Schulte v. Ideal Food Products Co.

• Decision Date: 05 April 1927
• Docket Number: 37928
• Citation: 213 N.W. 431,203 Iowa 676
• Parties: A. E. SCHULTE, Appellee, v. IDEAL FOOD PRODUCTS COMPANY, Appellant
• Court: Iowa Supreme Court

213 N.W. 431

203 Iowa 676

A. E. SCHULTE, Appellee, v. IDEAL FOOD PRODUCTS COMPANY, Appellant

No. 37928

Supreme Court of Iowa, Des Moines

April 5, 1927

Appeal from Linn District Court.--F. L. ANDERSON, Judge.

Action at law for $ 3,499.44 as balance of compensation due upon an express oral contract of employment entered into between the defendant and plaintiff. The defense was, in substance, a general denial and a plea of discharge of the plaintiff for a good cause. At the close of the evidence, the trial court directed a verdict for the plaintiff for the full amount claimed. The defendant has appealed.

Reversed.

L. D Dennis, for appellant.

Johnson Donnelly & Lynch and E. C. Barber, for appellee.

EVANS C. J. DE GRAFF, ALBERT, and MORLING, JJ., concur.

OPINION

EVANS, C. J.

The contract sued upon was made, if at all, in January, 1923. The defendant was a going corporation, which had been in business in Cedar Rapids for several years. The contract alleged to have been made with plaintiff was so made between him and one Bennett, on behalf of the corporation. Bennett was used as a witness by the plaintiff. Both Bennett and plaintiff testified to the terms of the contract. These were, in substance, that the plaintiff should receive as his compensation for the year 1923 a sum equal to 3 per cent of the gross business to be transacted in that year. Such gross business amounted to approximately $ 250,000. The amount of compensation claimed amounted approximately to $ 7,500. There were no witnesses to the contract other than plaintiff and Bennett. No record had ever been made of such contract, nor had it ever been reported to the defendant's board of directors. No direct evidence was available to the defendant to contradict the testimony of the plaintiff and Bennett as to the making of such contract. The defendant relied wholly upon evidence of circumstances which tended to show that the contract was unreasonable and improbable, and tended otherwise to impair or impeach the credibility of the testimony of the plaintiff and his witness. Some of the facts and circumstances thus relied on are undisputed in the record; others were elicited upon cross-examination of plaintiff; and others were sought to be thus elicited, but were rejected by the rulings of the court. Still other circumstances were sought to be shown by independent evidence, but were rejected by the rulings of the court. Though a large number of errors are assigned, the major question presented upon this record is whether the court properly directed a verdict for the plaintiff for the full amount of his claim, on the ground that the positive evidence of the plaintiff and his witness was uncontradicted by any direct evidence. In view of the necessity of awarding a new trial, we shall avoid, as far as possible, an undue discussion of the details of the evidence, and devote our consideration to what we deem to be the fundamental error in the case. This was the holding by the court that the facts and circumstances put and offered in evidence by the defendant neither tended to contradict the positive evidence of the plaintiff nor to impair its credibility.

We have consistently held that a mere failure to produce direct contradiction to the testimony of a witness does not necessarily entitle such testimony to be deemed true. It must still stand the test of credibility, in the light of all the circumstances surrounding the transaction. This is particularly true in those cases where, from its very nature, no evidence is available to the adverse party to contradict such testimony. We have also held that it is a rare case where a party having the burden of proof can be entitled to a directed verdict. Circumstances may be produced and relied on to show improbability and unreasonableness and inconsistency, and the nature of such circumstances is as varied, and the scope thereof as wide, as the field of human affairs. Holmes v. Connable, 111 Iowa 298, 82 N.W. 780; Arnd v. Aylesworth, 145 Iowa 185, 123 N.W. 1000; Bremer v. Haag, 151 Iowa 449, 131 N.W. 667; In re Estate of Chismore, 166 Iowa 217, 147 N.W. 297; Young v. McClannahan, 187 Iowa 1184, 175 N.W. 26. The general nature of the facts and circumstances relied upon by the defendant will appear in the following recital: Prior to December 2, 1922, one Strasburger was the majority stockholder and general manager of the business of the corporation. On the date named, he died. Next in interest in the corporation was Bennett, whose wife owned 31 per cent of the stock. At the time of the death of Strasburger, the plaintiff had been in the employ of defendant-corporation as a bookkeeper for the period of one year. His employment began upon a salary of $ 35 per week, which sum was raised to $ 50 per week sometime prior to January 1, 1923. Upon the death of Strasburger, Bennett became the general manager. One of the contentions pressed by the defendant was that, upon the death of Strasburger, Bennett and the plaintiff entered into collusion to manipulate the business of the company to their own benefit, and that they worked together to that end. On or before January 1, 1923, the plaintiff became a stockholder, director, and vice president of the corporation. The extent of his interest as stockholder is not disclosed in the record, but the inferences therefrom are that such interest was nominal. At a directors' meeting on January 1, 1923, the plaintiff offered the following resolution:

"And thereupon, the said directors and officers still being present, A. E. Schulte [plaintiff] presented the following resolution and moved its adoption:

"Resolved, that Henry Bennett be continued as manager for the ensuing year, of the Ideal Food Products Company (Del.) and that he, as such manager, is hereby delegated general powers to manage the business and affairs of the company, to hire employes and fix the pay and salaries thereof, including his salary, and the right to discharge such employes, to purchase goods for manufacturing purposes, to make or authorize sales thereof, and to carry out the method and plans of conducting the company's business adopted in the past, and is authorized to draw checks on moneys deposited in the bank or elsewhere, and to do all things necessary with a view of carrying out the object of the company, and as in his judgment may seem best."

This resolution had been prepared by Bennett. It was carried, and became a part of the record of the meeting, and was put in evidence by the plaintiff in proof of the authority of Bennett to make the contract alleged with the plaintiff. No memorandum or record of this contract was ever made, nor was it ever reported to the directors. The evidence tended to show harmonious co-operation between Bennett and the plaintiff. Friction arose, however, as between them and the other interests. A meeting of stockholders was called by due notice upon May 26, 1923. This call was hostile to Bennett and to the plaintiff. At such meeting, Mrs. Strasburger (widow of Strasburger) was elected as manager, in lieu of Bennett. Immediately preceding the directors' meeting, the plaintiff drew, and Bennett signed, three checks, purporting to be drawn by the company, as follows: On May 25th, one check for $ 2,500, payable to plaintiff, and one for $ 8,000 payable to Bennett; and again on May 26th, one check for $ 10,500, payable to Bennett. These checks were immediately cashed. The defendant claims that the issue of these checks was wrongful and fraudulent. In subsequent litigation, Bennett was required to return $ 13,500 of the amount thus drawn by him. In subsequent litigation also, the plaintiff testified concerning the $ 2,500 check issued to himself, and such testimony figures in the present record.

Owing to contesting litigation, Mrs. Strasburger did not take possession of the office as manager until August 8th. In the meantime, the plaintiff and Bennett continued in charge of the business. On August 8th, the right to conduct the business as manager was judicially awarded to Mrs. Strasburger; whereupon she appeared at the office of the corporation, with her attorney, while plaintiff was in charge thereof, and requested possession of the books of the corporation, and particularly the record of checks drawn. The plaintiff refused to comply with such request. He immediately placed all the records in the safe and locked the same. The combination of the safe was unknown to Mrs. Strasburger and to her helpers, and she finally gained access to the contents of the safe only after a week's effort, and with the help of experts, who drilled the same. Immediately after thus locking the safe, the plaintiff secretly drew another check, payable to himself, for $ 1,500, and later obtained the signature of Bennett thereto. Before it was presented at the bank, payment had been stopped thereon. Because of his conduct here recited, Mrs. Strasburger purported then and there to discharge him. The defendant offered other testimony tending to sustain the rightfulness of the plaintiff's discharge, but the court refused this evidence. In the final ruling, the court held, as a matter of law, that the discharge by Mrs. Strasburger was wrongful, and that the plaintiff was entitled to compensation, based upon the business of the corporation, for the full calendar year of 1923.

It appears also that, from the first of January, 1923, the plaintiff had drawn regularly $ 50 a week, to a sum total of $ 1,550, up to August 8th. One week after his discharge, he was a witness in a case pending between the defendant-company and Bennett, and was interrogated therein concerning his own attitude as to his right of compensation from the defendant-company. On that occasion, he apparently took the...