McCarty v. Mercury Metalcraft Co.

• Court: Michigan Supreme Court
• Writing for the Court: KAVANAGH; ADAMS
• Citation: McCarty v. Mercury Metalcraft Co., 372 Mich. 567, 127 N.W.2d 340 (Mich. 1964)
• Decision Date: 06 April 1964
• Docket Number: No. 31,31
• Parties: Joseph O. McCARTY, Plaintiff and Appellee, v. MERCURY METALCRAFT COMPANY, a Michigan Corporation, Defendant and Appellant.

Page 340

127 N.W.2d 340

372 Mich. 567

Joseph O. McCARTY, Plaintiff and Appellee, v. MERCURY METALCRAFT COMPANY, a Michigan Corporation Defendant and Appellant.

No. 31.

Supreme Court of Michigan.

April 6, 1964.

Cass S. Jaros and Marjorie S. Jaros, Detroit, for defendant and appellant.

Kanneth N. Karmer, Mt. Clemens, Letzer & Letzer, Detroit, for plaintiff and appellee.

Before the Entire Bench.

KAVANAGH, Chief Justice.

Plaintiff sued defendant for unpaid commissions allegedly due plaintiff for services performed under a sales contract with defendant. Defendant filed a cross declaration for reimbursement of expenses, incurred by plaintiff and paid by defendant, the payment of which was allegedly the obligation of plaintiff under said contract. After trial of the case to the circuit court without a jury, the court ordered judgment for plaintiff in substantially the amount claimed and dismissal of defendant's cross claim. From denial of defendant's motion for a new trial on both the declaration and cross declaration, defendant appeals.

On December 5, 1958, the parties executed a contract, effective retroactively from October 30, 1958, which provided for the representation of defendant manufacturing company by palintiff as a sales engineer. The contract, found by the lower court as controlling the disputed relationship of the parties, contained the following provisions pertinent to issues arising from plaintiff's declaration:

(1) The plaintiff was authorized to solicit orders from any firms except 4 specific firms, among which were Chrysler Engineering Division, Highland Park, Michigan, and Chrysler Missile Operations, Van

(2) Defendant would pay plaintiff 5 per

(2) Defendant would pay plaitiff 5 per cent commission on all orders secured by plaintiff and accepted by defendant, payment of said commission to be made on the first of the month following receipt by defendant of payment for any such orders.

(3) Cancellation of the contract could be effected by either party by written notice to the other party 60 days before cancellation date, and defendant was to pay plaintiff commissions due on all orders accepted before date of cancellation.

The issue raised by defendant's cross declaration, in regard to responsibility of plaintiff's expenses, is governed by the following paragraph of the contract:

'It is understood your [plaintiff's] expenses shall be your own responsibility. Should you feel any situation warrants an exception, your requests will be given due consideration. Unless we [defendant] have given authority to the contrary on such specific requests, however, we will not assume or pay any of your items of expense.'

The last paragraph of the contract provided that no further agreements between the parties would be binding unless in writing.

Pursuant to the contract, plaintiff solicited certain orders and was paid commissions thereon. Because plaintiff's income from these commissions was quite meager for the first few months during which the contract was in effect, defendant established for him a drawing account of $50 per week, chargeable against his commission earnings. The amounts drawn were always deducted from commission payments. Defendant also permitted plaintiff to use office space and telephone and authorized an automobile service station to allow plaintiff to charge gasoline and oil to defendant's account. The expenses incurred in connection with plaintiff's use of office, telephone, gasoline and oil were paid by the defendant and, unlike the drawing account funds, were never deducted from commission earnings nor ever requested to be reimbursed until the filing of defendant's cross declaration. In fact, the general manager of defendant company testified that reimbursement would not have been requested had plaintiff not instituted this suit.

The purchase orders for which plaintiff was awarded commissions by the trial court were admittedly procured by plaintiff and accepted by defendant during the term of the contract, and the fact that amendments to the purchase orders were later accepted by defendant does not alter the effect of the contract on payment of commissions for procurement of orders accepted within the term.

Plaintiff admits that the orders in question were for 'production' items rather than 'prototype' items, and that these orders were accepted by defendant with reluctance, caused by the fact that defendant's operational facilities were more suited to the handling of low-volume, high-accuracy 'prototype' work than of high-volume, low-accuracy 'production' projects. Defendant's general manager testified that this reluctance was overcome 'initially' by the desirability of accepting the orders 'as a customer service.' He further testified that 'we were in a position where we couldn't refuse to accept them without jeopardizing our position in future business.'

The problem created by this situation is whether the agreement between the parties called for commissions to be paid to plaintiff for such 'production' orders. The written contract nowhere classified the orders governed thereby, and, in fact, declared that commission would be paid on 'all orders secured by you [plaintiff] and accepted by us [defendant].' Defendant contends, however, that the written contract should not be construed strictly literally on this point, since, defendant alleges, at the time of execution the parties understood it to mean all 'prototype' orders, to the exclusion of 'production' orders, and that plaintiff was compensated for the orders in question through a later agreement providing for payment of commissions on orders specifically excepted from the written contract, namely, Chrysler Engineering and Chrysler Missile orders.

Plaintiff contends, on the other hand, that the words 'all orders' are to be construed literally, because that was the intent of the parties at time of execution and because the contract was drawn by defendant, against whom its wording should, therefore, be construed strictly. Plaintiff further points to the fact that the Chrysler account conmmissions were first paid to him long before the 'production' orders came into controversy, and alleges that the payment of the Chrysler account commissions was rather another attempt by defendant to provide adequate compensation to plaintiff.

On July 18, 1960, plaintiff terminated the contract by sending to defendant written notice thereof, effective immediately. Since the contract provided for 60 days' notice of termination, the premature termination constituted breach of the contract. Defendant pleaded this breach as a bar to plaintiff's suit. The trial court ruled that since defendant's proper remedy for breach was a claim for damages thereon, the absence of such a claim made the breach immaterial to determination of the issues actually raised. Defendant contends on appeal that the trial court erred in so ruling, and attempts to support this position by citing Jones v. Berkey, 181 Mich. 472, p. 480, 148 N.W. 375, 378, which adopted this general rule:

"He who commits the first substantial breach of a contract cannot maintain an action against the other contracting party for a subsequent failure on his part to perform."

That case and this Court's other decisions on that point indicate that the words 'substantial breach' in the ruling must be given close scrutiny. Such scrutiny discloses that the application of such a rule can be found only in cases where...