Crown Controls, Inc. v. Smiley

Jim Smiley (defendant) operated a manufacturer’s representative/distributorship business. In January 1983, Smiley transferred ownership of the trade name Industrial Associates to North American Drill Supply, Inc. (Drill) (defendant). Smiley was the authorized representative and president of Drill. In June 1983, Smiley and Drill contracted with Crown Controls, Inc. (Crown) (plaintiff) through Michael Slomer, president of Crown, to supply gas-chlorination equipment for Drill’s customer in Guam. Smiley identified himself to Slomer as an agent for Industrial Associates and did not disclose that he was acting on behalf of Drill. The equipment was delivered and accepted by Smiley and Drill. Crown billed Industrial Associates for $9,136.03. Smiley and Drill also ordered pump control values. The Guam customer encountered problems with the valves and returned them to Crown. Smiley sent a check to Crown for $5,547.92, less than the $9,136.03 owed, due to the damage to the pump control valves. Crown filed a complaint in Snohomish County, Washington, against Smiley and Drill for the full amount owed. In response, Drill sued Crown in Oregon State Court to recover for the damaged pump control valves. Drill received judgment for $3,363.11 plus interest. In the Snohomish County action, Crown was granted summary judgment against only Drill, because the court found a material issue of fact existed regarding whether Smiley had disclosed that he was an agent of Drill. After trial, the court found that Smiley was personally liable for the entire debt to Crown due to his insufficient disclosure of agency for Drill. The court held that Crown had to elect between pursuing Smiley or Drill to collect on its judgment under the election-of-remedies doctrine. Crown pursed against Smiley. Smiley appealed to the court of appeals. The court of appeals affirmed the judgment, rejected the election-of-remedies doctrine, and imposed joint and several liability against Smiley and Drill. Smiley filed a petition for review appealing the court of appeals’ decision.