Vogt Bros. Manufacturing Co. v. Stansbury

304 S.W.2d 787, 1957 Ky. LEXIS 282
CourtCourt of Appeals of Kentucky
DecidedMay 3, 1957
StatusPublished
Cited by2 cases

This text of 304 S.W.2d 787 (Vogt Bros. Manufacturing Co. v. Stansbury) is published on Counsel Stack Legal Research, covering Court of Appeals of Kentucky primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Vogt Bros. Manufacturing Co. v. Stansbury, 304 S.W.2d 787, 1957 Ky. LEXIS 282 (Ky. Ct. App. 1957).

Opinion

CULLEN, Commissioner.

C. B. Stansbury brought action against Vogt Brothers Manufacturing Company to recover upon quantum meruit a reasonable amount of compensation for services alleged to have been performed by him in assisting Vogt Brothers to obtain a contract with the [789]*789United States Air Force for the manufacture of bomb racks. The action was based upon an alleged oral agreement under which Stansbury was to represent Vogt Brothers at Wright-Patterson Air Force Base, in Dayton, Ohio, and which provided that if he was successful in obtaining a contract for them, a “satisfactory settlement” of compensation would be negotiated. Vogt Brothers were awarded a contract to manufacture bomb racks, in the ultimate gross amount of $543,386, but they refused to pay Stansbury a commission, on the grounds that their agreement with him did not cover “prime” contracts, and that he had not rendered any services in securing the bomb rack contract. The jury returned a verdict for Stansbury in the amount of $9,000 (less than two percent of the amount of the contract). Vogt Brothers have appealed from the judgment entered upon the verdict.

The primary contention of Vogt Brothers, on this appeal, is that the agreement under which Stansbury was to be paid a commission contingent upon the procurement of a prime contract with the Air Force was contrary to public policy, and therefore illegal. It is exceedingly doubtful whether they are entitled to raise this question on appeal, because they did not plead the defense of illegality in their answer, as required by CR 8.03, nor did they assert illegality as a ground of their motions for a directed verdict, as required by CR 50.01. However, we have considered the question, and as will be developed, we find the contention to be without merit.

In asserting illegality of the contract, Vogt Brothers first rely upon some early decisions of the Supreme Court of the United States, such as in Providence Tool Co. v. Norris, 2 Wall. 45, 56, 69 U.S. 45, 56, 17 L.Ed. 868, holding that an agreement for compensation to procure a contract from the government for furnishing supplies is contrary to public policy, as a matter of common law. However, since 1941 the public policy with respect to such procurement contracts has been declared by Congressional Acts and Executive Orders, with the result that the question of public policy is no longer governed by common law considerations. See Batesville Casket Co. v. Fields, 288 Ky. 104, 155 S.W.2d 743; Bankers Bond Co. v. Buckingham, 265 Ky. 712, 97 S.W.2d 596.

A vigorous argument is made that the contract violates a 1948 Act of Congress, 41 U.S.C.A. § 153(a), and a 1951 Executive Order of the President, No. 10210, 50 U.S. S.A.Appendix, § 611 note. The Act and the Order both provide that a person entering into a prime contract with an agency of the Department of Defense must warrant that “no person or selling agency has been employed or retained to solicit or secure such contract upon an agreement or understanding for a commission, percentage, brokerage or contingent fee, excepting bona fide employes or bona fide established commercial or selling agencies maintained by the Contractor for the purpose of securing business.1’ (Our emphasis.)

In a number of Federal Court decisions interpreting and applying the foregoing Act, and a previous Executive Order of 1941, No. 9001, 50 U.S.C.A.Appendix, § 611 note, it was held that contingent fee contracts by “free-lance” procurement agents were unenforceable. See Le John Manufacturing Co. v. Webb, 95 U.S.App.D.C. 358, 222 F.2d 48, 51; Mitchell v. Flintkote, 2 Cir., 185 F.2d 1008, 1009; United States v. Paddock, 5 Cir., 180 F.2d 121; Bradley v. American Radiator & Standard Sanitary Corporation, 2 Cir., 159 F.2d 39, 41. However, these cases all involved factual situations arising pri- or to 1950. Regulations of the Department of Defense, issued since 1951 pursuant to authority contained in Executive Order No. 10210, expressly permit contingent fee contracts for persons other than full-time employes, under designated conditions. Code of Federal Regulations, Title 44, sec. 150, 1952 Cumlative Pocket Supplement. Among the conditions are that there be a continuity of relationship between the contractor and the agent, and that the agent [790]*790have adequate knowledge of the products and business of the contractor.

Stansbury was a duly qualified, registered agent of Vogt Brothers. He was recognized by the Air Force as a qualified manufacturer’s representative, and participated in the facilities and services made available by the Air Force for such representatives at Dayton. He maintained a thorough and current knowledge of Vogt Brothers’ plant and its operations. He kept informed as to products in which they were interested, and endeavored to obtain for them subcontracts from other contractors, as well as prime contracts directly with the Air Force. He had maintained a relationship with Vogt Brothers over a considerable period of years. At the same time he also represented Reynolds Metals Company at the Dayton air base.

It appears that Stansbury’s activities as a manufacturer’s representative were carried on entirely in accord with established procedures at the air base for such representatives, and that there was no element of influence-selling involved. It is our opinion that his contract with Vogt Brothers did not violate public policy as expressed in the Congressional Act, the Executive Order, and the implementing regulations of the Department of Defense.

Vogt Brothers maintain that a number of errors occurred upon the trial, in the admission of evidence, in the instructions, and in the argument to the jury. The first alleged error was in permitting Stansbury to testify as to the range of commissions paid to manufacturers’ agents securing contracts from the Air Force. Since the issue in the case was the reasonable value of Stansbury’s services, we think it was entirely proper to show the customary fees paid for this general kind of service. No effort was made to testify as to a specific fee paid a specific representative, or for a specific service. There can hardly be any other criterion for measuring the value of services than what others generally receive for generally similar services. See 58 Am. Jur., Work and Labor, sec. 10, p. 518.

The second alleged error was in permitting Stansbury to testify as to elements entering into the determination of a reasonable fee, which might warrant a fee in excess of two percent. The contention is that Stansbury had agreed to a maximum fee of two percent, in his original negotiations with Vogt Brothers, and therefore evidence tending to support a higher fee was improper. It is true that Stansbury originally submitted to Vogt Brothers a written contract calling for a fee of two percent, but Vogt Brothers rejected this contract, and the ultimate contract entered into was an oral one calling for a “satisfactory” compensation.

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304 S.W.2d 787, 1957 Ky. LEXIS 282, Counsel Stack Legal Research, https://law.counselstack.com/opinion/vogt-bros-manufacturing-co-v-stansbury-kyctapp-1957.