Marnon v. Vaughan Motor Co., Inc.

194 P.2d 992, 184 Or. 103

• Court: Oregon Supreme Court
• Decided: November 14, 1947
• Status: Published

Opinions

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] IN BANC. Suit by Edward S. Marnon against the Vaughan Motor Company, Inc., for an accounting of profits derived from the sale of certain machines known as "Mobile Load-Lift Trucks" or "Mobilifts." Decree for plaintiff and the defendant appeals.

REVERSED AND REMANDED. This is a suit for an accounting of profits derived from the sale of certain machines known as "Mobile Load-Lift Trucks" or "Mobilifts".

The plaintiff Edward S. Marnon claims that he and the defendant Vaughan Motor Company, a corporation, were joint adventurers in the manufacture and sale of Mobilifts; that such joint adventure was created and evidenced by a contract in writing executed by the parties; and that the defendant has failed and refused to account to him for certain profits realized on the manufacture and sale of such machines during the years 1942 and 1943. The Circuit Court decreed that plaintiff was entitled to relief; that plaintiff was a joint adventurer with defendant "in the business of manufacturing and selling lift trucks and each entitled to a one-half interest in said business"; and, upon an accounting being taken, entered judgment for the plaintiff in the sum of $17,149.00 as the balance due on one-half of the profits for the year 1942, and the further sum of $95,550.00 as the balance due on one-half of the profits for the year 1943, and for plaintiff's costs and disbursements.

From this judgment and decree defendant has appealed.

The contract in question was executed by plaintiff and defendant under date of September 30, 1937, and reads as follows:

"THIS AGREEMENT, Made this 30th day of September, 1937, by and between VAUGHAN MOTOR CO., a Corporation of the State of Oregon, hereinafter called Party of the First Part, and EDWARD S. MARNON, hereinafter called Party of the Second Part,

"WITNESSETH:

"That,

"WHEREAS, Party of the First Part is designing, inventing and will hereafter patent, if anything in connection therewith is found to be patentable, a certain mechanical device which is to be known as the `Mobile Load-Lift Truck', the idea for which originated with Party of the Second Part; and

"WHEREAS, the experience of the Party of the First Part in regard to the manufacture and cost of said device is limited; and

"WHEREAS, the experience of the Party of the Second Part in the sale of said item is also an unknown factor; and

"WHEREAS, the Party of the First Part desires to manufacture said article, and the Party of the Second Part desires to market the same,

"NOW, THEREFORE, in consideration of the premises, it is agreed between the parties hereto as follows:

"1. Party of the First Part shall proceed with reasonable speed to develop the design for said Mobile Load-Lift Truck and shall thereafter promptly proceed with the manufacture of said article in such quantities as the sales thereof by the Party of the Second Part, or others, shall warrant.

"2. Notwithstanding the fact that the building of said Mobile Load-Lift Truck was suggested by Party of the Second Part, nevertheless, and it is distinctly understood and agreed between the parties hereto, the said Mobile Load-Lift Truck and the ideas embodied in the manufacture thereof shall be the sole and exclusive property of Party of the First Part and Party of the First Part shall have the right to patent any ideas contained in said device and all improvements thereon insofar as said device and said improvements shall be patentable and said patents, if any, when so obtained, shall be the sole and exclusive property of the Party of the First Part.

"3. The manufacture of said article shall be at the sole cost and expense of Party of the First Part, and Party of the First Part shall not inform, divulge or extend to any other person, firm or concern whomsoever, the ideas or thoughts embodied in said device or the right to design or manufacture the same, nor sell or market the same to or with any person other than the Party of the Second Part, except upon the terms and conditions hereinafter set forth.

"4. When said device has been designed and manufactured, Party of the First Part shall, within a reasonable time thereafter, set and quote to Party of the Second Part the cost of said device, reserving unto itself a reasonable margin of profit thereon. When said cost price, plus said manufacturer's profit, has been definitely fixed, the Parties hereto will each one with the other agree, fix and establish a reasonable list or consumer's price, having in mind as part of said cost price and list price a reasonable margin of profit wherein the Party of the Second Part can sell said device at such a profit as the exigencies of the business demand.

"5. Party of the First Part shall, at its own sole cost and expense, keep all book accounts relating thereto and maintain such bookkeeping system as the business demands, and all purchase payments on the sale of said article are to be made directly to the office of the Party of the First Part and it shall make disbursements therefrom to the Party of the Second Part after the fixed and set price hereinbefore mentioned reserved to the Party of the First Part has been deducted.

"6. Notwithstanding the fact that it is the intention of the Parties hereto that Party of the Second Part shall have the exclusive right to sell and market said device, nevertheless, if the Party of the Second Part shall neglect to serve adequately any particular territory where there is a demand for the device, or if the Party of the Second Part voluntarily declines to market said device in any given territory, then the Party of the First Part shall have the right, upon notice to the other party of its intention so to do, to set up and maintain a system of marketing said device in said territories, it being the intention that all territory, wheresoever the same may be located and in which a demand for said device arises, shall be served. In any such territory so served by Party of the Second Part, Party of the First Part shall pay to Party of the Second Part a commission of two (2%) per cent of the dealer's price on all such devices sold in said territory, provided, however, that if Party of the Second Part shall abandon the sale of said device, then said commission of two (2%) per cent shall be paid only for a period of five (5) years from the date of such abandonment.

"7. The provisions of this contract shall be binding alike upon the heirs, executors, administrators and assigns of the parties hereto.

"IN WITNESS WHEREOF, the foregoing is signed by the Parties hereto, in duplicate, the day and year first above written.

"VAUGHAN MOTOR CO. "By SAMUEL WEISS, Treas. "By H.G. BOUTIN, Secretary. "Party of the First Part.

"EDW. S. MARNON (Seal) "Party of the Second Part.

"In the Presence of: ________________________ ________________________"

THE PLEADINGS In his complaint the plaintiff alleges the following: In the year 1937 he "conceived the idea for the construction of a motor-driven hand truck with a motor-powered lifting device for the stacking and storing of boxes, crates and other containers of merchandise in warehouses and other storage facilities. That at said time the defendant was manufacturing and, as plaintiff was advised, owned the patent for, a device known as a `reversing clutch' which plaintiff considered essential to the successful operation of the motor truck and lifting device he contemplated building. That plaintiff approached the defendant and revealed his plans for the construction of said motor truck and lifting device, using defendant's said reversing clutch in such construction, and proposed to defendant that they, the plaintiff and defendant, manufacture and market said machine."

Plaintiff then alleges the execution of the above contract, which is pleaded according to its legal effect and in haecverba.

It is alleged that immediately upon the execution of said agreement plaintiff and defendant started to work upon the development of plaintiff's ideas for the construction of said machine; that in 1939, 1940 and 1941 the defendant became the owner of various patents on the machine and alterations and improvements thereof; that a design containing the words "mighty midget mobilift" was registered in plaintiff's name in the United States Patent Office on June 27, 1939; that the coined word "Mobilift" was registered in plaintiff's name as a trade-mark and trade name on December 3, 1940; and that

"during all of the times mentioned herein all of said machines manufactured by defendant have been manufactured under said patents issued and assigned to defendant, as aforesaid, and have been labelled, marketed and sold under said trade-marks owned by plaintiff, and all contracts made by defendant with agencies for the sale of said machines and with customers for the purchase of said machines have specified and designated said machines by the trade name so owned and held by plaintiff.

"That, on or about the first day of October, 1938, plaintiff and defendant had developed a machine which plaintiff considered adequate for the purpose for which intended and ready for market and plaintiff started to develop a sales organization and to promote the sale of said machines. That ever since said time plaintiff has devoted his whole time and efforts to the establishment of sales agencies and promoting the sales of said machines throughout the United States. That when plaintiff would establish an agency for the sale of said machines he would fix the amount of commissions to be allowed such agency and such agency would enter into a contract direct with the defendant and defendant would fix the sale price of said machines. That plaintiff took no part in the fixing of the sale price of said machines except in fixing the arbitrary sale price in 1938, as aforesaid, but plaintiff relied upon defendant to fix such sale price over and above such commissions as would allow plaintiff a reasonable margin of profit, as provided in said agreement. That the commissions paid by defendant on the sale of said machines were paid direct to the sales agencies. That plaintiff paid and agreed to pay no part of said commissions save and except in the case of one agency established to serve the territory in the trade area of the City of New York, plaintiff agreed to pay such agency a sum equal to five (5%) per cent of the profits plaintiff realized from the sales made in such territory, in addition to the sums such agency should receive from said defendant."

In addition to promoting the sale of Mobilifts the plaintiff, it is alleged, at the request of defendant, arranged for the purchase of materials and parts to be used for the manufacture thereof, negotiated with Government agencies for the obtaining of priorities for such purposes under the emergency war regulations; consulted with defendant on the organization and arrangement of defendant's manufacturing plant to speed the manufacturing of such machines; and generally worked with defendant to promote the common enterprise.

"That, on or about the first day of January, 1939, defendant informed plaintiff that it was unable to fix a cost price for the manufacture of said machines and could determine such cost price only from experience and proposed that plaintiff and defendant set an arbitrary figure as the sale price of said machines and that plaintiff accept eight (8%) per cent of such sale price in lieu of his reasonable profit as specified in said agreement and that a cost price be fixed according to the terms of said agreement when defendant should be able to determine such cost, to which proposal plaintiff assented."

Thereafter, until the end of the year 1941, defendant accounted to plaintiff each year for a sum equal to eight per cent of the sale price of machines sold during such year as follows: For 1939 — $2,000.00; for 1940 — $3,000.00; for 1941 — $25,000.00. At the end of 1939 defendant informed plaintiff that it had not been able during the year to segregate its costs of manufacturing Mobilifts from its other factory costs and requested plaintiff to continue on the same basis during the year 1940, which plaintiff agreed to do. At the end of 1940 defendant told plaintiff that, due to changes which had been made in the construction of the machines, its cost of manufacture was uncertain and asked plaintiff to continue another year on the same basis, which plaintiff agreed to do. At the close of the year 1941

"defendant informed plaintiff that he, the plaintiff, was making too much money, that the agreement they had been working under was of no value and that defendant could pay plaintiff any sum it desired and that it would not pay to plaintiff any sum in excess of four (4%) per cent of the sale price of said machines.

"That defendant has failed, neglected and refused to inform plaintiff of the cost price of said machines or to set a reasonable profit on its manufacturing cost of the same and has failed, neglected and refused to set a sale price with plaintiff which would allow plaintiff a reasonable margin of profit, according to the terms of said agreement, but on the contrary defendant has at all times set the sale price of said machines and ever since the first day of January, 1942, has claimed and now claims that plaintiff has no interest in the manufacture and sale of said machines, but is merely a sales agent of defendant, and defendant has failed, neglected and refused and now refuses to account to plaintiff for any profits realized on the manufacture and sale of said machines for the years 1942 and 1943, save and except that defendant has credited to plaintiff on its books a sum equal to four (4%) per cent of the sale price of said machines for said years."

The prayer is as follows:

"1. That defendant be required to account to plaintiff for its manufacturing costs for said machines for said years, and for the amount of profits it received on the manufacture and sale;

"2. That the court fix a reasonable profit to be allowed defendant on the manufacturing cost of said machines for said years and a reasonable profit to be allowed plaintiff on the sale of the same;

"3. That plaintiff have judgment against defendant for the amount of profit decreed plaintiff for said years, over and above said four (4%) per cent credited to plaintiff as aforesaid;

"4. That plaintiff have such other and further relief as to the court may seem equitable and just."

In its amended and supplemental answer the defendant alleged that prior to September 30, 1937, plaintiff suggested to it a need and market for a small self-propelled truck for use in transporting packaged goods in and around warehouses and similar places, and that thereupon it proceeded to experiment with and subsequently designed a truck, which, however, was and is quite different in design, structure and function from that suggested by plaintiff. "After defendant had so designed such truck, plaintiff represented to it that he had available financial resources amply sufficient to purchase and market said device, to establish sales agencies and to sell, develop orders for the same in quantities sufficient to permit defendant to manufacture and dispose of the same at a profit to it." It is alleged that in reliance upon such representations the defendant executed the contract of September 30, 1937, but that plaintiff did not have nor was he able to obtain financial resources with which to purchase machines which defendant had commenced to manufacture or to set up sales agencies for that purpose, and that he did not do so; and that, because of plaintiff's failure in that regard, "said agreement of September, 1937 was cancelled and terminated effective as of the first day of January, 1939." Thereafter, it is alleged, defendant proceeded to manufacture and market the machines, and employed plaintiff to act in general charge of the market and sale thereof throughout the United States and otherwise to render services to defendant. For such services plaintiff was to receive the sum of eight per cent on the net sales price of each machine sold by defendant, and out of such eight per cent plaintiff was to bear certain costs and expenses. This arrangement continued until January 1, 1942, at which time plaintiff's commission was reduced to four per cent. The defendant entered into a contract with the Mobilift Company of New York under which the latter bought trucks to be resold in certain territory and as to such sales plaintiff and defendant agreed that plaintiff's commission should be no greater than three per cent of the net sales price to defendant. All transactions between plaintiff and defendant prior to January 1, 1939, were settled on or before that date. Each year, commencing with the year 1939, defendant furnished plaintiff with a statement of his account with the defendant, showing net commissions earned and moneys paid by plaintiff to defendant or for his account. From January 1, 1939, to March 6, 1944, plaintiff's gross commissions amounted to approximately $228,472.81, and defendant paid to plaintiff or for his account the sum of $224,421.37, said sums including the adjustments and corrections for said period. Defendant is and at all times has been ready, able and willing to account to plaintiff for the transactions involved.

A further and separate answer relates to facts developed on the trial, and charges in substance that the plaintiff, in violation of his duty as its agent, was paid, pursuant to a secret agreement and without the knowledge of the defendant, a portion of commissions paid by the defendant to its agent in Washington, D.C., for his services in making sales of Mobilift trucks to the Government of the United States and its various departments, bureaus and agencies. The defendant alleged that all such secret profits belonged to it and prayed that the plaintiff be ordered to account to defendant therefor.

The court entered detailed findings of fact and conclusions of law which included as a finding of fact the following:

"The Court finds that there was never any agreement between the parties for the cancellation of the contract and further finds that, on January 1, 1939, the method of dividing profits as set forth in the contract was suspended and from that date there was never a meeting of minds between the parties as to their respective interest in the profits."

The conclusions of law are as follows:

"I

"That the written contract between plaintiff and defendant is valid and enforcible.

"II

"That said contract creates a joint adventure between plaintiff and defendant in the business of manufacturing and selling lift trucks and each of said parties have an equal interest in said business.

"III

"That said contract was not cancelled by the agreement between the parties on January 1, 1939, but the provisions therein relating to their respective interest in the profits from said business were suspended.

"IV

"That, during the years 1942 and 1943, the parties operated said business without any agreement between them as to the division of profits and the profits should be divided equally."

The court made no express finding of fact or conclusion of law on the question whether the moneys received by Marnon under his agreement with the Washington agent constituted "secret profits". In the accounting, however, the court determined the amounts so received for the years 1942 and 1943, and included them among the moneys to be divided equally between the parties as profits of the joint adventure.

THE EVIDENCE A summary of the material facts is as follows: Mr. Marnon for many years has been a salesman of industrial machinery. In 1937 he was employed in that capacity by Howard-Cooper Corporation, of Portland. He conceived the idea of a small lift truck machine which could be used for picking up and transporting packaged goods in places where the space was limited, such as warehouses and freight sheds, or, as he expressed it in his testimony, "a small machine that was capable of working almost anywhere, running into trucks, heavy trailers, into box cars, working on and off trailers". A lift truck he described as "a machine that runs around under its own power, has something out in front that runs under the load, lifts that load up, and sets it down again." As finally developed, the Mobilift is a truck with two wheels in front and a caster in the rear, an elevator consisting of a pair of forks in front, which are power-operated, for picking up loads, and a small step or platform in the rear on which the operator stands. Four different models were built, the largest capable of lifting and transporting a load weighing 2,000 pounds.

At the suggestion of Mr. D.I. Cooper, president of the Howard-Cooper Corporation and who was also vice president of the Vaughan Motor Company, Marnon presented his idea to the representatives of the latter company, which manufactured machinery, for the purpose of interesting it if possible in the development and manufacture of such a lift machine as he had in mind. Vaughan had no sales department. Marnon discussed the matter with Hiller Boutin, the secretary, and Samuel Weiss, the vice president of Vaughan. Boutin was in charge of the corporation's office, the "correspondence and financial end" of the business, while Weiss was at the head of its engineering and production department. They became interested in Marnon's idea to the extent that Vaughan proceeded with the making of designs and experimental models, and by the latter part of 1937, probably in October, had manufactured a complete machine. Considerable testimony was taken upon the question whether the device which Marnon suggested was a two-wheel hand truck to be propelled by a gas engine, as Vaughan contends, or a power-driven lift truck such as was ultimately designed and built. Vaughan has argued this contention here, but we are of the opinion that the question is foreclosed by the recitals in the contract that the idea of the "Mobile Load-Lift Truck" "originated with" Marnon, and that "the building" of it "was suggested" by him — this being the very machine which at the time of the execution of the contract had, as Vaughan asserts and we find, been designed and almost completely built.

Marnon seems to have made efforts in various directions to enlist capital to finance the sale of the machine. Among other projects was the organization of a sales corporation by Marnon and Roy Nelson of the Howard-Cooper Corporation, Marnon to assign his contract to the proposed corporation. This having failed, Marnon informed Boutin that he had made arrangements with Howard-Cooper to take over the sale of the truck with Marnon in charge, and, at Marnon's request, Boutin in August, 1938, obtained from Howard-Cooper an order for twenty machines. Marnon testified that he was entitled to a two per cent profit on these machines, as called for by his contract, but the evidence is all but conclusive that Marnon asked Boutin to add $20.00 to the price of each machine sold to Howard-Cooper and to credit him with the sum, and that Boutin agreed to do so. Vaughan's books, which are in no way impeached, show that credit was given Marnon in accordance with the agreement. These machines were delivered to Howard-Cooper and some of them resold, but, owing to a dispute that arose because of a claimed mechanical deficiency, the deal was cancelled and the trucks returned. By this time Vaughan had expended more than $50,000.00 in the development and manufacture of Mobilifts. Marnon then left the employ of Howard-Cooper, and, according to Boutin's testimony, told Boutin that he had money enough to last until the first of the year — this was about November 1, 1938 —, and suggested that he go out in the Pacific Northwest and sell machines on the same basis as the sales to Howard-Cooper, and that at the end of the year they would make a new arrangement. Boutin acquiesced, and during the last two months of 1938 Marnon made a few sales directly to consumers, receiving as his profit the difference between the manufacturer's price and the retail or list price. These transactions were handled on Vaughan's books by crediting Marnon with the list price and charging him with the manufacturer's price.

In the meantime he and Boutin discussed plans for marketing the machine. Marnon testified: "I suggested that I go out for a trial year to prove what could be done." On or before January 1, 1939, they agreed upon a method of operation. They mapped the country out into five or six different territories in each of which a dealer was to be established by Marnon. Marnon was also to break in a man in each territory — referred to as a "block man" — to work with the dealers, instructing them in the sale and servicing of the machines. It would be Marnon's duty to select the dealers, and if Vaughan, after investigation, found them acceptable, it would enter into dealer's contracts with them. An amount equal to eight per cent of the purchase price received by Vaughan on all machines was to be paid to Marnon, and, as Marnon was without funds and so informed both Boutin and Weiss, Vaughan agreed to advance him $700.00 a month for traveling and living expenses including the expenses of his family, against which such eight per cent was to be credited. Except for advertising, the eight per cent was to cover the entire cost of selling, including the pay of block men. Advertising, it was estimated, would cost four per cent of the sales price. They fixed a retail sales price, and agreed that the machines should be sold to dealers at a discount of twenty-five per cent off the retail or list price, and parts at a discount of thirty-five per cent.

Marnon went East early in 1939 and established dealers in Chicago and other large eastern cities. After Marnon had made the preliminary arrangements with the prospective dealer the latter would enter into a contract with Vaughan. An exception to this procedure was in the case of Mailler-Searles of San Francisco, with whom Vaughan entered into a contract appointing that concern its Pacific Coast dealer over Marnon's objection. Marnon did not see the Mailler-Searles contract.

As nearly as we can determine, the first time after January 1, 1939, that Marnon asserted rights specifically under the written contract of September 30, 1937, was in the summer of 1940 when both Marnon and Boutin were in Chicago. A dispute had arisen between two dealers over the division of the discount when one dealer sold a truck which was delivered in the territory of the other. Boutin undertook to settle the dispute, and in a discussion of the matter with Marnon, according to Boutin's testimony:

"* * * we finally came to where it sounded as though he was telling me the company didn't have any right to talk to their own dealers, and I asked him if that is what he meant, and he said yes, we didn't have any right to. I asked him how he figured that and he said `Read your contract.' I said `What contract? We haven't got any contract.' He said, `The old contract.' I said, `Well, we are not working under that contract and you know it.' And when I came back here I took up the contract and took it over to Mr. Maguire (Vaughan's attorney) and related this conversation in Chicago. He asked me if, when we had made the change, if there had been anything in writing and I told him no. He said, `Well, then, it will be one man's word against the other.' I said, `Well, if it ever comes to a case in court, this contract would get into it then, wouldn't it?' He said, `Yes.' I says, `What does it mean and how would a court view it?' And he gave me his opinion on it."

Boutin was not asked, and did not testify, about the contents of the opinion.

In January, 1941, the Chicago dealership was discontinued and in its place Vaughan, with Marnon's full approval, established a factory branch in that city. All expenses of the branch were borne by Vaughan and all commissions of salesmen working out of the branch were paid by it. Marnon described the branch in his testimony "as just another dealer", and it was credited with the same discount as ordinary dealers. Both during the course of the business and as a witness, Marnon conceded that he was not entitled to any part of the "profits" — as distinguished from his eight per cent compensation — on trucks sold through the Chicago branch. He explained that what he meant by "profits" were the dealer's discounts and service charges earned by the Chicago branch.

In the latter part of 1941 Marnon and Boutin discussed the desirability of discontinuing dealerships and setting up factory branches, like the Chicago branch, in their stead. Marnon favored this plan, and it seems to have been agreed upon. Marnon conceded that he was not to participate in the profits of any of the branches.

A dealer's contract was entered into about the middle of 1939 with the Mobilift Company of New York, which was given exclusive distributing rights in eastern New York and certain other eastern states. Marnon, on Boutin's suggestion, got in touch with the men who organized this company and they came to Portland, where the contract was entered into, both Boutin and Marnon participating in the negotiations. Owing to certain special advantages that this dealership offered, a discount of thirty-seven and one-half per cent was allowed instead of twenty-five per cent as in other cases. Marnon agreed that on sales made to the Mobilift Company of New York he would forego five per cent of his eight per cent compensation, while Vaughan was to contribute the remaining seven and one-half per cent to make the additional twelve and one-half per cent discount. On July 11, 1938, Marnon had applied to the United States Patent Office for registration of a trade-mark containing the words "Mighty Midget Mobilift", which was registered on June 27, 1939. Subsequently he registered the single word "Mobilift" as a trade name. He testified that he coined the word as a contraction of "Mobile Load-Lift Truck", and that he gave the organizers of the Mobilift Company of New York permission to use the name. This name was stamped on all trucks manufactured by Vaughan and was used by it on its letter-head and advertising of the machine. The contract of the Mobilift Company of New York was cancelled by Vaughan in February, 1942, and as a result that company sued Vaughan in the United States District Court for the District of Oregon and recovered a judgment for breach of contract.

In the latter part of 1940 Marnon went to Washington and arranged for the sale of some twenty trucks to the Procurement Warehouse, a government agency. In January, 1941, he engaged a man named Larry Cain to establish himself in Washington as the Mobilift representative to secure government contracts. From that time on, due to the fact that this country was preparing for war, with the consequent adoption of the system of governmental priorities on essential materials, Mobilift sales were made in increasing volume to the government and its various agencies, while sales to private individuals dwindled. As will be seen, sales to the government developed into a very large and profitable business. Cain was not a dealer, but an agent working on a commission of fifteen per cent on sales. Dealers into whose territory machines sold to the government were shipped, were allowed a service charge of ten per cent. This ten per cent arrangement applied likewise to the Chicago branch. Eventually, as will appear, this evolution into what became practically a one-customer business led to cancellation of all dealers' contracts, and thereafter Vaughan set up its own service organization, furnishing men to the office of the Quarter Master General for general service purposes. Marnon, according to his testimony, hired the men, but their salaries were paid by Vaughan.

Marnon paid all expenses in connection with the setting up of this Washington agency, and was very active in promoting the government business. Without Vaughan's knowledge Marnon entered into an agreement with Cain by which Cain was to pay him fifty per cent of his commissions. The facts about this secret agreement did not come to light until the trial of the case, and, as a result of the disclosure, the defendant filed an amended and supplemental answer in which it claimed that Marnon was under a duty to account to it for all moneys received by him under such agreement.

The record contains an extensive correspondence between Marnon and Boutin, covering the period from June, 1941, to June, 1942, relative to difficulties encountered in securing priorities, and the need of plant expansion and speeding up of the manufacturing process in order to fill the rapidly increasing government orders. This correspondence is discussed in a section of Vaughan's brief under the head "Marnon's Claim that Vaughan Would Make No Effort to Obtain Sufficient Materials to Keep the Plant Going." Unless the subject matter of the correspondence has a bearing on the contention of Marnon that he and Vaughan were joint adventurers, it must be regarded as irrelevant to any issue in the case.

A dispute between Marnon and Boutin concerning dealers' discounts developed out of the government business. At first all government buying was centered in Washington, but later it became apparent that it was to be decentralized, and, as a result, sales would be made to various agencies of the government in a territory where a Mobilift dealer had exclusive rights under his contract with Vaughan. Thus a question arose as to whether in an instance of that kind Cain or the dealer was entitled to the commission or discount. In March, 1942, Boutin submitted to Marnon a copy of a letter which he proposed to send to Cain confirming the arrangement which Marnon had made with Cain for the payment to the latter of a fifteen per cent commission, but containing this sentence:

"While all dealers have been requested to not solicit government agencies for Mobilift business, they may occasionally make an isolated sale and in any such case, we do not assume responsibility for payment of the above mentioned commission to you."

Marnon, in a letter to Boutin, objected to the inclusion of this language in the letter to Cain because of "the position that it would place Cain in", and continued:

"Write all dealers as follows:

"`From and after 30-60? days from the date hereof, your sale contracts on Mobilift shall be modified and amended to provide a discount of 10% rather than 25% on all sales to Government Agencies'."

On April 18, 1942, Boutin wrote to Marnon enclosing a copy of a letter Boutin had sent to the dealers and which read as follows:

"There is some possibility that the purchases of Government equipment will be decentralized so that the various Depots and Branches will be given the authority to negotiate the purchase of their own equipment at least in certain instances. Therefore, we find it necessary to notify you that after June 1st the discount allowed on all sales to all Government Agencies will be 10% rather than 25% regardless of whether the contract is negotiated through you or direct with us."

Boutin also informed Marnon in this letter that he "was not going to write the letter to Cain eliminating that one paragraph until after we see what reaction we get from the letter to the dealers." He took the position that they had entered into contracts with the dealers before the agreement with Cain was made and that the dealers were entitled to be protected, and, further, that, since the war would end sometime, they should look to the future and so conduct the business as to have dealers when peace came and government business had ceased. Marnon objected vigorously in a letter dated April 29, 1942, saying, in reference to the letter which Boutin had sent to the dealers:

"First, let me say that wasn't what I told you to write. I said nothing about telling the dealers that there was a possibility Government purchase(s) would be decentralized. I wrote you an exact quotation which, if you had mailed it to the dealers, would have been a short and just as conclusive a method of canceling their present contract and (as?) writing a new one, which would leave you everyway in the clear."

His letter concluded:

"If I must tell Cain that I made an agreement with him (which I cannot back up), then, naturally, that places me in a position where it will be necessary for me either to voluntarily withdraw from Mobilift or depend upon the courts to establish my authority.

"Now, since you and I both agree that this latter procedure is going to be costly to both of us and the only ones who would benefit would be the lawyers and we decide(d) to leave it to your attorney and mine to adjust, then, in the interim and until such adjustment is made, why don't you co-operate with me by assuming that I know what I am doing and agree to the decisions and agreements that I make and not cause all of the confusion and embarrassment which is occasioned by your continually upsetting the apple cart?"

(The decision "to leave it to your attorney and mine to adjust" refers to the dispute which arose at the end of 1941, related below and which led to this litigation.)

The upshot of the matter was that the dealers' contracts were canceled — whether because Vaughan was persuaded of the correctness of Marnon's position or because of the fear of litigation referred to in Marnon's letter it is impossible to say.

We go back now to the end of the year 1939. Marnon finished his first year's work of establishing dealers "$2,000.00 in the red". He testified that at the end of 1939 he asked Boutin about the cost of the machine "because that was the way that I had in my mind that we were going to set it up and the actual basis upon which we were going to perform", and that Boutin told him there was no way to establish the cost since the Mobilift business hadn't been kept separate from Vaughan's other business. No new arrangement was made in 1940, and "they just went ahead on the same basis for another year". In 1940 Marnon's net earnings amounted to about $3,000.00. At the end of that year he again, according to his testimony, brought up the question of the cost of building the machine, and Boutin told him that they did not have a cost because they had been out of production for several months during the course of the year. The sales for 1940 amounted to approximately $191,000.00. The business was carried on in 1941 without any new understanding and Marnon was paid eight per cent, as theretofore. His net for that year was about $25,000.00. About the first of the year 1942, according to Marnon, he again asked Boutin about establishing a cost price and Boutin said:

"* * * that his board of directors had taken cognizance of the fact that the business was getting to be pretty big, they were becoming interested in it, and that they were going to take some definite action at their annual meeting, which was to be held some time in the first part of the year. He intimated that they had some grief in store for me."

Boutin, on the other hand, testified that Marnon asked him many times for cost figures, and that he refused to give them because "we considered it confidential information and we refused to give it to anybody." He denied that in asking for this information Marnon had referred to the written contract.

Boutin's testimony regarding the conversation which Marnon said took place about the first of the year 1942 is to the effect that he knew that Marnon's rate of commission was going to be cut and that he was trying to tell him so; that the discussion lasted all day and into the evening; and that the substance of it was that Marnon thought that the company had no right to cut his commission.

"* * * I thought he was talking about he still wanted 8%, but after several hours it developed that he was talking about the principle of the matter rather than the rate of commission; that we didn't have any right to set his commission at all, and I contended that he was no different than anybody else; that the company could set his remuneration or discharge him or do anything else, the same as they could with me."

Marnon denied that the company had that right, Boutin testified, and asserted "that he had an interest in the truck that was above that of an employee or of an agent, or anything else; it was something tangible in the machine itself." At another point in his testimony Boutin stated, apparently as a reason for cutting Marnon's commission, that by the beginning of 1942 Vaughan had practically only one customer and that was the government. They did not want to establish any more dealers since they had nothing to sell them, and "that his (Marnon's) original job temporarily didn't exist."

After the meeting between Marnon and Boutin at the end of 1941 above described Marnon went back to Chicago, and while there received from Boutin a letter dated January 23, 1942, informing him that Vaughan had come to the conclusion "that the rate (of Marnon's commission) should be reduced to four per cent in view of the fact that the objective in mind at the time the original rate was determined could not be reached or even furthered under the conditions as they exist today." Marnon called Boutin on the phone and threatened to bring suit, but on reflection, fearing the adverse effects of litigation on the business, suggested to Boutin that they try to settle the controversy by arbitration or otherwise. Boutin acceded to this suggestion, and they continued to do business with the question of Marnon's right undetermined. After January 1, 1942, as Marnon testified, the business was carried on in essentially the same way as before the dispute arose.

Under date of January 29, 1942, Boutin, in a letter to Marnon regarding their differences, which, he said, related only to remuneration, wrote:

"In the absence of any special consideration no one is for long going to pay a great deal more to one person for a given commodity when they can or think they can buy the same commodity from someone else. In our particular case, I contend that there is no special considerations and you take the opposite viewpoint. If there is a valid contract in effect then you are right — if there is not, then I am right."

During 1942 the parties and their attorneys met several times in an effort to bring about an agreement, but none was reached.

In 1942 and 1943 the Mobilift business grew to very large proportions. In 1942 Vaughan's net profits, before taxes, were $146,084.00, and in 1943 $461,452.00. Marnon's commissions credited to him by Vaughan at the rate of four per cent amounted to $46,929.00 for 1942 and to $96,811.00 for 1943. In addition, as the Circuit Court found, he received from the Washington agency under his agreement with Cain for a division of commissions, $30,649.00 for the year 1942, and $88,146.00 for the year 1943.

On March 31, 1944, Marnon filed this suit, and on April 10, 1944, Vaughan wrote him, "Your relations as an employee and representative of this company are hereby terminated as of this date."