Sears, Roebuck & Co. v. Blade

• Decision Date: 29 February 1956
• Citation: 294 P.2d 140,139 Cal.App.2d 580
• Court: California Court of Appeals Court of Appeals
• Parties: SEARS, ROEBUCK AND CO., a New York corporation, Plaintiff and Respondent, v. Frank R. BLADE, Defendant and Appellant. Civ. 20782.

Page 140

294 P.2d 140

139 Cal.App.2d 580

SEARS, ROEBUCK AND CO., a New York corporation, Plaintiff and Respondent, v. Frank R. BLADE, Defendant and Appellant.

Civ. 20782.

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

Feb. 29, 1956.

Hearing Denied April 25, 1956.

Gerald R. Knudson, Gerald R. Knudson, Jr., Tobias G. Klinger, Los Angeles, for appellant.

John L. Wheeler, Eugene D. Williams, Newlin, Holley, Tackabury & Johnston, George W. Tackabury, Hudson B. Cox, Los Angeles, for respondent.

FOX, Justice.

By its complaint for money had and received plaintiff seeks to recover from defendant, who was its advertising manager, 'kickbacks' that he had received from engravers and printers to whom he let such work on behalf of plaintiff. Judgment was rendered in favor of plaintiff for $66,089.06. Defendant appeals.

Defendant contends that (1) the major portion of the items comprising the judgment was barred by the statute of limitations; (2) the evidence is insufficient to establish the amount of such kickbacks from one of the engraving concerns; and (3) interest was computed on an erroneous basis in view of the prayer of the complaint. We have concluded the judgment must be affirmed.

Defendant was advertising manager of the retail stores in plaintiff's Los Angeles group. He assumed this position in August, 1929, and continued in it (except for one year of military service) until December 10, 1951, when it was discovered that he had been receiving kickbacks from engravers and printers with whom he had been doing business for plaintiff. It was his job to 'produce the advertising.' As an executive of Sears he received bids for the engraving work and generally determined who performed such services for Sears. He approved the bills and allocated the advertising costs among the 12 stores of the group. Payment was made on his approval after going through the auditing department. Defendant handled any complaints that arose with respect to advertising. His immediate superior was the sales promotion manager.

From 1937 to the summer or early fall of 1949 defendant turned all of Sears engraving work to Metropolitan Engravers. ¹ At this latter point defendant began to give some of the engraving business to Barnard & Quinn Company, ² at the suggestion of Mr. Plummer who had become sales promotion manager in March, 1949. During 1950 and 1951 both of these concerns received from defendant substantial engraving business for Sears. From 1937 to December 10, 1951 (when defendant's services were terminated by Sears), defendant received from Metropolitan a total of $34,150. In a little more than two years he received $8,212.65 from Barnard & Quinn. In 1948 defendant began receiving kickbacks from a publishing company for printing that he ordered for Sears. From this source he received $4,270.03. In 1948 defendant received a kickback of $50 from another printing concern. The total of such sums thus appropriated was $46,682.68.

Although the complaint prayed for interest from December 1, 1951, the court allowed interest at 7 percent 'from the first of January of each year next succeeding the date of receipt of such sums for the entire amount received during the preceding year until the date of the decision in this case, to wit, June 16, 1954.' The interest thus calculated amounted to $19,406.38.

Sears did not have actual knowledge of these payments to defendant until it concluded an investigation early in December, 1951. A three hour conference was then held with defendant on the 10th at which he admitted receiving payments from the engravers. The investigation resulted from information that came to President McConnell of Sears from the president of a Chicago bank. This information ³ was passed on to A. T. Cushman, Vice President of Sears, for the Pacific Coast, with the request that he have the matter investigated. This was in the latter part of May, 1951. The investigation followed in due course.

When Mr. Plummer became sales promotion manager in March, 1949, various representatives of engraving conerns called on him in an effort to get some of Sears' business. They represented that they could save Sears a lot of money, do a good job and give good service. When Plummer discussed with Blade the idea of giving their engraving work to two or three companies Blade discouraged it on the ground that Metropolitan was equipped to give a more prompt service than others and this was important to Sears, and that dividing the business would lead to difficulties and delays. Quinn, of Barnard & Quinn, called on Plummer a number of times in his campaign to get part of Sears' engraving business. Finally Plummer suggested an order be placed with Barnard & Quinn on a trial or experimental basis. Sometime thereafter during the summer Plummer directed that Barnard & Quinn be given a portion of the engraving business.

In August, 1949, Quinn told Plummer that there was a payoff to his advertising manager. Plummer asked him if he could prove that. Quinn said, 'No--I can't prove it, but I think it is going on. I'm sure it is going on.' Plummer told him, 'If you have any proof of that accusation I would like to have it.' Quinn never provided him with any additional information on that subject. Plummer did not investigate this charge because Quinn, 'by his own admission had nothing to prove that statement at all.' Plummer just considered Quinn's statement as 'one of the 'outs' trying to get 'in." Plummer regarded Blade as 'a very excellent advertising manager.' He observed that 'Blade lived in rather moderate circumstances,' so far as housing accommodations were concerned, 'at a housing development adjacent to Sears.' He went home for lunch each day; he dressed neatly but not expensively; had no extravagant habits; and drove a car that was not new. He lived 'on the conservative side.' Plummer knew Blade's salary and the approximate amount of his bonus. He did not observe anything in Blade's conduct or manner of living that caused him to become suspicious that he might be taking money that belonged to plaintiff.

In reply to President McConnell's request to Mr. Cushman to investigate the report of payoffs in the purchase of printing (see footnote 3), Mr. Cushman wrote in part: 'About 3 year and a half ago a charge was made by an engraver here in town that people were getting paid off because he was unable to get any business. I investigated this and found there was no foundation to it.' This referred to the accusation Quinn made to Plummer which the latter, according to Cushman, conveyed to him. Cushman testified he had a check made of Blade by the personnel department sometime early in 1945 or 1946. He found that Blade 'lived a normal life, and that he was a good man.' Cushman further testified: 'I had him (Blade) checked that once' (in 1945 or 1946) and 'then I made my own checks as far as the reports were concerned, from then on,' and 'that continued up until' he (Cushman) received the report from President McConnell. Up to that time Cushman had not 'learned anything as a result of his checks' on Blade and he 'had no information of any facts' which caused him to believe or suspect that Blade was taking money from persons with whom he was dealing on behalf of Sears.

Plaintiff's complaint consists of a common count for money had and received. A writ of attachment was issued and a levy made. Defendant plead the two-year statute of limitations, Code Civ.Proc. § 339, subd. 1. The court found that no part of the cause of action was barred by the statute.

In approaching his argument on the statute of limitations, defendant points out that by suing on a common count for money had and received and by causing a writ of attachment to be issued, the plaintiff has elected to waive the tory by which defendant acquired the money in question and to rely on the promise the law implies to pay over to his employer the funds he had wrongfully obtained, Philpott v. Superior Court, 1 Cal.2d 512, 36 P.2d 635, 95 A.L.R. 990; McCall v. Superior Court, 1 Cal.2d 527, 36 P.2d 642, 95 A.L.R. 1019; Steiner v. Rowley, 35 Cal.2d 713, 221 P.2d 9; and that an action on a contract not founded upon an instrument in writing must be brought within two years. Code Civ.Proc. § 339, subd. 1. Defendant therefore concludes that the recovery against him should be limited to payments received by him within the two years preceding December 10, 1951, the date on which this action was filed. He then argues that the statute cannot be tolled to permit recovery of payments received prior to December 10, 1949, since the statute does not expressly so provide, and, as an alternate proposition, he argues that the evidence is insufficient to toll the statute. The cases do not support defendant's position.

It is unmistakeably clear that over the years Blade had fraudulently concealed the facts upon which plaintiff's action and right of recovery are based. Such fraudulent concealment tolls the statute of limitations until plaintiff discovers, or in the exercise of reasonable diligence should have discovered, the facts on which its cause of action is based and then the applicable statute commences to run. The rule is admirably stated in Kimball v. Pacific Gas & Electric Co., 220 Cal. 203, at page 210, 30 P.2d 39, at page 42: 'We are of the opinion, however, that independent of statute, a fraudulent concealment by the defendant of the facts upon which a legal common-law action is based, under the proper circumstances, tolls the statute until discovery, and that upon discovery the statute applicable to that particular action (in this case section 340, subd. 3, of Code Civ.Proc.) then commences to run. There are cases from other jurisdictions, many of which are cited by appellant, which hold that in the absence of a statutory exception, the fraudulent concealment of the fact upon which the cause of action accrues does not toll the statute, but, in our opinion, the cases in...