140 N.W. 1038 | Wis. | 1913
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *494
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *495 The following opinion was filed April 8, 1913: The questions raised by plaintiff's appeal upon its cause of action are these: (1) Did plaintiff have an adequate remedy at law by an action of unlawful detainer? (2) Did the defendant incur a forfeiture of the contract and lease by failing to report the so-called cost sales ? (3) Did plaintiff waive the forfeiture? and (4) Are defendants entitled to equitable relief therefrom ?
For a proper understanding of the questions of law and fact involved in this case a brief description of the Boston Store and of its method of transacting business is deemed necessary. A concise and correct description thereof is contained in plaintiff's brief, and its language, with only minor variations, is for convenience adopted. The BostonStore contains about seventy departments operated by department *517 managers under contracts with the plaintiff in the nature of leases, providing for a joint contribution by the parties to the conduct of the business and for a division of the proceeds between them. It is conducted in a five-story and basement building on Grand avenue, Milwaukee. The entire building is under lease by the plaintiff from the Plankinton estate for the purpose of conducting the business which is being carried on therein. The store was started by one Julius Simon in 1900, who took the lease from the Plankinton estate. In 1904 he organized the Milwaukee Boston Store and transferred the lease of the building and all his interest in the business to this corporation and had all the stock of the company issued to himself. Simon continued in the active management and control of the store until October, 1906, when he transferred all the stock thereof to the Herzfeld-Phillipson Company, another corporation which at the time was operating several departments in the store. Since then Simon has had nothing to do with the store. The control and management thereof has been in the Herzfeld-Phillipson Company as the owner of the capital stock of the plaintiff, which has continued to hold the lease from the Plankinton estate. The BostonStore has continued to maintain its separate organization, make all subleases of the departments therein and, through its own officers and employees, and the Herzfeld-Phillipson Company acting for it, has continued to conduct the business of the store as the lessor of all the departments and to participate in the conduct and management of the business in the manner and to the extent provided in the various contracts under which the departments are conducted. In the organization and arrangement of the store a certain amount of space is set apart for the conduct of the business of each department in accordance with the provisions of the contract under which the business of the department is conducted, and the lessee of the department is required to confine his operations to that particular space and to sell thereon *518 only the class or classes of goods specified in his contract and lease. The several departments are not shut off from each other as separate stores. The same aisles and passageways used in one department continue through the other departments on the same floors and all use the same common entrances to the building and the same elevators, making, so far as the physical arrangement is concerned, one large store. Each department lessee buys the goods for his department, keeps up his stock, and hires his own clerks to sell the goods to the customers on the floor of the department. The Boston Store, besides providing the space and furnishing light, heat, elevator and janitor services, supervises and has the right to dictate the arrangement and display of the stock in the different departments. It makes rules and regulations for the conduct of the business, passes on all credits to customers, assumes and collects all accounts, maintains a credit and accounting department for the entire store, takes charge of bundles, and delivers through a regular delivery system all goods sold. It receives the proceeds of all sales, accounting to the lessees of the departments at intervals for their share thereof, conducts and controls the entire advertising, and exercises general supervision and control over the entire business. For the space provided and for its entire contribution to the business theBoston Store retains under its various contracts with the lessees of the departments certain percentages of the proceeds of sales, all of which, under the terms of the contracts, must pass through its hands. All business is required to be done in the name of the Boston Store, and for the purpose of keeping track of all sales and to see that all transactions go through the proper channels from the sale of the goods to the delivery to the customer, and for the purpose of insuring a proper accounting, a uniform system of rules and regulations has been established which every department in the store is required to observe. This system is as follows: The clerk making a sale is required to make out *519 duplicate sales tickets on which is entered the description of the article, the price at which it was sold, whether it was a cash or credit sale, and the name and address of the customer. These tickets with the article and also the money, in case of a cash sale, are sent to a cashier of the Boston Store, who sits at a desk conveniently located and whose duty it is to make the proper inspection of the checks, stamp them, and pass one with the article on the bundler's desk to be bundled and sent out. If the sale was a cash sale she retains the money, and in any case one of the duplicate tickets is retained properly stamped and sent to the auditing department, where the proper record is kept.
1. The defendants contend that the relation of the parties was that of landlord and tenant and therefore plaintiff had an adequate remedy at law by an action of unlawful detainer. This defense was specifically pleaded by them in their answer and is insisted upon in this court. Our attention is called to that part of the prayer for relief which reads, "That it be adjudged and decreed that the plaintiff is entitled as against the defendants . . . to the possession of the premises referred to in or covered by said agreement and lease, and that the defendants be ordered and adjudged to quit and surrender the same to the plaintiff, and that they be permanently and forever enjoined from interfering with the possession of said premises by the plaintiff," and to the fact that just such relief is prayed as would be covered by the judgment rendered in an action of unlawful detainer. We are also referred to eighteen or more clauses in the agreement where the term lease is used or where language is employed that is strictly germane to the terms of a lease, and the case of Porter v. Merrill,
"The written contract declared upon purports to be a lease, for a precise time and at a definite weekly rate, of certain specific rooms, so separated from all other rooms in the same house as to become in fact and in law the separate tenement of the lessees. . . . The fact that, besides leasing the rooms, the lessor undertakes to furnish certain specific accommodations, and imposes certain restrictions as to the manner in which the premises are to be occupied or used, does not change the essential character of the instrument."
It is evident there was no joint possession in that case. As bearing upon the claim that the contract between the parties was a lease, the cases of Oliver v. Moore,
It is true that the agreement is in a certain sense a lease, but it is more than that. It provides for the carrying on of a joint business in which plaintiff furnishes the space, does the bundling and the delivery, and has charge of credits, advertising, and the general conduct of the business, and the defendants buy the goods, make the sales, hire and pay the clerks, turn over the money on cash sales to plaintiff to be by it accounted for later, and out of the gross proceeds of the sales the plaintiff retains ten per cent. as its compensation for the space furnished and services rendered, not including certain services in the credit and advertising departments. There is also a joint possession of certain aisles and approaches *521 in the store, and the plaintiff retains the key thereof, though all the space leased is within it. Joint show windows are to be decorated under the direction of plaintiff, suitable regard being had to the reasonable wishes of the defendants. And as to bargain sales, it is provided the plaintiff may buy goods for the same if the defendants decline to do so. Many other features of the agreement could be adverted to for the purpose of showing that it is more than a lease. It creates such business and fiduciary relations between the parties as to be more properly denominated a partnership or quasi-partnership agreement than a lease. The plaintiff held joint possession with the defendants of certain portions of the space, and in a sense had the physical control of all of it, for by locking the doors it could exclude the defendants therefrom and compel them to resort to legal process to regain possession. So it is evident that an action of unlawful detainer would not give plaintiff the relief prayed for, or to which it would be entitled under evidence sustaining the allegations of the complaint. An accounting involving complicated business relations covering a number of years is also asked for. In fact the suit partakes more of the nature of the dissolution of a partnership and the settlement of the account between the parties than the mere adjudication of the right of possession of the space in plaintiff's store. It is therefore deemed that plaintiff did not have an adequate remedy at law and that the suit was properly brought in equity.
2. The defendants argue that the cost sales were not sales for which they were required to account or pay a commission upon. In support of this they rely upon evidence showing that a custom had obtained for a long time in the store permitting sales to clerks and managers at cost, and that such sales were not reported to plaintiff. The latter denies that it was aware of the custom, and while it concedes that the owners of the department might perhaps be entitled to take out goods for themselves and the members of their families *522 such right did not extend to clerks and friends of owners and employees. The terms of the agreement are that the defendants will pay to plaintiff "ten per centum (10 %) on the gross sales of said department." This is the measure of plaintiff's compensation for the space furnished and services rendered by it. And it is evident that such compensation cannot be arbitrarily or unreasonably diminished by the defendants without its consent. The agreement further provides that "all merchandise sold in said department and money received from sales shall be immediately delivered to and handled by the cashier of the party of the first part." The terms "gross sales" and "all merchandise sold" are broad and comprehensive enough to include cost sales to employees. It could certainly not have been the intention of the parties that plaintiff was to receive a commission only on sales made at a profit, for if that were so, the agreement would undoubtedly have contained apt terms expressing such intention. It is a matter of common knowledge that a certain class of goods at times is sold at cost or less to the general public, but such sales are none the less sales within the meaning of the agreement. Whether or not a certain transaction constitutes a sale is entirely independent of the element of a profit to either party to the transaction. Therefore, when defendants sold goods to their employees they made a sale thereof just as much as if they had sold them to the public, and plaintiff was entitled to a commission upon such sales irrespective of whether or not the defendants made a profit upon them. The evidence shows that over $1,200 worth of goods were sold to others than employees and owners of the department.
But it is claimed that even if these cost sales were within the terms of the agreement a failure to report them did not work a forfeiture, because such failure was not wilful or intentional. The evidence on this branch of the case is somewhat conflicting, and, since the trial court has found in favor of the plaintiff upon such issue, it remains only to examine *523 the evidence to see if it is sufficient to sustain the finding. We shall not review it at any length, but only refer to a few salient points therein that show the finding is based upon sufficient evidence. Practically all of the goods so sold were bundled and delivered by the defendants themselves. They were not sent to the cashier's desk at all, and plaintiff was precluded from knowing anything either as to the quantity or value of goods so sold. When credit was given no report thereof was made to the credit department, nor was plaintiff allowed to pass upon the question of credit as provided for in the agreement. The true nature of the sales was concealed by entering all goods so sold in the "Return Merchandise Account" at first, and later in an account under the name of "M. Phillipsborn." No adequate explanation was given by the defendants of such method of bookkeeping. The evidence also showed that part of the defendants' books relating to their sales had been destroyed, but a fairly satisfactory explanation of such destruction was given. From the whole evidence we are satisfied that the trial court properly found that an intentional effort was made by the defendants to conceal these sales from plaintiff, both by the manner in which the goods were bundled and delivered and by the manner in which their true nature was concealed by the method of bookkeeping resorted to. It is plain that a cost sale to any one should not be entered in the account of "Merchandise Returned," and the explanation that it was so entered because there was no profit in it is entirely inadequate, coming as it does from men experienced in business and bookkeeping. The defendants knew the agreement entitled plaintiff to ten per cent. commission on all sales; that all sales were required to be reported to plaintiff and go through the regular channels of its business; and that it had no means of knowing what the sales were or of collecting commissions thereon unless they were reported. When, therefore, in the face of such knowledge, they actually concealed such sales from plaintiff *524 both by the manner in which the bundling and delivery was done and by the manner in which the books were kept, they must be held to have intentionally violated the terms of the agreement. So we conclude that the finding of the trial court to the effect that the cost sales made by the defendants prior to May 31, 1910, and aggregating $19,730.27 were in violation of the provisions of the agreement and were wilfully and intentionally concealed by them from the plaintiff, is supported by the evidence.
3. It appears from the evidence that on September 15, 1911, plaintiff was first informed by the defendants of the fact that they had made unreported sales to employees. The evidence as to the extent of the disclosure is somewhat in conflict. Plaintiff contends that the defendants represented the sales were quite trivial in amount, while the defendants claim that, although no amount was stated by them, yet the impression conveyed to the plaintiff was not that the sales were entirely trivial in amount, and they claim that Mr. Stone, acting on behalf of the plaintiff, in reply to a statement made by Mr. Hoyt, who represented the defendants, that they were willing to submit a report of such sales and pay a commission thereon if desired, said: "That is not necessary; we don't desire it." This much, however, remains certain: No definite conclusion or agreement was arrived at on that date. On the 19th of September the plaintiff by a letter to the defendants stated:
"In order that we may be fully advised as to the nature and extent of the transactions of this character, we would respectfully request that you furnish us at once with as full and complete statement as you are able to give, showing the dates, number, and amounts of such transactions and the period over which the same have extended."
The defendants immediately replied to this letter, stating they would comply with its request but that it would take some time to prepare the required statement. On September *525 29th the defendants furnished such statement to the plaintiff, and then, for the first time, it learned of practically the full amount of unreported sales, except as to a correction made thereto October 3, 1911, which increased the amount of $17,836.75 reported to $19,730.27.
The defendants claim that the plaintiff, after full knowledge of all the facts and circumstances relating to the breach of the agreement, has waived the same: (1) By negotiating with the defendants on September 18th for an extension of the lease to cover additional space; (2) by continuing to do business under the lease, receiving all the benefits thereof without any notice whatever to the defendants until the afternoon of September 19th; (3) by continuing to do business under the lease, receiving all the benefits thereof from September 19 to October 2, 1911, without notice of any intention to declare a forfeiture; (4) by continuing to do business and exacting and receiving from the defendants all the benefits and payments due it under the lease from October 2, 1911, down to the commencement of the action, after it had been notified by the defendants that its claim of forfeiture of the lease was without foundation and that they would continue to keep the premises thereunder and that they insisted upon the plaintiff performing the duties imposed upon it by the lease; and (5) by exacting and receiving from the defendants, after the commencement of the action and in January, 1911, money for a sprinkling charge for a period ending in the month of June, 1912, as part of the compensation for the use of said premises for that period.
It is quite apparent from any version of the testimony that plaintiff was not fully informed as to the extent of the unreported cost sales until September 29th. That the extent of such sales might materially influence it in determining whether or not it would insist upon a forfeiture is quite apparent. It might be willing to overlook a trifling breach *526
when it would not tolerate a substantial one. It is elementary that a waiver must be predicated upon the intentional relinquishment of a known right. Monroe W. W. Co. v. Monroe,
But the question whether its acts subsequent to October 2d do not in fact constitute a waiver of the forfeiture is more serious. A large number of cases are cited by the defendants showing that the receipt of rent by a landlord after a breach constitutes a waiver thereof. For reasons already stated these cases have only a partial or qualified application, since the relations between the parties are not solely those of landlord and tenant. As will be seen by a reference to plaintiff's letter of September 30th giving notice of a cancellation of the agreement, it offered to continue to transact the business of the department in the manner in which it had theretofore been transacted, without prejudice to its right to insist upon a forfeiture, until a surrender was made by the defendants as therein required. And in its letter of October 4th it gave notice "that pending the determination of the action which has been begun to enforce the rights of theMilwaukee Boston Store in the premises, all goods sold by you from said department and delivered to us will be accounted for and handled by us, and the business of said department, regardless of the contract which has been terminated, will be conducted on our *527 part substantially as heretofore, except that we shall apply to the court as soon as practicable for an order authorizing the deposit, until the surrender by you of said department, of the proceeds of such sales or so much thereof as may be sufficient to indemnify us against loss or damage sustained by us and which may hereafter be sustained by reason of your unlawful withholding from us of the possession of said department to which we are now entitled. And in the meantime and until such order shall be made the percentages of the proceeds of sales which we shall retain as heretofore will be applied on account of such loss and damage." Defendants' reply to plaintiff's letter of September 30th contained an unqualified refusal to surrender possession and notified it that they should continue to hold under their lease, and demanded of the plaintiff that it continue the performance of the duties imposed upon it thereunder.
The plaintiff never applied to the court for the order mentioned in its letter of October 4th. So if it held the percentages of the proceeds of sales as damages at all, it held the same by virtue of the right declared in the last sentence of said letter. It is a little difficult to understand just what is meant by such sentence, taken in connection with the previous statement in the letter that the business would be conducted substantially as theretofore. Under the previous conduct of the business plaintiff was entitled to retain ten per cent. on all sales as its share of compensation for space furnished and services rendered. If the business was continued the same as before it was entitled to retain the like percentage for such space and services, and there would be nothing left to apply towards damages for withholding possession. That the business continued to be conducted after the action was begun and down to the time of the trial precisely as it had been from the inception of the agreement, was conceded upon the trial and so found by the court. Plaintiff therefore retained no money in its hands out of sales made subsequent *528
to the commencement of the action out of which it could reimburse itself for damages. The defendants by unequivocal language notified plaintiff that they should continue to hold under the agreement. This was equivalent to informing it that the ten per cent. retained should be applied upon the amount due it for the use of the space and the services rendered by it pursuant to the agreement. Admitting that the defendants owed plaintiff damages for withholding possession, they also owed it ten per cent. on sales made, hence they as debtors, and not the plaintiff as creditor, had the right to say upon what debt the money they turned over to plaintiff should be applied. Jones v. Williams,
There is much force in plaintiff's argument that great loss would accrue to it by a sudden termination of business relations between the parties, and that it ought not to be subjected to such loss as a condition of insisting upon the forfeiture. On the other hand, should plaintiff be permitted to reap the benefits of the agreement and at the same time claim that it was canceled ? The loss to the defendants from a sudden termination of business relations and their loss after a short prolongation thereof would not differ very materially, while to the plaintiff, if it could continue the business uninterruptedly, the difference would be very great. In the latter case it might sustain practically no loss at all, while in the former it might seriously affect its whole business for a time. When it elected to break with the defendants it was incumbent upon it to weigh the advantages and disadvantages of the situation. It ought not to be permitted to accept the advantageous *529 part, namely, that of securing control of defendants' business, and at the same time compel them to accept its terms of a temporary continuance thereof in order that it might relieve itself from the consequent loss of flatly standing upon its right of forfeiture. When declarations and conduct are at variance, as here, the conduct and acts of the party must be held to outweigh the declarations and be controlling. For these reasons it is considered that the plaintiff, by its continuing the business with the defendants in the manner and under the circumstances stated after October 2, 1911, waived the forfeiture.
4. Having held that plaintiff waived the forfeiture, it perhaps becomes unnecessary to determine whether the defendants would be entitled to equitable relief in the absence of a waiver. In view of the importance and peculiar circumstances of the case, however, we prefer to base our decision upon both grounds. It is the settled doctrine of this state that equity will relieve against a forfeiture resulting from a condition broken where such condition was intended as security for the payment of money. Gates v. Parmly,
Let us now briefly review the situation of the parties and consider the relative hardships that would result by granting or refusing to grant relief, and also the relative delinquencies of the parties towards each other in their dealings under the agreement. As will be seen from the findings of the trial court, contained in the statement of facts, between May 1, 1907, and October 3, 1911, the total sales in defendants' department amounted to $2,188,185.97. Their agreement does not expire till 1922, and they have an option for a further extension at that time under certain contingencies. That good judgment and splendid management have gone into the creation of a business of such magnitude is self-evident. The good will thereof is of great value, and if plaintiff could succeed to it unimpaired it would be greatly enriched thereby. Were the defendants required to vacate the premises they could not carry any great portion of the business with them. The result would be that plaintiff would reap a large benefit from the established business and the defendants practically none. That plaintiff, too, by good judgment and business ability has aided in its creation may be freely conceded. But the fruits of the joint effort should not all go to one party except for grave cause.
The delinquency of the defendants in failing to report the cost sales is established. And for the purposes of the case we will assume that no excuse exists to mitigate it except the *531 fact that the custom was promptly discontinued when they were advised that such sales were in violation of the agreement. On the other hand, the plaintiff's conduct is not altogether such as to appeal strongly to the conscience of the court. It withheld from defendants the fact that it had secured substantial rebates on advertising contracts, eighteen per cent. of which belonged to them, amounting in all to $887.67. It failed to disclose to them the true cost of the credit department and had entered up against it $5,000 in excessive salaries, $3,000 of which went to plaintiff's president. The total moneys belonging to the defendants which it kept back as to this item were $4,049.47. It retained in its possession the sum of $6,257.57 due the defendants on an overcharge in the trading-stamp account. It is not necessary to say that these sums were fraudulently withheld from the defendants. It is sufficient to say that they were withheld, and the first, at least, without any pretense of right. Viewed in connection with these acts of plaintiff, the failure of the defendants to report sales upon which the plaintiff was entitled to a commission of $2,338.37, including interest, does not call so loudly for the forfeiture of a business whose value renders their omission almost trivial by comparison. It was no doubt with this idea in mind that the learned trial judge said that "under the circumstances disclosed by the evidence it would be inequitable to permit the plaintiff to enforce a forfeiture of the lease." The conclusion reached upon all the facts in the case is that, had there been no waiver of the forfeiture by the plaintiff, equity would relieve against it.
The questions arising upon the counterclaim relate to three separate accounts, known as Newspaper Advertising, Trading Stamp Account, and Charge Account. These are fully set forth in the trial court's findings numbered 10, 11, and 12, respectively, included in the statement of facts, to which reference may be had for a fuller understanding thereof. We have carefully examined the statement of these accounts *532 and the evidence relative to the same and have reached the conclusion that the accounting as made by the trial court should not be disturbed. To restate the accounts here and give in detail the reasons for the conclusions reached as to the numerous items would unreasonably and uselessly extend this opinion.
Under the provisions of the agreement between the parties and the practical construction given it by them since its inception, the trial court properly refused to reimburse plaintiff for the amount of money it had paid newspapers for head-plates and editorials relating generally to the Boston Store, and not to any specific department. Nor could the cost of the trading stamps be charged to this class of general advertising, though plaintiff's books showed that it was. The use of trading stamps constituted a special form of advertising and was separately provided for in the agreement and a maximum limitation of one and one-half per cent. of the gross sales fixed. It may be conceded that an absolutely accurate account of the cost of trading stamps to each department could not be stated. But facts were at hand which made it possible to state an account substantially accurate, and that was done by the trial court.
As to the Charge Account, the court under the evidence properly disallowed excessive salaries in the sum of $5,000 for extra managerial services. It also did not abuse its discretion in retaining the sum of $2,000 in the account as a reserve fund. Under the evidence showing rapid increases of late years in the credit balances of this account, that sum would seem to be sufficient.
The defendants claim the court erred in allowing plaintiff commissions on the cost sales not reported, amounting to $2,338.37; in allowing plaintiff clerk hire in the stamp department to the amount of $643.35; in allowing an excess salary charge in the credit department of $810, and a rent charge therein of $364.50; in refusing to allow them interest *533 on credit balances in the credit department amounting to $436.11, and in refusing to give them interest on overcharge in advertising to the amount of $56.80, in all the sum of $4,649.13. Though plaintiff concedes that if it is proper to undertake to determine any of the counterclaims in this action the defendants may be entitled to interest on the Journal overcharge amounting to $22.57, we think the court properly disallowed it in view of the manner in which the mistake was made by plaintiff in not sooner refunding the overcharge. As to other claims made by the defendants upon this appeal, it appears that the findings of the trial court upon them are sustained by the evidence and ought not to be set aside.
By the Court. — Judgment affirmed on both appeals. No costs allowed to either party, except that the defendants shall recover clerk's fees and cost of printing not to exceed $75.
SIEBECKER, J., took no part.
A motion for a rehearing was denied, with $25 costs, on May 31, 1913.
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