Remme v. Herzog

California Court of Appeal Dec 4, 1963 No. Civ. 10710Published

Before: Van Dyke

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Holding. The court held that an accounting was proper, the trial court's interpretation of 'net profits' regarding tax deductions was supported by evidence, and the corporate veil could be pierced to hold shareholders personally liable due to undercapitalization and disregard of the corporate entity. The judgment was affirmed as modified to correct an arithmetical error in the damages calculation.

Issues

Whether the trial court erred in granting an accounting to the plaintiff.
Whether the trial court correctly interpreted the employment contract regarding the deduction of taxes from net profits.
Whether the trial court erred in holding the individual shareholders personally liable for the corporate debt.
Whether the trial court erred in its calculation of damages.

Disposition. modified and affirmed

Quotations verified verbatim against the opinion

“If plaintiff has a cause of action of which the court has jurisdiction, and it is necessary to have an accounting to determine his rights, it will be done.”

“An appellate court will accept and adhere to the interpretation of a contract adopted by the trier of fact where parol evidence is introduced in aid of interpretation”

“Undercapitalization is a factor to be considered in determining whether the corporate veil should be pierced.”

VAN DYKE, J.

Herzog Builders Supply Company, Inc., a corporation, Harry H. Herzog and Zella B. Herzog appeal from a judgment in favor of Palmer Bemme in the amount of $7,348.73 plus interest from June 1,1959.

The Herzogs operated a builder’s supply business consisting of wholesale and retail lumber supplies. Bemme was em

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ployed by the Herzogs in 1955 as the manager of the business. It was agreed orally that his compensation was to be one-third of the net profits of the business. In 1956 the Herzogs incorporated their business, and in April 1957 the corporation and Eemme entered into a written contract of employment. This contract read, in part, as follows:

“Manager, PAUL REMME, in lieu of fixed remuneration for services shall receive one third of the net profits of Employer’s business, but shall be entitled to the privilege of drawing $600.00 per month, which includes remuneration in the form of either expense or salary during any one year period, which sum so drawn shall be deducted from his share of the net profits of the said business for any one year period after deduction of Employee’s bonus....”

On September 30, 1958, Remme terminated his employment. He then brought this action for an accounting and to recover the percentage of profits due him.

Appellants first contend that it was improper to grant an accounting because Remme did not produce sufficient evidence to show that he was entitled thereto. Neither the pleadings nor the pretrial conference order show that any objection was made to the court’s exercise of its equity jurisdiction. In 19 American Jurisprudence, Equity, section 107, page 114, it is stated that unless an objection to equitable jurisdiction is made at the outset, the objection is deemed waived. However, it appears from the clerk’s transcript, which contains many matters not necessarily included in such a record on appeal, that there had been considerable argument, both oral and by briefs, on the issue of whether or not plaintiff was entitled to an accounting. It might be unfair to hold waiver, but even over objection it would not have been error to grant an accounting in this ease. As stated in

Remme v. Herzog

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VAN DYKE, J.

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