Malvern Gravel Co. v. Mitchell

Ed. F. MoFaddin, Associate Justice, (dissenting). The Majority Opinion states the issue in the first paragraph: “If there is substantial evidence that the gravel company is a common carrier, within the meaning of the Federal Employers’ Liability Act, the Trial Court was correct in refusing to direct a verdict for appellant, but if there is no substantial evidence that the gravel company is a common carrier within the meaning of the aforesaid Act, the judgments must be reversed.” Then in a subsequent paragraph the Majority Opinion has this statement: í (There are three things that must combine to constitute a common carrier within the meaning of the Federal Employers ’ Liability Act: (1) a carrier must be engaged in interstate commerce; (2) it must operate a railroad in interstate commerce; and (3) it must operate a railroad as a common carrier.”

I propose to take these three essentials and demonstrate that there is ample and substantial evidence to take the case to the jury on each of these three essentials. It is not for this Court to sit as an appellate jury and render a factual finding on each of these three essentials: it is our duty to determine whether there is substantial evidence to take the fact questions to the jury; and this I now propose to demonstrate as to each of the three essentials listed in the Majority Opinon, as above quoted.

I. The Malvern Gravel Company Was A Carrier Engaged In Interstate Commerce. The proof abundantly shows that the Malvern Gravel Company made carload shipments of gravel over its railroad track from its plant to various states, and transported over its tracks shipments from outside Arkansas. So the Malvern Gravel Company was engaged in interstate commerce. That the Malvern Gravel Company was a carrier so engaged in interstate commerce is clearly demonstrated by the fact that the Malvern Gravel Company was the same as the Malvern & Ouachita River Railroad, even though they existed as separate corporations.

The record shows that the Malvern & Ouachita River Railroad was incorporated and received its charter from the State of Arkansas on April 30, 1929, "... for the purpose of forming a railroad corporation to incorporate, own, construct and operate a short line of railroad necessary to the successful mining quarrying and marketing of stone, rock and other materials ...” The incorporators certified that 391 shares of the 400 shares were owned by Frank McGillicuddy, and that the railroad would be about four and one-half miles long in Hot Spring County, Arkansas. In order to acquire a part of the right of way, the Malvern & Ouachita River Railroad exercised the power of eminent domain in the Hot Spring Circuit Court in May 1929. So we have an Arkansas railroad corporation exercising the power of eminent domain. Article 17, Section 1 of the Arkansas Constitution states: “All railroads, canals and turnpikes shall be public highways, and all railroads and canal companies shall be common carriers.” Notice the language: “. . . all railroads . . . shall be common carriers.”

That the Malvern Gravel Company is the same as the Malvern & Ouachita River Railroad is abundantly established from the evidence. On April 3,1931, the Malvern Gravel Company entered into a signed contract with the Missouri Pacific Railroad Company. Mr. Frank Mc-Gillicuddy — previously stated as owning 391 of the 400 shares of the issued stock of the Malvern & Ouachita River Railroad — signed the agreement as representing both the Malvern Gravel Company and the Malvern & Ouachita River Railroad. The instrument is so enlightening that I copy pertinent excerpts:

“It is understood that the Missouri Pacific, in compliance with recent order of the Arkansas Railroad Commission, desires to perform the service required of it by the Commission’s order in connection with the service mentioned in the caption, in lieu of paying to the Gravel Company the allowance prescribed by the Commission, in the event the work is performed by the Gravel Company rather than by the railroad. In order to carry out this arrangement, the following is agreed upon:

“1. The Malvern Gravel Company (Malvern & Ouachita River Railroad Company) will provide track upon which Missouri Pacific engines and cars may be safely operated between the Missouri Pacific main line connection and the loading facilities of the Malvern Gravel Company; the latter being located approximately one and three quarters (1%) miles from the Missouri Pacific main line. ...

“2. The Malvern Gravel Company (Malvern & Ouachita River Railroad) will provide suitable track facilities convenient to its plant where empties will be set out by the Missouri Pacific engine and crew, also suitable track or tracks from which loads will be moved by the Missouri Pacific crew. Commercial loads for movement via Missouri Pacific will be placed together by the Malvern Gravel Company (Malvern & Ouachita River Railroad) on designated tracks so that switching in the plant by the Missouri Pacific crew for the purpose of getting this business together, will not be necessary. . . .

“4. The hour or hours at which Missouri Pacific will make trip to plant of the Malvern Gravel Company (Malvern & Ouachita River Railroad) will be agreed upon between representatives of the two companies on the ground, and may be changed from day to day as conditions require, by mutual agreement between these representatives. . . .

“/s/W. E. Lamb, Superintendent — Mo. Pac. RR. Co.

“/s/Frank McGillicuddy, Representing Malvern Gravel Co.

(Malvern & Ouachita River RR. Co.)”

It will be observed that the Malvern & Ouachita River Railroad was the name placed in parenthesis after Malvern Gravel Company in each instance, and this certainly indicates that the two were considered as one. On January 21, 1932, Malvern Gravel Company became a Delaware corporation and on January 25, 1932, it qualified to do business in Arkansas, and has so remained. On June 1, 1934, Malvern Gravel Company leased from the Missouri Pacific Railroad Company track materials consisting of 27,114 lineal feet of steel rails, and also angle bars, frogs, guard rails, switch plates, and other such materials for operating a railroad. The charter of the Malvern Gravel Company did not authorize it to construct a railroad track, yet it did so because its alter ego, Malvern & Ouachita River Railroad, needed a railroad track. In the present case Mr. Sam R. Clark testified that he was President of both companies. I copy excerpts from his testimony:

“Q. State your name, please, sir.

“A. Sam R. Clark.

“Q. Mr. Clark, are you connected with the Malvern Ouachita River Railroad in any way?

“A. Yes, sir. I’m president of both companies.

“Q. What do you mean both companies?

“A. Malvern Gravel Company and Malvern Ouachita River Railroad Company.

“Q. All right. Mr. Clark, what operations are carried on by the Malvern and Ouachita River Railroad Company? Do they carry on any operations at all?

“A. No, it’s just a hook corporation is all it is . . .

“Q. For what purpose was that railroad incorporated ?

“A. It is my understanding that the only reason the railroad was incorporated was to condemn the right of way from the plant site to the Missouri Pacific switching yards. . . .

‘ ‘ Q. What is the relationship between the Malvern and Ouachita River Railroad Company and the Malvern Gravel Company?

“A. Malvern Gravel Company owns stock in the company.

“THE COURT: Wliat was your answer?

“A. I said the Malvern Gravel Company owns stock in the company. There’s a hundred shares of stock in the Malvern Ouachita River Railroad Company and the Malvern Gravel Company owns 97 shares of that stock. I own a share and my wife owns a share and Wilburn Cox owns a share. According to Arkansas Law there has got to be three incorporators, so Malvern Gravel Company owns all the stock except the three shares.

“Q. Does Malvern Gravel Company have any lease with the Malvern Ouachita River Railroad Company?

“A. Yes, sir.

“Q. What is the rental on that lease?

“A. Twenty-five hundred per year.

“Q. Do you rent all the facilities of the Malvern and Ouachita River Railroad Company?

“A. Yes, sir.

“ ‘ Q. How long have you been operating under that lease, ever since you have been there?

“A. Ever since I have been there, and I don’t know how long before that. I have been there for 15 years. . . .

“Q. Your Malvern and Ouachita River Railroad Company rents or leases its track and other material to the Malvern Gravel Company, is that correct?

“A. Yes, sir. ..

“Q. And you pay $2,500.00 per year on that lease?

“A. Yes, sir.

“A. Yes, sir.

“Q. What other property does the Malvern and Ouachita River Railroad Company own besides the track down there?

“A. They own about-three different parcels of right of way along that railroad.

“Q. Well, what other personal property to they own?

“A. They own the locomotive.

££Q. They own the locomotive?

“A. Yes, sir.

‘ ‘ Q. Now that’s the locomotive that does the switching down there, is that correct?

“A. Yes, sir.

<£Q. That is in the Malvern Gravel Company plant down there?

££A. Yes, sir. . . .

££Q. 'Who is president of Malvern & Ouachita River Railroad Company?

££A. I am.

££Q. How long have yon been president of it?

££A. Roughly I would say about six or eight years.

£ £ Q. Do you have a board of directors for Malvern and Ouachita River Railroad Company?

££A. Yes, sir.

££Q. Would you name some of the individuals on that board?

££A. I am on the board and Frank Riley and Bill Riley was on the board. We haven’t replaced him. He is deceased.

££Q. Now, is this the same board that operates the Malvern Gravel Company?

“A. Yes, sir.”

The State and Federal income tax returns of Malvern & Ouachita River Railroad were introduced in evideuce. These showed the only income of the Malvern & Ouachita River Railroad to be $2,500.00 per year, which it was testified was the lease money paid to it by the Malvern Gravel Company.

The fact that the Malvern Gravel Company and the Malvern & Ouachita River Railroad are separate corporations affords the Malvern Gravel Company no immunity, because courts disregard the fiction of the corporate entity in order to do justice. This is discussed in detail in 13 Am. Jur. p. 160 et seq.: “A subsidiary or auxiliary corporation which is created by a parent corporation merely as an agency for the latter may sometimes be regarded as identical with the parent corporation, especially if the stockholders or officers of the two corporations are substantially the same or their systems of operation unified.” This principle of disregarding the claim of separate corporations has been applied to railroad companies. In Chicago, Milwaukee RR. Co. v. Minneapolis Civic Assn., 247 U.S. 490 , 62 L.Ed. 1229 , the United States Supreme Court held that a railroad company owning what are obviously merely terminal or spur delivery tracks in a city and which is a mere agency or instrumentality of two other railroad companies entering the city which owned its capital stock and controlled its operations, cannot be regarded as an independent public carrier merely because it is technically a separate legal entity. In Buie v. Chicago R. I. Ry. Co., 95 Tex. 51 , 65 S.W. 27 , 55 L.R.A. 86 , the Supreme Court of Texas held that when one corporation makes use of another as its instrument through which to transact its business, the principal corporation is really represented by the agent of the sub-corporation and its liability is the same as if it had done business in its own name. 1

The Arkansas Supreme Court has pierced the fiction of the corporate entity when justice so demanded. Some of these eases are: Rounds and Porter v. Burns, 216 Ark. 288 , 225 S.W. 2d 1 ; Plant v. Cameron, 228 Ark. 607 , 309 S.W. 2d 312 and Black & White v. Love, 236 Ark. 529 , 367 S.W. 2d 427 . In Bounds and Porter v. Burns, supra, we pierced the fiction of separate corporate entities, and held the parent corporation liable for the debt of its subsidiary because the parent corporation manipulated the subsidiary ‘ ‘ to its own advantage at the expense of the appellee. Under the principles already stated this conduct entitles the appellee to a judgment directly against the parent corporation without regard to the separate entitle of the subsidiary. ’ ’ In Plant v. Cameron, supra, we held the parent corporation (Cameron) liable for the debt of the subsidiary corporation (Nashville), saying: “Though the corporations are separate legal entitles it would constitute a constructive fraud in this case to allow Nashville to now claim an entirely separate existence from Cameron.” In Black S White v. Love, supra, there were two taxicab companies, one being Black & White and the other being Checker Cab Company. Love sued Black & White which defended on the ground that only Checker Cab Company was liable. We affirmed a judgment against Black & White, saying: “Furthermore, the two corporations were owned by the same shareholders, operated by the same officers, and the cabs were interchanged. It would be putting fiction above right and justice to allow Black & White to hide behind the corporate entity of Checker in this case.”

The evidence is clear that Malvern Gravel Company and Malvern & Ouachita River Railroad were one and the same corporation, and that Malvern Gravel Company was a carrier engaged in interstate commerce.

II. The Malvern Gravel Company Operated A Bail-road In Interstate Commerce. As previously stated, the evidence showed beyond peradventure of a doubt that the Malvern Gravel Company’s railroad received and transported over its railroad tracks, with its engine, carload shipments from outside Arkansas, and also shipped its products over its railroad tracks onto the Missouri Pacific track; and these cars moved in interstate commerce. So, clearly, the Malvern Gravel Company was operating a railroad in interstate commerce. There is no necessity to further dwell on this point.

III. The Malvern Gravel Company Operated A Railroad As A Common Carrier. I now point out some of the instances in the record where evidence was introduced that the Malvern Gravel Company acted as a common carrier:

(a) Pursuant to a tariff filed with the Arkansas Commerce Commission, the Rock Island Railroad paid to the Malvern Gravel Company $5.00 a car for the services which Malvern Gravel Company rendered the Rock Island Railroad in picking- up empties at Abco (a switching point) and bringing the loaded cars back to that point. Thus, the Malvern Gravel Company received, and is receiving, $5.00 per car from the Rock Island Railroad for switching cars over the tracks of the Malvern Gravel Company.

(b) The Malvern Brick & Tile Company uses a part of the railroad track of the Malvern Gravel Company under a joint maintenance agreement.

(c) In 1957 two cars of limestone from Neosho, Missouri, consigned to the Arkansas Highway Department, were switched by the Malvern Gravel Company over its railroad tracks and unloaded from a location on the tracks of the Malvern Gravel Company.

(d) In 1962 several cars of steel beams from Tulsa, Oklahoma, consigned to Fairchild Construction Company, were likewise switched by the Malvern Gravel Company over its railroad tracks and unloaded from a location on the tracks of the Malvern Gravel Company.

(e) In 1963 two cars of cinders from Strawn, Arkansas, consigned to the Malvern Public School, were likewise switched by the Malvern Gravel Company over its railroad tracks and unloaded from a location on the tracks of the Malvern Gravel Company.

Altogether it was shown that over a dozen cars moved in interstate shipment over the tracks of the Malvern Gravel Company. There is no instance in the record where the Malvern Gravel Company ever refused to do any hauling offered to it by anyone. The fact that the Malvern Gravel Company did not post tariffs does not prevent it from being a common carrier. One isolated incident of hauling over its tracks as a common carrier might not he, sufficient but repeated incidents over a number of years, as here shown, certainly made a case for the jury; and the Malvern Gravel Company, a comr mon carrier under the laws of Arkansas, is shown to have repeatedly hauled and transported interstate shipments.

The Majority Opinion cites the following cases as instances in which a corporation was held to be outside the Federal Employers’ Liability Act. These cases are: Duffy v. Armco Steel Corp., 225 F. Sup. 737; Tilson v. Ford Motor Co., 130 F. Sup. 676; Kelly v. General Elec. Co., 110 F. Sup. 4; and Jones v. N.Y. Central, 182 F. 2d 326 . In none of these eases 2 was there a factual situation like that in the case at bar; so I forego discussing them. As aforesaid, there is no instance ever shown werein Malvern Gravel Company refused to haul interstate shipments over its tracks; and there are repeated instances, as above mentioned, wherein the Malvern Gravel Company actually did haul interstate shipments over its tracks. I submit that these instances are enough to submit the issue to the jury for decision as to whether the Malvern Gravel Company operated a railroad as a common carrier.

CONCLUSION

Tliis is a long dissent, but the Majority Opinion strikes at the very heart of our jury system. As an appellate Court we are not to decide what we think the evidence shows in a jury case: we are ■ to decide whether there was substantial evidence to take the factual issue to the jury for its decision. Because I believe so thoroughly in the jury system, I cannot in good conscience remain silent when I see a fact question decided by the appellate court instead of by the jury as the Constitution provides.

Therefore, I respectfully dissent.

Johnson, J., joins -in this dissent. In 1 A.L.R. 610 there is an annotation entitled: “Disregarding corporate existence”; and in Section III of that annotation there are given many instances wherein courts have considered the parent company and the subsidiary company to be one and the same. To the same effect see also annotations in 34 A.L.R. 599 and 63 A.L.R. 2d 1055 .

The Majority Opinion states: “Time and again the Federal Courts have defined a common carrier that comes within the meaning of the Act. We are bound by the decisions of the Federal Courts in that respect.” I maintain that the Arkansas Supreme Court is “bound” only by the decisions of the United States Supreme Court. The decisions of other Federal Courts are only persuasive.