Court Opinion

ID: 4494728
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:13:58.689787+00
Date Added: 2024-06-11T15:04:01.978267
License: Public Domain

Steenhagen,
dissenting: The evidence taken in its entirety indicates to my mind an affiliatiop. The Sutherland Co. while separately incorporated is still but an organized branch of the complete enterprise. Sutherland testified that he understood, as a layman would, that the Davidson Co. and its board of directors controlled both the business and the stock of the Sutherland Co.; that he had no control, no more power in dictating the company’s policies than if he had owned only 5 per cent of the stock, and that he was manager in the same sense and exercised the same authority over the incorporated branch as prior to its separate incorporation. It should be remembered that the 55 per cent of the stock which he did not own was *1228not scattered and ineffectual but was owned entirely by tire Davidson Co., so that as a stockholder he was powerless against it.
There was complete unity in the enterprise. The Davidson Co. was not merely the progenitor of the Sutherland Co. but it exercised a parental care and responsibility. As Sutherland expressed it, “ We were working for the mutual good of each other.” The practice of each bidding for the whole job in behalf of both worked for their mutual advantage. Sutherland alone drew salary. In addition to this, if Sutherland at any time was discharged he Avas required to offer his stock to the Davidson Co., and, as he said, he had every reason to believe that the old company would take it over. This seems to me to indicate a control by the Davidson Co. of the Sutherland stock either directly or through closely affiliated interests.
The statute seems to me to make it necessary, as I had understood this Board to hold, to examine the facts of each case with a view to a recognition of actual control of the stock during the particular year in question, and'I had not supposed that by control of the stock was meant only ownership or its approximation. Here it seems to me that the Davidson Co. had all the control of this stock an owner could have except title and the right to dividends. The other rights were so completely dominated by the Davidson Co. as to make Sutherland’s so-called ownership a mere form for increasing his salary. This was what Davidson testified was the purpose of the separate incorporation. While I agree that ownership of a majority of voting stock is not of itself equivalent to the statutory ownership or control of substantially all of the stock, I think that actual conditions may be such as to bring such a situation within the statute. This I think is such a case.
On reference to the Board, Ge a other, James, and Phillips concur in the dissent.