Opinion
No. 42507.
March 10, 1952. Motion for Rehearing or to Transfer to Court En Banc Denied April 14, 1952.
APPEAL FROM THE CIRCUIT COURT OF JACKSON COUNTY, THOMAS R. HUNT, J.
Lyman Field, Clay C. Rogers and Rogers, Field Gentry, all of Kansas City, Robert R. Hasty, Wichita, Kan., for appellant.
Richard S. Righter, Robert D. Youle and Lathrop, Woodson, Righter, Blackwell Parker, all of Kansas City, Henry A. Gardner, Jr., Chicago, Ill., for respondent.
Plaintiff-appellant Lusk (herein called plaintiff) sued defendant-respondent Lyon Metal Products, Inc. (herein called defendant), for commissions allegedly due under a written contract. Initially, the trial court directed a verdict for plaintiff for $23,257.10, and, in the jury's discretion, interest thereon. The verdict was for that amount and $2,000 interest, a total of $25,257.10. Judgment was entered accordingly. Thereafter, the trial court, upon defendant's motion, set aside that judgment and alternately ordered entry of judgment for defendant or a new trial. Plaintiff appealed.
The issue, as submitted, is whether the provisions of another writing were made parts of an executed document by reference. Or, what was "the contract" between the parties?
Each party urges application of certain rules of contract construction, among which are: The contract should be construed as a whole and, if possible, all of its provisions should be given effect. In re Collins Trust Estate, 354 Mo. 614, 190 S.W.2d 259; Swinney v. Continental Bldg. Co., 340 Mo. 611, 102 S.W.2d 111. "If the contract is free from ambiguities, it must be construed as written and the construction given by the parties may not be considered." Campbell v. Webb, 356 Mo. 466, 202 S.W.2d 35, 39. In case of ambiguity the contract is to be construed most strongly against the party who prepared it. Larson v. Crescent Planing Mill Co., Mo.App., 218 S.W.2d 814. "The expression in a contract of things of a class implies the exclusion of all not expressed, even though all would have been implied had none been expressed." 17 C.J. S., Contracts, § 312, p. 730. A separate document may be incorporated in the contract by reference. Spitcaufsky v. State Highway Commission of Missouri, 349 Mo. 117, 159 S.W.2d 647. When the reference is made only for specific purposes, the separate document becomes a part of the contract only for such purposes. Tillman v. City of Carthage, 297 Mo. 74, 247 S.W. 992.
The essential facts are not disputed. Plaintiff is a wholesale hardware dealer in Wichita, Kansas. Defendant is engaged in the manufacture, sale and distribution of certain steel products, such as shelving, lockers and kitchen and filing cabinets; its home office is in Aurora, Ill., and it has a district office in Kansas City, Mo. For many years before September 1, 1947, plaintiff had continuously represented defendant in soliciting orders for defendant's products. On January 1, 1946, by a Memorandum signed by both parties, defendant "appointed" plaintiff to solicit orders for the sale of its products. On September 1, 1947, defendant terminated plaintiff's appointment.
Defendant furnished plaintiff its Manual, catalogs and dealers' price lists. During the 18 months period the appointment was in effect, plaintiff solicited, secured and forwarded to defendant's district office, for forwarding to defendant's home office, over 500 orders totaling $232,571. Most of these orders were cancelled by the customers. Some were filled and shipped to customers more than 90 days after September 1, 1947, the date of the termination of the appointment.
When the orders were received at defendant's home office, defendant issued to the customer, upon a "Temporary Acknowledgment" form, an acknowledgment of receipt of the order, a statement that it had been placed in the company's "backlog" file and was held pending receipt of the necessary raw materials with which to fabricate the item or items ordered. The orders were then placed in this "backlog" file, which had been built up by a "huge backlog of orders" during World War II and post-war years. Later, the company "reprocessed" these orders by inquiring of the customers if they still desired the items ordered.
Defendant offered evidence, which was excluded, that many of the orders were "reprocessed" through plaintiff's office, and that plaintiff himself had returned to defendant many customers' cancellation requests. Defendant's proffered evidence of certain trade or industry practices and customs was also rejected. Other evidence excluded is later discussed.
The Memorandum, upon printed "Form No. 1661," was:
"Memorandum Governing Sales Upon Commission.
"Lyon Metal Products, Incorporated, Aurora, Illinois, authorizes C. J. Lusk [address], to solicit orders for Lyon Metal Products, Incorporated, referred to as the Company, for the sale of its Steel Equipment Division products, upon the following terms and conditions:
"Products as follows: All products covered in the Steel Equipment Division Price, Policy and Procedure Book.
"Sales territory — the territory described as follows: [a list of counties in western Kansas.]
"Commission — Rates as set out in the Company Manual hereinafter referred to.
"The Company will lend its Manual containing price, policy and procedure data; also current rates of commissions. Notice of changes in such Manual will be sent from time to time as the Company may determine. This Manual shall be returned immediately upon request of the Company or upon the termination of this appointment.
"This appointment may be terminated by the Company for any reason whatsoever, upon thirty days' written notice.
"Date effective: 1-1-1946. Send all correspondence and orders to the Kansas City District Office, [address]."
Plaintiff pleaded the Memorandum as "* * * a written contract, by the terms of which the defendant employed plaintiff to solicit orders for the sale of defendant's products * * *." He alleged that he had secured the orders, "all of which were accepted or received and not disapproved or rejected by defendant; * * * that the commission to which plaintiff is entitled as agreed to in said contract on defendant's products for which plaintiff obtained orders, is the sum of 10% of the total of said orders."
Defendant admitted the execution of the Memorandum, but stated that "defendant's Manual is by reference made a part of the contract." Defendant alleged that the greater part of the orders solicited, secured and forwarded by plaintiff "were cancelled by the purchasers and did not result in sales by defendant; that by the terms of the defendant's Manual, which is a part of plaintiff's contract with defendant and by which plaintiff was bound, plaintiff was not entitled to commission on cancelled orders; that plaintiff has been paid in full all commissions due him, including those for sales made by him between January 1, 1946, and September 1, 1947." Defendant denied that plaintiff's commissions were agreed to in the Memorandum or were payable "on defendant's products for which plaintiff obtained orders" as plaintiff had alleged. Rather, defendant asserted, "plaintiff's commissions are provided for in defendant's Manual * * * and that by the terms of said Manual the plaintiff is not entitled to any commission not already paid him for the alleged sales * * *."
The contentions of the parties are stated in plaintiff's brief thus: "In order to establish the amount of plaintiff's commission under the contract provision which says, `Commission — Rates as set out in the company manual hereinafter referred to,' plaintiff introduced that applicable portion of the manual: `8. Commission Rates (subject to any authorized underbase): a. Dealer Sales (for resale) Standard products listed in dealer catalog and dealer price list: 1. All products, 10.0 per cent.' The defendant, taking the position that the contract referred to the entire manual with respect to commissions, and not just the Rate section, attempted to introduce as Defendant's Exhibit A, its entire Manual; and as Exhibits A-1 to A-7, inclusive, certain specific sections of that manual other than the Commission Rate section. The trial court, upon objection by plaintiff, held that the written contract was clear and unambiguous, specifically referred only to the Commission Rate section of the manual, and refused to permit the whole manual or these other specific sections of it to be introduced in evidence by the defendant."
However, the trial court thereafter decided that these rulings were erroneous and, as stated, set aside plaintiff's directed verdict and sustained defendant's alternate motion. Among the grounds assigned were: error in excluding defendant's Exhibits A and A-1 to A-7, inclusive; and error in admitting in evidence "Sec. 8a of the Commission Operations Section of defendant's manual (defendant's Exhibit A), stating the rate of commission alone and without other explanatory matter contained in the same heading in the same section of said exhibit and out of its context, and particularly in admitting said Sec. 8a, and not also admitting in evidence Secs. 9 and 10 under the same heading as part of the context regarding commissions, rates and when they are earned and are payable."
Exhibit A is defendant's entire "Price, Policy and Procedure Manual." It consists of mimeographed or typewritten sheets in a looseleaf, ring binder inserted between title and subtitle "tab sheets." Each sheet shows the date of issue, date effective and the priorly dated sheet it cancelled. Exhibits A-1 to A-7, inclusive, all entitled "Policy Bulletin — Commission Operations Section," are in the "Commission Operations Section." The first sheet in that section is "Form No. 1661," the form of the Memorandum instantly involved. This form, and Exhibits A-1, A-4 and A-7, were issued January 10, 1946, and were effective January 1, 1946, the date of the Memorandum. Exhibits A-2, A-3 and A-6, effective January 1, 1947, and A-5, effective March 1, 1947, were changes made while plaintiff's appointment was in effect.
Exhibit A-1 specifically states that "Form #1661, `Memorandum Governing Sales on Commission' will be issued by the company authorizing you to solicit orders for the sale of its products"; that the company "expects its Commission Appointees to sell at its established selling prices, quantity discounts, terms of sale, extras and differentials, as set forth in the company's Price, Policy and Procedure Manual * * *; Order Acceptance: No order shall be valid or binding upon the company until it is accepted by the Company at its home office"; that commission appointees "are expected to sell and promote the sale of Lyon Products and to develop their territory in the best mutual interest of themselves and the company"; that the company will furnish certain catalogs, price books, literature, and other sale helps but that these "must be returned upon request"; that the company will supply certain samples, debiting the commission appointee's account therefor.
In Exhibit A-1, the company expressly "reserves the right, at any time, with or without notice," to: handle certain orders direct without compensation to the commission appointee, "such action superceding any conflicting provision or provisions in these policies"; revise sales territories; adjust commissions upon certain orders; debit the commission appointee's account for errors due to his failure to follow instructions; and "revise or cancel any phase of its policies governing sales upon commissions." Then follows Section 8a, quoted above, which plaintiff insists is the only part of the Manual incorporated in the Memorandum by reference.
Section 8b is "Direct Sales (for use) Standard Products as listed in catalog and sold at regular selling prices (except items 3 and 4 below) * * *. 4. Outside purchases: 10% when authorized by the company and priced at full selling price mark-up — See Policy and Procedure Manual — (no commission when not priced at full selling mark-up) * * *." Subsection 9 of Section 8b provides, inter alia, that "in accordance with current policy" certain lockers or shelving "will be sold only through a dealer and not direct to the user."
Section 9 is: "Commission Credits. a. The basis for commissions is the product sales value of the order, subject to any authorized underbase or overbase, or any exceptions that may be established by the company from time to time. `Product Sales Value' is net selling price, f. o. b. shipping point, after any quantity and/or trade discounts. No commission is allowed on any charges. b. Commissions shall be recorded in the month in which orders are shipped. Commissions on returns and allowances shall be deducted. c. At the time you receive your Commission Appointment, an individual code number shall be assigned to you, which will thereafter be applied to identify orders on which you may later receive commissions. d. Any approved underbase, resulting from selling prices lower than normal selling prices as authorized by the company will be applied to reduce regular commission rates as charted below." This is followed by a 20-line, 11-column "Commission Underbase Chart" showing "Reduced Commission Rate expressed in % of net, f. o. b. factory prices." Sections 9e, f, and g provide for 50% and 100% increases in "regular commissions" under certain circumstances. Exhibit A-5 was a sheet dealing with commissions where customers furnish materials. Exhibit A-6 deals with division of commissions between "salesmen" where more than one "salesman" is involved.
Exhibit A-6 contained Section 10, "Commission Payments." This provides: that commissions credited each month, less any debits, will be paid between the 15th and the 20th of the month, "immediately following the month in which orders are shipped"; and that, in the event of either termination of the commission appointment or "deduction of sales territory," the commission appointee's account will be credited with commissions "on any orders obtained and shipped by you prior to said termination, or from the territory deducted prior to its deduction, and shipped within a period of ninety days from the effective date" of such termination or deduction.
Exhibit A-7 was Section 11, dealing with commissions for installing, as well as securing orders for, the company's products. The company reserves the right to make the installations itself and must be satisfied that the commission appointee is qualified; the commission appointee must furnish a bond conditioned upon his use in the work of funds advanced by the company; both final approval of the work by the customer and acceptance by the company are necessary.
Sections 8, 9, 10 and 11 were all parts of the "Policy Bulletin — Commissions Operations Section" of the Manual.
Plaintiff asserts that "the only true `reference' "in the Memorandum is to commission rates. While there are two other Memorandum references to the Manual, we shall, momentarily, make such an assumption. But Section 8, "Commission Rates," contains more than Section 8a, "Dealer Sales (for resale)." Section 8b relates to "Direct Sales (for use)." The Memorandum does not limit plaintiff's authority to solicit orders for "dealer sales" as distinguished from "direct sales." Section 8b's subsections also provide either for a 10% commission or for other commission rates, generally more but in some instances less than 10%. (It was agreed below that if plaintiff was entitled to recover at all, the commissions on the orders involved would be straight 10%. But such fact is not for consideration in the determination of whether the "regular commission" of 10% was subject to change under Section 8b or, as will appear, under Section 9.) Under plaintiff's own contention, both Sections, 8a and 8b, are necessarily incorporated.
But again assume momentarily that only Section 8a was incorporated. That section makes the 10% commission rates "subject to any authorized underbase." Section 9 sets out the "Commission Underbase Chart" showing the "Reduced Commission Rate" and percentage reductions in "regular commissions." Section 8a alone clearly incorporated Section 9.
We agree with plaintiff that the Memorandum does not expressly provide that "the provisions of this contract shall be governed and controlled at all times by the Manual." But there are other reasons why we believe that the provisions of the Manual, and particularly Sections 8b, 9 and 10 are incorporated, as well as Section 8a. Assume that the Memorandum's "Commission — Rates * * *" paragraph, standing alone, incorporates only Sections 8a and 9. We must read the Memorandum in its entirety, and construe all of its provisions together and its various provisions with each other.
There are two other Memorandum references to the Manual. One is: "Products as follows: All products covered in the Steel Equipment Division Price, Policy and Procedure Book [Manual]." The other is: "The Company will lend its Manual containing price, policy and procedure data; also current rates of commissions. Notices of changes in such Manual will be sent from time to time as the Company may determine. This Manual shall be returned immediately upon request of the Company or upon the termination of this appointment."
Why was defendant to "lend" the Manual to plaintiff? As two of the Memorandum references are to products and commission rates, defendant was obligated to furnish the Manual in order that plaintiff might know what products he was authorized to solicit orders for and what his commission rates were. But defendant's obligation is not limited to furnishing only the provisions relating to products and commission rates. Defendant is to lend plaintiff its entire Manual. Why, if the parties are not bound by its provisions? And particularly, why the Memorandum reference to defendant's policies and procedures other than those relating to products and commission rates?
Only one reasonable interpretation of the Memorandum is possible, viz.: The Memorandum references incorporated the provisions of the entire Manual for purposes of defining, explaining and qualifying or limiting language and terms used in the Memorandum itself. By the Memorandum, defendant authorized plaintiff " to solicit orders for the sale of" defendant's products in a certain area. Was that area fixed or was it subject to change? Were the manner or methods of "solicitation" discretionary with plaintiff or was he to comply with the defendant's established policies and procedures with which plaintiff had been familiar for many years? Was defendant to furnish samples, and if so, without cost to plaintiff? Was plaintiff to pay for any local advertising? Was plaintiff to solicit different kinds of orders on "dealer sales" and "direct sales"? What were to be the terms and conditions of the orders? Could an order be cancelled by the purchaser? If so, was plaintiff entitled to a commission? Was a down payment or a deposit required? What were the terms of the orders as to delivery?
And how and when and under what conditions were the sales to be made by defendant? What were defendant's prices and were such prices f. o. b. defendant's home office in Illinois or f. o. b. Wichita, Kansas? If the order was an offer, was it to become a contract upon acceptance by defendant? If so, was defendant to notify plaintiff or the purchaser of such acceptance? If the purchaser repudiated the contract, what disposition was to be made of any deposit or down payment and what was the effect of such repudiation upon plaintiff's right to a commission?
And when was plaintiff to be paid his commissions? Upon receipt of the orders or only upon consummated sales? Within a specified time after he mailed the order or upon delivery of the product at Wichita? Were commissions on cancelled orders to be charged against his account?
These questions, and others that might be posed, are clearly and definitely answered in the Manual. Its provisions clarify the language of and define the terms used in the Memorandum. They explain such nontechnical terms as "authorize," "to solicit," "orders" and "for the sale of." The Manual carefully "spells out" plaintiff's Memorandum authorization to solicit orders for the sale of defendant's products, and the rights and obligations of both parties, including the conditions upon which plaintiff is entitled to commissions. Convinced that all of the terms of the contract are not contained in the short Memorandum, we construe the Memorandum references to incorporate the entire Manual. We hold that "the contract" consisted of both, and that construed together, the terms of the contract are clear, definite and certain.
Upon the assumption that all of the terms of "the contract" are contained in the Memorandum and Section 8a, plaintiff cites the following: 17 C.J.S., Contracts, § 299, p. 716, and Sec. 312, p. 730; Tillman v. City of Carthage, 297 Mo. 74, 247 S.W. 992; Guerini Stone Co. v. P. J. Carlin Construction Co., 240 U.S. 264, 36 S.Ct. 300, 60 L.Ed. 636 — all stating and applying the rule that a reference to another writing for a particular purpose incorporates the other writing only for such purpose. These authorities support plaintiff's contention. But they are inapplicable in view of our finding that the assumption, upon which his argument is based, is unwarranted.
As these conclusions are decisive of the issue, we need not rule the other matters briefed and argued here.
It follows that the trial court properly found that defendant was entitled to judgment as a matter of law. McCain v. Sieloff Packing Company, Mo.Sup., 246 S.W.2d 736.
Plaintiff contends that "even assuming that the Memorandum and Section 8a were not the entire contract, then it would be a jury question to determine what was the contract." He cites 17 C.J.S., Contracts, § 617, pp. 1284-1286; Yost v. Silvers, 138 Mo.App. 524, 119 S.W. 971; Wirtel v. Nuelle, Mo.App., 27 S.W.2d 501; Marden v. Radford, 229 Mo.App. 789, 84 S.W.2d 947; Edwards v. Smith, Adm'r, 63 Mo. 119. These state and apply the rule that construction of a contract is for the jury where the terms are ambiguous and their meaning must be determined by resort to extrinsic evidence. As that is not the situation here, a new trial should not be ordered. Compare Hughes v. St. Louis Nat. League Baseball Club, Inc., 359 Mo. 993, 224 S.W.2d 989, 16 A.L.R.2d 904, where the alternate new trial motion had been overruled.
The judgment as entered for defendant is affirmed.
VAN OSDOL and COIL, CC., concur.
The foregoing opinion by LOZIER, C., is adopted as the opinion of the court.
All concur.