The opinion of the court was delivered by: SHERIDAN
This matter comes before the court on the objections of Tri-F's Associates, Inc. (Tri-F's), intervening defendant, to the attachment of funds in the hands of Craft Associates, Inc. (Craft), garnishee.
On October 7, 1964, a judgment of $20,955.60, together with interest, was entered in the United States District Court for the District of Kansas in favor of Ana H. Pasos, plaintiff, and against Herman S. Ferber and Marion Juanita Ferber, defendants. The judgment was based on findings that in 1959 and 1960 defendants wilfully and maliciously converted plaintiff's funds to their own use. On July 3, 1965, defendants' post trial motions were denied. On July 20, 1965, a certified copy of the judgment was registered in this district and an execution writ issued against defendants.
The writ directed the Marshal to attach the property of defendants in the possession of Craft. Craft, a designer and manufacturer of furniture, with its principal place of business in Wilkes-Barre, Pennsylvania, in this district, had engaged defendant, Herman S. Ferber, as its sale representative in a multi-state area in the Midwest and allegedly owed him commissions. On August 2, 1965, Craft filed an affidavit that it did not employ defendants, had none of their property in its possession, and was not and would not become indebted to them.
On June 7, 1966, plaintiff amended her writ to add Tri-F's as a party. The amended writ alleged that Tri-F's was a sham corporation, which defendant caused to be incorporated and that he had transferred the Craft franchise and certain assets to it to defraud plaintiff, that Tri-F's was the alter ego of defendant and that any monies due it from Craft were in reality due defendant.
Both plaintiff and Tri-F's agree that the primary issue is whether Tri-F's is the alter ego of defendant. Plaintiff asserts that another issue is whether defendant fraudulently transferred the franchise and certain assets to Tri-F's. Tri-F's contends that this issue is relevant only insofar as it bears on whether Tri-F's is the alter ego of defendant. A hearing was held and evidence received on both issues.
In 1954, defendant started to represent Craft in the sale of furniture in an area which included all or parts of the States of Kansas, Iowa, Nebraska and Missouri. To cover this territory it was necessary to drive about 35,000 miles per year. There was no written contract of employment but merely an oral arrangement under which defendant received an eight percent commission on sales. The commission was payable on all Craft sales in the territory, although defendant was free to make boundary and commission adjustments with Craft representatives in adjoining territories. Sales were made in the name of Craft only, and Craft was apprised of all customers to whom sales were made. This arrangement was similar to that with other Craft representatives, all of whom were on commission. So far as Craft is concerned the arrangement was terminable at will and without notice. As a matter of practice, Craft gives thirty days' notice of intention to terminate. Termination pay is neither contemplated nor given.
As a part of his duties with Craft, defendant was required to attend annual or semi-annual regional furniture shows in Dallas, Kansas City, New York City, Los Angeles, San Francisco and Chicago, the principal show. When attending the shows, defendant worked at the Craft display stand and occasionally made sales. The primary purpose of the shows was promotional rather than sales. Prior to 1962, defendant was married to defendant, Marion Juanita Ferber, who travelled with him to the various shows and while she helped to a limited extent at the stands, she did not take an active part in the business. Two children were born of this marriage which ended in divorce in 1961.
In February 1962, defendant married Talitha Ferber. Prior to her marriage, Mrs. Ferber had been engaged in business and management pursuits and for a long time had been self-supporting. Beginning in 1942, she served three and one-half years as a WAC commercial transportation officer. She managed a large beauty salon and served as a district sales manager for a hair dye concern. She owned and managed three beauty salons in connection with which she also had a cosmetic franchise. She held various offices in state and civic groups. Between 1961 and 1964, she had an income of $16,000 to $20,000 a year from her individual businesses.
After her marriage to defendant Mrs. Ferber interested herself in his business. She organized an office which was maintained at their residence. Prior to this defendant had no formal records or systematized office procedure. She attended furniture shows with him to learn the business and to help to the extent that she could. Later she travelled with him while he sold and serviced accounts. In June 1962, she became a representative of San Hygene Manufacturing Corporation, a company never before represented by defendant, and also took over complete representation of one of his companies, Plasto Manufacturing Company. During this time her own business declined.
In January 1964, defendant was stricken with pneumonia. In February 1964, while he was recuperating, Mrs. Ferber became actively engaged in his business. In July 1964, defendant was found to have high blood pressure and several hospitalizations resulted. His doctors advised a decrease in business activity and more rest. About this time, Mrs. Ferber and defendant first discussed the possibility of a corporation. Because of defendant's health it was apparent that either Mrs. Ferber would have to conduct the business or the franchises would have to be surrendered. Also at this time, preliminary contacts were made with Craft and the other manufacturers in an effort to keep the franchises.
In the fall of 1964, Mrs. Ferber went alone on the road to sell and service accounts. She was able to engage in her own business only on weekends. During this time she consulted with defendant whose health continued to be bad. Defendant's gross commissions from Craft and from all sources during the period 1962 through 1964 were:
Craft All Sources
1962 $20,367.30 $39,343.43
1963 27,954.62 48,135.62
1964 34,954.33 45,524.29
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