Store of Happiness v. Carmona & Allen, Inc.

Citation152 Cal.App.2d 266,312 P.2d 1104
CourtCalifornia Court of Appeals
Decision Date03 July 1957
PartiesSTORE OF HAPPINESS, a California Corporation, Plaintiff and Respondent, v. CARMONA & ALLEN, Incorporated, a California Corporation, Defendant and Appellant. Civ. 22136.

Edward I. Gorman, Los Angeles, for appellant.

Abe Richman, Los Angeles, for respondent.

ASHBURN, Justice.

Plaintiff Store of Happiness, a corporation, sued defendant Carmona & Allen, Inc., a corporation, for money had and received and recovered judgment in the sum of $4,592.07. From that judgment this appeal is taken. Defendant cross-complained, pleading common counts, and recovered from May Diamond Company, a corporation, the sum of $2,145. This judgment covers a period of time different from that embraced in plaintiff's judgment and no complaint is made by any party with respect to it. Store of Happiness and May Diamond Company are controlled by the same people, are treated by counsel for both sides as the alter ego of each other and are interchangeably referred to as plaintiff. We shall follow the same pattern.

Plaintiff's suit in assumpsit seeks recovery of secret profits reaped by defendant while acting as its agent in the placing for it of certain spot advertising upon television station KTTV in the city of Los Angeles.

Appellant challenges first the implied finding of agency. 1 In considering a claim of insufficiency of the evidence, which is the present contention, the court of review must accept as established all testimony and all inferences favorable to respondent. Nichols v. Mitchell, 32 Cal.2d 598, 600, 197 P.2d 550. We proceed upon that basis.

The business of defendant is that of operating an advertising agency; it so alleged in its cross-complaint. 'The distinguishing features of agency are its representative character and its derivative authority' (2 C.J.S. Agency § 2a, p. 1026). Wallace v. Sinclair, 114 Cal.App.2d 220, 229, 250 P.2d 154, 160: 'Agency is the relation that results from the act of one person, called the principal, who authorizes another, called the agent, to conduct one or more transactions with one or more third persons and to exercise a degree of discretion in effecting the purpose of the principal. The heart of agency is expressed in the ancient maxim: 'Qui facit per alium facit per se.'' Plaintiff is engaged in the retail jewelry business and advertises through television, newspaper and direct mailing. When its relationship began with defendant's predecessor (Carmona & Allen, a partnership), Mr. Allen told plaintiff's general manager Mr. Leo Westen, he 'wanted to handle our account. * * * he would represent us and we would buy time through him,' referring to television time for spot anouncements. Westen testified that he accepted 'their offer to act as [our] advertising agency.' Plaintiff thereupon wrote the Carmona-Allen agency as follows: 'In accordance with our telephone conversation, we desire as of this date to employ you as our exclusive advertising agency to procure our television spots until such time as either of us desires to terminate this arrangement. We will send you a check on the 10th of the following month for all advertising procured for the proceeding [sic] month in accordance with the arrangement outlined by us.' The corporate defendant herein was but a continuation of the partnership and no further distinction will be drawn between them.

Defendant's activity consisted of placing 'leads' for plaintiff on television and buying for it the necessary spot time. A lead is advertising designed to produce telephonic or mail response which is then pursued through calls made upon the inquirers by a crew of salesmen. The dispute herein is confined to advertising done through television station KTTV. The practice pursued was that defendant would locate and buy from KTTV desirable spot time and would make a contract with it for same. The parties to that contract were defendant and KTTV, Inc. Defendant in each instance would quote a flat price to plaintiff, which was interested in obtaining leads at the lowest possible price; it would accept the offer when satisfactory. The television company would bill defendant for the time so used; it would pay the all and in turn would invoice plaintiff for same and plaintiff would pay it the amount of that invoice.

The contract between defendant and KTTV, Inc., described defendant as the 'Agency.' It recited that 'the Agency desires to avail itself of the said broadcasting facilities on behalf of its client May Diamond Co.' Paragraph (1) says: 'KTTV agrees to furnish the necessary facilities of the aforesaid television station for broadcasting and on behalf of the Agency to broadcast the television programs hereinafter described in behalf of Agency's client for the advertising of its products and services acceptable to KTTV.' It specifies a gross charge per week, an 'Agency Commission' stated in dollars but computed at 15 per cent of the gross charge, and further says: 'KTTV will bill Agency weekly and Agency shall pay the charges within 1 week after the end of the week in which they are incurred. Items of gross charges followed by an asterisk are subject to an agency commission of 15%, if this agreement is with a recognized agency.' Defendant had no goods or other tangibles to sell, nor did it own television time other than that procured for plaintiff; it had only services to offer. The evidence abundantly establishes that defendant was plaintiff's agent and there seems to have been no question about it prior to the trial. It was then vigorously contended that defendant was an independent contractor, but that claim having been rejected by the trial judge and the evidence being sufficient to sustain his finding, the contention no longer can be entertained.

The controversy revolves around the agency commission and certain 'Frequency Discounts.' The 15 per cent commission specified in the contracts between the agency and the televiser is the one customarily paid for such services. The custom was well established, known to plaintiff and relied upon by it when employing defendant as its advertising agent. There was nothing said between the parties at any time about the amount of the commission, so the custom entered into the contract as one of its implied terms. 'Unexpressed provisions of a contract may be inferred from the writing or external facts. Thus it is well settled that a contract need not specify price if it can be objectively determined. * * * In Buckner v. A. Leon & Co., 204 Cal. 225, at page 227, 267 P. 693, it was said: 'It is the general rule that, when there is a known usage of the trade, persons carrying on that trade are deemed to have contracted in reference to the usage, unless the contrary appears; that the usage forms a part of the contract, and that evidence of usage is always admissible to supply a deficiency or as a means of interpretation where it does not alter or vary the terms of the contract,' quoting from Hind v. Oriental Products Co., 195 Cal. 655, 667, 235 P. 438. See Civ.Code, §§ 1655, 1656; Code Civ.Proc. § 1870, subd. 12; 12 Cal.Jur.2d, Contracts, § 140.' California Lettuce Growers v. Union Sugar Co., 45 Cal.2d 474, 482, 289 P.2d 785, 790, 49 A.L.R.2d 496. To the same effect, see Guipre v. Kurt Hitke & Co., 109 Cal.App.2d 7, 14, 240 P.2d 312. Thus defendant's commission was fixed at 15 per cent and no more.

The term 'frequency discount' embraces an allowance made to the advertiser by KTTV as an incentive and reward for continuous use of its facilities, the amount of such discount ranging from 15 per cent to 22 1/2 per cent of the gross. The 'more times the spot is on the larger the discount, up to what is known as end rate' of 22 1/2 per cent. This discount is distinct from the agent's commission. It is given to the advertiser and goes to it so long as the station is used regardless of any change in its advertising agency.

Billing was done by KTTV to the agent only; its invoices showed the gross price, agent's commission, frequency discount and the net amount remaining after deducting both of the last named items. This amount the agent would pay to KTTV. In turn it would bill plaintiff for the gross amount, keeping for itself the 15 per cent commission and the frequency discount.

Plaintiff was ignorant of the practice of KTTV to make such allowances and was never told anything about them until the fact of their receipt by defendant was discovered by Mr. Westen in 1955 after a period of about two years of their secret appropriation by defendant. He then claimed same for plaintiff but without results. When his initial demand was made Mr. Allen said 'that they needed that money to supplement what they were making from us.' Mr. Carmona told Westen 'that he told Bill [Allen] when it first started he should have advised me [Westen] and we should have talked about this.' Later, 'Mrs. Levitt asked Mr. Carmona why wasn't this brought up before, why didn't he say something about it, about getting the frequency discount and never telling us about it, and Mr. Carmona, to quote him, said it was an unanswerable question.'

Plaintiff urges that this was a secret profit received by its agent which belongs to it in equity and in good conscience. Defendant's argument is that it quoted plaintiff a flat spot price in each instance, which plaintiff agreed to pay and did pay. The price so quoted was the gross charge of KTTV. From this circumstance of a flat figure defendant deduces the conclusion that it was an independent contractor and hence there could be no secret profit recoverable by plaintiff. It is shown above that the relationship was that of principal and agent and it follows therefrom that the agent could not keep for itself moneys belonging to the principal without the knowledge and consent of that employer. Defendant was in substantially the same position as a real estate broker who has been...

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