Land Finance Corp. v. Sherwin Electric Co.

• Decision Date: 08 May 1929
• Citation: 146 A. 72
• Parties: LAND FINANCE CORPORATION v. SHERWIN ELECTRIC CO.
• Court: Vermont Supreme Court

146 A. 72

LAND FINANCE CORPORATION

v. SHERWIN ELECTRIC CO.

Supreme Court of Vermont. Chittenden.

May 8, 1929.

Exceptions from Chittenden County Court: John S. Buttles, Judge.

Action by the Land Finance Corporation against the Sherwin Electric Company. Judgment for defendant, and plaintiff appeals. Reversed and remanded.

See, also, 141 A. 598.

Argued before WATSON, C. J., and POWERS, SLACK, and MOULTON, JJ.

Max L. Powell and Guy M. Page, both of Burlington, for plaintiff.

Charles F. Black and Robert W. Ready, both of Burlington, for defendant.

SLACK, J. This is an action of contract on two trade acceptances drawn by the Autocrat Sales & Distributing Corporation on the defendant, and accepted by it, payable to the order of the drawer, and indorsed by it to plaintiff before maturity. The defense now relied upon is fraud in procuring the acceptances. Trial was by jury, resulting in a verdict and judgment for the defendant.

On April 18, 1925, the defendant entered into a "Special Agency Agreement," in writing, with the Autocrat Sales & Distributing Corporation, hereafter called the company, for the term of one year, and ordered from it seven dishwashing machines to be delivered at earliest convenience. The only description of the machines in the agreement is:

"2 Autocrat Dishwashing Machines Model 'B' (Com.)

"5 Autocrat Dishwashing Machines Model 'A* (Dom.)."

Under this agreement defendant was to furnish a list of names for mailing and advertising. The company agreed to furnish free advertising and supplies, and "by special effort, to sell or cause to sell, goods listed above (the machines in question) within 60 days from arrival of shipment, or * * * take back at prices shown thereon and in accordance with the period of this Agency Agreement any of such goods remaining unsold." At the bottom of the instrument was the following: "Only the written conditions appearing hereon in reference to this order are binding on the Company." The agreement is signed by the company only by its salesman, J. M. McElroy. It contains no provision respecting the manner or terms of payment for the machines. The acceptances, of which there were three, were on separate pieces of paper. They were drawn and accepted at the time the agency agreement was executed and were payable 60, 90, and 120 days after date, respectively.

In compliance with its agreement, defend ant sent the company a mailing list April 23, 1925. Defendant received the machines May 22d, uncrated one of them, and displayed it in its show window, and started newspaper advertising. June 2, it wrote the company asking for advertising matter, and inquired when it expected to start its sales campaign. The company replied the next day that it had sent the advertising matter and that "within a week or so our demonstration and resales man will be with you to carry out our resales plan." Defendant never received the advertising matter, nor did the company send a salesman. The first acceptance was paid when due. Shortly thereafter, the date not appearing, defendant wired the company: "Dishwashing machines arrived May 22—You have cashed our trade acceptance without making any effort to sell the machines. Our bank will refuse further trade acceptances until you sell enough to cover acceptance used and next one due. We have done our part why not do yours." Defendant received no reply to this telegram, and June 24 wired the company: "Courtesy of a reply to our telegram would be appreciated." The day following the company wired that failure to reply to first telegram was an oversight, and wrote that delay in sending salesman was due to the fact that they were tied up elsewhere and that: "We confidently expect to have our man visit you and help you dispose of the machines on hand very soon." No one was sent, however. The second acceptance fell due July 17 and was protested. July 22, the day following the expiration of the time within which the company agreed to sell or cause to sell the machines, defendant wrote the company among other things, as follows: "The sixty days in which you agreed to dispose of these machines has expired and you have not lived up to your contract in any way. * * * We are not going to keep these machines in attempt to merchandise them ourselves. * * * In order to close this matter without further litigation we suggest that you return, to us, the amount of the first trade acceptance on receipt of which we will make immediate shipment of all machines." The next day the company wrote defendant calling its attention to the fact that its agency agreement was for the term of one year, and added: "At the expiration of which time, any machines remaining unsold are subject to return in accordance with the terms of our agreement." It also wrote that it had learned that the second acceptance had been protested, and urged the importance of immediate payment. July 25 defendant wrote the company that its information regarding the protest of the second acceptance was correct, and that it would so remain until the company's long-promised salesman had disposed of a sufficient number of machines to take care of it, and also the acceptance which had been paid. This suit was commenced the latter part of the month following.

Subject to plaintiff's exception that its salesman, McElroy, had no authority to extend the limitation of the printed contract, that he could not by parol vary or enlarge the terms thereof, Mr. Sherwin, defendant's representative with whom the negotiations were had, was permitted to testify, in substance, that McElroy represented that the company desired to establish an agency for the machines, and merely wanted to use defendant's place of business as headquarters in that locality; that defendant would not have to put any effort into the sale of the machines, as plaintiff would send a corps of specially trained salesmen to sell them by new methods which were unknown to defendant; that plaintiff would furnish free certain advertising matter; that all machines not sold within 60 days plaintiff would take back for full credit, which would relieve defendant from any expense; that he showed witness very elaborate photographs of what appeared to be an excellent machine of very heavy gauge metal—14 gauge metal—Amco steel; that he told witness that the machines were very heavy white enameled—baked enamel, wrought iron legs and very heavy casters, that they were a flash switch machine so they could be operated by a one-fourth horse power motor which was to be belted to a bronze shaft on which were welded or brazed a number of spoon-shaped discs; that the photographs displayed by McElroy showed the machines to be all that he claimed for them; that McElroy told him that he wanted the trade acceptances merely as evidence of defendant's good faith to the company, and that, immediately upon receipt of notice that the machines had arrived, plaintiff would send its salesmen to dispose of them; that they would be sold so that none of the acceptances would ever be presented for payment; and that they would not be negotiated because there would be no need of so doing; and that said representations were false and fraudulent.

Since plaintiff treats all of this evidence as standing alike, we so treat it.

That McElroy was the company's agent for the purpose of selling the machines in question cannot be doubted. Not only did it equip him with the necessary outfit to carry on such business, but it accepted the benefit of the business that he did. It held him out to the world as its accredited agent. That it would be answerable for the fraud and deceit which the evidence in question tends to show he perpetrated on the defendant would be equally free from doubt, were it not for the provision of the agency agreement last above quoted, since but for that he was clearly acting within the apparent scope of his employment in what he said and did. Greenough v. United States Life Ins. Co., 96 Vt. 47, 117 A. 332; Jones v. Sherwood Distilling Co., 150 Md. 24, 132 A. 278; Story's Agency, pars. 452, 453; 31 Cyc. 158; 2 C. J. 484. How does that provision affect the admissibility of this evidence under the defense here relied upon. This precise question has never been passed upon by this court. In iEtna Chemical Co. v. Spaulding & Kimball Co., 98 Vt. 51, 126 A. 582, and in Pictorial League v. Nelson, 69 Vt. 162, 37 A. 247, the only cases cited by plaintiff, it was held that a somewhat similar provision precluded the admission of oral evidence to show that the written contract did not embody all of the terms of the agreement. But in those cases the defense was not, as here, that the contract was induced by the fraud and deceit of the agent. While it is held in some cases, among which are Colonial Development Corp. v. Bragdon, 219 Mass. 170, 100 N. E. 633; Cannon v. Burrell, 193 Mass. 534, 79 N. E. 780; Pease v. Fitzgerald, 31 Cal. App. 727, 161 P. 506: and Equitable Mfg. Co. v. Biggers, 121 Ga. 381, 49 S. E. 271, that a provision in such a contract that the principal shall not be liable for representations or agreements, or for representations and inducements, of the agent, not contained in the contract, will bar a showing of fraudulent representations made as an inducement, even when the defense is fraud, it is held otherwise, and on more sound and logical reasoning, we think, in the following cases: Stroman v. Atlas Refining Corp., 112 Neb. 187, 199 N. W. 26; Menking v. Larson, 112 Neb. 479, 199 N. W. 823; Schuster v. North American Hotel Co., 106 Neb. 679, 184 N. W. 136, 186 N. W. 87; Shepard v. Pabst, 149 Wis. 35, 135 N. W. 158; Landfried v. Milam (Tex. Civ. App.) 214 S W. 847; Roseberry v. Hart-Parr Co., 145 Minn. 142, 176 N. W. 175; Jones v. Minks, 188 Ill. App. 45; Jones v. Bankers' Trust Co. (D. C.) 239 F. 770. See Land Finance Corporation v. Grafton Co. Elec. L. & P. Co. (N. H.) 144 A. 845. Our conclusion, which is supported by the latter cases, is that the provision...