Court Opinion

ID: 4000256
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:57:15.053066+00
Date Added: 2024-06-11T13:41:08.807746
License: Public Domain

From the evidence, the jury was justified in finding that the following facts were proven beyond a reasonable doubt: That, in 1910, there was organized a corporation known as "Gunston-Heath Insurance Company;" that the name of the corporation was changed in 1912 to "Gunston-Mahaffay Company;" that, in 1913, the name was again changed to "R.E. Mahaffay  Company;" that, subsequent to that time, the defendant, R.E. Mahaffay, was the president, manager, and guiding spirit of the corporation. Regardless of how the stock was distributed from time to time, the affairs of the company were under Mahaffay's sole management and control. The secretary of the company (who had been such for fifteen years) testified:
"Q. Was anything done in the R.E. Mahaffay Company without R.E. Mahaffay's knowledge, consent or approval? A. No, sir. Q. He had complete charge? A. Yes, sir. Q. When you kept the books of the R.E. Mahaffay Company and the Universal Investment Company, under whose control and influence were you? A.R.E. Mahaffay."
Subsequent to 1932, the company was insolvent. While it was not dissolved or put into receivership, it thereafter had no active existence. It was a corporation only in name. Of the character of its existence, the secretary testified:
"Q. Is the R.E. Mahaffay Company a going concern at the present time? A. Not at the present time. Q. So determined from the books of the state department? A. I can't say as to that. Q. How long since it has been a going concern? A. Since November, 1932. . . . Q. It went into trusteeship in 1932 and has not been a going concern since, and is not now? A. No, sir."
In 1928, Mahaffay and others organized the Universal Investment Company. The organizers took the *Page 86 
common stock, and sold the preferred stock to the public. The two companies at all times had their offices in the same suite. Very soon, if not at the beginning, Mahaffay became the manager of Universal. He shortly became president, and full control of the company's affairs fell into his hands. From the beginning, the funds of Universal were turned over to R.E. Mahaffay  Company, ostensibly "for investment." An account was set up on the books of each of the companies so as to give the appearance of mutual debits and credits. Sometimes the formality was indulged of depositing money to the bank account of Universal and then transferring it to R.E. Mahaffay  Company. Frequently the formality was dispensed with, and funds belonging to Universal found their way directly into the account of R.E. Mahaffay 
Company. This went on until November 16, 1935, when, according to the book accounts, there was due from R.E. Mahaffay  Company to Universal the sum of $17,308.13. The defendant, as president, executed a note in that amount on behalf of R.E. Mahaffay 
Company to Universal.
At no time was any authority given by Universal for this method of handling its funds. The jury was fully warranted in finding that the book accounts showing mutual debits and credits were simply designed to veil the real character of the transactions; that "R.E. Mahaffay  Company" was, for all real intent and purpose, R.E. Mahaffay; that "R.E. Mahaffay  Company" was a mere conduit through which the funds of Universal Investment Company were sluiced into the pockets of R.E. Mahaffay, the individual.
In State v. Davies, 176 Wash. 100, 28 P.2d 322, this court said: *Page 87 
"One may not, by a corporate form of organization, or by utilizing a corporate entity, succeed in the attempt to evade a legal obligation or escape punishment for breach of a criminal statute."
Believing the evidence brings this case under that rule, I dissent.
BEALS, MAIN, and ROBINSON, JJ., concur with BLAKE, J.