Court Opinion

ID: 6805754
Source: CourtListenerOpinion
Date Created: 2022-07-23 18:46:47.038327+00
Date Added: 2024-06-11T16:03:26.268722
License: Public Domain

*1231OPINION.
Maequette :
This controversy particularly involves the payments made by the petitioner to its four stockholders in excess of the amount of $2 or $3.50 per ton specifically paid them for ice delivered under the original contract of April 19, 1916, and the contract as modified. The petitioner contends that the payments of $2 or $3.50 per ton were not intended to be in full payment for ice delivered by the stockholders, but were merely advances to assist the stockholders in taking care of their operating expenses, and that the remainder of the proceeds realized from the sale of ice, less selling costs, belonged to the stockholders as additional payments for ice furnished by them. It is the contention of the respondent that the payments of $2 or $3.50 per ton were and were intended to be the purchase price of the ice delivered by the stockholders and that the other payments or distributions represented earnings and income of the petitioner and dividends to the stockholders.
The evidence presented at the hearing is voluminous, and it is not necessary to set it forth in detail here. The material part thereof, briefly summarized, shows that prior to April, 1916, the four companies that constitute the petitioner’s stockholders were competing in the manufacture and sale of ice at Mobile, each maintaining separate sales and delivery equipment. The ice business was at that time in an unprofitable state and at the suggestion of a banker with whom some of the companies dealt, their representatives held a conference to devise means of effecting economies in the business. *1232It was finally agreed that they would form a consolidated sales agency to handle the output of the four companies, thus obviating the duplication of sales and delivery equipment. At first it was not thought that it would be necessary to form a corporation, but some of the persons interested were distrustful of the others, and the question of management and liability for accidents arose, as well as the question of bringing suits to collect accounts, and it was decided that the delivery company should be incorporated, the capital stock thereof to be allotted to the four manufacturing companies in proportion to their producing capacity and to be paid for with delivery equipment equal in value to the par value of the stock. It was also suggested that the manufacturing companies deliver their output to the delivery company without receiving any advance payment, but, as some of the weaker companies needed money to take care of their operating expenses, it was finally agreed that the delivery company would make an advance payment of $2 per ton, subsequently changed to $3.50 per ton, and that the balance of the proceeds from sales after deducting the cost of selling would be distributed among the stockholders in proportion to the stockholdings and deliveries of ice, it being intended that stockholdings and deliveries should be in the same ratio. On April 19, 1916, the written contract set forth in the findings of fact was executed by the four companies for the purpose of carrying the oral understanding or agreement into effect. At or about the same time the petitioner was incorporated with a capital stock of $20,000, which was distributed among the four companies, in exchange for delivery equipment equal in value to the par value of the stock and in proportion to their producing capacity and the amounts of ice they were to deliver to the petitioner under the contract. The petitioner handled from the time it was organized the entire output of the four manufacturing companies, and paid them the specific amount per ton provided by the contract, and also distributed to them at intervals, usually weekly in the summer months and less frequently in the winter, all the proceeds from sales, less selling costs. These distributions were not made in the exact proportions in which the companies were required to deliver ice under the contract, which was also in proportion to their stockholdings in the petitioner, but were made regardless of whether the full quota had been delivered.
The respondent urges that as the distributions were always in proportion to the stockholdings and not in exact proportion to actual deliveries of ice they show that they were dividends and not payments for ice. We do not however think that fact is necessarily controlling, It is true that the distributions were exactly in proportion to the stockholdings, but they in turn were in the same proportions as the *1233amounts of ice the stockholders were to deliver to the petitioner under the contract, and it was, as the evidence shows, the capacity of the several plants and the amounts of ice to be delivered that determined the interests the four companies were allotted in the petitioner. By the contract it was provided that, in order to obviate the operating all of the plants concurrently, each plant should operate part time until they had produced their proportionate amounts. It was therefore obviously impossible that at all times the production of the four plants would be in the proportions contemplated by the contract, but it was intended that it would be equalized over the period of the ice year which began on April 1 of the calendar year. We do not attach any particular importance to the fact that over the years involved herein there was some disproportion in deliveries which was never equalized. It simply results in the fact that over a period of years, despite the intent of the contract, one or more of the companies received, in the practical carrying out of the contract, a little more and the others a little less for their ice than was contemplated.
The respondent also urges that the petitioner treated the distributions in question as “ dividend ” on the minutes of the meetings of the board of directors, and in its income-tax return for 1916, and that they were in fact dividends. The evidence however shows that they were so treated by the petitioner’s bookkeeper and treasurer, and that shortly after the close of the year 1916 he was informed by the stockholders that such treatment was erroneous; that the petitioner had not made any dividend; that the intention and purpose of the agreement was that any money over and above expenses of delivery and the initial payment of $2 per ton was an additional payment for ice, and entered into the ice purchase accounts on the petitioner’s books.
It is also contended by the respondent that if we give to the contract of April 19, 1916, the construction contended for by the petitioner it would be in violation of the anti-trust laws of Alabama. In our opinion that question has no bearing on this case. Conceding, for the purpose of this opinion only, that in making the contract of April 19, 1916, and in forming the petitioner corporation the four manufacturing companies did so in contravention of law, it can not change the fact that the petitioner engaged in business for a number of years, or transform into dividends payments actually intended and made for ice furnished it. Furthermore we are unable to perceive how it would be any the less a violation of law for the several companies to control the petitioner and receive its profit as dividends than for them to sell it their product in the manner in which they did.
The respondent also points out that the petitioner was not a party to the contract of April 19, 1916, and that we should attach no importance to it. That argument presents no difficulties. It is suffi*1234cient to say that the petitioner was a creature of the four companies that organized it pursuant to the contract, and that it was in fact, if not in law, as firmly bound and controlled by the contract as if it had been a party thereto.
In the light of the evidence in this proceeding we are impelled to the conclusion that the petitioner was organized, not as a corporation to engage in business independently for the purpose of profit, but that it was and was intended to be a selling agency for the four companies which owned its capital stock, and that all proceeds from sales in excess of the initial payments for ice and the cost of selling were additional payments for ice, as contended by the petitioner. The contract is'clearly susceptible of that construction and has at all times been so construed by the parties thereto.
Eeviewed by the Board.
Judgment will he entered on 15 days' notice, u/nder Rule SO.