Hodson-Feenaughty Co. v. Coast Culvert & Flume Co.

178 P. 382, 91 Or. 630, 1919 Ore. LEXIS 72

• Court: Oregon Supreme Court
• Decided: February 11, 1919
• Status: Published

Opinions

HARRIS, J.

Although there is a dispute as to the amount of the commissions due on account of sales made by the Poison Implement Company yet it is admitted by the defendant that the plaintiff is entitled to some commission on those sales ; and hence the sales made by the Poison Implement Company will be eliminated from the discussion and we shall confine our attention to the sales made to the several counties enumerated in the pleadings. The sale to Grant County was made at a time when exhibit “A” was in force. The remaining sales specified in the complaint were made during the life of exhibit “B.” The first cause of action pleaded by the plaintiff includes the sale to Grant County; and the second cause of action embraces sales to the counties of Crook, Malheur, Gilliam, Yamhill, Wallowa and Wahkiakum.

The arguments advanced by the defendant in a very able and closely reasoned brief may be reduced to two contentions: (1) that exhibit “B” “does not grant anything more than a limited exclusive right to sell”; and (2) that the defendant is not in any event liable for commissions on sales made by it unless the plaintiff pleads and proves performance of its agreement.

It is conceded by the defendant that exhibit “A” provides that a commission shall be paid to the plaintiff upon every sale of culverts whether made through the plaintiff or directly by the defendant. The plaintiff ’insists that exhibit “B” is like exhibit “A” and that it, too, provides, with certain enumerated exceptions, for the payment of commissions on sales made by the defendant itself. Contracts involving the element of exclusive agency may fall in any one of three classes: (1) Where the contract does not prevent the principal from making direct sales although it does deprive him of the right to appoint another agent; (2) where the agent is not only made the exclusive agent but is also given the- exclusive right to sell; and (3) where the exclusive agency is accompanied with the stipulated right to commissions on all sales whether made indirectly through the agent or directly Ay the principal. The defendant contends that exhibit “B” belongs to the second rather than to the third class of cases and that therefore the plaintiff can only recover by showing that it would have made the sales if the defendant had not interfered.

1. It will be necessary to examine exhibit “B” to ascertain whether it grants the right claimed by the plaintiff. Exhibit “B” does more than merely to create an exclusive agency. While not conceding that the contract gives the plaintiff an exclusive right to sell plus the right to commissions on all sales, the defendant itself does admit that the plaintiff is given a limited exclusive right to sell. The first paragraph gives to Hodson-Feenaughty Company the exclusive selling agency in a specified territory with the reservation that the Coast Culvert & Flume Company shall have “the right to solicit and sell in conjunction with” the plaintiff, counties noted in páragraph No. 10, cities, towns, new railroads and irrigation projects. This paragraph recognizes that the plaintiff has some sort of an exclusive right to solicit and sell and that the right of the defendant to solicit and sell is limited to the enumerated exceptions. Other paragraphs emphasize the idea expressed in the first. The third paragraph requires the plaintiff to advise the defendant of prospective customers so that “we may assist you in keeping the goods before them”; paragraph 4 provides against the danger of loss of business to a competitor and yet it will be noticed that this paragraph contemplates that the plaintiff shall first express a desire that the defendant send a special salesman. Paragraph 10 specifies the persons whom the defendant can solicit as its “own prospects”; and in paragraph 12 the defendant says to the plaintiff: “We will render you all reasonable friendly assistance in helping you make sales.” Thus it is seen that the contract gives to the plaintiff the exclusive right to sell and then limitations are placed upon that right by specifying certain exceptions. Finding a contract which confers an exclusive right to sell, subject though it is to defined exceptions, we would naturally expect to find some provision in the contract protecting that right. Before again looking at exhibit “B” we may with propriety remind ourselves that for two years the two corporations acted under exhibit “A” which the defendant concedes made it liable for commissions Pot only for sales effected through the plaintiff but also for sales made by the defendant. The managing officers of Hodson-Feenaughty Company operated under exhibit “A” from January 19, 1914, to July 1, 1914, and hence they were not strangers to the terms of exhibit “A.” Turning again -to exhibit “B” we read in the eighth paragraph that the defendant agrees to send to the plaintiff duplicate invoices “covering all sales made within your territory on which commissions would be due you, including orders received direct by us, except as provided in paragraphs 1 and 10 thereof.” Paragraph 1 excepts from the contract cities, towns, new railroads and irrigation projects and counties “noted in paragraph No. 10.” The language of the tenth paragraph is alone significant and especially so when considered in connection with the eighth paragraph. In the tenth paragraph the defendant in effect says to the plaintiff:

“If you lose the trade of an established customer to whom you have the exclusive right to sell or if you are unable to close a sale to a person to whom you are granted the exclusive right to sell then your right ceases to be exclusive and we have the privilege of soliciting such customers without being liable to you for commissions on such sales as we make to them.”

The italicized words standing alone carry with them an admission that without them the defendant would be liable for commissions even where the sales were made by the defendant after an established customer is lost to. a competitor or after the plaintiff is unable to close a sale. The fourth paragraph gives additional support to the contention of the plaintiff, for we there read:

“Should our salesmen originate culvert orders from any of your customers when your salesmen are not on the ground, we are to have one-half of your regular commission of such sales. ’ ’

2. This is one way of saying that in the absence of this provision an order originated by the defendant would result in a liability for all “your regular commission.” As we construe exhibit “B” it expressly provides that the defendant shall be liable, with certain exceptions, for commissions on sales whether effected through the plaintiff or brought about by the defendant. Moreover, by their own conduct the parties themselves placed this construction upon the contract. J. T. Pasqual, the bookkeeper for the Coast Culvert & Flume Company, testified that at some time between January 19, 1914, the date when Hodson, Feenaughty and Thompson purchased the stock in Beall & Company, and February 4,1914, John S. Beall

“asked me to hold up the sales which came in direct to the factory in order to find'out whether or not Hodson-Feenaughty Company were working the trade in a business-like manner.”

Pursuant to this order Pasqual did “hold up,” exclusive of the sales in controversy, 108 sales “that came direct to the” defendant between February 4, 1914, and June 29, 1915. Twenty-three of these sales were made while exhibit “A” was in force and the remaining 85 sales were made during the life of exhibit “ B. ” When in October, 1915, the plaintiff learned of these 108 sales it claimed and the defendant paid commissions on them.

3, 4. The second contention of the defendant is based upon the ground that before it can recover on its first cause of action the plaintiff must allege and prove that it fulfilled the promises made by it in exhibit “ A”; and that the plaintiff must also allege and prove that it kept its agreements set forth in exhibit “B” before commissions can be allowed on sales made to any of the counties specified in the second cause of action. In this connection it is to be noted that the reply denies that part of the answer which avers that plaintiff did not perform its agreements and the reply also denies the allegations of the defendant concerning the asserted failure of the plaintiff properly to work the several specified counties; and, therefore, any defect in the complaint is cured by the answer and reply: Catlin v. Jones, 48 Or. 158, 163 (85 Pac. 515).

The defendant argues that exhibit “B” contains mutual and dependent covenants; that the promise of the defendant to pay commissions depends upon performance by the plaintiff of all its covenants; and that therefore a substantial performance of the plaintiff’s covenants must be shown as a condition precedent before the defendant becomes liable for any commissions. The defendant insists that paragraph two states the consideration to be furnished by the plaintiff and that this consideration is entire; and that therefore, since exhibit “B” applies to Oregon, Idaho and “such parts of Washington as we (the defendant) supply,” the plaintiff must show that it has substantially performed its agreements throughout the whole territory before it can recover a commission on a sale made directly by the defendant in any part of that territory. The defendant tersely states its position in its brief as follows:

“In the case at bar, plaintiff cannot claim an exclusive right anywhere within the territory without showing that it substantially performed its agreements everywhere within the territory.”

The defendant argues, for example, that if the plaintiff failed “to work the trade,” as required by paragraph 2 of exhibit “B,” in Douglas County, it could not assert an exclusive right in Crook County and therefore would not be entitled to commissions on sales made by the defendant in Crook County. The word “counties”, found in the first paragraph of exhibit “B ” is used in the sense of a customer. The counties of Oregon, -Idaho and Washington constituted a considerable portion, if not the largest part, of “the trade.” A very considerable portion of the culvert business was done with counties and consequently it is fair to assume that the parties had this fact in mind when-they wrote and signed exhibit “B.” As stated in Burkhart v. Hart, 36 Or. 586, 589 (60 Pac. 205, 206):

“It is often extremely difficult to determine whether the covenants of the respective parties to a contract are dependent or independent, and there is much conflict in the authorities upon the question; but, as already said, each case depends upon its own facts and the justice and good sense of the matter.”

The plaintiff contends that exhibit “A” as well as exhibit “B” is a divisible contract and that therefore whenever a sale was made and the price paid, the plaintiff became entitled to its commission on that sale. Here, too, it is difficult to lay down a rule applicable to all cases, and hence each case must largely depend upon the terms found in the contract; but after all., the question of whether a contract is entire or sever-able is one of intention and the intent of the parties is to be determined by the language used by them and the subject matter of the agreement: 13 C. J. 562. It must be remembered that the defendant did not rescind or attempt to rescind either contract. Indeed, the defendant contends that exhibit “B” was kept in force until September 12, 1915. The parties acted under exhibit “A” until July 1,1914, and both litigants admit that they acted under exhibit “B” from July 1, 1914, until July 1, 1915. Taking exhibit “B” by its four corners and reading it in the light of the surrounding circumstances it is our view that the parties intended that the plaintiff should be entitled to a commission for a sale made to Crook County even though the plaintiff failed “to work the trade” in Douglas County. A commission is paid on each separate sale and the amount of the commission is regulated by the amount of such sale. Moreover, the parties have themselves expressly provided for the penalty to he suffered by the plaintiff, for it is said in paragraph 10 that in the event the plaintiff loses the trade of an established- customer, or is unable to close a sale, then the defendant has the privilege of soliciting such “customers” without being liable to the plaintiff for commissions on sales made to such “.customers.” It makes no difference whether the loss of an established customer or the failure to close a sale was caused by the neglect of the-plaintiff to “work the trade in a first-class business-like manner” or resulted from inability of the plaintiff to secure the business after having worked the trade, for in either event the defendant was entitled to make a sale, if it could, without being liable for a commission.

We have carefully examined the evidence found in the record and we are satisfied that the judgment appealed from “was such as should have been rendered in the case.” We do not fin'd any error in the case which would warrant us in reversing the cause and remanding it for a new trial; and therefore the judgment appealed from is affirmed.

Aeeirmed.

McBride, C. J., and Burnett and Benson, JJ., concur.

Rehearing denied April 1, 1919.