Edwards v. Scott & Fetzer, Inc.

• Decision Date: 09 August 1957
• Docket Number: Civ. A. No. 294.
• Citation: Edwards v. Scott & Fetzer, Inc., 154 F. Supp. 41 (M.D. N.C. 1957)
• Court: U.S. District Court — Middle District of North Carolina
• Parties: C. C. EDWARDS, Plaintiff, v. SCOTT & FETZER, Inc.; Standard Vacuum Cleaner Manufacturing Co., George H. Scott, President, Carl S. Fetzer, Vice-President and Treasurer, John W. Franklin, Agent, Defendant.

154 F. Supp. 41

C. C. EDWARDS, Plaintiff, v.SCOTT & FETZER, Inc.; Standard Vacuum Cleaner Manufacturing Co., George H. Scott, President, Carl S. Fetzer, Vice-President and Treasurer, John W. Franklin, Agent, Defendant.

Civ. A. No. 294.

United States District Court M. D. North Carolina, Durham Division.

August 9, 1957.

N. H. Godwin, Bryant, Lipton, Strayhorn & Bryant, Reade, Fuller, Newsom & Graham, Durham, N. C., for plaintiff.

Spears & Spears, Haywood & Denny, Durham, N. C., Davies, Eshner, Johnson & Miller, Cleveland, Ohio, for defendant.

HAYES, District Judge.

This is an action against an Ohio Corporation, its Ohio subsidiary, its President, Secretary-Treasurer and its Georgia agent to recover $120,000 which plaintiff expended as a guarantor of installment contracts sold by Henry Glenn to Fidelity Bank of Durham.The crucial questions on the motion of defendants to quash service and to dismiss is what type of connection or relation Henry Glenn of Durham or J. W. Franklin of Georgia bore to the defendantScott and Fetzer Company.

This company manufactured and sold Vacuum Cleaners and attachments bearing its trade name "Kirby" in the following manner.It gave Franklin a region embracing a large portion of the Southern states to locate and recommend to it persons suitable for distributors of its product.The contract was in writing.At his expense he was to supervise and service such distributors as the company accepted and for his services he was paid $3 on each machine actually sold to the distributor.The territory for each distributor was specified and he could resell at wholesale or retail, the products only in his territory and at the company's retail price.Franklin had no authority to sell the products or to collect accounts or to otherwise act for or on behalf of the company.

Franklin located and recommended Henry Glenn for distributor in Durham, Person, Orange and Granville counties of North Carolina.The company accepted the recommendation and entered into a written contract with Glenn.He was made a distributor in this area to buy for cash or on C.O.D. with draft attached, F.O.B. Cleveland, Ohio at a fluctuating price per unit-flat $40 plus $10 each for first 18; plus $7 for 19 through 26; $5 each for 27 through 34, plus $2.50 for 35 through 42 and on 43 and over at the base price.The average was less than $50 per unit.The retail price was $123.45.All advertising and expenses of resale were borne by Glenn.The company had no control whatever over his methods or manner of sale except he nor anyone under him was allowed to sell them out of his territory nor at a less price than its designated retail price.He was given the patent and copyright privileges of selling the products and an agreement to save him harmless against any alleged infringement of other patents or trade names.Glenn was at liberty to sell for cash or on time and to adopt whatever name he saw fit but without any authority to act as agent or employee of the company or to incur any liability on its behalf.At no time did the company maintain any place of business in North Carolina or maintain parts or supplies for its products.It sold them outright to the distributor who paid for them before they came into his possession.

If the contract between them was cancelled, the company was to have the privilege of purchasing any new machines on hand at their cost price.

Glenn did a flourishing business between April 1, 1952 and Nov. 21, 1954, the effective date of cancellation.He adopted as his trade name "The Kirby Company".In order to pay cash for his purchases, he entered into a floor plan contract with C. C. Edwards by which Edwards was to put up $45 cash on each unit which was to be stored in a bonded warehouse; Glenn was to pay the balance of the purchase price and the title to the unit vested in Edwards; Glenn could withdraw the unit only by paying Edwards $50; not over 60 units were to be stored at one time and Glenn had to sell at least 30 units each month, thereby yielding a profit to Edwards of $150 per month on the use of $1,350 for thirty days.

The units were bought by Glenn under the terms of his contract with the company.He sold them under his trade name, The Kirby Company.Glenn sold them on a promissory note, secured by chattel mortgage for $151.31, payable in 12 monthly installments.Glenn and Edwards entered into another contract on Feb. 14, 1953 under the terms of which Edwards agreed to guarantee to the bank the payment of each mortgage note upon which he wrote "O.K. CCE".In consideration and payment for this endorsement, Edwards was to have 20% of the proceeds which was to be deposited simultaneously in the bank to the credit of C. C. Edwards, Special.About 3,000 contracts were handled in this manner until in the fall of 1954 when Glenn admitted that 660 of these purchase notes were either in fictitious names, forgeries or fraudulent.Edwards was forced to pay the bank its balance on these fraudulent notes.It is worthy of notice that all of Edwards' dealing with Glenn were with him only and on the theory that Glenn was becoming the absolute purchaser of the company's products the title to which vested in Glenn on payment of the cash price.As security for the $45 advanced by Edwards, Glenn's title was transferred to Edwards, together with possession deposited in a bonded warehouse in the name of Edwards where it could not be removed without the authority of Edwards and by Glenn paying all storage charges.Moreover, Edwards required Glenn to move at least 30 units from the warehouse each month.After the company got its contract price for the unit, it had no title to it or control over it except the contract promise of Glenn to sell it in the named territory and at the company's retail price.

After the title to the machines passed from the company to Glenn, he was in full control of the ways and means of reselling them.It would appear more logically to say he was reselling them for Edwards, or Edwards and himself, than to say he was selling them as agent of the Company.

While there are affidavits by the bank employees as to methods of the Company and Byrd Distributing Co. in 1956 and for two years prior thereto, they do not change the facts as above stated relating to Glenn prior to Nov. 1954.

The evidence of the meeting held in Washington Duke Hotel, on July 18, 1956, at which time Franklin paid $81.07 for 23 luncheons and Scott and Fetzer Co. paid $282.50 for 50 dinners on order of John W. Franklin, at most shows the entertainment by the Company and Franklin of Company's distributors.It does not reach the requisite proof of showing that the Company was present doing business in this state or exercising control over its...