Ford Motor Co. v. Maddox Motor Co.

HODGES, J. This suit was filed in the court below against the Ford Motor Company by F. W. Maddox and J. H. Mitchell, who were conducting a Ford sales agency in Pittsburg, Tex., under the partnership name of the Maddox Motor Company. The purpose of the suit was to recover damages for the breach of an automobile sales contract made by the parties to the suit in 1923 and renewed in 1924. After a trial before a jury, a judgment was rendered in favor of the plaintiffs against the Ford Motor Company for the sum of $23,500 as damages. This appeal is from that judgment. [913] The record in the case is large, and numerous errors have 'been assigned. But, in view of the disposition which we make of the case, only a few of the questions involved need be discussed. According to evidence which is apparently undisputed, and the testimony offered by the appellees, the following is a fair summary of the material facts: In the early part of 1923 what is called the Ford Sales Agency at Pittsburg, Tex., was owned and conducted by the Nichols Motor Company. The business of that agency was selling the cars, trucks, and products of the Ford Motor Company, a private corporation located at Detroit, Mich. Appellee Maddox was interested in that agency. Because of some dissatisfaction on the part of the Ford Motor Company, the contract with Nichols was eahceled about the 1st of February, 1923. Shortly after the cancellation of that contract, the appellees, Maddox and Mitchell, agreed to apply for the agency, and did file an application with the Ford Motor Company’s branch office at Dallas, Tex., for a similar contract for the sale of Ford products at Pittsburg. For the purpose of pressing their application, both Maddox and Mitchell went to Dallas, and, while there, had a personal interview with K. W. Brown, the chief roadman in Texas of the Ford Motor Company. Since what was said in the conversation that followed between the appellees and Brown is' relied on as constituting the first contract, referred to in the pleadings, the version given by Maddox is here quoted: “The conversation, as well as I remember, started, the first thing — when K. W. Brown walked up there and shook hands with us, and he said, ‘Now, gentlemen, if you have come over to intercede for the old dealer, Mr. Nichols, I am a busy man, and I haven’t got time to talk to you.’ I said, ‘Mr. Brown, I have come over here to make application for the Ford agency myself for Pittsburg.’ When I told him that I was over there to negotiate for the agency or contract at Pittsburg, Brown said, ‘Mr. Maddox, you understand I have got seven applications on my .desk now for the agency at Pitts-burg, and some of them are old experienced dealers; but’, he said, ‘Listen, if you will do what I want you to, I will give you the contract.’ And I said, ‘Mr. Brown, what do you want me to do?’ and he said, ‘Go back home and secure a well located lot and build a house, a building that we will accept and approve, not only for the present time, but for the future home of the Ford.’ I says, ‘Mr. Brown, how long will you give me a contract if I will go home and secure a location that you will approve and build a building that you will accept on it?’ He said, ‘You understand, Maddox, the written contract that we put out is only for twelve months’; and I said, ‘Mr. Brown, I couldn’t build a building — buy a lot and build a building like you would want for any Ford contract for a period of twelve months’; and he said, ‘Listen, Maddox, you ignore the written contract that will be sent you later; I will give you a contract for a period of six years, if you will do what we want you to do, buy a lot and build a building that we will accept and approve, at Pittsburg.’ I said, ‘I will do that.’ He then turned around to Dr. Mitchell and said, ‘Dr. Mitchell, will Maddox build a building like we want in Pittsburg? Will you guarantee it, Doctor, that he will fcuild a building like we want?’ and Dr. Mitchell said, ‘I -¶⅛1 guarantee that he will build it as you require’; and he said, ‘Then that is enough. I am a busy man. You go back home, and I will ship you some cars,’ which he did.” Within a few days after the return. to Pittsburg,' Maddox received a lengthy written sales contract, which contained, among other things, the following provisions: “This agreement, made at Highland Park, Michigan, this 2d day of Jan., 1924, by and between the Ford Motor Company, a Delaware corporation, of Highland Park, Michigan, hereinafter known as the company, and Maddox Motor Company, located at Pittsburg, in the-state of Texas, hereinafter known as the dealer, Witnesseth: “(1) That company hereby grants to dealer the privilege of selling Ford automobiles, trucks, chassis, Fordson tractors, Lincoln automobiles, chassis, parts, and accessories for use within the boundaries of the United States of America, upon the terms and conditions herein specifically set forth. “(2) Company reserves the right to appoint other dealers in any part of the United: States of America, and also reserves the right to make direct sales of its products to customers any place in the United States of America without being obligated to pay to any of its dealers a commission upon said direct sales. Company expressly reserves the right to sell its products to the United States government, or to any of the departments thereof, or to the American Red Cross, without the payment of any discount or commission whatever to dealer, and dealer agrees to immediately turn over to the company any inquiries or orders received therefrom without any payment or compensation to him therefor, and to make deliveries of the company’s products, as it may direct, without charge for the handling, etc. “(3) Dealer agrees to maintain a place, of business and properly equipped salesroom and service station, prominently located and acceptable to the company, and shall employ competent salesmen and efficient workmen, and company shall not in any wise be responsible for- any charges connected with such place of business. “(5) In order that company may determine the prospective requirement's of its business, and may base its purchases for materials, etc., thereon, the dealer agrees that he will furnish to company on form provided, prior to December thirty-first of each year, an estimate of the number of Ford automobile trucks, chassis, Fordsop tractors, and Lincoln automobiles and chassis, dealer will sell at retail, and to be shipped him in the various months of the following year as specified. “(6) Company agrees that the estimate and shipping specifications of the dealer will receive company’s careful attention, but company does not agree absolutely to fill them, but‘expressly reserves the right to refuse them from time to [914] time, or such parts of them as company deems necessary or proper, and all such estimates are subject to delays occurring from any cause ■whatsoever in the manufacture and delivery of its product — no legal liability to fill such estimates being incurred under any circumstances. And the dealer may cancel, upon one month’s written notice to company, any unfilled part of said estimates. “(8) Company will sell its Ford automobiles, trucks, chassis, Pordson tractors, Lincoln automobiles and chassis to dealer as hereinafter provided at discounts from its established list prices, f. o. b. Detroit, Michigan, as follows: “(17) This agreement shall continue in force and govern all transactions between the parties hereto until canceled or terminated by either party, but it is agreed that either party shall have the privilege, with or without cause, to cancel and annul this agreement at any time upon written notice by registered mail, or personal delivery of notice to the other party, and such cancellation shall also operate as a cancellation of all unfilled retail and other orders and requisitions for all products of company which may have been received by the company from the dealer prior to th.e date when such cancellation is served.” That contract was dated March 14, 1923, and was signed in triplicate by Maddox for the Maddox Motor Company. One copy he retained, and the other two were returned to the Dallas office. After some negotiations, Maddox purchased a lot 100 feet square, on which he intended to, and did thereafter, erect a suitable building, one which he intended should be satisfactory to the representatives of the Ford Motor Company. There was some delay, however, in clearing the title and in securing possession of the lot. The erection of the building did not begin till in December, 1923. In the meantime, Maddox Motor Company, as the agency was styled, occupied a leased building, and was receiving and selling cars and other products of the Ford Motor Company. On January 2, 1924, Maddox received another written contract from the Ford Motor Company, with notification that it was intended to supersede the former contract. It was, in all respects material to the issues here in controversy, a copy of the previous written agreement which had been executed by the parties. The substitution of that for the former contract was made necessary in order to include other products of the Ford factory not mentioned in the first contract, and to provide for the commissions to be paid the dealer. On account of delay in perfecting title to the lot and the weather conditions, the work on the building progressed slowly, or at least not to the satisfaction of the representatives of the Dallas Ford Agency. As a result of that delay, the shipment of cars to the Maddox Motor Company was either suspended or so diminished as to create dissatisfaction on the part of Maddox. In March, 1924, he went to Dallas for another conference with the representatives of the Ford Motor Company. The following is his version of the conversation which took place between him and Proctor, the.assistant branch manager, and Brown, the chief road-man: “The first thing I asked Mr. Brown was why it was they wasn’t shipping me any cars; they were withholding my cars just' at that time, and had been for several days, and he said, ‘You want to find out about cars; you will have to talk to Mr. Proctor.’ I then walked into Mr. Proctor’s office and saw Mr. Proctor. I asked him why I wasn’t getting any cars, and he said, T don’t know whether we have any cars available’ ; and I said, ‘Mr. Proctor, you are shipping them all the time’; and he said, ‘You may not need any cars; we may be forced to cancel you’; and I said, ‘On what grounds do you seek to cancel me, Mr. Proctor?’ and said, ‘My God, man, don’t you know?’ and I said, ‘No, I don’t.’ And he said, ‘Why, you haven’t even got a Ford accounting system in your place of business.’ * * * And I said, ‘Mr. Proctor, there is nothing in my written or oral contract that I had with Mr. Brown that states anything in either of them that I am compelled to put in a Ford accounting system or any other system.’ And he seemed to get a little bit peeved, and he picked up a file and said, ‘If you want to talk about contracts you go back and talk to Brown,’ and he commenced to read letters, and I left his office, and went on in and talked to Mr. Brown. * * * I said, ‘Mr. Brown, it is very encouraging to have a demand left that I must begin building operations in thirty days, and you refuse and fail to ship me any cars to sell.’ I said, T haven’t got much encouragement to go ahead and try to perfect my contract I have on my lot I wish to build on.’ ‘Well,’ he said, ‘Maddox, Pittsburg always has been a curbstone proposition; it has been a hard place to get an adequate Ford dealer, get a dealer that would furnish us with adequate quarters. Now,’ he said, ‘listen, if you will go back home and do your best — ’ I said, ‘Mr. Brown, it’s encouraging to me to have gone this far with a contract on a lot that I am going to be forced to comply with and pay for at a price of $4,500, and you people refuse to ship me cars, and I have denied all cars now for several weeks, and can’t get your products to sell, and you are demanding that I begin building operations within 30 days’; and he said, ‘Maddox, are you ever going to get that lot title cleared up?’ and I said, ‘Yes, I will be forced to clear it up, and I will be forced to take it when the title is clear. It just takes a matter of time to get the title cleared up and possession’; and he said, ‘If you will go back and do your best and secure this lot and build on it at the quickest possible moment, we will give you more cars, and we will let you have this contract for the period of six years, which I agreed to let you have.’ So I left the office and went back, and they began to ship me cars, and I went ahead with my business.” The building above referred to was being erected by day labor, and under the personal supervision of Maddox. At the time that conversation occurred very little seems to have been done in the erection of the struc [915] ture. Upon his return home, Maddox received more cars, and resumed the conduct of his business in the usual way. Some time later the Ford Motor Company shipped to the Maddox Motor Company a carload of tractors, which the latter refused to accept. A difference then arose between Maddox and the representatives of the Ford Motor Company at Dallas, which resulted in the cancellation of the contract by the Ford Motor Company. Another party was subsequently given the agency at Pittsburg, to whom Maddox sold the Ford stock he then had on hand. At that time the building was nearly completed, and a portion of the stock of the Maddox Motor Company had been moved into it. An offer was made by the successor to the Ford agency to rent the building, but the parties failed to agree on the price, and no rental contract was made. The testimony shows that Maddox was using the building at the time of the trial in selling other automobiles. In this suit the appellees rely on the written contract executed on January 2, 1924, as modified by a parol agreement made with Brown at Dallas on or about March 10 following. It is conceded that, under the express stipulations contained in paragraph 17 of the written contract, the appellant had the option to discontinue selling its cars and products to the appellees at any time, and that appellees had the same right to discontinue buying appellant’s cars and products. The cause of action is based upon what ap-pellees claim is a valid and binding parol agreement made with K. W. Brown, appellant’s agent, which modified the above-mentioned contract and obligated appellant to sell and ship its cars and products to the appellees at Pittsburg for a term of six years from the completion of the building which appellees had agreed to erect. There is some uncertainty in the pleadings as to when that six-year term was to begin and end; but, since it is conceded that the appellant canceled the contract within less than six years from the time the original contract was entered into, that uncertainty becomes unimportant. As evidence of the binding parol modification of the written contract, ap-.pellees rely on what was said in the conversations with K. W. Brown.. Their version of those conversations has been quoted, and need not be here repeated. In the trial below and in this appeal that parol agreement is assailed upon two grounds: First, that by its terms it creates an obligation which was not to be performed within one year, and is in violation of the statute of frauds; second, that Brown had no authority to make such an agreement. Since the written contract is one determinable at the option of either party, it was not required to be in writing, and for that reason it may be modified or amended by a subsequent parol agreement. The modification pleaded expressly stipulates that it shall continue for a term of six years. Whether- or not such an agreement must, in order to-be valid, be in writing, depends on the nature-of the_ obligations which it imposes. A contract which expressly provides for obligations-to be performed during a period of more-than a year but which may upon the happening of some contingency be fully performed within less than a year is not pb-, noxious to the statute of frauds. It has been, held that, if the contract evidences a personal undertaking .which ends with the death of one or more of the parties, it comes within, that class of contracts which may be performed within less than one year, regardless ¡ of the contractural period named. Weatherford, etc., Ry. Co. v. Wood, 88 Tex. 191, 30 S. W. 859, 28 L. R. A. 526; Warner v. T. & P. R. Co., 164 U. S. 418, 17 S. Ct. 147, 41 L. Ed. 495. The contract here under consideration is, we think, a personal one. If Maddox and Mitchell, who composed the-partnership, Maddox Motor Company, had died, the contract would have ended. The-evidence makes it clear tljat in making contracts of this character the appellant was much interested in selecting dealers because of their personal fitness to conduct a satisfactory and successful sales agency. It was-expressly provided in the written contract that it should not be assigned without the-consent of the Ford Motor Company. Those facts bring this contract within the rule announced in the cases above referred to. The next question is, Was Brown authorized to bind the appellant by the oral'agreement relied on in this case? If the ap-pellees must depend-upon actual authority in Brown, they have failed to discharge the-burden imposed by law of proving that authority. All the relevant testimony shows-that Brown was a subordinate agent — what they call the chief roadman in Texas — and. had no power to make or modify the written contracts sent out from the home ofiice of the-appellant. That power was lodged in the-higher officials of the company. As evidence - of Brown’s authority, appellees refer to what Proctor, the assistant manager at Dallas, said to Maddox when the latter stated to-Proctor that there was nothing in his oral or written contract requiring him to keep-any system of bookkeeping. It is true Proctor then referred Maddox to Brown, but evidently that was done only to settle a dispute about a detail which was not incorporated in the written contract. There is no evidence that Proctor knew anything about what had occurred between Maddox and Brown previous to that time. Certainly there was nothing in what Proctor said to justify Maddox in assuming that Brown was thereby empowered to make a radical change in the writter contract under which the business was then-being conducted. It is claimed, however, that, if Brown had no actual authority to make the parol modification of the written contract, he had the916 apparent authority to do so. What constitutes the apparent authority of an agent is thus stated in page 495, 1 Clark & Skyles on Agency: “The apparent scope of an agent’s authority is that authority which a reasonably prudent man, induced by the principal’s acts or conduct, •and in the exercise of reasonable diligence and sound discretion, under similar circumstances with the party dealing with the agent, and with like knowledge, would naturally suppose the agent to have. The question is not what was the authority actually given, but what was the third party, dealing with the agent, and induced by the principal’s acts, justified in believing the authority to be. The authority of an agent must be determined by the nature of his •business and the apparent scope of his employment • therein. It cannot be narrowed by private and undisclosed instructions, unless there is something in the nature of the business or the circumstances of the case to indicate that the agent is acting under special instructions or limited powers.” It is elementary that one who deals with an agent of a corporation must exercise proper diligence to ascertain the agent’s authority to bind his principal. Whether or not the agent is acting within the apparent scope of his authority must be determined by what the principal has done, not by the unratified acts and declarations of the agent Morgan v. Harper (Tex. Com. App.) 236 S. W. 71; 1 Clark & Skyles on Agency, p. 509. . After a careful examination of the evidence, we have reached the conclusion that it does not support a finding that in making the parol agreement relied on as the basis of this ■suit Brown was acting within the apparent scope of his authority. In reaching that con-elusion, we have taken into consideration only the apparently conceded facts and that portion of the testimony which came from appellees’ own witnesses. Maddox, it seems, •conducted all the negotiations with the appellant’s agents. . He was a man of business experience, and of at least average intelligence. He was to some extent familiar with the methods adopted by the appellant in contracting and dealing with its sales agents, or “dealers,” as they are called, before he applied for the first contract. He knew why the contract with Nichols had been canceled. He also knew that appellant was interested in securing capable and enterprising dealers who would occupy suitable buildings favorably located for the sale of its cars and automobile accessories. He testified that in his first interview with Brown he agreed to secure a well-located lot, and build on it a house that would be acceptable to the Ford Motor Company. His partner, Mitchell, who was present, concurred in that promise, and personally guaranteed that this would be done. It was upon the faith of that promise that appellant’s first written contract was made. It is true that Maddox also testified that in that conversation Brown told him that the written contract which was to follow would not embrace that six-year provision, and that the writing to that extent might be disregarded. However improbable it might be that such directions were relied on, it is an admitted fact that the written contract was sent and signed within a few days after that interview, and was evidently recognized as binding in all of its terms. That contract contained paragraph 17, which made the entire agreement revocable at the will of either party. Maddox admitted that he was familiar with that provision of the contract. Presumably he read the instrument before he signed it. As a business man of ordinary intelligence, he must have known that this written contract, which Brown told him would come from the home office, was superior to any verbal agreement previously made with Brown. With full notice thus given that Brown’s assumption of authority to make an important 'contractual stipulation was either unknown to his principal, or, if known, had been repudiated, Maddox accepted the written contract as the one under which he and his associate were willing to conduct their business and to purchase a lot and erect a building thereon that would be acceptable to the appellant. It was under that first written contract that he purchased and sold Ford cars and accessories until January 2 the following year, 1924. On the date last mentioned he signed another written contract, which contained the same paragraph 17 expressed in the exact language used in the first contract. He unconditionally accepted both of those contracts, and continued his business dealings with the appellant without making any objections'to the terms of the writings, or asking for any modification. In his testimony in the trial below he makes it clear that he did not go to Dallas in March, 1924, the date he says the second parol agreement was made with Brown, for the purpose of securing a modification of paragraph 17, or of any other provision of the written contract last signed, but to ascertain why he was not receiving more cars. According to his own statements, up to that date Maddox had done all that he could to secure the lot and erect the building demanded by appellant’s agents. In fact, the lot had been contracted for, and the delay complained of was due to some formalities necessary to clear the title. In addition to signing the second written contract on January 2, 1924, Maddox executed the following written instrument : “Estimate and Shipping Specifications for the Tear Ending December 31, 1924. “Ford Motor Company, Highland Park, Michigan, Dallas Branch. “In accordance with the provisions of sales agreement executed with your company, for the [917] sale of its products, I estimate I shall sell at retail the following, cars, trucks, chassis, and tractors for the year ending December 31, 1924, specifying the months in which shipments are to be made without any further or confirming orders, permitting you, however, to change the model specifications or shipping dates to conform to your productions as manufactured. “I agree to receive, accept and pay for such products in accordance with the terms of sales agreement.” Then follows a list of cars, trucks, and tractors. The execution of that instrument indicates that Maddox expected to continue his business relations with the appellant under the terms of the unmodified written contract. With full notice that the written contracts were sent out from the home office, he must have known that those in chare of the home office dictated the terms. When he found that those terms were in direct conflict with what Brown had agreed to do, he must have known that Brown’s assumption of authority was repudiated. There is no evidence that any of the contracts were signed by Brown. Liability for the unauthorized acts of an agent done within the apparent scope of his authority rests upon the principle of es-toppel. Unless the party dealing with such agent has been misled by the conduct of the agent to alter his position or to make or perform some agreement which would result in an injustice to such third party, if the principal were permitted to deny the authority of the agent, the doctrine of apparent authority has no application. Hobby v. King Trailer Co. (Tex. Civ. App.) 273 S. W. 650; 2 Corp. Juris, p. 461; 21 Corp. Juris, pp. 1172, 1173. The purchase of the lot and the erection of a building acceptable to the appellant is all ap-pellees rely on which might, under any circumstances, constitute an estoppel against the appellant to deny Brown’s apparent authority in this case. When the testimony of Maddox is considered in its entirety, he makes it plain that appellees were not induced by the parol agreements with Brown to purchase that lot and erect that building. It is true Maddox stated that, before any writing was signed, Brown agreed that ap-pellees might have the agency for six years. But, before they did anything toward purchasing the lot, or erecting a building, the written contract which in effect superseded the parol agreement was presented to them and signed without objection. That contract contained the following provision: “Dealer agrees to maintain a place of business and properly equipped salesroom and service station, prominently located and acceptable to the company, and shall employ competent salesmen and efficient workmen and company shall not in anywise be responsible for any charges connected with such place of business.” That provision was repeated in the second written contract. It'was while doing business under those written contracts alone that the lot was purchased and preparations were made to erect the building acceptable to the Ford Motor Company. The remaining assignments of error need not be considered further than to say they are overruled. For the reasons stated, the judgment will be reversed, and the cause remanded for a new trial.