Thomas-Bonner Co. v. Hooven, Owens & Rentschler Co.

• Decision Date: 03 October 1922
• Docket Number: 3601.
• Citation: 284 F. 386
• Parties: THOMAS-BONNER CO. v. HOOVEN, OWENS & RENTSCHLER CO.
• Court: U.S. Court of Appeals — Sixth Circuit

284 F. 386

THOMAS-BONNER CO. v. HOOVEN, OWENS & RENTSCHLER CO.

No. 3601.

United States Court of Appeals, Sixth Circuit.

October 3, 1922

Irving A. Fish, of Milwaukee, Wis., and Edw. P. Moulinier, of Cincinnati, Ohio, for plaintiff in error.

Floyd C. Williams and Stanley Shaffer, both of Cincinnati, Ohio (Shaffer & Williams, of Cincinnati, Ohio, on the brief), for defendant in error.

Before KNAPPEN, DENISON, and DONAHUE, Circuit Judges.

KNAPPEN Circuit Judge.

The parties were aligned below as here. In the year 1914 defendant, a manufacturer of machinery at Hamilton, Ohio began to get out an automatic typewriter, by which a paper record, similar to that used in the player piano, was perforated by the operation of typewriter keys, from which record a theoretically indefinite number of successive reproductions could automatically be made-- each in ribbon typewritten form, as distinguished from carbon and other manifolding processes. In April, 1915, defendant was ready to market the machine. At that time the Thomas-Bonner Company was a partnership, composed of Mr. Bonner, who was an adjuster for a life insurance company, Mr. E. D. Thomas, who was a safety inspector for the same company, and Mr. Carl Thomas, who devoted his time generally to the business of the partnership, which, aside from the insurance business, was that of manufacturers' agents at Milwaukee, Wis. It was selling two articles in Wisconsin and Michigan, one of which was an adding machine.

On May 12, 1915, a written contract was made by which defendant appointed the Thomas-Bonner Company its sales agent for the Milwaukee district, defendant agreeing to deliver to the agent the number of automatic typewriters and accessories for which the agent should obtain orders, and to pay a commission of 25 per cent. on all accepted sales; also to furnish the necessary tools and parts for maintaining service to customers and carrying out the service guaranty free of charge; to do all advertising for the proper introduction of the typewriter and to furnish the agent with advertising literature and stationery for the conduct of the agency without charge to the agent; to make collections on account of sales made by the agent; and to assist the latter in every way possible in the building up of a mutually profitable and satisfactory business. The Thomas-Bonner Company agreed to establish a suitable office or salesroom in Milwaukee for carrying on the district agency business, including the demonstration of the typewriter and accessories; to install therein at least two automatic typewriters and their accessories complete for demonstration purposes, paying defendant $450 for each machine; to make a diligent effort to effect sales, and 'to devote his entire time to the work of and incidental to' the same; to instruct properly the persons designated by the purchaser to learn the operation and care of the machines; to care for, adjust, and make necessary repairs to the same, when called upon by the purchasers during the life of the guaranty (employing a suitable person therefor); to handle all detail and clerical work incident to the operation of the district office; and to conform to defendant's selling rules and prices, in default of which defendant was authorized to abrogate the contract. The Thomas-Bonner Company further expressly agreed to make at least six bona fide sales each month; defendant having the privilege, in the event of failure so to do, to cancel the contract upon 60 days' written notice. The contract was to remain in force from year to year, if the agent complied with the contract provisions, and in the event of disagreement between the parties the agent agreed to resell to defendant the two automatic typewriters to be purchased by the agent at the price it had paid for the same. ^[1] Steps were promptly taken to carry out the contract, an agency office was established, the two typewriters bought by the agency, and two members of the copartnership attended defendant's school of instruction at Hamilton

In June, 1915, the three original members of the firm, a fourth person, recited in one of the papers as then a member of the firm, together with a fifth person, who appears not to have been a partner, formed, under the laws of Wisconsin, a corporation under the same name as the partnership, for the purpose of carrying on the business as manufacturers' agents at Milwaukee, and to this corporation, on June 26, 1915, the four persons referred to as copartners sold and transferred the agency contract in question, together with all other contracts at that time held by the partnership and all its personalty generally. The corporation thereafter carried on the business of the former copartnership, including the performance of the agency contract here in question, but entirely without knowledge by defendant of such change to corporate organization until apprised thereof by this suit, which was begun June 14, 1916. Meanwhile the agency had experienced great difficulty and had incurred much expense in endeavoring successfully to operate the machines, which were found to require replacement or substitution of parts, and in some cases changes in the method of manufacture. Although obtaining a considerable number of prospective purchasers, plaintiff did not succeed in making any effective sales. Defendant accordingly canceled the contract as of February 1, 1916. In this suit, as now presented, the successor corporation seeks damages for breach of an asserted implied warranty of merchantability of the machines. Defendant denied the warranty, and sought to justify its cancellation of the contract by the failure of the agent to make the sales agreed to be made, as well as to devote the entire time of the agents to the business of selling the machines and otherwise.

At the close of the testimony each party moved for a direction of verdict in its favor, and the case was submitted to Judge Hollister, the presiding judge, for decision. Judge Hollister died before the case was decided, and his colleague (Judge Sater) took charge of the case; Judge Hollister's successor being disqualified. The case was thereupon argued before Judge Sater, who, on consideration of the testimony and exhibits presented on the trial before Judge Hollister and the arguments made before Judge Sater, reached the conclusions that plaintiff was not entitled to recover on account of any breach of the contract subsequent to the assignment, for the reason that the contract was not assignable, because involving personal credit and confidence reposed in the members of the partnership, and that there was no breach of the contract previous to the assignment creating a right of action in the partnership. Judgment was accordingly entered for defendant.

Plaintiff contends that the contract was assignable; that a breach of the contract by defendant had already occurred when the assignment was made, entitling the partnership to recovery, under the undisputed evidence, of $10,800, being the agreed commissions on one year's minimum sales of 72 machines; that Judge Sater had jurisdiction to pass only upon questions of law raised by the record, and not on questions of fact; and thus that, if he was of opinion that the evidence was disputed, he should have ordered a new trial because of the sufficiency of plaintiff's evidence to sustain a verdict. The denial of the assignment, made by answer, put on plaintiff the burden of showing a valid assignment. Johnson v. Vickers, 139 Wis. 145, 149, 120 N.W. 837, 21 L.R.A. (N.S.) 359, 131 Am.St.Rep. 1046.

In our opinion the agency contract was not assignable by the partnership to plaintiff corporation without defendant's consent. The contract was purely executory. The relationship between the partnership and the defendant involved personal trust, confidence, and credit. This conclusion is specifically supported by reference to the nature of the services already enumerated required of the partnership. Moreover, the presumption arising under an ordinary agency contract is specially confirmed by what occurred here. Defendant advertised for '17 big caliber men as sales managers,' who must be--

'experienced in the organizing and handling of a selling force, made up in turn of high-grade men; * * * must have strong personality-- be able to meet 'man to man' the biggest and best men of this country and put our proposition before them; * * * must be men of record-- able to show results in the past. We don't want 'comers'-- we want men of proved ability, * * * men who have some money, * * * simply that we consider men who have made money and saved money best suited for our work.'

The Thomas-Bonner Company answered the advertisement, saying, among other things:

'We believe that our firm, though young, measures up to the standard of the German 42-centimeter. We can qualify on all four of your requirements.'

The specific considerations which compel the conclusion that the agency contract involved personal trust, confidence in, and the credit of the individual partners are fully and persuasively elaborated in the opinion of Judge Sater (284 F. 377) and need not be repeated here.

Especially as applied to executory contracts involving personal trust confidence, and credit, the rule that 'every one has a right to select and determine with whom he will contract, and cannot have another person thrust upon him without his consent,' is firmly established, not only by the general law (in the absence of statute), but by the law of the state of Wisconsin. Arkansas Valley Smelting Co. v. Belden Co., 127 U.S. 379, 387, 388, 8 Sup.Ct. 1308, 32 L.Ed. 246; Delaware Co. v. Diebold Co., 133 U.S. 473, 488, 10 Sup.Ct. 399, 33 L.Ed. 674; Burck v. Taylor, 152 U.S. 634, 651, 14 Sup.Ct. 696, 38 L.Ed....