Lowther v. Hays

Citation225 S.W.2d 708
Decision Date09 January 1950
Docket NumberNo. 41241,No. 1,41241,1
PartiesLOWTHER et al. v. HAYS et al
CourtUnited States State Supreme Court of Missouri

Terrell & Taylor, Charles W. Hess, Jr., Guy A. Magruder, Jr., Kansas City, for appellants.

Forest W. Hanna, Jerome Stone, Kansas City for respondents.

DALTON, Judge.

Action to recover commissions earned and due under an exclusive sales agency contract. Defendants filed a counterclaim for damages in the sum of $33,592.21 on account of alleged fraudulent representations of plaintiffs. The cause was tried to the court without the aid of a jury. The court found the issues for plaintiffs on both the cliam and counterclaim. Judgment was entered in plaintiffs' favor for $1300. Defendants have appealed.

Appellants in Kansas City were engaged in the manufacture of a wooden toy gun, known as 'Ranger Automatic.' Respondents operated a sales agency in St. Louis. On June 28, 1945, respondents were given an exclusive sales agency contract to sell this toy on certain commission. At the trial, the parties stipulated that $1300 was due respondents for commissions earned and unpaid. Testimony was heard on appellants' counterclaim. Appellants contend the court erred in finding for respondents on the counterclaim.

The charge of fraudulent representations is based upon a letter dated, August 1, 1945, from respondents to appellants. Appellants alleged that this letter falsely stated the number of orders held by respondents for appellants' toy gun and that appellants relied thereon to their damage.

Appellants' evidence tended to show the formation of their partnership, the signing of a sales agency contract with respondents and the beginning of the manufacture of the toy gun to fill orders supplied by respondents. As between appellant Hays and the respondents, this contract was only a modification and continance of a prior contractual relationship existing since March 1945. Under this contract orders for a great number of toy guns had been obtained and filed with appellants, but few guns had been manufactured or shipped. Appellants reserved the right to sell to outside sources in the event appellants's production tof guns exceeded the sales by respondents. Sales commissions were payable on the 15th of each month following the date of invocie on all accounts paid by that time. All orders that had been secured by respondents prior to June 28, 1945 were to be considered under the new contract.

On July 1, 1945, appellants had on hand orders for about 68,000 guns. Thereafter, cancellations and new orders came in, until some 70,000 unfilled orders were in appellants' hands. On August 1, 1945, respondents wrote appellants the letter on which this suit is based. From this letter, appellants concluded tht respondents had orders on hand for 100,000 guns, in addition to the orders which had been tuned in to appellants. Production schedules to meet these orders were forthwith establised, raw materials were ordered, the pay roll was increased, machinery and facilities were added and appellants began to manufacture the toy gunds as rapidly as possible. The rate of manufacture and shipment increased rapidly, until about the middle of October. Appellants shipped 948 guns in July, 7188 in August, 17,714 in September, 12,919 in October, 5485 in November, and 78 in December. A total of 44,331 guns were shipped, but cancellations totaled 63,540. Between August 1 and October 15 orders for some 33,612 guns had been cancelled and respondents had furnished new orders for only some 5000 additional guns. Appellants caught up with unfilled orders and, on October 18, respondents promised to get additional orders for 15,000 guns. Appellants continued in production until November 1, but new orders were not supplied. It was then too late for appellants to set up their own sales organization and appellants were left with 15,000 finished guns and some 30,000 otheres in various stages of production. There was no sale for these guns and large quantities had to be burned. Much material was on hand that could not be salvaged, or otherwise profitably disposed of, and appellants suffered damages in excess of $11,372, aside from the loss of profits and a sum in excess of $12,000.

Evidence favorable to respondents tended to show that orders for these toy guns were taken beginning in March 1945; that, by August 1, orders for from 100,000 to 110,000 guns had been filed with appellants; that orders for 29,928 guns had been cancelled prior to August 1, largely because of the failure of appellant Hays and his various associates to manufacture and ship the guns within a reasonable time; that between August 1 and August 14 orders for some 17,000 guns were cancelled; that, thereafter, orders for some 16,000 were cancelled; that 'quite a number,' but not all of the calcellations between August 1 and August 14, and later, were due to appellants' failure to deliver; that a lot of advertising had 'played up the war feature' and the saleability of the gun was adversely affected by the cessation of hostilities on 'V.J. Day' (August 14, 1945); that saleability was also affected because the guns were made of wood and buyers did not want wooden guns on their shelves in 1945, when better guns made of metal and plastic would be available; that jobbers and wholesalers had to have such toys on hand by October 1 for delivery to retailers for Christmas sales; that respondents continuously pressed appellants to manufacture and ship guns; that appellants never caught up with avilable orders in their possession, until after the middle of October; that promptly after August 1, and, thereafter, from time to time, respondents furnished to appellants additional orders for 5000 guns; that appellants were never a solvent concern, except during the month of September 1945; that respondents continuously pressed appellants for the payment of commissions due and were unable to collect any commissions, until October 27, 1945, and then only for the amount due from April to October 1, 1945; that respondents were further asked 'to hold the check awhile' because the money wasn't in the bank that, late in October, respondent tried to collect their commissions in toy guns, but appellants were of the opinion their own sales organization would sell the guns on hand and refused to settle on that basis; that respondents' salesmen lost interest because the customers were not getting deliveries and the salesmen were not getting their commissions; that, when respondents pressed for the collection of commissions they only got promises; that respondents visited appellants' plant 'a good many times' in October and December 1945 and, at no time prior to February 11, 1946, was there ever a claim that respondents had misrepresented the number of orders on hand on August 1, nor was there any demand for such additional orders as respondents should have claimed to have had on hand on August first; and that no reference to the letter of August 1st was ever made during the time respondents were pressing for the collection of the past due commissions.

Documentary evidence included the sales agency contract of June 28, 1945 and subsequent correspondence between the parties, usually between appellant Hays and respondent Owens. On July 5, 1945, Owens wrote Hays: 'Cancellations are coming in pretty regularly. I have a great many cancellations as well as a great many orders that I have been holding awaiting your word as to what would happen to Western Toy Company.' On July 25, 1945, Owens wrote Hays as follows: 'I have a great many more orders in my possession for Ranger Automatic Guns but have hesitated to send them on to you until you make some progress with the orders that we have had on hand for some time.' On July 29, 1945 appellants wrote respondents, in part, as follows: 'We have quite a number of guns in process now, which should be ready for continuous shipping beginning Monday or Tuesday. * * * My new partner, Mr. A. N. Ohlfest, called me from Detroit yesterday and said he had located a manufacturer there who wanted to manufacture the Ranger Automatic guns for us. This manufacturer wants a contract to make 500,000 guns for us within the next four months, stating he can produce them at the rate of 5,000 per day until December 1st. Do you think you can sell them this fast? * * * together with at least 3,000 per day to be made by us. If you think this is possible, please advise me at once and if we can get together on the price with this new manufacturer we will negotiate the deal. * * * Our production should be up to at least one thousand per day by the end of the coming week, and we expect to have this production up to 3,000 per day the latter part of August, possibly quicker. We have enough material on hand now for about 30,000 guns, and more coming in.' (It is admitted that production never approached these optimistic estimates. A contract was subsequently made with a Detroit company, but it was cancelled before a single gun was produced.)

On August 1, 1945, Owens wrote to Hays, in reply to the letter of July 29, as follows: 'If I understand your letter correctly, we should be shipping approximately 80 dozen guns per day by the end of this week. That production should undoubtedly step up as the month progresses until you reach the 3,000 per day which you say is possible by the latter part of August. I know that we both agree, and wish it were 3,000 pieces per day right now. * * * I have not made a recent tabulation of the guns that we still have on order but it is my opinion that it is still in the neighborhood of 70,000 pieces. Consequently with this quantity still to be delivered and the many orders that I now have in my possession, it looks as though it will take us at least 90 days to clean up our present orders. I note your comments regarding the connection made by your new partner, Mr. A. N. Ohlfest. Due to the lateness of the season and the fact that we have not made any...

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