbonated liquid does not ordinarily explode if it is carefully handled. Where a bottle containing liquid under pressure does explode causing injury the plaintiff is entitled to the benefit of the doctrine of res ipsa loquitur to supply an inference that the bottler was negligent, either in excessively charging the liquid or in failing to discover a flaw in the bottle, if it is probable under the evidence that the defendant was negligent in either respect.
Here there was evidence tending to show the defendant negligent in failing to make any of the standard tests for the detection of flaws in the bottles it distributed. New and used bottles were subjected only to a pasteurization process designed primarily to arrest fermentation, not to reveal weaknesses. An expert having long experience in the manufacture of glass and glass bottles testified that the pasteurization process was not a satisfactory test for strains, thin walls or small stones in the glass. He stated that manufacturers ordinarily subject bottles to three tests, the polariseope test, the hammer test, and the hot and cold plunge test. These tests if properly made were said to disclose all defects. None was utilized by the defendant. There was no showing that their use would have been impracticable or the cost prohibitive. The defendant's duty to make such tests is emphasized by the fact that bottles of its beer were known to explode during pasteurization and afterward during transportation. A sufficiently satisfactory showing of probable negligence on the part of the defendant was therefore made to warrant an instruction on res ipsa loquitur.
The doctrine may be applied, however, only where the instrumentality causing the injury was subject to the control of the defendant. In the Escola case this court rejected the contention that the instrumentality must have been in the possession of the defendant at the time of the accident. It was there stated: "Many authorities state that the happening of the accident does not speak for itself where it took place some time after defendant had relinquished control of the instrumentality causing the injury. Under the more logical view, however, the doctrine may be applied upon the theory that defendant had control at the time of the alleged negligent act, although not at the time of the accident, provided plaintiff first prove that the condition of the instrumentality had not been changed after it left the defendant's possession." While the Escola case differs from the present case in that there the defendant bottler had itself delivered the faulty bottle to the plaintiff's employer the principles laid down govern the ease here. It was then declared that a plaintiff may rely on the doctrine of res ipsa loquitur "if there is evidence permitting a reasonable inference that it [the exploded bottle] was not accessible to extraneous harmful forces and that it was carefully handled by plaintiff or any third person who may have moved or touched it." (Escola v. Coca Cola Bottling Co., supra, 24 Cal.2d 453, 458.)
Tracing the case containing the bottle which exploded from the defendant's plant to his hand the plaintiff introduced evidence to the effect that it suffered no damage at any stage of its transportation. The course of cases of ABC beer in August of 1944 when the accident occurred was as follows: The cases were loaded on trucks of the La Salle Trucking Company at the defendant's San Diego plant; La Salle drivers delivered them to a warehouse of the Associated Brewers Distributing Company in Los Angeles where they remained about three days; on August 22 the ease which contained the bottle that exploded was delivered by an Associated driver to the plaintiff. Evidence was presented which showed that La Salle trucks were not involved in accidents during August, 1944; that no accidents occurred in the Associated warehouse that month which might have affected the beer; that the driver who delivered the case to the plaintiff was not involved in an accident en route and did not bump the case; that it was in excellent condition on delivery, and that the plaintiff handled the case and bottle carefully. While this evidence was not conclusive it was the jury's province to determine, after being properly instructed, whether the plaintiff had sufficiently proved the absence of intervening harmful forces after the defendant shipped the bottle to entitle the plaintiff to rely on an inference inherent in the doctrine that the defendant's lack of care was the proximate cause of his injury.
But it is contended by the defendant that even if it be assumed that the doctrine of res ipsa loquitur was correctly invoked the court committed prejudical error in an instruction on the subject. The following instruction is claimed to be erroneous and to require a reversal: "From the happening of the accident involved in this case, as established by the evidence, there arises an inference that the proximate cause of the occurrence was some negligent conduct on the part of the defendant. That inference is a form of evidence, and if there is none other tending to overthrow it, or if the inference preponderates over contrary evidence, it warrants a verdict for the plaintiff. Therefore you should weigh any evidence tending to overcome that inference, bearing in mind that it is incumbent upon the defendant to rebut the inference by showing that it did, in fact, exercise ordinary care and diligence or that the accident occurred without being proximately caused by any failure of duty on its part." Standing alone this instruction was erroneous for it omitted reference to the fact that before the jury may accord the plaintiff the benefit of the res ipsa loquitur inference it must believe that the bottle did not suffer damage at the hands of persons other than the defendant.
In determining the propriety of an instruction the reviewing court should examine the charge as a whole. (Wells v. Lloyd, 21 Cal.2d 452, 458 [132 P.2d 471]; Douglas v. Southern Pacific Ry. Co., 203 Cal. 390, 396 [264 P. 237].) If when considered together the instructions are found generally to state the applicable law, reversible error is not necessarily present even though an isolated instruction is defective in not containing all of the essential elements. (Westover v. City of Los Angeles, 20 Cal.2d 635, 637 [128 P.2d 350]; Collet v. Alioto, 210 Cal. 65, 70 [290 P. 438].)
After the above instruction was given, the court went on to charge: "The instruction just given may appear to constitute an exception to the general rule that the mere happening of an accident does not support an inference of negligence. The instruction, however, is based on a special doctrine of the law which may be applied only under special circumstances, they being as follows: First: the fact that some instrumentality, by which the injury to the plaintiff was proximately caused, was in the possession and under the exclusive control of the defendant at the time the cause of the injury was set in motion. . A defendant is deemed to have control at the time of the alleged negligent act although not at the time of the accident, provided plaintiff first proves that the condition of the instrumentality had not been changed after it left the defendant's possession. The defendant is not charged with the duty of showing that something happened to the bottle after it left its control and management. In order to be entitled to the benefit of the doctrine of res ipsa loquitur, the plaintiff must show that every person who moved or touched the bottle after it left the control of the defendant, did so with due care, and that during said time the bottle was not accessible to extraneous harmful forces."
Thus the broad instruction on res ipsa loquitur was followed by qualifying instructions explaining the circumstances which must be present before the inference of negligence can arise, including a charge that the plaintiff must prove that all who dealt with the bottle beside the defendant did so with due care. It is therefore apparent that taken together the entire charge on the subject fairly presented to the jury the element of careful handling and that the erroneous omission of that element from the general instruction was not prejudicial. (See Westover v. City of Los Angeles, supra, 20 Cal.2d 635, 637-39; Juchert v. California Water Service Co., 16 Cal.2d 500, 513-15 [106 P.2d 886]; Barham v. Widing, 210 Cal. 206, 216-18 [291 P. 173]; McChristian v. Popkin, 75 Cal.App.2d 249, 257-58 [171 P.2d 85]; Barsha v. Metro-Goldwyn-Mayer, 32 Cal.App.2d 556, 565 [90 P.2d 371].)
For still another reason the defendant's attempt to show reversible error must fail. Apart from instructions on res ipsa loquitur, instructions on general rules governing liability for negligence were given. The jury was instructed that the burden was upon the plaintiff to prove by a preponderance of evidence that the defendant was negligent and that his negligence was a proximate cause of the injury. There was present in this case a strong showing of negligence in the defendant's failure to test the bottles before distributing them to the public where they might cause harm if defective. There was also evidence to refute the possibility of intervening damage to the bottle. Under these circumstances the instruction on res ipsa loquitur, even if erroneous, did not result in a miscarriage of justice, for it is highly improbable that the jury found in the plaintiff's favor without concluding that the defendant was negligent and that the bottle was carefully handled after the defendant parted with it. (Gerdes v. Pacific Gas & Electric Co., 219 Cal. 459, 471 [27 P.2d 365, 90 A.L.R. 1071]; Junge v. Midland Counties etc. Corp., 38 Cal. App.2d 154, 160 [100 P.2d 1073]; Gonzalez v. Nichols, 110 Cal.App. 738, 741-42 [294 P. 758].)
This action was prosecuted against the defendant corporation only and it is contended that any cause of action for injuries resulting from defects in ABC beer bottles, which arose on the date of plaintiff's injury should lme been brought against the Aztec Brewing Company, a partnership, and not the Aztec Brewing Company, a corporation. It appears that the plaintiff did not learn the details of the defendant's structure and its relationship to the partnership until the action against the defendant corporation had proceeded to trial. When these facts were disclosed the plaintiff decided to proceed against the defendant corporation instead of the partnership on the theory that one was the alter ego of the other.
There is no conflict in the evidence on this question. The Aztec Brewing Company, a corporation, was organized in 1932 and thereafter engaged in the manufacture and sale of ABC beer. In March, 1944, the company's structure was changed to a partnership for tax reasons. All of the corporation's property was transferred to the partnership and the business continued as before, the partnership assuming without interruption the manufacturing, bottling and selling of ABC beer. The partners were the same persons as the stockholders in the corporation. They acquired and retained the same proportional interest in the partnership as they had had in the corporate stock. The president and vice-president of the corporation became general partners in the new partnership while the other former stockholders became limited partners. The name, Aztec Brewing Company, was retained and a license procured to sell beer under that name. The partnership continued to employ the same personnel and use the same manufacturing plant and offices. No changes were made in labels, packing cases, letterheads or invoices. The corporation was not dissolved, however, but remained in existence to collect debts owed it, continning for a short time to use the offices of its successor. Checks of the corporation and partnership were differentiated by the addition of the words "corporation" or "a partnership" after the name, Aztec Brewing Company.
On the basis of these facts the trial court, instructed the jury, "It has been established in this case that Aztec Brewing Company, a corporation, is the ' alter ego or other self' of the Aztec Brewing Company, a copartnership. Therefore, if one is liable, both are liable." A verdict in the plaintiff's favor was returned against the corporation and partnership and a judgment entered against both.
The defendant contends that the relationship of alter ego was not established as a matter of law and that the instruction to that effect was improper. A similar case was decided by the Supreme Court of the State of Washington in Associated Oil Co. v. Seiberling Rubber Co., 172 Wash. 204 [19 P.2d 940]. Suit was brought' against the Seiberling Rubber Company, an Ohio corporation, to recover on a guaranty alleged to have been executed by the defendant. In the written guaranty, the guarantor was described as Seiberling Rubber Company, a Delaware corporation, and the guaranty was signed "Seiberling Rubber Company." After the answer was filed' the plaintiff discovered for the first time that there were two corporations closely allied, the defendant Ohio corporation, and a Delaware corporation having the same name. It was found that the Delaware corporation owned all the stock of the Ohio corporation, that their officers were identical, and that the business affairs of the two corporations were conducted from the same offices. Because of the similarity in names' and commingling of business the Washington Supreme Court held that the plaintiff was entitled to treat the two corporations as a single entity, and thus recover from the defendant, although it had not signed the note, since the confusion of the two identities resulted in probable fraud upon third persons dealing with the corporations, whether or not actual fraud was intended. Related also to this case is our decision in Marabito V. San Francisco Dairy Co., 1 Cal.2d 400 [35 P.2d 513], in which a truck bearing the name of the defendant San Francisco Dairy Company struck the plaintiff. It was urged that the evidence was insufficient to sustain a verdict against the defendant since it was merely a nonoperating subsidiary of the Dairy Delivery Company which carried on the business. The officers of both companies were the same. This court held that the only logical conclusion was that the San Francisco Dairy Company was the alter ego of the Dairy' Delivery Company and that the evidence was sufficient to sustain the verdict against the San Francisco Dairy Company. Subsequently an order adding to the'judgment the name of the Dairy Delivery Company as the real defendant was sustained. (Marabito v. San Francisco Dairy Co., 8 Cal.App.2d 54 [47 P.2d 530].) That- these decisions involve two corporations and not a corporation and partnership as in the case before us does not lessen their significance for the same principles apply.
The cases mentioned illustrate in a factual context similar to that before us the rule that where the recognition of the fiction of separate corporate existence would foster" an injustice' or further a fraud the courts will refuse to recognize it. (Stark v. Coker, 20 Cal.2d 839, 846 [129 P.2d 390]; Puccetti v. Girola, 20 Cal.2d 574, 578 [128 P.2d 13]; Shea v. Leonis, 14 Cal.2d 666, 669 [96 P.2d 332].) It is not necessary that, the plaintiff prove actual fraud. It is enough if the recognition of .the two entities as separate would result in an injustice. (Wenban Estate, Inc. v. Hewlett, 193 Cal. 675, 698 [227 P. 723]; Minifie v. Rowley, 187 Cal. 481, 488 [202 P. 673].). Hera.confusion would be promoted and an unjust result be accomplished if the maintenance of the two entities controlled by the same persons and having an identical name were, permitted to frustrate a meritorious claim. Since the evidence-on this question was not contradicted there was no issue of' fact requiring submission to the jury and the trial court's determination that as a matter of law the corporate defendant was the alter ego of the partnership must be sustained.
It is contended by the defendant that the issue. of whether there existed an alter ego relationship was not pleaded and was therefore not before the trial court. Defects in the complaint may be cured by allegations of the answer. (Vaughn v. Jonas, 31 Cal.2d 586, 603-04 [191 P.2d 432]; Hartman Ranch Co. v. Associated Oil Co., 10 Cal.2d 232, 248-49 [73 P.2d 1163]; Marr v. Postal Union Life Ins, Co., 40 Cal.App.2d 673, 680-81 [105 P.2d 649].)- In its answer the defendant denied that it was engaged in the business of bottling, selling and distributing ABC-beer at any time mentioned in the complaint. The question of which entity manufactured the beer and was responsible for the safety of its containers, was thereby.-sufficiently raised. Furthermore, even if the pleadings were to be considered deficient in this respect, it is clear that the defendant has not been misled to its prejudice by any variance between pleadings and proof. (Code Civ. Prod., §'469.)- From the beginning of the proceedings it was prepared to maintain, and did maintain throughout the trial, that the liabilities of the partnership could not be fastened upon the corporation.
The judgment is affirmed.
Gibson, C.. J., Carter, J., Schauer, J., and Spence, J,,.. concurred.- •