Opinion ID: 1153554
Heading Depth: 1
Heading Rank: 5

Heading: Funds and services provided by corporation to Advance Hydro Wreckers, Mfg., Inc.

Text: In late 1970, a new corporation was organized named Advance Hydro Wreckers Mfg., Inc. (Hydro). Siler was its president and was issued 30% of its stock, in return for his ability to set the operation in motion. The remaining stock was apparently issued to Ahern, who was to furnish the money, and to a man named Mr. Nowell, who claimed to own patents for certain wrecker equipment. According to Siler, this corporation was organized because Commercial could not otherwise build such equipment in view of these patents. Siler did not consult Baker about the Hydro venture. Hydro leased a portion of Commercial's unused shop space and also used Commercial's office. Prior to December 1, 1970 (when Hydro apparently acquired its own crew), the Commercial crew did work for Hydro. Commercial also furnished bookkeeping services to Hydro. As of May 1971, Hydro owed $10,700 to Commercial. Nevertheless, the Commercial financial statements for the fiscal year ending June 30, 1971, as prepared by a CPA, show a net profit of $15,772.53 and a net worth in the sum of $74,498.11, after including that profit as retained earnings. Hydro apparently ceased active operations after a few months and Commercial advanced $2,510 to pay a debt owed by Hydro for the purchase of a wrecker chassis. Commercial also billed $6,700 to Hydro for labor made available by the Commercial crew to build the wrecker on that chassis, which Commercial then took over in payment for these advances and was holding for sale at the time of trial. Commercial also billed Hydro for $1,500 for bookkeeping and managerial services. Hydro was also delinquent in some rental payments and at the time of trial owed a balance of approximately $5,000 to Commercial. Although the Commercial accounts receivable increased substantially after the advent of Hydro and apparently included substantial amounts owed by Hydro, at least at one time, and although, as a result, Commercial had to borrow $7,000, and was Hydro's largest creditor, there was no direct proof that, as a result, Commercial had suffered any actual loss as of the time of trial in January 1972. As of that date it appears that Hydro had ceased active operations and that Commercial had ceased making any further advances to it. It also appears that Hydro then still owned some completed wreckers, which it had for sale. In addition, Siler was apparently negotiating with Nowell to take over the assets of Hydro, including the alleged patent rights, for enough money to pay the balance owed by Hydro to Commercial. Neither was there evidence whether Commercial made a profit or suffered a loss during the period between the end of the fiscal year on June 30, 1971, and at the time of trial in January 1972. According to Siler, Hydro did not compete with Commercial and the Commercial crew worked for Hydro during slack periods, so as to keep the crew busy, rather than lay off men and risk losing them. Also, Baker testified on trial that he presumed that the last financial statements, which were prepared by a CPA and showed a net worth of $74,498, were accurate and that the corporation was worth more at the time of trial than when he was terminated in June 1970. Indeed, at the conclusion of the trial plaintiffs' attorney stated that his calculation [based upon that same amount] is that at the present time the book value of 49% is worth $36,504.07 and that was the amount for which plaintiffs demanded judgment in the trial court as the value of their stock, and as an alternative to a forced dissolution of the corporation.