Overland Machined Products, Inc. v. Swingline, Inc.

• Decision Date: 01 July 1968
• Citation: 263 Cal.App.2d 642,69 Cal.Rptr. 852
• Court: California Court of Appeals Court of Appeals
• Parties: OVERLAND MACHINED PRODUCTS, INC., a California corporation, Plaintiff, Respondent and Appellant, v. SWINGLINE, INC., a New York Corporation, Speedfast Corporation, a New York Corporation, Defendants, Appellants and Respondents. Civ. 31340.

Page 852

69 Cal.Rptr. 852

263 Cal.App.2d 642

OVERLAND MACHINED PRODUCTS, INC., a California corporation, Plaintiff, Respondent and Appellant, v. SWINGLINE, INC., a New York Corporation, Speedfast Corporation, a New York Corporation, Defendants, Appellants and Respondents.

Civ. 31340.

Court of Appeal, Second District, Division 2, California.

July 1, 1968.

Hearing Denied Aug. 28, 1968.

George C. Black, Culver City, for plaintiff.

Newton & Irvin, Beverly Hills, and I Walton Bader, New York City, by Richard B. Newton, Los Angeles, for defendants.

ROTH, Presiding Justice.

Two agreements, one referred to as 'Basic Agreement' and the other as 'Secrecy Agreement,' dated January 8, 1960, were executed by respondent and appellant (collectively referred to herein as Basic Agreement). Under the terms of the Basic Agreement, appellant issued a purchase order calling for the manufacture by respondent of 2500 pneumatic nailers or guns in accordance with appellant's prints and authorizing the manufacture of 500 complete units as well as the manufacture or purchase of all the necessary parts to complete the entire order.

Respondent subsequently received instructions from time to time, oral and in writing, changing and modifying the design of many parts to such an extent that they no longer fit the guns. These parts became obsolete. Mr. LeSage, appellant's former president, testified he had inspected the parts changed and made obsolete by the instructions and had agreed on behalf of appellant to pay for them at an agreed price. In addition to the obsolete parts created by the subsequent oral and written instructions, appellant, to obtain a cheaper quantity price, did per Mr. LeSage, authorize respondent from time to time to manufacture a larger number of parts than were included in the specific purchase order given under the basic contract.

Appellant discontinued relations with respondent. Mr. Rumsey, president of respondent, testified that LeSage told him that appellant was planning on having its goods manufactured by someone else. As a consequence of the severance the obsolete parts, a quantity of incomplete parts and excess parts, all manufactured at a price agreed to by Mr. LeSage, were left with respondent. Respondent, however, was requested to hold up invoicing the excess parts, the incomplete parts and the parts made obsolete by changes in specifications until appellant had completed negotiations with a new supplier.

Respondent, on September 28, 1961, learning that appellant had completed arrangements with a new supplier, tendered to appellant delivery of all the parts, obsolete, excess and incomplete and appellant refused to accept them. Respondent billed appellant for all the parts which it had been instructed to hold in the total amount of $29,609.64.

Appellant refused to and did not pay. Respondent sought recovery in three common counts.

(1) For the reasonable value of the obsolete, excess, complete and incomplete parts;

(2) Open Book Account;

(3) Account stated.

Respondent recovered for obsolete parts in the amount of $6,443.07, and for the complete and incomplete parts in the sum of $19,633.42, totaling $26,076.49 in the aggregate. The trial court did not allow interest.

The evidence shows that many written and verbal authorizations were issued by appellant to modify parts which became obsolete. There was no provision in the basic agreement for the payment of parts so modified. Nor did the basic agreement make any provision for the payment of parts unchanged from specifications but ordered in addition to those called for in the specific purchase orders. These transactions were extraneous to, not included in, and were entirely outside the basic agreement. All the changes in manufacture and all excess parts over and above those called for in specific purchase orders were manufactured at the request of and presumably for the benefit of appellant.

Respondent could not have sued on the basic agreement for recovery of losses on transactions which were not provided in the basic agreement. In these circumstances the language of the court in the early case of DeBoom v. Priestly, 1 Cal. 206, is apposite. '* * * (P)laintiff Can sue upon an implied contract. Indeed, should he sue upon the express contract, he must necessarily fail; because he cannot prove that the work has been done according to the terms of the contract; and he must recover, if at all, upon an implied contract for work and labor and for materials; * * *.'

'Where the entire performance of a special contract has been prevented by one of the parties, or where its terms have been afterwards varied by the agreement of both parties, the action for the amount due for work and labor should be in the form of Indebitatis assumpsit, and not upon the contract.' (Reynolds v. Jourdan, 6 Cal. 108, 111.)

Appellant argues nevertheless that the basic agreement is the exclusive measure of the respondent's right and that common counts are inappropriate as a remedy for damage.

Respondent performed all the work it was specifically authorized to do under the basic contract and pursuant to specific authorizations for work in addition to and extraneous to the basic contract. Appellant's transfer of its work to a new supplier was among other reasons made in the express hope that the new supplier would take over the obsolete and excess parts which appellant had authorized, but which it did not accept and for which it did not pay. Under these circumstances, respondent has properly brought its action in assumpsit predicated upon an oral contract separate and apart from the basic agreement. '(Where a contract) has been Executed * * * and nothing remains but the payment of the price in money by the defendant, * * * the plaintiff may declare generally, using the common counts, or may declare specially on the original contract, at his election.' (Castagnino v. Balletta, 82 Cal. 250, p. 258, 23 P. 127, p. 128.) Although appellant contends that the basic agreement provided for a method to establish prices for obsolete, added, complete and incomplete parts, we find no substantial evidence introduced to prove that it did.

Appellant argues that oral evidence was improperly admitted and that its introduction resulted in the enforcement of a totally different agreement than the basic agreement.

The general rule on parol evidence is that a written agreement is considered to contain all the terms agreed upon by the parties and there can be no extrinsic evidence of the terms other than those in the writing of the parties which alone contains the intent of the contractors. This exclusionary rule, however, is not applicable here. The basic agreement is silent on the method of payment for the additional parts complete and incomplete, or parts rendered obsolete by changes appellant authorized, but not included in specific orders as required by the basic agreement. Respondent's president, Mr. Rumsey, testified over appellant's objection as to the prices of many parts and how they were arrived at. The testimony did not vary, change or alter the terms of the basic contract and it supplied missing information. 'The parol evidence rule is a principle of...