Kinzbach Tool Co., Inc. v. Corbett-Wallace Corporation

• Decision Date: 04 March 1942
• Docket Number: No. 7828.,7828.
• Citation: 160 S.W.2d 509
• Parties: KINZBACH TOOL CO., Inc., v. CORBETT-WALLACE CORPORATION et al.
• Court: Texas Supreme Court

Page 509

160 S.W.2d 509

KINZBACH TOOL CO., Inc., v. CORBETT-WALLACE CORPORATION et al.

No. 7828.

Supreme Court of Texas.

March 4, 1942.

Rehearing Denied April 8, 1942.

Error from Court of Civil Appeals for First Supreme Judicial District, Harris County.

Suit by the Kinzbach Tool Company, Inc., against the Corbett-Wallace Corporation and G. E. Turner to establish a trust against the amount of a commission to be paid by the first-named defendant to the last-named defendant, which suit was consolidated with a suit by the Corbett-Wallace Corporation against the Kinzbach Tool Company, Inc., to recover the amount alleged to be due under a contract involving sales rights to a patented tool known as a "whipstock", wherein the defendant filed a cross-action. To review a judgment of the Court of Civil Appeals, 145 S.W.2d 235, reversing the judgment of the district court in favor of the Corbett-Wallace Corporation, the Kinzbach Tool Company, Inc., brings error.

Judgments of the Court of Civil Appeals and the district court reversed and the cause remanded with instructions.

Kayser, Liddell, Benbow & Butler, Frank A. Liddell, and Hardway, Woodruff & Austin, all of Houston, for plaintiff in error.

Sewell, Taylor, Morris & Connally, of Houston, for defendant in error Turner.

T. J. Stovall and W. F. Tarver, both of Houston, for defendant in error Corbett-Wallace Corporation.

CRITZ, Justice.

The pertinent facts of this case, as presented by the record, viewed in the light of the trial court's findings and judgment, are as follows:

This suit grows out of a transaction had between Kinzbach Tool Company and the Corbett-Wallace Corporation, both private corporations. For convenience, we will hereinafter refer to the Corbett-Wallace Corporation as Corbett, and to Kinzbach Tool Company as Kinzbach. During the time here involved, Kinzbach and Corbett were engaged in the oil field tool business in the City of Houston, Texas. In March, 1937, Corbett was owner of a sales right contract on a patented tool called "whipstock." Corbett decided that it would make an attempt to sell such contract right to Kinzbach. E. B. Corbett, was the president of Corbett and its majority stockholder. Robert Kinzbach was the vice president of Kinzbach. E. B. Corbett and Robert Kinzbach were unfriendly with each other. About March 1, 1937, E. B. Corbett sent word to one G. E. Turner, an employee of Kinzbach, that he wanted to see him. E. B. Corbett knew that Turner was an employee of Kinzbach. In response to E. B. Corbett's message, Turner went to see him. At such meeting E. B. Corbett told Turner that Corbett wanted to sell the whipstock contract to Kinzbach. Corbett then told Turner to see what he could do, and come back and report. In this interview Corbett agreed to pay Turner a commission if the whipstock contract was sold to Kinzbach. Also, in this interview Corbett informed Turner that it wanted $20,000 for the whipstock contract, and would pay Turner a commission out of that figure. In such interview Corbett instructed Turner not to mention to his (Turner's) employer, Kinzbach, what the whipstock contract could be bought for. The general trend of this conversation between E. B. Corbett and Turner was that Turner was given to understand that Corbett wanted to get as much as possible from Kinzbach for the whipstock contract, and would not take less than $20,000 for it. Turner was cautioned not to make known this figure to his employer. Turner was to see what Kinzbach would pay, but was not to give Kinzbach any information as to what Corbett wanted for the contract. Turner was to get Kinzbach to make Corbett an offer, but was not to give him any information as to price. It appears that E. B. Corbett, and also one Wallace, vice president of Corbett, had many interviews with Turner after the first one above detailed, in regard to this deal. In none of these interviews were the instructions to Turner above mentioned altered.

At the times above mentioned, and at all times involved in this case, Turner was a trusted employee of Kinzbach, receiving a regular monthly salary. His duties were to sell Kinzbach's products, and he performed such other services as his employer directed.

After the conversation between E. B. Corbett and Turner, above detailed, Turner approached the officers of Kinzbach about buying the whipstock contract from Corbett. Kinzbach advised Turner that they were interested. Frank Kinzbach, the president of Kinzbach, expressly instructed Turner to find out what Corbett would sell for, but not to quote any price.

It appears that there were several conversations regarding this deal between E. B. Corbett and Wallace, and Turner, on the one hand, and Frank Kinzbach, Robert Kinzbach, and Turner, on the other. At some time during these conversations Turner was advised by Kinzbach that it would probably be willing to pay as much as $25,000 for the whipstock contract.

At none of the conversations between Turner and his employer, Kinzbach, did Turner ever disclose that he was to get a commission from Corbett if the whipstock contract was sold to it, Kinzbach. Furthermore, Turner never in any way disclosed to Kinzbach that Corbett might take $20,000, and even pay him a commission out of that amount. All this was in spite of the fact that Turner had been instructed by his employer to get from Corbett this very information.

After the above events had transpired, and as a culmination of prior events, Frank Kinzbach, acting for Kinzbach, and W. F. Tarver, acting for Corbett, closed a deal by which Kinzbach agreed to pay Corbett $25,000 for this whipstock contract. Under such sale contract Kinzbach paid Corbett $2,500 in cash. The balance, $22,500, was made payable $2,500 January 1, 1938, and $5,000 on June 1st of each succeeding year until the full purchase price was paid. The deferred payments were to bear no interest until maturity. A right of acceleration of installments was provided in the event of default in the payment of any installment for six months. The contract also provided for the usual ten per cent. attorney's fees. It is not shown that W. F. Tarver had any knowledge of any transactions with Turner.

After the above deal was fully consummated, Kinzbach for the first time discovered that Turner was to receive a commission of $5,000 for the sale of this whipstock contract to it. Kinzbach immediately discharged Turner. It appears that prior to the consummation of the deal Corbett had agreed to pay Turner a commission, but had not agreed what it would be. After the deal was closed Corbett paid Turner $500, being twenty per cent. of the $2,500 cash paid by Kinzbach. Corbett further agreed to pay Turner twenty per cent. additional, if and when the balance of the payments were made. This left $4,500 of Turner's commission unpaid. Under their agreement Turner was to get $500 when Kinzbach made payment of the first $2,500 deferred installment, and $1,000 out of each of the four $5,000 deferred installments, when paid.

When the first deferred installment of $2,500 on this contract became due, Kinzbach, having found out about Turner's commission, tendered to Corbett the sum of $1,500 in full settlement thereof. Such tender was made on the theory that the $2,500 installment should be credited by the $500 commission theretofore paid by Corbett to Turner, and by the additional $500 that Turner was to receive out of the proceeds of such first deferred installment. This tender was rejected by Corbett. On June 23, 1938, Kinzbach tendered to Corbett the sum of $2,500, on the condition that Corbett would give Kinzbach a receipt showing that such payment was made and received without prejudice to any rights Kinzbach might have against Corbett and Turner. This additional tender was also rejected by Corbett. In November, 1938, Kinzbach tendered to Corbett the $2,500 installment unconditionally. This tender was also rejected by Corbett.

After the above events, Kinzbach filed suit against Corbett and Turner, seeking to establish a trust against the $5,000 to be paid Turner. Also, on the same day the Kinzbach suit was filed, Corbett filed suit in the same court against Kinzbach, to recover the $2,500 installment due June 1, 1938, with ten per cent. attorney's fees. This installment was past due. Both suits were consolidated and tried as one. Kinzbach answered the Corbett suit, and set up its defenses, and asked for affirmative relief by way of cross-action against both Corbett and Turner.

During the pendency of this suit Corbett filed an amended petition, in which it sought to mature this entire contract with Kinzbach, and sought recovery thereon in the amount of $22,500, with ten per cent. attorney's fees, $2,250.

Kinzbach answered Corbett's amended petition. In such answer Kinzbach pleaded as before, and, in addition thereto pleaded estoppel against Corbett. Corbett asserted the right to mature its entire contract.

Simply stated, Kinzbach prosecutes and defends this suit on the theory that the facts we have recited constitute such wrongful conduct on the part of Corbett and Turner as entitled it, Kinzbach, to recover against them the $5,000 commission paid, and agreed to be paid, by Corbett to Turner. As we understand its pleadings, brief, and argument, Kinzbach in effect contends that it is entitled to have its first $2,500 deferred installment credited by $1,000, being the $500 paid Turner and the $500 he would get out of the proceeds of such installment if paid. Kinzbach then contends that it is entitled to have the four $5,000 installments credited by $1,000 each. Of course, if this is done, it would follow that Corbett's obligation to Turner for $4,500 should be cancelled.

The district court, where the case was tried without a jury, entered the following judgment:

1. Kinzbach was awarded a judgment against Turner for $500, being the commission Corbett had paid Turner on the $2,500 cash payment made by Kinzbach to Corbett.

2....