Detroit Graphite Co. v. Hoover

• Decision Date: 05 June 1930
• Docket Number: 2425.,No. 2424,2424
• Citation: 41 F.2d 490
• Parties: DETROIT GRAPHITE CO. v. HOOVER et al. (two cases).
• Court: U.S. Court of Appeals — First Circuit

41 F.2d 490 (1930)

DETROIT GRAPHITE CO. v. HOOVER et al. (two cases).

Nos. 2424, 2425.

Circuit Court of Appeals, First Circuit.

June 5, 1930.

John M. Raymond, of Boston, Mass., and James V. Oxtoby, of Detroit, Mich. (Lawrence

E. Brown, of Detroit, Mich., on the brief), for appellant.

Henry B. Cabot, Jr., and John G. Palfrey, both of Boston, Mass. (Charles C. Cabot, and Warner, Stackpole, Bradlee & Cabot, all of Boston, Mass., on the brief), for appellees.

Before BINGHAM, ANDERSON, and WILSON, Circuit Judges.

ANDERSON, Circuit Judge.

These cross-suits arise out of a contract of employment of Hoover by the Detroit Graphite Company, for five years from March 31, 1923. Hoover contends that the contract was broken by the Detroit Company in March, 1926; the Detroit Company contends that it was then ended by mutual agreement; that Hoover then owed the company $11,770.59 for advances made to him under the contract; it brought suit therefor. The jury found for Hoover, in both suits, and assessed his damages for breach of contract at $50,000.

The main questions arise from the company's contentions that the court erred in leaving the construction of the correspondence leading to the termination, to the jury, as a question of fact, and in denying the company's motions for directed verdicts in both suits. Other questions presented arise out of the rulings as to damages.

Hoover is a graduate of the Massachusetts Institute of Technology in 1913. Shortly after he entered the employ of the Detroit Company, a large manufacturer and distributor of paint in Boston and in New York; in 1919 he went, under a written contract, to the Pacific Coast to introduce its business in that section. On March 31, 1923, he made another written contract, out of which this controversy arises.

The contract covered, as Hoover's territory, California, Oregon, Washington, and Alaska. The contract proceeds:

"2. Remuneration:

"(a) Mr. Hoover is to be credited on the net collections from all sales made at the company's list, originating within the territory as follows:

"On paint in barrels selling at $2.00 per gal. or less at rate of 16%.

"On paint in barrels selling at $2.10 to $2.50 per gal. at rate of 15%.

"On paint in barrels selling at $2.51 per gal. up at rate of 14%.

"(b) Divisional Credits: Divisional credits to be issued in proper proportion, based on expense, time and co-operation (Company's decision to be final) on business originating without the territory where paint is shipped into the territory or vice versa.

"(c) Specification paints or other competitive business: Credits will be determined by the Company.

"(d) Paints sold at prices in excess of list: On point sold at prices of list Detroit figures and full delivery costs, the overage is to be credited to Mr. Hoover.

"(e) A statement of all credits, and showing the condition of Mr. Hoover's account, shall be issued on or before the 10th day of each month covering shipments of the month preceding.

"(f) Drawing Account: $1250 per month to be advanced Mr. Hoover in all months that the credit balance in his favor equals or exceeds this amount, against sales credits to be earned, otherwise the monthly drawing account shall be $1,000.00 per month. When the earned credits for any year shall be in excess of moneys advanced to Mr. Hoover, 75% of the excess due him from the company at the close of such year shall be paid — the remaining 25% to be retained by the company at 6% interest and applied against any unearned drawing account in the ensuing year.

"(3) Freight and storage.

"When freight is prepaid the amount of prepayment is to become a charge against Mr. Hoover, except it be covered in the selling price. All paint stored on the Coast is to be the property of the Company and insured by them, the cost of storage and delivery to the purchaser to be assumed by Mr. Hoover.

"(4) Collections:

"All invoices will be rendered from Detroit but in view of time required for transmission of mail, an invoice upon request of purchaser may be rendered by Mr. Hoover on Detroit bill heads per instructions on purchaser's order, and carbon copy mailed promptly to Detroit.

"(5) Credits Extended to Customers:

"These to be subject to the approval of the Company. Where deliveries are made from Coast stock prior to receipt of Company approval of credit extension, one-third of any loss resulting from such delivery or ill advised credit shall be charged to Mr. Hoover's account.

"(a) He is to be furnished with Dun or Bradstreet letters, and in the event of uncertainty will wire Detroit the opinion of these agencies and other references, when he feels that any doubt exists.

"(b) Claims for Loss or Damage: Where claim is to be made from Detroit for loss or damage by transportation companies, warehouse or truckmen — all papers, receipts and affidavits shall be carefully assembled and immediately transmitted to Detroit in proper form by Mr. Hoover.

"6. In consideration of exclusive sales rights in the territory, and remuneration specified, Mr. Hoover agrees to give his undivided time and exclusive effort to the promotion of the Detroit Graphite Company's business for the period of five years from above date and is hereby granted the option of renewing this agreement for a like period upon the same terms or such other terms as he and the Company may then agree upon.

"Mr. Hoover is to establish and maintain suitable office and subagents or selling connections for the proper handling of the Company's business. He is to cover the entire territory in person as may be necessary for its development and operation, and is to assume and pay all expenses of every character."

Under the course of business under the contract, the company paid, on vouchers approved by Hoover, commissions to subagents, freight and storage, cartage charges on the Coast, and his drawing account of $1,000 a month — as a minimum — or, until the fall of 1925, $1,250 a month. Hoover paid from his drawing account his personal, traveling, office and incidental expenses; but the other expenses incurred by him in establishing the company's business on the Pacific Coast were paid by the company and charged up as against his commissions and overages. When in 1925 these charges exceeded the amount of his earned commissions, his drawing account was reduced from $1,250 to $1,000 a month. Hoover agreed that this was the company's right under the contract. At one time the company loaned him $1,000, which was repaid by deducting $100 a month from his drawing account. Business on the Coast was good in 1923 and most of 1924, but fell off in 1925; it improved in 1926, and was excellent during the next two years. This temporary slump in business was the primary cause of dissension and the rupture of the long-term association between the parties.

The crux of this case is whether the contract between the parties was broken by the company, or was terminated by mutual agreement. The court left this question to the jury, instructing them also that, if the company broke the contract, it could not recover in its suit for the advances made on Hoover's account. These rulings are attacked as error. We may start our consideration of the correspondence (relied upon by the company as a cancellation by agreement) between Davis, the company's president, and Hoover, by Davis' letter on March 12, 1926, received by Hoover on March 17 in Los Angeles.

After reference to earlier letters and telegrams, pertaining to the unsatisfactory status of relations under the contract, Davis said:

"I would add here that any disbursements made on your account from March 1 will be charged against your drawing account allowance for this month."

This was plainly inconsistent with the company's obligation under the contract; Hoover might have treated it as a breach, for he was entitled to a minimum drawing account of $1,000 a month, whatever the status of the commission account and whether or not he was ultimately liable for the advances made by the company to his subagents and for other expenses. To this Hoover replied by telegram March 17:

"Recognize now your desire to force my resignation by your handling March check and general attitude. I am entitled to advance notice relative your decision covering March funds, and assuming wires had fully covered discussion as doing business as usual; had counted upon check for one thousand. In view your expressed wish I agree mutual cancellation of contract, provided you will wire balance of five hundred dollars due me for March. Wire answer at once please."

Construing this telegram in the light of the surrounding circumstances, it is not perfectly clear, in at least two particulars: (1) Hoover takes his position on the theory that Davis is forcing his resignation. (2) The phrase "I agree mutual cancellation," etc., is, at least in the light of the conflicting views as to his personal liability for advances, doubtful. The doubt becomes greater when we consider the subsequent telegrams. Davis replied March 18:

"For company I accept your proposal that contract between us be cancelled provided we send you five hundred dollars additional on March drawing account which is being done and your resignation is hereby accepted. This cancellation is made effective today by your proposal and our acceptance which constitute a mutual agreement. You are of course to reimburse us for debit balance which your account shows either cash or in some manner to be agreed upon. You well know that there has been no desire to force your resignation but on the contrary repeated expressions of confidence and desire that you should continue with us."

The $500 was sent, but Davis added — to what otherwise might be construed as a flat acceptance of an offer from Hoover to cancel — the following:

"You are of course to reimburse us for debit balance which your account shows either cash or in some manner to be agreed upon."

If Hoover's "mutual cancellation" on...