O'Reilly

On May 22, 1946, Joe A. O’Reilly and Puget Sound Pulp and Timber Company entered into an agreement, which among other things provided that a corporation, to be known as Bellingham Paper Products Company was to be formed with a capital stock of $200,000, of which O’Reilly was to contribute a paperboard machine and $2,000 in cash for a total contribution valued at $50,000, and receive one-fourth of the capital stock, and Puget Sound Pulp and Timber Company was to contribute $150,000 in cash and receive three-fourths of the capital stock. The agreement of May 22, 1946, contained the further provision that when the new corporation was organized, it would enter into a five year agency agreement with O’Reilly, whereby O’Reilly would sell the products of the new corporation, and receive as compensation for such services 3% commission on net sales of the company, together with reimbursement of certain expenses. There were other provisions in the agreement of May 22, 1946, which are not material to this case.

The new corporation, Bellingham Paper Products Company, was formed, a building to house the paper machine was constructed on land owned by Puget Sound Pulp and Timber Company, and…