Bailey v. Lisle Mfg. Co.

• Decision Date: 06 November 1916
• Docket Number: 4609.
• Citation: 238 F. 257
• Parties: BAILEY v. LISLE MFG. CO.
• Court: U.S. Court of Appeals — Eighth Circuit

238 F. 257

BAILEY v. LISLE MFG. CO.

No. 4609.

United States Court of Appeals, Eighth Circuit.

November 6, 1916

John G Park, of Kansas City, Mo. (McVey & Freet, of Kansas City Mo., on the brief), for appellant.

Howard J. Clark, of Des Moines, Iowa (Orr & Turner, of Clarinda Iowa, and Clark, Byers & Hutchinson, of Des Moines, Iowa, on the brief), for appellee.

Before SANBORN, Circuit Judge, and TRIEBER and VAN VALKENBURGH District Judges.

SANBORN Circuit Judge.

E. R. Bailey, the defendant below, appeals from a decree which reforms and modifies the written contract of June 4, 1907, between the Lisle Manufacturing Company, a corporation, and himself, so as to deprive him of thousands of dollars, commissions which, according to the terms of the agreement, he had earned as the general sales agent of that company. As such agent he had made a sale of 15,000 cream separators to the William Galloway Company for $30.80 each, upon which he was to receive settlement and payment under the third paragraph of the contract, which provided that as commission or compensation as general sales agent he should 'receive that part of the amount the company received from the sale of separators as is in excess of fifty (50) per cent. of retail list price on all separators he may sell or cause to be sold to the trade or others who may desire to purchase. ' The Lisle Company appealed to the court to modify this clause of the contract on the ground of mutual mistake, and the court by its decree so modified it that it now reads that Bailey shall 'receive that part of the amount the company receives from the sale of separators as is in excess of fifty per cent. (50%) of retail list price on all separators he may sell or cause to be sold to the retail trade,' thereby depriving Mr. Bailey of this commission which the Lisle Company by its written agreement contracted to pay him on the 15,000 separators he sold to the Galloway Company and on all other separators sold to the wholesale trade, or to any others than those engaged in the retail trade. Bailey insists that the evidence was insufficient to sustain the finding of a mutual mistake, and this claim has rendered it necessary to make a patient and thorough examination of the record.

This record conclusively establishes these facts: In 1904 and 1905 Bailey was inventing improvements in cream separators, and had completed a model of a separator in the fall of 1905, which he exhibited to and tested in the presence of C. A. Lisle, the president, and William Orr, one of the directors, of the Powers Manufacturing Company, a corporation, and on November 7, 1905, that company made a written contract with Bailey whereby it agreed to pay him 'that part of the amount they receive which is in excess of fifty per cent. of the list price as a commission on all machines (cream separators) that he may sell, or cause to be sold, to the trade or to others who may desire to purchase. ' At that time the Powers Company was without machinery suitable to make separators, and it proceeded to procure and operate such machinery, and changed its name to Lisle Manufacturing Company. The first separator it made was delivered to a purchaser on June 16, 1906. The separator first made was called the Monarch; that made pursuant to the Galloway contracts was called the Galloway separator. On June 5, 1906, Bailey had completed his improvements in cream separators, and had obtained a patent, No. 795,424, therefor. Thereupon the Lisle Company made a contract with him exclusively to make and sell his patented separator, and to pay him 'a royalty of five (5) per cent. on actual amount received on each sale of all cream separators manufactured and sold under this contract. ' In the fall of 1906 Bailey sold about 6,000 separators for the Lisle Company to the William Galloway Company for $36 each, and on November 17, 1906, the Lisle Company made a written contract with the Galloway Company to make and deliver these separators pursuant to that sale. On May 20, 1907, Bailey sold to the Galloway Company 15,000 cream separators for the Lisle Company at the price of $30.80 each, made a written agreement with the Galloway Company as sales agent of the Lisle Company for the sale and delivery of these separators, and obtained the promissory notes of that company for $12,000 in part payment of the purchase price, and delivered them to the Lisle Company. On June 4, 1907, the Lisle Company made the contract with Bailey which is the subject of this controversy, and which was modified by the court. The first article of that agreement provided that the commission contract of November 7, 1905, and the royalty contract of June 5, 1906, were abrogated and that the agreement of June 4, 1907, should take the place thereof as to all separators manufactured during its life, including those to be made under the Galloway contract for the 15,000 separators. The second paragraph provided that, in consideration of services rendered to the Lisle Company as general sales agent and for the privilege of manufacturing separators under his patents, the Lisle Company would pay him $1 for each separator made and sold by it and that part of 10 per cent. of the annual profit realized by it in excess of $1 upon each separator sold. The third paragraph, which the court modified, provided that:

'The said Bailey is to act on a commission as the general sales agent for the company for the sale of separators, * * * and as commission or compensation he is to receive that part of the amount the company received from the sale of separators as is in excess of fifty per cent. (50%) of retail list price on all separators he may sell or cause to be sold to the trade or to others who may desire to purchase.'

The provisions of this contract of June 4, 1907, regarding the royalty or amount agreed to be paid 'for the privilege of manufacturing cream separators under patents,' it will be seen, differs from the provision of the royalty contract of June 5, 1906, whose place it took, in this: That under the contract of June 5, 1906, he was to receive 5 per cent. of the amount of the sales, while under the contract of June 4, 1907, he was to receive $1 on each separator sold, and the excess of 10 per cent. of the net profits over that amount. But the provision of the contract of June 4, 1907, regarding Bailey's service as general sales agent and the commission the company was to pay him therefor, is in effect the same as that in the commission contract of November 7, 1905, whose place the contract of June 4, 1907, took. During a few days preceding June 4, 1907, C. A. Lisle, the president of the Lisle Company, Edwin Lisle, his son, the secretary of the company, and William Orr, one of the directors of the company, an attorney at law, who sometimes acted as the company's attorney, had been objecting to the payment of the royalty of 5 per cent. on the sales of the 15,000 separators, and negotiating with Bailey to make the contract of June 4, 1907, in the place of the two preceding contracts, and they had finally agreed with him that, instead of the 5 per cent. on the sales owing him under the royalty contract, he should receive $1 for each of the 15,000 separators sold and the excess of 10 per cent. of the profits over that amount. After this agreement had been reached, a meeting of the directors of the Lisle Company was called for June 4, 1907. There were present in the forenoon of that day at the meeting of the directors C. A. Lisle, Edwin Lisle, Orr, Standage, Ferris, Ganiard, and Bailey, and Vice President Woolson. The contract of June 4th had been prepared and was in the hands of the company. C. A. Lisle read it aloud to the gentlemen present, paragraph by paragraph, commented upon it, all had an opportunity to read it, there was a discussion of some of its terms for an hour or two, and then an adjournment until the afternoon, to enable Mr. Woolson, the vice president, who said he did not understand it, to read and study it. At the meeting in the afternoon a resolution was passed by the board, without further discussion or objection, which authorized and directed the proper officers of the company to execute the contract which had been read in the morning, and they did so. After this agreement and the second Galloway contract were made, the Lisle Company made and sold few more Monarch separators, and devoted itself chiefly to the manufacture and delivery under the Galloway contract of a separator approved by that company and called the Galloway separator.

The Lisle Company paid Bailey $1 on each of these separators, but it never paid him any of the excess of the amount of the sales over 50 per cent. of the retail list price which it received for them, or any of the excess of 10 per cent. of its net profits over the amount of $1 per separator, and in 1912 he brought an action to recover these amounts. As by the terms of the contract the company was clearly liable to pay them, and it could not defend the action at law on the ground that it was not bound to do so by that contract, it brought this suit to so modify the contract on the ground of mutual mistake as to relieve it from liability on account of the sales of its separators to the Galloway Company, and to other wholesale dealers, which constituted the great bulk of its sales. The action at law awaits the result of this suit. The facts thus far stated are either undisputed or conclusively established.

The company claimed that before the contract of June 4, 1907, was made Bailey agreed with C. A. Lisle, Edwin Lisle, and Orr that by that contract he would waive his commission of the amount of the sales in excess of 50 per cent. of the retail list price of the 15,000 separators sold to the Galloway Company, and to other wholesale...