Thomas v. Buttress & McClellan, Inc. , 141 Cal. App. 2d 812 ( 1956 )

ASHBURN, J.

Plaintiff brought an action for the recovery of commissions under an oral contract of employment. The jury returned a verdict in plaintiff’s favor against defendants Buttress & McClellan, Inc., Panelcrete of California, and J. E. McClellan in the sum of $44,723.90. Defendants appeal from the judgment.

The employment agreement, which was made in June, 1950, specified that plaintiff should become sales manager for defendant Buttress & McClellan and as compensation receive a salary of $700 per month, plus a commission of one-fourth of 1 per cent of “gross sales” of the employer.

Of the numerous claims made by appellants as ground for reversal it is necessary to consider only one primary and one secondary contention: (1) That the basis for computation of commissions due plaintiff as such sales manager cannot include the cost of a certain construction job done for Consolidated Vultee Aircraft Corporation (commonly known as Convair), a guided missile plant at Pomona, California; (2) alternatively, that the compensation received by Buttress & McClellan for doing that work is the maximum amount that can be included in the base if plaintiff is entitled to any commission on account of the Convair contract.

At the time the employment contract was made, Buttress & McClellan was engaged in selling “package” or “turnkey” construction jobs, mostly precast industrial plants. Plaintiff was familiar with defendants’ business and its method of conducting the same. Asked to explain his duties as sales manager plaintiff testified: “A broad definition is the general supervision of the sales effort in obtaining business. To detail that, this was a peculiar situation. Buttress & McClellan occupied a very unique situation in the construction industry at that time. They were the pioneer developers of precast construction. That is what is commonly known as tillup. Buttress & McClellan did not participate in competitive bidders in the sense that an ordinary contractor would. They did not function on any jobs unless they made the drawings and did the construction as a package deal. In other words, the common terminology is a turn-key job, and in order to participate in the industrial picture in Los Angeles it was necessary for a certain amount of promotion in order to convinee a client that he would have the best economic picture by entering into a contract with Buttress & McClellan rather than hiring an independent architect and then submitting it to the general construction fraternity for competitive bids. That involved the constant knowledge of the new industrial projects within the area that we chose to work in and the submission of certain data to these people to encourage them to talk to us about the business and for us to make certain preliminary drawings of what we expected to furnish them and a detailed estimate which was generally explained to the client, what we expected to put into a building for a given amount of money. After that procedure had been completed, why, we were usually in the position to talk contract to them, develop a contract and submit it to the owner, with this stipulation, that we would furnish the working drawings for the building and complete the building ready for occupancy for the owner. Certain exceptions that the owner may or may not have furnished certain of his own facilities, but generally speaking it was a turn-key job where he would occupy the facilities when we would have completed them.”

Such a “package” or “turnkey” job required defendant to furnish all engineering and architectural services, supply all labor and material and deliver a completed structure for an agreed price. The agreement with plaintiff was that he should have a salary of $700 a month, plus one-fourth of 1 per cent of defendant’s “gross sales.” These package jobs comprised the whole business of defendant at that time, and the word “sales” necessarily applied to them. Technically they did not constitute sales (see United Iron Works v. Standard Brass Casting Co., 69 Cal.App. 384, 388 [231 P. 567]; 46 Am.Jur. § 12, p. 206; 77 C.J.S. § 2, pp. 584-585; 27 Cal.Jur. § 3, p. 199), but all parties tried the case upon the theory that they were sales. As thus used that word was actually the equivalent of “gross receipts.”

In April, 1951, some nine or ten months after plaintiff’s compensation contract was made, the Oonvair guided missile job became a possibility; a letter of intent was issued on July 20, 1951; that was authority for doing the first $250,000 of work. The contract which eventuated on January 15, 1952 (made effective as of July 20, 1951) was quite different from the package deal that defendant was wont to make. It was a contract for the rendition of services and in no sense a sale. Defendant’s compensation was to be a percentage of the actual cost of the work—under a ‘ ‘ cost-plus-fixed-fee ’ ’ contract—which cost was borne by the United States. A joint bank account was established by Convair and defendant, the funds therein deposited were furnished by the government, and costs of labor and materials were paid out of that account upon the joint signatures of Convair and Buttress & McClellan. Title to materials or other purchases never vested in defendant and it received for itself none of the moneys of the joint account except its fee for supervision of the job. That fee was $435,219.90, based upon a cost of $17,113,703. (When the fee for architectural and engineering services is added the total cost becomes $18,234,244.63.) Clearly there was no sale here. “ A sale is a contract by which, for a pecuniary consideration, called a price, one transfers to another an interest in property. . . . ‘Sale is a word of precise legal import. ... It means at all times a contract between parties to give and to pass rights of property for money which the buyer pays or promises to pay the seller for the thing bought and sold.’ ” (Van Allen v. Francis, 123 Cal. 474, 479 [56 P. 339].) “To constitute a sale of property as distinguished from other agreements or transfers relative to property it is essential that in addition to other elements the absolute or general property in the thing sold be transferred from the vendor to the vendee. ’ ’ (Eggert v. Pacific States Sav. & Loan Co., 57 Cal.App.2d 239, 242 [136 P.2d 822].) The Convair deal was strictly a service contract (22 Cal.Jur. § 9, pp. 82-83; Crowe v. Boyle, 184 Cal. 117, 134 [193 P. 111]), and the problem is to determine whether the word “sale” as used in June, 1950, is to be held to apply to a deal made in 1951 or 1952 which does not possess the characteristics of a sale and which was not contemplated by the parties when dealing in June, 1950.

The intent of the parties to a contract is to be ascertained as of the time the contract was made, not some later date. (Civ. Code, § 1636; Doll v. Maravilas, 82 Cal.App.2d 943, 949 [187 P.2d 885] ; 12 Cal.Jur.2d § 120, p. 328; 17 C.J.S. § 295, pp. 689, 694.) Subsequent unforeseen events cannot be allowed to control in arriving at that intent. In Pendell v. Westland Life Ins. Co., 95 Cal.App.2d 766 [214 P.2d 392], the meaning of the word hernia as used in an insurance policy had to be determined. At page 777, the court said: “Contracts ‘must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting.’ (Civ. Code, § 1636.) (Italics added.) The purpose of interpreting a writing is to ascertain the intention of the parties at the time the writing was made. The action taken by appellant in 1946 with respect to the amount it would pay for specified ‘hernia’ operations has no bearing and does not shed any light on what was intended by the word ‘hernia’ as used by it in its 1943 contract.” Hoffer Oil Corp. v. Hughes, (Tex.Civ.App.) 16 S.W.2d 901, 904: “In construing a contract, the cardinal rule is to ascertain the intention of the parties. Their intention is to be ascertained from the words used in the contract, construed in the light of the facts and circumstances surrounding the parties at the time it was made, and not in the light of subsequent unforeseen facts and circumstances, and in the light of the purposes sought to be accomplished by the making of the contract.” Nelson v. Big Rapids Gas Co., 299 Mich. 284 [300 N.W. 89, 95] : “To determine the intention of plaintiff and defendant it is necessary to examine their situation prior to and on May 20, 1933, when this contract was made. Changing circumstances and events subsequent to the execution of the contract are not controlling factors in determining such intention.” (See also 17 C.J.S. p. 750, § 321.)

There is a conflict in the evidence concerning what happened at the time the Convair deal became a reality in July, 1951. Defendant McClellan asserts that he told plaintiff he would receive no commission on that job as payment of one would be illegal¹ and that plaintiff acquiesced. Plaintiff flatly denies any such conversation or understanding. He asserts that there was no change in the basis of his compensation either at that time or when he went to take charge of defendant’s San Jose office in September, 1951. They jury having found with him, we must accept his testimony in this regard for present purposes. The record is devoid of any evidence pointing to a practical construction by the parties of the word “sale” as applied to a service contract such as the one with Convair. Plaintiff never made any claim to a commission upon that specific job and defendant never paid him on that basis, nor was there any talk or any agreement, express or implied, about it. We therefore have the bald question whether the word “sales” as used in June, 1950, applies to a deal made in July, 1951, or January, 1952, which has none of the earmarks of a sale.

For present purposes it is as if there were no conflict in the evidence upon the subject, plaintiff’s testimony having been accepted as true for purpose of this appeal. The question is one of law. So considered, it appears that there is no basis for applying the word “sale” to the entire cost (to the government) of the Convair job. As the original use of that word signified gross receipts of defendant, and there was no subsequent conversation on the subject, the fair interpretation of the language of the contract as applied to the new factual situation is that it continued to refer to gross receipts of defendant—in this instance the $435,000 fee. The amount of the verdict shows that it was rendered upon the basis of an $18,000,000 sale and is therefore excessive ; to what extent we are not in position to determine.

There seems to be no controlling equity which would justify a more expansive application of the term “sales.” Plaintiff did not produce the customer or in any sense originate the Convair deal; he took no part in the negotiations; before he went to San Jose (from July to September) he took no part in the work, and that was also true after he went to the northern city. The only thing he ever did was to devote about three weeks to compiling some of the information that went into a brochure that was presented to Convair during the early discussions. The matter of commissions is not to be confused with that of salary. Plaintiff was paid $700 a month when in Los Angeles and a like amount when in San Jose. This is not a case of keeping an employee in service and denying an obligation to pay his salary. It is a question of measuring the additional compensation payable to him.

Appellants complain that the court wrongfully refused to instruct the jury upon the subject of what constitutes a sale, their theory being that the Convair job was not a sale and the $18,000,000 cost to the government not a proper basis for computing plaintiff’s commissions. Proceeding upon the tacit assumption that gross sales are the equivalent of gross receipts, counsel for defendants requested instructions to the effect that the $435,000 fee is the measure of plaintiff’s commission on the Convair job if he is entitled to any compensation thereon. Unfortunately, all such instructions requested by defendants were inept and properly denied for that reason.

But the record shows that this case went to the jury without their being advised of the real question to be solved by them. They were not told what constitutes a sale within the purview of plaintiff’s contract, or what was the basis of his compensation, or how it was to be computed. They were merely advised in two instructions that in the event they found plaintiff entitled to recover he should receive “one-quarter of one per cent of all the sales made by the defendants.” The jurors were left to determine for themselves whether plaintiff was entitled to any compensation for the Convair job and were not told how to approach that question. This would be a serious defect in any trial.

It is generally recognized that the trial judge has a right to refuse an erroneous request without having any duty to modify it, and that he has a like right to ignore the absence of definitive or qualifying instructions. But that does not mean that the trial judge’s obligation is limited to that of referee. Such authorities do not dispense with his obligation to see that justice is done and to that end to furnish the jurors with guidance upon the controlling legal principles applicable to the case. Jaeger v. Chapman, 95 Cal.App.2d 520, 525 [213 P.2d 404] : “Of course, although misleading, inaccurate or incomplete instructions need not be modified, it is incumbent on the trial court to give instructions on all vital issues in the case so that the jury will have a full and complete understanding of the law applicable to the facts, and if necessary to modify incomplete instructions or to give ones drafted by the court. (Herbert v. Lankershim, 9 Cal.2d 409, 482 [71 P.2d 220].) ” The following language is quoted from the cited case of Herbert v. Lankershim: “In the interest of a full and complete understanding of the law applicable to the case it was necessary that the jury be instructed on the major subjects raised by the pleadings even if a modification in this or other respects was required to make a more acceptable presentation of the law. We think this is the rule approved by statute and judicial decision where fundamentals are involved, there being no attempt on the part of the author to mislead the court or jury by resorting to equivocally or ingeniously phrased requests, especially in cases where the jury otherwise would be left uninstructed on vital issues of the case.” (P. 482.) Pleasants v. Fant, 22 Wall. (U.S.) 116, 121 [22 L.Ed. 780, 783] : “It is the duty of a court, in its relation to the jury, to protect parties from unjust verdicts arising from ignorance of the rules of law and of evidence, from impulse of passion or prejudice, or from any other violation of his lawful rights in the conduct of a trial. This is done by making plain to them the issues they are to try, by admitting only such evidence as is proper in these issues, and rejecting all else; by instructing them in the rules of law by which that evidence is to be examined and applied, and finally, when necessary, by setting aside a verdict which is unsupported by evidence or contrary to law.”

Volume 53, American Jurisprudence, section 510, page 412: “The law of every ease, in whatever form presented, belongs to the court; and in a jury trial it is not only the prerogative of the judge, but his solemn duty, to declare it, especially where requested so to do. . . . In some jurisdictions the practice statutes and rules of practice impose an imperative duty upon the trial court to charge the jury. It is not to be inferred, however, that the trial court is bound upon its own initiative fully to charge the jury upon all facts and issues in this case; under this rule it is the duty of the trial court to instruct the jury on the basic fundamental rules applicable to the principal facts in issue, and if its charge does not fully cover the facts and issues as counsel conceive them, it is the latter’s duty to request instructions upon specific questions arising. ’ ’ (See also 88 C.J.S. § 299, p. 811; 64 C.J. § 531, p. 592.)

The trial court on its own motion should have instructed the jury that the measure of recovery in the event they should adopt plaintiff’s version of the facts would be one-fourth of one per cent of defendant’s $435,000 fee, so far as the Convair job was concerned. The cause must be reversed. Of course there was a substantial conflict in the evidence upon this vital issue, for defendant McClellan testified in effect that he and plaintiff agreed that the latter should have no commission on the Convair job. Upon a new trial it would be the duty of the trial judge to give appropriate instructions upon the separate theories advanced by the respective parties.

Defendants moved for a new trial upon the grounds of excessive verdict, insufficiency of the evidence, that the judgment is against law, etc. The verdict being excessive as a matter of law the refusal to grant a new trial constitutes reversible error. (20 Cal.Jur. § 73, p. 115.)

The judgment is reversed.

Moore, P. J., concurred.

1 The record does not sustain this assertion of illegality of such a commission.