Grayson v. Nordic Construction Co. , 22 Wash. App. 143 ( 1978 )

Andersen, A.C.J.

(dissenting) — I would affirm the judgment against Arnold Bergstrom based on the trial court's finding that he engaged in deceptive advertising violative of the Consumer Protection Act and 'caused damages to a householder in the sum of $3,099.44 plus $500 attorneys' fees.

Following a trial to the court at which witnesses testified and evidence was presented, the trial court entered findings of fact. The pertinent ones read:

That Arnold Bergstrom was at all times president, manager, and a member of the Board of Directors of Nordic Construction Company, Inc. and otherwise directed, formulated, and carried out all activities of Nordic Construction Company as it relates to the Plaintiffs herein, as though the Plaintiffs were dealing with Arnold Bergstrom himself as an individual and that Nordic Construction was the alter ego of Arnold Bergstrom.

Finding of fact No. 3.

That advertising mailers were drafted by, and directed to be sent through the U.S. mail to residents of the Seattle area by Arnold Bergstrom, Defendant, herein.

Finding of fact No. 4.

That the plaintiff Bessie Grayson did receive advertising mailers, Exhibits 4, 5 and 6, and did, because of those mailers, contact the Defendant Arnold Bergstrom in order to have repair work done to the residence wherein she resided.

Finding of fact No. 5.

That the mailers received by the Plaintiff and sent by the Defendant Arnold Bergstrom" represented that financing was available. That Nordic Construction Company and Arnold Bergstrom did not have the capabilities to finance jobs as implied by the advertising received by the Plaintiffs.

Finding of fact No. 6.

That the court finds that the advertisements representing financing are violations of RCW 19.86.020 in that they are unfair and deceptive acts and practices which have the capacity or the tendency to deceive.

Finding of fact No. 7.

That, although the court finds violations of RCW 19.86.020, the court does not feel that an award of damages is proper for that violation; but as authorized under the statute, RCW 19.86, will find that the Plaintiffs should be allowed the sum of $500.00 attorney's fees as authorized under the provisions of RCW 19.86.

Finding of fact No. 13.

In order to put the case in better perspective from the standpoint of the consumer's interest, the Consumer Protection Act issue will first be dealt with and, following that, the corporate entity issue.

First, then, with respect to the violation of the Consumer Protection Act found by the trial court.

A basic purpose of the Consumer Protection Act, RCW 19.86, is to protect the public. RCW 19.86.920. Bessie Grayson, the respondent, is a member of that public.

The act is to be liberally construed to the end that its beneficial purposes may be served. RCW 19.86.920; Salois v. Mutual of Omaha Ins. Co., 90 Wn.2d 355, 358, 581 P.2d 1349 (1978).

Under the act, unfair or deceptive acts or practices in the conduct of any trade or commerce are unlawful. RCW 19.86.020. Here the householder, Bessie Grayson, received three advertising mailings which caused her to contact Mr. Bergstrom to have repair work done on her residence. Finding of fact No. 5; exhibits 4, 5 and 6. One of the mailers (exhibit 5) referred to "Reasonable Financing Available" and another (exhibit 6) described the nature of such financing as "Best Financing In Years."

It was up to the trial court to decide whether this was just sales rhetoric or whether, under the circumstances, it was a material misrepresentation. The trial court did not err in construing the advertising against the advertiser, Murray Space Shoe Corp. v. Federal Trade Comm'n, 304 F.2d 270, 272 (2d Cir. 1962), and finding that financing, as such term is generally understood, was not available and as a consequence the advertisements were "unfair and deceptive acts and practices which have the capacity or the tendency to deceive." Finding of fact No. 7.

The advertiser's intent is not the critical issue, nor is whether the recipient was actually deceived or not. But as the trial court correctly indicated in that finding, what is critical is whether the advertisements have the "capacity or tendency to deceive." State v. Ralph Williams' North West Chrysler Plymouth, Inc., 87 Wn.2d 298, 317, 553 P.2d 423 (1976); Fisher v. World-Wide Trophy Outfitters, 15 Wn. App. 742, 748, 551 P.2d 1398 (1976). The trial court did not err in so finding here.

So far as the requirement that the transaction affect the public interest, Salois v. Mutual of Omaha Ins. Co., supra at 361, the advertising of the home improvement service to the public was sufficient to satisfy such requirement. Lightfoot v. MacDonald, 86 Wn.2d 331, 334, 544 P.2d 88 (1976); Fisher v. World-Wide Trophy Outfitters, supra at 748.

In order to thoroughly understand the applicability of the Consumer Protection Act to this case, it is well to reflect upon the background of that act. The Consumer Protection Act was one of several consumer protection statutes enacted by the state legislature based upon the work of the Washington State Consumer Advisory Council, and on information developed in statewide hearings conducted by the Council. A portion of the Council's report dealing with home improvement contractors is apropos to the present case:

Both in terms of the amounts of money involved and the number of complaints received, the home improvement contracting industry poses by far the most serious current consumer problems. . . .

Examples of many of the unfair and deceptive practices employed, which reduce the purchasing power of the Washington public by millions of dollars each year, include:

(6) Misleading advertising;

A report to Governor Albert D. Rosellini by the Washington Consumer Advisory Council, Consumer Protection in the State of Washington 14 (1960).

Tragically, it is not uncommon for a householder's hopes to be raised by deceptive advertising of a marginal home repair contractor only to be dashed in a sea of broken promises, work done improperly or not at all and culminating in litigation which in most instances the householder can ill afford. This is such a case, as the trial court found.

The trial court made its award of damages to the householder in the amount of $3,099.44 based on breach of contract. It had the discretionary authority to award additional damages on the basis of the enhanced damages provision of the Consumer Protection Act, RCW 19.86.090, but in a decision based on the equities of the case declined to do so. The trial court did, however, award $500 attorneys' fees to the householder pursuant to the authority of the provision of the Consumer Protection Act so authorizing. RCW 19.86.090. That award of $500 attorneys' fees was well within the trial court's discretion. State v. Ralph Williams' North West Chrysler Plymouth, Inc., supra at 314.

The other issue on appeal regards the trial court's piercing of the Nordic Construction Company, Inc., corporate veil and finding Mr. Bergstrom personally liable.

Here the corporation, Nordic Construction Company, Inc., was adjudged bankrupt prior to the trial of this case.

Even though the home repair contract was ultimately entered into between the householder and the corporation (Nordic Construction Company, Inc.), the advertising on which the trial court based the Consumer Protection Act violation was not in the name of the corporation.

Mr. Bergstrom, in his brief filed in this court, states that " [t]here is no dispute that the mailers were sent in the name of the corporation,..." Brief of Appellant at 5. This is incorrect. The three mailers (exhibits 4, 5 and 6) which the trial court found were received by the householder (finding of fact No. 5) do not bear the words "corporation," "incorporated" or the designation "Inc." anywhere on them. They refer only to "Nordic Construction Co." and one of them (exhibit 6) features Bergstrom in large print, as "Mr. Bergstrom Gen./Mgr. 28 Yrs."~The trial court also found as a fact that the "advertising mailers were drafted by, and directed to be sent through the U.S. mail to residents of the Seattle area by Arnold Bergstrom,..." Finding of fact No. 4.

In addition, the trial court found as a fact that under all of the circumstances of this case, "Nordic Construction was the alter ego of Arnold Bergstrom." Finding of fact No. 3.

It is, of course, true that the corporate form is frequently properly utilized to limit the personal liability of corporate officers, directors and shareholders and that as a general rule, the corporate entity will be respected by the courts. There are circumstances, however, where the corporate form has been so abused that in order to do justice the corporate personality will be disregarded if rights of innocent third parties are not thereby prejudiced.

Whether the corporate entity will be disregarded or not depends largely on the factual determinations which are made in the particular case. See Burns v. Norwesco Marine, Inc., 13 Wn. App. 414, 418-20, 535 P.2d 860 (1975) and authorities collected therein. In discussing this issue, one of the leading texts on the subject, 1 M. Wolf, Fletcher's Cyclopedia of the Law of Private Corporations § 41, at 12 (perm. ed. rev. vol. 1974, Cum. Supp. 1978), states the following rule:

Since the issue is thus one of fact, its resolution is particularly within the province of the trial court. . .

(Italics mine.) Without unduly belaboring the subject, I would hold that the findings of fact of the trial court were based on substantial evidence in the case and did support the trial court's decision to pierce the corporate veil and find Bergstrom personally responsible for his actions.

In this connection, it should be added that the trial court specifically found that Nordic was the alter ego of Arnold Bergstrom, and the rule in that regard is that

[w]here the corporate fiction is merely an alter ego or business conduit of an individual, it may be disregarded in the interest of securing a just determination of an action.

18 Am. Jur. 2d Corporations § 15, at 562 (1965). Accord, J.L. Cooper & Co. v. Anchor Sec. Co., 9 Wn.2d 45, 70, 113 P.2d 845 (1941); Pohlman Inv. Co. v. Virginia City Gold Mining Co., 184 Wash. 273, 283, 51 P.2d 363 (1935). The trial court did not err in so concluding here.

Based on the facts discussed herein, I would hold that the trial court's findings above set out were based on substantial evidence and do support affirmance of the trial court. As an appellate court, we are constitutionally prohibited from substituting our findings for those of the trial court, Thorndike v. Hesperian Orchards, Inc., 54 Wn.2d 570, 343 P.2d 183 (1959); therefore, the trial court's findings should be considered as verities on this appeal.

For the foregoing reasons, I dissent from the majority opinion. I would affirm the trial court's judgment for Bessie Grayson, the householder, and would also award her an additional $450, the sum she has requested as attorneys' fees on appeal.

Reconsideration denied February 14, 1979.

Appealed to Supreme Court March 8, 1979.