Knudsen v. Domestic Utilities Mfg. Co.
| Decision Date | 05 April 1920 |
| Docket Number | 3235. |
| Citation | 264 F. 470 |
| Parties | KNUDSEN v. DOMESTIC UTILITIES MFG. CO. et al. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Rehearing Denied May 17, 1920.
Robert L. Hubbard, of Los Angeles, Cal., for plaintiff in error.
Davis Kemp & Post, R. W. Kemp, and Kemp & Clewett, all of Los Angeles, Cal., for defendants in error.
The plaintiff in error entered into a contract with the Domestic Utilities Manufacturing Company, a corporation, hereinafter called 'the Company,' wherein, in consideration of $5,000 paid to the Company by the plaintiff, the latter sold to her as its agent 1,667 'vacuum clothes washers.' The contract provided that the plaintiff might sell said washers at retail at a price not less than $3.50 for each and it gave her the right to make as many sales at wholesale as she could successfully solicit, upon contracts in every way identical with the contract between her and the Company and it provided that those contracts might be for 50 washers for $150, 167 for $500, 334 for $1,000, 834 for $2,500, or 1,667 for $5,000, and that upon each sale of lots as so specified the plaintiff should receive commissions from the Company of approximately two-thirds of the said specified sums. The contract contained very numerous provisions which, for the purposes of this case need not be alluded to. It was executed on July 7, 1911.
On January 26, 1915, the plaintiff brought her action in the court below, setting up the execution of the contract, alleging that she entered upon the performance thereof, whereby she was put to large outlay and expense in traveling and otherwise establishing places for the sale of the Company's goods in various cities throughout the United States, spending large sums of money in so doing; that she paid to the Company large sums of money for a large number of clothes washers, and directed the Company to ship the same to various persons at various points, but that the washers were never delivered, and the Company failed and refused to perform its contract with the plaintiff, and refused to deliver to her or to ship to her order the 1,667 vacuum washers so bought by her in her contract; that the Company held back and refused and neglected to ship to her order, as required by the terms of the contract, more than 30,000 of vacuum clothes washers which she had sold; that she sold 36,000 of said washers, and the Company never delivered more than 4,000 thereof; that in order to carry out her contracts with customers she was compelled to and did establish manufactories and manufactured washers; and that in fact the Company was not endeavoring to manufacture washers to comply with its contract with her and other contract holders of the same class.
The complaint further alleged that the Company and the individual defendants conspired to cheat and swindle the plaintiff by their paper circulars and booklets and other literature, wherein they represented, and plaintiff was led to believe, that the Company was actually engaged in the manufacture and sale at wholesale and retail of vacuum clothes washers, etc., to its agents and their customers; that such statements and representations and pretenses were false, were sham and deceit, and worked a fraud upon the plaintiff; that the Company was not and never had been actually or really manufacturing for sale or selling, either at wholesale or retail, said washers and other articles, except that it manufactured a few for the mere purpose of show, and not for delivery to buyers or its agents; that the Company has in all manufactured not more than 500,000 washers, whereas it has sold 10,000,000 thereof under the contracts made by it; and that the Company has manufactured washers only as a pretense and as a blind to screen its real business, which was to sell its contracts, such as the contract with the plaintiff, and to induce the original purchasers of said contracts to sell other contracts like them, and subcontracts as provided therein, and to reap a portion of the purchase price of each of said resale contracts for the enrichment of the Company without any intention on its part to deliver the washers ordered by said contracts or subcontracts, and to that purpose the defendants sought by every means to encourage the sale of contracts, and to discourage in every way possible the actual sale of washers; and the plaintiff alleged that she had purchased from the Company and paid to it $13,003, the full price of 12,337 vacuum clothes washers which she had sold to certain named persons in lots ranging from 50 to 1,667, and that the Company received the money, but refused and failed to deliver the washers, or any thereof; that the plaintiff has demanded the repayment of said several sums of money, but the Company has refused and still refuses to repay the same; that the plaintiff established factories with the Company's consent for the manufacture of washers, and that she manufactured the same until wrongfully forbidden to do so by the Company.
The plaintiff further alleged that at the time when she entered into the contract the defendants Crooker and Ellis represented to her that the Company owned patent rights in Canada and other foreign countries giving them the right to manufacture and sell therein the vacuum washers; that the plaintiff believed those statements and relied thereon, and entered into the contract with the intention of selling the washers in some of said foreign countries; that said representations were false, and defendant knew them to be false when they were made; that they were made with intent to deceive plaintiff and induce her to pay her money to the Company; that the plaintiff did not discover that said statements were false until about March, 1912, after she had paid out and expended large sums of money in establishing business in Toronto, Canada, prior to which she had received from the Company permission to manufacture and sell said washers in Canada; that she learned in 1912 that the Company had secured no patents or patent rights in Canada, and had no right to manufacture or sell said washers therein, and that the plaintiff was not permitted by the laws of Canada to import to Canada for sale any of said washers, whereby she suffered large financial loss. The plaintiff set forth in detail the items of her damages,...
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