Miller v. Ranson & Co., 24389
| Decision Date | 06 June 1966 |
| Docket Number | No. 24389,24389 |
| Citation | 407 S.W.2d 48 |
| Parties | Roy G. MILLER, Respondent, v. RANSON AND COMPANY, Inc., Appellant. |
| Court | Missouri Court of Appeals |
C. Thomas Carr, Sheridan, Sanders, Peters, Carr & Sharp, Kansas City, for appellant.
Rodger J. Walsh, Kansas City, Rafter, Biersmith & Walsh, Kansas City, of counsel, for respondent.
This is a suit by the plaintiff below to recover commissions he claims to be due him under his employment contract with the defendant below. Trial to a jury resulted in verdict and judgment for plaintiff in the amount of $8,800.00 and a verdict and judgment for defendant, on its counterclaim, in the amount of $959.90. The defendant has duly appealed to this court from plaintiff's judgment. Plaintiff did not appeal.
The defendant Ranson and Company, Inc. is an investment banking corporation specializing in municipal bonds. It is this specialized aspect of the business that is involved in the case at bar. It appears that in the business of underwriting municipal bonds, as conducted by defendant and the other companies which participated with defendant in the underwriting, that the investment bankers, through their agents and employees known as 'buyers', initiate the idea that a town or city might purchase or construct a natural gas distribution system, or other similar municipal utility. They then try to interest the city officials in such a project, and if they are successful, the investment bankers take the lead in securing the feasibility studies and other necessary preliminaries, at their own expense, and, in effect, lead the cities by the hand up to the point of the issuance of the bonds, which are underwritten or 'bought' by the investment bankers. The investment bankers, such as defendant, then sell the bonds which they have underwritten or bought and make their profits out of the difference between the price they pay the city for the bonds and the price at which they are able to sell such bonds to the investors. When the banker, or more specifically his buyer, has created an interest in the city, an underwriting agreement is signed by the banker and the city officials. The contract is normally binding for three years and provides that the underwriter (the banker) will secure an engineering study to determine the feasibility of the proposed project. If the engineering study reveals that there is a likelihood of being able to secure a gas supply and that there would probably be a sufficient volume of customers to produce enough revenue to make the venture economically sound, then an election is held to authorize the city to issue the revenue bonds. If the bond issue carries, then a commitment to underwrite or purchase the bonds, in the form of a contract, is signed by the city and the underwriter; then application is made to the Federal Power Commission for an allocation of a gas supply from sources in interstate commerce and if such allocation is secured, then the actual contract to buy the bonds is signed, the bonds are issued and purchased by the underwriter. If at any step in this process the city determines, for any reason, not to go forward with the project, it can back out without obligation and the expenses of the engineering survey and other preliminaries are borne by the underwriter. The evidence indicates that about ninety per cent of the projects which are initially investigated by the underwriters fall through at some step before the actual issuance of the bonds.
These companies employ men known as 'buyers' to interest the cities in the project and to carry the project through until it culminates in the bond issue. The also employ men known as 'sellers' who sell the bonds primarily to institutional investors rather than the general public. The buyers are also interested in the sale of the bonds they buy and will do whatever they can to assist in the sale of such bonds. The buyers primarily travel around to the cities to drum up interest in such projects, whereas the sellers primarily stay in the office and attempt to make sales over the telephone, although they do travel to make personal contacts with the investors.
This case involves five bond issues for natural gas distribution systems in the cities of Madison, Perry, Paris, Monroe City and Grant City, all in the State of Missouri.
Late in May of 1960 the plaintiff Roy Miller contacted Jack Ranson, who was vice president of the defendant, and whose father was president of the defendant company, and asked for a job. He had previous experience in buying municipal bonds in the type of business heretofore described. This resulted in a meeting between Jack Ranson and the plaintiff wherein plaintiff was hired by defendant, primarily as a salesman, although in view of his past experience as a buyer, he was given a small territory of seventeen counties in northwest Missouri and some counties in northeast Kansas, in which he was authorized to buy. The terms of his compensation are disputed. He was to receive a salary of $400.00 a month. Plaintiff says this was a salary pure and simple and had no effect upon the payment of commissions. Jack Ranson, who was the only witness for the defendant, and with whom plaintiff had all his contacts with defendant, testified that plaintiff was to be compensated by commission only, but that he was given a 'guarantee' or 'guaranteed salary' of $400.00 a month. In addition to this $400.00, both parties agree that plaintiff received $100.00 a month as a drawing account. In addition to the $400.00 salary and $100.00 drawing account per month, plaintiff was to receive commissions on all bonds that he sold according to a specified schedule, which varied according to the maturity and other details of the bonds sold. This commission was paid or credited to plaintiff at the time of the sale and delivery of the bonds sold. Plaintiff was also to receive a commission of 10% of the net profit of defendant on any bonds which plaintiff bought. Both plaintiff and defendant agree as to the amount of the commission on sales and the commission on bonds bought, although there is some minor dispute as to the exact meaning of commission and that the $400.00 was a salary, and was not to be offset against his commissions.
Defendant's counterclaim was for the balance due on the $100.00 drawing account plus $175.00 advanced to plaintiff for traveling expense not paid back. Plaintiff admitted he owed the amount of the counterclaim. Verdict of such agreed amount was directed by the court and it is not in issue here.
Jack Ranson also testified that it was specifically agreed between him and plaintiff, at the time of plaintiff's employment, that no buying commission would be paid to plaintiff after he left defendant's employ, on any bond issue bought by plaintiff which was not finally concluded before plaintiff left defendant's employ. He stated this was an unusual agreement. Plaintiff denies any such agreement and specifically testified that there was no discussion whatever of what would happen if and when he left the company.
In the fall of 1960, exact date uncertain, but within a few months after plaintiff started to work for defendant, there was a luncheon meeting attended by plaintiff, Jack Ranson for defendant, and John Willhauck, vice president of Luce-Thompson and Company, investment bankers operating in the municipal bond field, at the Phillips Hotel in Kansas City, Missouri. It seems that defendant and Luce-Thompson had cooperated in underwriting municipal bonds in the past; plaintiff had previously been employed by Luce-Thompson and was a personal and business friend of John Willhauck. At this meeting plaintiff and Willhauck proposed to Jack Ranson that plaintiff be permitted to buy municipal bonds throughout the State of Missouri, and that he and Willhauck travel together to initiate these projects and to 'buy' the bonds. Jack Ranson agreed to this and plaintiff and Willhauck did travel together. They contacted the city officials of the above five named Missouri cities, among many others, and were both present and one or both signed the underwriting agreements with each of these five cities on behalf of both defendant and Luce-Thompson as to Madison, Perry and Paris, and on behalf of these two investment bankers plus a third investment banker in the instances of Monroe City and Grant City.
Where two or more investment bankers underwrite one bond issue, one company takes the lead and acts as the 'underwriters' underwriter' or 'manager' and does the detailed work in following the project to conclusion. In each of these instances, John Willhauck for Luce-Thompson and Company acted as the underwriters' underwriter or manager and did 90 to 95% of the work on each of these five projects. His company was given a manager's fee plus an additional percentage of the profits to compensate for this work.
There was testimony that the initial contract with the city, called the 'underwriting agreement', although it contained many contingencies on which the project could be discontinued by the city without obligation, is a firm contract which extends for three years, with the possibility of a further extension, and obligates the city to retain the bankers as...
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