Mechanical Wholesale, Inc. v. Universal-Rundle Corp.

Decision Date19 October 1970
Docket NumberNo. 28564.,28564.
PartiesMECHANICAL WHOLESALE, INC., Plaintiff-Appellee, v. UNIVERSAL-RUNDLE CORPORATION, Defendant-Appellant.
CourtU.S. Court of Appeals — Fifth Circuit

John F. McClure, Chicago, Ill., Tom Ramey, Jr., Tyler, Tex., for defendant-appellant; Arnstein, Gluck, Weitzenfeld & Minow, Chicago, Ill., Ramey, Brelsford, Flock & Devereux, Tyler, Tex., of counsel.

Franklin Jones, Sr., Franklin Jones, Jr., Marshall, Tex., for plaintiff-appellee; Jones, Jones & Baldwin, Marshall, Tex., of counsel.

Before GEWIN, GOLDBERG and SIMPSON, Circuit Judges.

GOLDBERG, Circuit Judge:

This is a breach of contract action on its second appearance before this court. In this second round we strive for finality and affirm the remanded rematch.

The problems here involved had their inception in November, 1964, when Victor Schaffer founded Mechanical Wholesale, Inc. (Mechanical), the plaintiff. Mechanical became the wholesaler in Austin, Texas, for the plumbing fixtures and accessories manufactured by Universal-Rundle Corporation (Rundle), the defendant. Even though it was a relatively new company, Mechanical, apparently at the behest of Rundle's agents, decided to bid on a contract to supply the plumbing fixtures and accessories for a large commercial construction project at Fort Hood, Texas. In December, 1964, Porter Plumbing and Heating of Austin was awarded the sub-contract to install the plumbing fixtures and accessories and Mechanical bid to supply Porter with this equipment. Porter was reluctant to deal with Mechanical because Mechanical was unknown in the trade, but eventually Porter agreed to accept Mechanical's bid if Rundle would guarantee Mechanical's performance on the entire order. The parties disagree over whether or not Rundle through its agents ever agreed to furnish this guaranty. It is clear, however, that when the written guaranty was forwarded to Rundle for signing, Rundle refused to formally execute the contract. As a result Porter cancelled its order from Mechanical and Mechanical lost the Fort Hood job.

Mechanical then brought this suit against Rundle, alleging that due to Rundle's refusal to abide by its agreement to guarantee the Fort Hood contract Mechanical sustained damages for the lost profit on the Fort Hood job and lost profits on other commercial jobs which it would have obtained but for the injury to its reputation occasioned by the Fort Hood incident. The jury found for Mechanical, awarding damages of $137,500, and Rundle appeals. Finding no error in the trial court's conduct of this case, we affirm.

The Contract

Rundle first alleges that the trial court committed reversible error in submitting to the jury the question of whether or not Rundle agreed to guarantee Mechanical's performance on the Fort Hood contract. It is Rundle's position that there was no contract as a matter of law because (1) Rundle refused to sign the written contract and (2) its agents were not authorized to bind the company to any such agreement. Both arguments are without merit. Under Texas law

"* * * where the parties agree that a contract entered into by them orally shall be embodied in a formal writing and signed by them before a binding agreement is consummated * * * there is no binding contract until that has been done, but if they intend their agreement shall be effective from the time when it is made, it will be given effect from that time though they agree or intend that a formal writing embodying its provisions shall subsequently be prepared and signed." Vick v. McPherson, Tex.Civ.App.1962, 360 S.W.2d 866, 868, error ref. n. r. e. (citation omitted).

Here the trial judge properly instructed the jury on the law, and the jury obviously determined that the parties had agreed that Rundle's promise to guarantee the purchase order was to be effective immediately even though it was intended that a written guaranty would later be signed. There is ample evidence to support the jury's verdict in this respect. Its decision must therefore be upheld.

Rundle's second contention is that even if the contract was intended to be effective without a formal written agreement there was no evidence to show that the agents of Rundle had authority to bind the company to such a contract. We find this contention without merit. An agent has the apparent or implied authority to do those things which are usual and proper to the conduct of the business which he is employed to conduct. Campbell Paint & Varnish Co. v. Ladd Furniture & Carpet Co., Tex.Civ.App. 1935, 83 S.W.2d 1095, error dism'd; North Texas Oil & Refining Co. v. Standard Tank Car Co., Tex.Civ.App.1923, 249 S.W. 253, error dism'd; Manhattan Life Inc. Co. v. Stubbs, Tex.Comm'n App. 1921, 234 S.W. 1099. Third parties dealing with agents may presume that the employee has the authority to transact the business he is employed to conduct. Manhattan Life Ins. Co. v. Stubbs, supra. In the instant case it is quite clear that the alleged negotiators, Wallace and Harber, were the district sales manager and regional sales manager, respectively, for Rundle. They...

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