Wilke v. Coinway, Inc.

• Decision Date: 19 December 1967
• Citation: 257 Cal.App.2d 126,64 Cal.Rptr. 845
• Court: California Court of Appeals Court of Appeals
• Parties: Cscar C. WILKE and Kathryn H. Wilke, Plaintiffs and Appellants, v. COINWAY, INC., a corporation, Defendant and Respondent. Civ. 23506.

Page 845

64 Cal.Rptr. 845

257 Cal.App.2d 126

Cscar C. WILKE and Kathryn H. Wilke, Plaintiffs and Appellants, v. COINWAY, INC., a corporation, Defendant and Respondent.

Civ. 23506.

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

Dec. 19, 1967.

Gerald J. Kilday, San Mateo, for appellants.

Ralph Irby White, San Francisco, for respondent.

TAYLOR, Associate Justice.

On this appeal by plaintiffs, Oscar and Kathryn Wilke, from an adverse judgment in their action to rescind for fraudulent representations a contract for the purchase of 30 coin-operated testing devices from defendant, Coinway, Inc., a California corporation (hereafter Coinway), the only question is the sufficiency of the evidence.

The record reveals the following facts. In 1961, plaintiffs, husband and wife, were 68 and 63 years old, respectively, and living in Burlingame. Neither of them had ever had any business experience of any kind. Plaintiff, Oscar Wilke, although employed at that time as a shop superintendent in an aircraft plant, was contemplating retirement; his wife was a homemaker. They were interested in something to supplement their retirement income and began to follow the business opportunity advertisements in the newspapers. Mrs. Wilke answered a blind (telephone number only) advertisement placed by Coinway by calling the number given. The person who answered identified himself as Mr. Hayden, indicated that he did not wish to discuss the matter over the telephone but wanted to discuss the details in person, and made an appointment for the following evening (June 8).

At that time, Mr. Reed and Mr. Williams, then agents and employees of Coinway, called on plaintiffs at their home and showed them a Reactometer. The Reactometer is neither a vending machine nor a coin-operated amusement device but a testing machine to ascertain a person's reflexes and his ability to respond. The player inserts a nickel in the Reactometer. A light goes on and then the player presses a second button that activates a spring device that releases after a certain amount of time, and the player measures his reaction in terms of a chart on the machine.

Reed and Williams explained to plaintiffs that they would have the first and exclusive rights to the Reactometers, and mentioned the total price of $4,968.90 for 30 machines installed at locations selected by Coinway and all that plaintiffs would have to do would be to drive around over the week end in their spare time, collect the coins, and keep the machines in operation by making necessary repairs and replacing worn-out batteries and other parts.

Reed and Williams indicated that there was some urgency in closing the deal as there was a great demand for the machines. Although they could not accept a personal check, the payment of $1.00 in cash would hold the deal until plaintiffs obtained a cashier's check. Accordingly, plaintiffs paid $1.00 down and signed a pink document that they were told was not a contract, but a receipt. In fact, the document they signed on June 8 was a conditional sales contract for equipment for business use, providing for the purchase of 30 Coinway Reactometers, 30 banks of $5.00 worth of nickels to be supplied to each location, 30 spotlights installed, one at each location, and 30 locations subject to approval, for a price of $4,950, plus sales tax of $18.90, a total of $4,968.90.

The following day, June 9, Reed and Williams returned and plaintiffs signed a document entitled 'Purchase Order' for 30 Reactometers, plus an extra one for spare parts at a unit price of $150.92 each, including spotlights, etc., for $4,521.60, plus sales tax of $180.90, making a total cash price of $4,702.50. ¹ They gave Mr. Reed a certified check for this amount. The purchase order signed by both plaintiffs contained the location provision and other provisions set forth below, ² as well as a general disclaimer provision, likewise set forth below. ³ At the time of the execution of the document dated June 9, plaintiffs were given a copy of 'Coinway's Exclusive Reactometer' ⁴ and '10 Reasons,' likewise set forth below. ⁵

Coinway ordered the 30 machines purchased by plaintiffs on June 19 and received them by the end of the month. Thereafter, Coinway employed one Mather, as well as Reed and Williams, to obtain locations for the machines.

Plaintiffs first met Mr. Hayden, the president of Coinway, when they went to the Oakland office of the corporation on June 24. At this time, he demonstrated the use of the Reactometer to them and told them that the locations were being selected. Plaintiff, Oscar Wilke, accompanied a Coinway mechanic to the installation of the first two machines. At the first location, Walt's Place, despite the signed location agreement dated July 28, 1961, the owner would not permit the installation and said he had not heard the entire deal. Although Mr. Hayden testified that all of the machines were installed by August 7, the earliest of the location agreements signed by the bar owners (a necessary prerequisite to the installation of the machines) is dated July 28, 1961, and the latest August 31.

By these agreements, the owner of the location, usually a bar, agreed to permit the installation of a Reactometer in return for 50 percent of the gross receipts. Plaintiffs were to furnish a $5.00 bank of nickels for promotional purposes, to take from the collections sufficient revenue to reimburse the location for all license requirements, and that the agreement could be cancelled by either party at any time.

On August 7, 1961, plaintiffs again went to the Coinway offices in Oakland and signed three location acceptance agreements for the 30 locations provided by defendant. Each of the location acceptance agreements provided that it was understood and agreed that there are no guarantees as to the income from any of the locations. Of the 30 locations, 18 were in San Francisco, 4 in South San Francisco, 2 in Redwood City, 1 in Daly City, and the remaining 5 in San Mateo. Although all of the machines had not yet been installed, plaintiffs were asked to sign the acceptance agreements so that Coinway could pay its location men and so plaintiffs would not again have to make a trip to the Coinway office in Oakland.

Sometime thereafter, the installation of all 30 machines was completed and plaintiffs commenced their collections. From August 8, 1961, until January 19, 1962, when plaintiffs regularly made collections, they received a total amount of $360.10. Since most of the locations were in San Francisco, plaintiffs discovered that the time required to service them was quite extensive. Working all day on Saturdays and Sundays from 8:00 a.m. until dark, without any time off for lunch, they could only cover 8--10 locations a day. Because the amount of time involed was so great and the take so small, plaintiffs could not make their collections more often than once every two weeks. In addition, as all of the premises were bars, they were not open until noon on the week ends and many times machine parts had to be replaced or cleaned, a time-consuming matter.

Plaintiffs continually complained to Coinway about their difficulties with the collections from the machines and were told by Mr. Hayden that they should change the locations of the Reactometers. Hayden testified that in order to make the machines productive, plaintiffs would have to periodically find new locations and that the solicitation of new locations required a sales ability which he thought plaintiffs were capable of at the time they received the machines, but he subsequently realized they did not have. He offered to have his son help them find new locations. He also helped plaintiffs draft an ad to be placed in the newspapers to sell the Reactometers.

On January 13, 1962, plaintiffs made their last collections and then gave up as it was not worth the expenditure of gasoline. However, even prior to that time, some of the Reactometers previously installed had been taken out either at the direction of the proprietor of the premises or because there was no money in the machines. At the time of trial, all but a few of the machines were in plaintiffs' garage, along with 3 others that Hayden gave them when he went out of the Reactometer business. At the time of trial, 3 of the machines had been abandoned at their respective locations.

Hayden testified that he was the president of Coinway, a closed corporation owned by him, his wife and son. He had been exclusively in the coin vending machine business since 1950 but his experience was limited to selling the machines. He promised and gave plaintiffs an exclusive franchise for the Reactometers but did not so state in any of the written agreements. He had no experience with vending or coin machine routes, their servicing, potential income, etc. He had had no experience with Reactometers, but first heard of them from Reed in the spring of 1961. Reed and Williams were employed by him from May until about the end of November 1961 to sell Reactometers. He did not answer plaintiffs' original telephone call but Reed and Williams had the authority to do so.

Coinway sold a total of 50 Reactometers in 3 transactions that were all consummated in June 1961, with the 30 machines sold to plaintiffs representing the major sale as each of the other 2 buyers had purchased 10 machines. Coinway had no complaints from them and he did not know whether they were still in operation at the time of trial. Although not legally obligated to do so under the terms of the contract signed by plaintiffs, Hayden felt morally obligated to spend $200 to defend a licensing proceeding involving one of the machines which had been removed by a law enforcement officer. He was not familiar with 27 of the 30 locations provided for plaintiffs but had paid a location finder $20 for obtaining each one. His total cost for each Reactometer sold to plaintiffs for $150.92 each was about $80, broken down as follows: $45 to...