Opinion
No. 42969.
July 14, 1952. Motion for Rehearing or to Transfer to Court en Banc Denied September 8, 1952.
APPEAL FROM THE CIRCUIT COURT OF THE CITY OF ST. LOUIS, F. E. WILLIAMS, J.
Tyree C. Derrick, Karl E. Holderle, Jr., St. Louis, for appellants.
Greenfelder, Hemker Wiese, Forrest M. Hemker, Mark R. Gale, St. Louis, for respondents.
In this suit by Benjamin R. and Gertrude Villmer against Household Plastics Company and W.L.M. Clark, Inc., on two nonnegotiable $5000 notes a jury returned a verdict for the defendants on the plaintiffs' principal cause of action and the plaintiffs have appealed. The nonnegotiable notes recited that they were "subject to the terms and conditions of the Contract of even date herewith by and between the parties hereto." In their petition the plaintiffs pleaded the notes, the fact that they arose out of the contract, dated June 30, 1949, and "that plaintiffs have in all respects complied with said contract upon which payment was predicated." The defendants, in separate answers, admitted the execution of the notes but denied that the plaintiffs had "as alleged, in all respects complied with such contract." In addition the defendants pleaded specific clauses of the contract and asserted that by the quoted clauses payment of the notes was "expressly conditioned upon the performance by the plaintiffs of the terms and conditions thereof; that such performance constitutes a condition precedent to the payment" of the notes and, the defendants alleged that the plaintiffs had not performed or complied with the conditions. The defendants pleaded the clauses of the contract in which the plaintiffs agreed that they would not employ or solicit the employment of Household Plastics' employees, or engage in the "Party Plan" of selling plastics in competition with Household in the territories in which it operated. They pleaded the clause of the contract in which the plaintiffs agreed, for a period of nine months, that they would not "become interested or participate, directly or indirectly, as owner, agent, employee, stockholder, partner, sales agent or in any other manner in any business operating in any State of the United States in which Employer (Household) or any subsidiary may then be doing business, which is the same as or similar to the type of business now operated by Employer, which type of business features and is predicated upon the sale of plastic products of any and all sorts by means of the so-called `Party Plan of Selling,'" except that plaintiffs were permitted to sell plastics wholesale. The answers alleged, as the contract provided, that "It is the essence of this agreement that Employees (Plaintiffs) shall not" violate the quoted clauses and the answers again asserted that the plaintiffs had failed to "perform the precedent conditions" by engaging in specified and prohibited activities and, therefore, the defendants were "excused from payment of the instruments sued on" and were not liable to the plaintiffs. In separate counts the defendants Clark, Inc. pleaded a setoff and Household Plastics pleaded a counterclaim as well as a setoff of $972.04. The plaintiffs' replies to the separate answers were, in effect, general denials and the reply to the counterclaim was that they were under no obligation to pay the item. While the action was on the notes it is thus plain from the pleadings that the suit and the plaintiffs' right to recover depended upon whether they had substantially complied with the contract or whether they had breached the contract and these were in fact the vital and decisive issues tried and submitted.
The jury, although given several forms of verdicts covering all possible issues and possible verdicts, returned the single verdict, "We, the Jury in the above cause, find in favor of the Defendants on the issues herein joined." The judgment, from which the plaintiffs appeal, recites "that the plaintiffs take nothing by reason of their cause of action, and that the defendants be discharged and go hence without day as to said cause of action * * *." Upon this appeal the plaintiffs assert that their motion for a directed verdict at the close of all the evidence should have been sustained and that the verdict for the defendants is not supported by evidence. They also claim that the jury's failure to return a verdict on Household's counterclaim was prejudicially erroneous and that the court erred in admitting certain evidence upon the counterclaim. In connection with their principal cause of action the plaintiffs also assert that the trial court prejudicially erred in the giving and refusal of specified instructions.
Benjamin and Gertrude Villmer and W. L. M. Clark became associated in a business venture in these circumstances, which are necessary to an understanding of this litigation and the basic issues involved: Ben is a young man, thirty-six, formerly a truck driver. Through his wife he became interested in selling plastic items on the "Party Plan." Briefly this method of selling consists in having a sales person, a "dealer," arrange with a housewife to invite a number of her friends to her home and the dealer displays, demonstrates and takes orders from the guests for the various plastic products for sale. The dealer then purchases the items at a discount from a company handling them and delivers them to the housewife and collects for the sales. Ben and his wife intermittently engaged in this type of merchandising for others and finally started out on their own on a rather limited scale. They lacked capital and in the course of their business met Mr. Clark, seventy-seven years of age, a manufacturer of small plastic products — the principal stockholder in W. L. M. Clark, Inc. At first Mr. Clark extended the Villmers some credit and finally formed a partnership with them and caused them to move their business operations into a vacant room in his establishment. The Villmers displayed an extraordinary talent for this type of merchandising and between February 1948 and November 1949 literally skyrocketed gross sales from $2000 a month to $200,000 a month and were doing business in eighteen states. In April 1948 the partnership was dissolved and a corporation, Household Plastics Company, was formed. The W. L. M. Clark company paid in $25,300 and received 250 shares of the authorized 500 shares of capital stock of Household Plastics Company. The Household Plastics Company entered into a contract with Ben Villmer under which he acted as general manager and received one half the net profits, before taxes, as compensation. By November 1948, on this basis he was entitled to $45,000 as his one half the net profits and he used $24,5000 of that sum to acquire 245 shares of the capital stock of Household Plastics. The business grew from twenty-five dealers doing business in the St. Louis area of $1200 a month to 600 or more dealers doing $260,000 a month. Ben Villmer, by December 1948, was drawing a salary of $1000 a month, plus $500 a month for expenses, and his wife, Gertrude, was drawing $1000 a month as a sales manager. Finally disagreements arose between the Villmers and the Clarks as to policies, advertising, retrenchment and sound financing and they commenced negotiations with a view that either the Villmers buy out the Clarks' interest or the Clarks buy out the Villmers' interest. The Villmers were unable to finance the purchase of the Clarks' interest and the result was that the Clarks bought out the Villmers by the contract of June 30th, 1949. Villmers received the $24,500 they had paid for their stock and for their employment contract the two $5000 notes payable in nine months. From June 1949 forward Household Plastics Company lost dealers and area and unit managers and it is a fair inference from the record, whatever the cause, that sales and business declined and the boom for this particular enterprise ended.
In support of their argument that the verdict in favor of the defendants is not supported by substantial evidence and that their motion for a directed verdict should have been sustained the appellants argue that there is no evidence from which it could be found that they breached the contract. They approach the argument in this manner: They contend that they made a prima facie case and that the defendants pleaded and relied upon affirmative defenses, for which they had the burden of proof, and that there was no evidence to support the affirmative defenses. It is in this connection that they contend that the court erred in refusing two of their instructions, A and B, which placed the burden of proof upon the defendants to establish "the affirmative defense that the plaintiffs breached the terms and conditions of said contract" and in giving one of the defendants' instructions which declared that "the burden is on the plaintiffs to prove their case by a preponderance or greater weight of the credible evidence and that unless they have done so your verdict must be for the defendants." On the other hand the respondents contend that the provisions of the contract impose precedent conditions, the performance of which must be pleaded and proved as a part of the plaintiffs' case, as the plaintiffs in fact pleaded and assumed the burden, and that the sufficiency of the evidence to support the verdict is not an open question in this court. The respondents contend, therefore, that the court did not err in instructing the jury.
The arguments concerning affirmative defenses and conditions precedent and burden of proof, so far as the essential merits of the case are concerned, are rather academic at this stage of the proceedings. We have set forth the pleadings and, whether they present affirmative defenses or conditions precedent, they fairly well define the issues of whether the plaintiffs had complied with the contract and were therefore entitled to recover on the notes, or whether they had failed to comply with the contract and therefore were not entitled to recover. The plaintiffs made a prima facie case: They testified to the development of the business, the inception of their relationship with the defendants and Mr. Clark, the course of their business relationship, their disagreements, the dissolution of their relationship, and the execution of the notes and the contract. As a part of their case in chief Ben Villmer testified that he and his wife had not violated the terms and provisions of the contract. He testified that they had not, either directly or indirectly, within the nine months' period, engaged in the Party Plan of merchandising plastics in competition with Household Plastics Company. He said that they had not in any respect interfered with the sales organization of Household Plastics, and that they had substantially and in good faith performed all the conditions of the contract. Despite the plaintiffs' assertions to the contrary, the defendants offered evidence from which it was a fair inference, as the jury could and did find, that the plaintiffs had not abided by the terms of the contract but had breached the contract in material particulars. It would serve no useful purpose to detail all the evidence and demonstrate that the plaintiffs' breach of the agreement was a fair inference from all the facts and circumstances. The following will suffice by way of illustration: The plaintiff, Ben Villmer, immediately after leaving Household Plastics, rented a room at 7329 S. Broadway, and began doing business as "National Variety Company." He says that his business was that of a wholesaler, which was excepted in the contract. His brother, George, who had formerly been a stock room employee of Household Plastics, started doing business at 7327 S. Broadway as "American Variety Company," and, admittedly, was selling, among other things, plastic products on the "party plan." American Variety was National Variety's principal customer, most of their business being transacted on a credit basis. The Clarks fired some of the former employees of Household, nevertheless a large number of the key employees turned up working for either George or Ben. Incidentally, except for the first month, Ben paid the rent for both 7327 and 7329 S. Broadway. On July 7, 1949 a large number of area and unit managers received the following letter, written at Ben's home: "As we are no longer connected with the Household Plastics Company, we would like to take this opportunity to thank you for your wonderful cooperation and friendship in the past. It has been a pleasure to be associated with you in business and if at any time you have an opportunity we would like to hear from you." The letter was signed "Ben Villmer, Vice-President," "Gertrude Villmer, Regional Director," "Ted Buck, Sales Manager," "Eunice Bolash, City Branch Manager," "Mildred Hemphill, Regional Manager," "Helen Schulz, Regional Manager," "George Herrmann, Area Manager," "Betty Naes, Area Manager," "Jack Eisenhauer, Area Manager," and "Anne Dussold, Editor Unit News." All these people were former key employees of Household Plastics. There were other circumstances but these suffice to illustrate that there was evidence from which the jury could reasonably find that the plaintiffs had breached the contract and therefore were not entitled to recover. In these circumstances affirmative defenses and conditions precedent are not determinative of the essential issues, the parties have not so relied upon these rules as to make them determinative; the issue was one of fact, there was evidence to support the verdict and the plaintiffs were not entitled to a directed verdict. Baker v. Swearengin, 351 Mo. 1027, 174 S.W.2d 823; Diamant v. Stein, 232 Mo.App. 1174, 116 S.W.2d 273; Cluck v. Abe, 328 Mo. 81, 40 S.W.2d 558; 53 Am.Jur., Secs. 273, 274, pp. 231-232. It also necessarily follows that the court did not err in giving instructions six, seven and eight which conversely directed a verdict for the defendants upon a finding that the plaintiffs had not, directly or indirectly, refrained from financing American Variety Company, becoming interested in or participating in the company and had not refrained from interfering with the sales organization of Household Plastics Company. Nor was it prejudicial error for the court to refuse or to fail to define the terms "substantially" or "financing." Deatherage Lumber Co. v. Snyder, 65 Mo.App. 568; Carrollton Monument Co. v. Geary, 210 Mo. App. 45, 240 S.W. 506; Fearey v. O'Neill, 149 Mo. 467, 50 S.W. 918.
Instruction four, given at the request of the defendants, is a conventional burden of proof instruction. It defined the term "preponderance of the evidence" and told the jury that "the burden is on the plaintiffs to prove their case by a preponderance or greater weight of the credible evidence." The plaintiffs offered two instructions which the court refused to give, one of these told the jury that the burden is upon the defendants to establish by a preponderance of the evidence that "the plaintiffs breached the contract," and the other instruction told the jury that the burden was upon the plaintiffs to establish that they "have substantially complied with the terms and conditions of the contract * * * and that having done so, the burden of proof is on the defendants to establish by a preponderance of the evidence the affirmative defense that the plaintiffs breached the terms and conditions of said contract." The appellants now urge that the court erred in giving instruction four and in refusing to give their instructions A and B. The principal part of their argument concerns, as indicated, whether the contract imposed conditions precedent or whether the defendants asserted affirmative defenses and what we have said upon the merits of the cause may be sufficient to dispose of this phase of the argument.
However given instruction four was not prejudicially erroneous in the circumstances. The burden was certainly upon the plaintiffs "to prove their case by a preponderance or greater weight of the credible evidence," as they assumed to do in the trial of the case, and as the jury was instructed in effect by the principal instruction hypothesizing the defendants' liability. This was the fact and necessary whether the defense were affirmative or whether the contract imposed conditions precedent. The given instruction, unlike the instructions in Bennett v. National Union Fire Ins. Co., 230 Mo.App. 939, 80 S.W.2d 914, 920 and Brush v. Miller, Mo.App., 208 S.W.2d 816, 818, did not, without qualification or limitation, place upon the plaintiffs "the burden of disproving defendant's affirmative defenses, whereas the burden of proving such defenses rested on defendant." The instruction in the Bennett case placed upon the plaintiff the burden of establishing "the facts necessary to a verdict in his favor `under these instructions'", and that of course erroneously included the affirmative defense and exclusion in the policy of the plaintiff's having parted with title or possession of the insured property. In Brush v. Miller the suit was to recover for labor and materials in decorating the defendant's house, there was no issue as to defective performance and so it was held that an instruction which placed upon the plaintiff the burden of proving that he did the work "in a good and workmanlike manner" was improper. Here the instruction placed upon the plaintiffs the burden "to prove their case by a preponderance or greater weight of the credible evidence" and in so stating the instruction did not in terms place upon the plaintiffs the burden of proving any affirmative defenses and was not prejudicially erroneous. Diamant v. Stein, 232 Mo.App. 1174, 116 S.W.2d 273, 278; Claper v. Lakin, 343 Mo. 710, 123 S.W.2d 27. In so far as refused instructions A and B dealt with the plaintiffs' burden and defined "burden of proof," the instructions were cautionary, the principal subject being covered in other instructions, and it cannot be said that the court abused its discretion in refusing them, Wiedeman v. St. Louis Taxicab Co., 182 Mo.App. 523, 529, 165 S.W. 1105, even though it would not have been improper had the court given an instruction as to any burden upon the defendants. Scullin Steel Co. v. Mississippi Valley Iron Co., 308 Mo. 453, 273 S.W. 95. In any event, in view of the pleadings and the burdens assumed the refusal of the two instructions in the circumstances of this case did not constitute such prejudicial error as to demand the granting of a new trial. Section 512.160, subd. 2 RSMo 1949, V.A.M.S.; Bolino v. Illinois Terminal R. Co., 355 Mo. 1236, 1245, 200 S.W.2d 352, 357.
Finally the plaintiffs assert that the failure of the jury to specifically return a verdict on the defendants' counterclaim was reversible error entitling them to a new trial. They also assert that the court prejudicially erred in admitting certain evidence on the counterclaim and in instructing the jury on the subject. The respondents assert that their claim was in fact a setoff, available only to reduce the amount of the plaintiffs' recovery, not a counterclaim, and that the jury's general verdict in favor of the defendants effectually disposed of the setoff. This latter argument begs the question and is not in accordance with the facts. The defendants did plead a setoff in count one of their answer but they also plainly pleaded the same matter as a counterclaim in count two of the answer. Likewise their instruction submitting the item of $972.04 concluded with this language, "then you may find in favor of defendants on their counterclaim and setoff against plaintiffs." The verdict, as we have pointed out, found "in favor of the Defendants on the issues herein joined." The jury, therefore, did not make a finding on the counterclaim, otherwise the jury would have used one of the forms of verdict designed to cover that issue and of necessity would have found some sum due on the counterclaim. The judgment upon the verdict is that "plaintiffs take nothing by reason of their cause of action." Consequently the jury did not, by its verdict, make a finding upon the counterclaim and there is now no judgment in this record specifically covering the subject. But it does not follow that the plaintiffs are entitled to a new trial or that the counterclaim has not in fact been disposed of so far as this cause and the essential merits of the appeal are concerned.
There are instances in which failure to dispose of a counterclaim constitutes such prejudicial error as to demand a new trial. For example, in Winkelman v. Maddox, 119 Mo.App. 658, 95 S.W. 308, the suit was against four defendants on an implied promise to pay for wire. The jury's verdict was for the plaintiff and against three defendants. There was no finding as to one defendant, and there was no finding as to another defendant's counterclaim in the sum of $47. The latter defendant called the matter to the trial court's attention, filed a motion in arrest of judgment for that reason and appealed after his motion was overruled and judgment entered against him on the plaintiff's cause of action. The court held that the verdict was not responsive to the issues, and the appealing defendant having properly called the matter to the trial court's attention was entitled to a new trial. See also Liepman v. Rothschild, 216 Mo.App. 251, 262 S.W. 685. Conversely, a judgment finding for the plaintiff on the defendant's counterclaim but failing to dispose of the plaintiff's cause of action against one defendant was prejudicially erroneous as against the other appealing defendant. National Cash Register Co. v. Kay, 230 Mo.App. 1046, 93 S.W.2d 260.
There is another line of cases in which it is held that appeals from judgments which fail to dispose of counterclaims are premature, the judgment appealed from not having disposed of all the issues and all the parties, and the appeals in those cases have been dismissed. But in most, if not all those cases, the plaintiffs' petitions were dismissed for failure to state a cause of action and the plaintiffs appealed, and there was no opportunity, at that stage of the proceedings, for a hearing on the counterclaim. White v. Sievers, 359 Mo. 145, 221 S.W.2d 118; Farmers Mutual Hail Ins. Co. v. Garnand, Mo.App., 238 S.W.2d 437. In Severs v. Williamson, Mo.App., 198 S.W.2d 368, there was a finding for the plaintiff on his principal cause of action and there was a finding in favor of one defendant on his counterclaim but there was no finding upon a counterclaim which the plaintiff had asserted in a reply, and upon the plaintiff's appeal it was held that the appeal was premature. There is another series of cases, suits to establish trusts, ejectment and partition suits and suits for the assignment of dower, in which cross bills and counterclaims were undisposed of and it was impossible upon appeal to determine the essential issues and those cases have been dismissed as premature. Bennett v. Wood, Mo.Sup., 239 S.W.2d 325; Deeds v. Foster, Mo.Sup., 235 S.W.2d 262; Scanland v. Walters, 305 Mo. 415, 265 S.W. 688.
There is also a line of cases in which it is held, when it is apparent from the record that the court or jury in fact, or by necessary implication, considered and passed upon the counterclaims, even though no specific findings were made, that the appeals were not premature but were from final judgments. Cosgrove v. Strange, 194 Mo. App. 14, 183 S.W. 691; Plymouth Cordage Company v. Yeargain, 87 Mo.App. 561. This is certainly true in the automobile negligence cases in which it would be impossible for the jury to find for the plaintiff on his cause of action and also for the defendant on his counterclaim. Ragsdale v. Young, Mo.App., 215 S.W.2d 514; Staples v. Dent, Mo.App., 220 S.W.2d 791.
These cases serve to illustrate that the question really involved here is not whether the jury's failure to return a verdict on the defendants' counterclaim is prejudicial error, but is whether for that reason the appeal is premature and should therefore be dismissed. It is our conclusion that the present case is distinguishable from the cases noted and that in the circumstances and for the purposes of this appeal the judgment is final and disposes of the counterclaim as well as of the plaintiffs' cause of action. The defendants pleaded the counterclaim, they introduced evidence concerning it, the jury was instructed upon the subject and there were forms of verdicts covering the counterclaim. When the verdict was returned there was no objection by either the plaintiffs or the defendants to the fact that there was no finding on the counterclaim. There was no request by the defendants that a finding be made, there was no authorized after trial motion and the defendants have not appealed and are not now complaining of the judgment entered and so they acquiesce in the procedure, and the plaintiffs are certainly in no position to complain of the fact that a judgment was not rendered against them on the counterclaim. City of St. Louis ex rel. and to Use of Sears v. Clark, Mo.App., 35 S.W.2d 986; Mackey v. First Nat. Bank of Centralia, Mo.App., 293 S.W. 66. The claim upon which the defendants relied as a counterclaim arose out of the transactions constituting the plaintiffs' cause of action, it was in existence when the original suit was filed Section 509.420 RSMo 1949, V.A.M.S. and it was appropriately pleaded and submitted and the defendants, having asserted the claim, are certainly precluded from asserting it again. Keller v. Keklikian, Mo. Sup., 244 S.W.2d 1001; State ex rel. Fawkes v. Bland, 357 Mo. 634, 210 S.W.2d 31; Cantrell v. City of Caruthersville, 359 Mo. 282, 221 S.W.2d 471. Even though there was no verdict upon the counterclaim it has been effectively disposed of as far as the defendants are concerned and the plaintiffs are in no position to complain of the fact or of the fact that the trial court erred in the admission of evidence or erroneously instructed the jury upon the subject. City of St. Louis ex rel. and to Use of Sears v. Clark, supra; Lindsey v. Nagel, 157 Mo.App. 128, 137 S.W. 912; Mackey v. First Nat. Bank of Centralia, supra.
There was no prejudicial error upon the record and the judgment is affirmed.
WESTHUES and BOHLING, CC., concur.
The foregoing opinion by BARRETT, C., is adopted as the opinion of the Court.
All concur.