Diederich v. Wisconsin Wood Products, Inc.

Action by Henry Diederich on contract for commissions, commenced in February, 1944, against the Wisconsin Wood Products corporation. From a judgment dismissing the plaintiff's complaint, the plaintiff appeals.

Plaintiff seeks to recover a commission claimed to have been earned as salesman of defendant Wisconsin Wood Products corporation on an alleged sale made December 30, 1942, of defendant's products to the B. F. Nelson Manufacturing Company (hereinafter referred to as the "Nelson company"). Plaintiff became an employee of the defendant on June 21, 1933, under a written contract which provided for commissions on all sales made by the agent or directly by the corporation to all customers which the agent has sold or solicited in the past and are recorded in his reports to tile corporation, as well as to any new companies which he solicits from time to time in the future. This contract was renewed on August 24, 1938, for a period of four additional years, terminating December 31, 1942.

The defendant is a Wisconsin corporation operating at Phillips and Rib Lake, Wisconsin. The present directors of the corporation are: Harry Gustafson, president; Violet Marschke, secretary and treasurer; and Ole Petersen, vice-president. They were elected in 1939. In 1941 Harry Gustafson was appointed general manager of the company.

Early in December of 1942, Mr. McNally, general manager of the Nelson company of Minneapolis, one of the best customers of defendant and on plaintiff's list, addressed a letter to Mr. Harry Gustafson of the Wisconsin Wood Products, Inc., in which he stated that his company desires "to effect a written contract with your company for our estimated requirements for next year." It is undisputed that it was not the policy of the defendant to give written contracts in connection with the sale of their wood fiber but that the company preferred to operate by filling individual orders as they came in. In the same letter, Mr. McNally mentioned that Mr. Diederich had been of great aid in maintaining pleasant relations between the two companies and expressed the hope that the company would retain plaintiff after the expiration of his contract.

The letter was answered on December 16, 1942, by the defendant company. There is testimony that the letter was written by Violet Marschke, a director and secretary and treasurer of the corporation; and the name of Mr. Gustafson, as president, was affixed. The letter stated that Mr. Gustafson would arrange to be in Minneapolis to discuss the matter of a written contract at the convenience of Mr. McNally. The record also shows that on December 18, 1942, the board of directors of defendant met and voted not to renew Henry Diederich's contract and also not to enter into any written contract with the Nelson company.

Thereafter, on December 30, 1942, Mr. Gustafson, Mr. Diederich, and Mr. Marschke, husband of Violet Marschke, went to Minneapolis to discuss the matter with Mr. McNally. While plaintiff was conferring with the purchasing agent of said company concerning certain new formulas for the determination of the price rate, Mr. Gustafson conferred with Mr. McNally. He testified that he told Mr. McNally that it was not the company's policy to enter into written contracts, and that the Wisconsin Wood Products company did not have contracts with other concerns. Nevertheless, Mr. Gustafson did sign an order for shipment of not less than six thousand five hundred tons nor more than seven thousand five hundred tons of wood fiber as ordered from time to time during the year of 1943 by the Nelson company. The Nelson company was not informed, nor did it have any knowledge of the action of the board of directors of defendant in voting not to enter into such a contract.

After defendant had been notified on January 2, 1943, by plaintiff that he claimed commissions on any sales made pursuant to the contract, the defendant consulted its attorney, Mr. Leicht, who wrote the Nelson company on January 4, 1943, stating that Mr. Gustafson "had no authority to make any written contract at all, and particularly he was expressly prohibited by a formal action of the board of directors that there would be no further business contracted in which Mr. Diederich should be entitled to any commission." The letter also stated that the defendant would deal with the Nelson company by filling its orders as it had in the past.

On January 6, 1943, the Nelson company wrote a letter to defendant stating that it had no interest in the internal affairs of the defendant, and on January 8, 1943, Mr. Leicht again wrote the Nelson company reiterating the defendant's decision not to recognize the contract.

The record shows that the shipments of wood fiber were made to the Nelson company during 1943 and that they approximated the amount recited in the alleged contract. But each order was filled as it came in and no reference was made to the order of December 30, 1942. Plaintiff asks for commissions amounting to $7,715.04. This covers all the Nelson company orders delivered during 1943.

At the close of the testimony both sides moved for a directed verdict and the case was withdrawn from the consideration of the jury. The court found as conclusions of law that Mr. Gustafson had no authority to accept the contract; that no apparent authority was involved, and that plaintiff was not entitled to a commission on the sales made in 1943. Judgment was entered dismissing plaintiff's complaint. It is admitted that if the alleged contract of December 30, 1942, is valid the defendant under its contract with plaintiff is liable for commissions on all the wood fiber shipped to the Nelson company during the year 1943.

The sole question, therefore, is whether the sales arranged for on December 30, 1942, are binding upon the parties. The defendant frames the question in his brief as follows:

"There is but one question involved in this action and that is: Can the president of a common corporation bind the same by his unauthorized act to a contract with a third party when there is nothing by word, act or silence to estop the corporation from asserting the truth?"

If the facts warranted stating the question in that way, the answer, of course, would be favorable to the defendant. But they are not; for it appears from the record of the defendant that Gustafson was the president and general manager; that his sister was secretary and treasurer, and that after the letter of the Nelson company had been considered on December 16th, the defendant wrote the Nelson company as follows:

B. F. NELSON MFG. CO.

Minneapolis, Minn.

Dear Mr. McNally: We have your kind letter of Dec. 9 and wish to say it is gratifying to our company and myself to know that the services of Mr. Diederich are so highly appreciated by your company. We too hold high respect for Mr. Diederich's ability and also are fully aware of the important part he had in the pioneering of our industry. However, there are several angles to be considered and you can be sure that before arriving at any decision, we have taken everything into consideration.

Arrangements will be made to give your account the same personal service as in the past and assure you that every effort will be made to maintain the pleasant relations we have enjoyed at all times.

In regard to a written contract, I will arrange to be in Minneapolis at your convenience and we can then go into this matter.

Again thanking you for your letter and assuring you of our appreciation of your interest, we remain,

Very truly yours,
WISCONSIN WOOD PRODUCTS, INC.
HARRY GUSTAFSON,
President.

This evidence with more to the same effect shows that Gustafson was not only held out by the company as one authorized to deal on its behalf but that he had actually authority. Findings of fact to the contrary are against the great weight and clear preponderance of the evidence. It is true that a resolution was adopted at a meeting of the board of directors, when the subject of the Nelson contract and the contract with plaintiff was under consideration, and that the president and general manager was secretly denied the authority to enter into a written agreement with the Nelson company. It also appears from the record of the company that Gustafson, as president, presided at the meeting; that he seconded the motion restricting his authority and evidently he put the motion and declared it carried. Whatever the purpose of this unusually carefully guarded restriction may have been, it is established that neither the plaintiff nor the Nelson company had any knowledge of the proceeding. It also appears that the Nelson company and all concerned dealt with the matter relying upon the known relation of Gustafson to the company as disclosed in the letter quoted above. He was the president, a director and general manager. And a majority of the directors had knowledge of and assisted in the preparation of the letter quoted above. The conclusions of law of the trial court are not sustained by the facts set forth in the recital in the findings of fact. The statement that Mr. Gustafson had no authority to accept the contract must be based on the secret resolution and this, having been kept from all interested parties, cannot affect the usual and apparent authority which attached to his position and the representations made by the company in its letter informing the Nelson company that the president would be present at the meeting "in regard to a written contract."

The general rule is that "the president, treasurer, secretary and other officers of a corporation are merely its agents, appointed by the stockholders or the board of directors or trustees, and vested with such powers, and such powers only, as may be conferred upon them by the corporation, subject, of course, to any express charter or statutory provisions." 2 Fletcher, Cyc. Corp. p. 228, sec. 434. And any contracts or acts entered into by the officers in excess of such authority will not bind the corporation in the absence of estoppel or ratification. Walworth County Bank v. Farmer's Loan Trust Co. (1851) 14 Wis. *325.

But under certain situations a corporation may be estopped to deny the authority of its agents to enter into contracts in its behalf. If the corporation has clothed an officer or director with an apparent authority to act for it in a particular business transaction and third parties have relied upon such apparent authority, the corporation will be bound by the acts of the agent. 2 Fletcher, Cyc. Corp. p. 257, sec. 449; SenourMfg. Co. v. Clarke (1897), 96 Wis. 469, 71 N.W. 883;Northwestern Fuel Co. v. Lee (1899), 102 Wis. 426,78 N.W. 584.

Furthermore, a president who is also general manager of a corporation has the implied power to do anything that the corporation could do within the general scope of its business. 2 Fletcher, Cyc. Corp. p. 610, sec. 667; Eastern Rolling MillsCo. v. Michlovitz (1929), 157 Md. 51, 145 A. 378; W. T.Rawleigh Medical Co. v. Woodward (Mo.App. 1921), 230 S.W. 647; Kline v. Little Rapids Pulp Co. (1932) 206 Wis. 464,240 N.W. 128; St. Clair v. Rutledge (1902), 115 Wis. 583,92 N.W. 234; Lowe v. Ring (1902), 115 Wis. 575,92 N.W. 238. It cannot be questioned that a contract for the sale of the goods produced by a corporation is one which is in the general scope and ordinary course of its business. That Mr. Gustafson not only had the title of general manager but was actually held out by the company as exercising such powers as are incident to the position is shown by the testimony in the record. All correspondence emanating from the home office bore his name or was signed by him. And the letter of December 16, 1942, already referred to, was an act the corporation effectually holding out Mr. Gustafson as an agent of the defendant possessing the power to negotiate a contract with Mr. McNally. The Nelson company was entitled to rely on this appearance of authority. A corporation cannot, by the passage of a secret resolution, unrevealed to its customer, limit a general manager's authority. 2 Fletcher, Cyc. Corp. p. 614, sec. 66. Mr. Gustafson and Mrs. Marschke conducted the greater part of the business activities of the corporation. It was from them that plaintiff received directions as to the conduct of his work. There was nothing given any publicity which would indicate that Mr. Gustafson's powers were at all restricted or limited in transacting the defendant's business with the plaintiff or the Nelson company.

It is also significant that the quantity of goods shipped to the Nelson company in 1943 approximated the amounts named in the contract of December 30, 1942. Although it is possible that under the procedure of receiving and filling individual orders as they came in without regard to the contract, such a result was only coincidental; still, from all the evidence, it appears that the defendant was willing to abide by the contract in so far as the relations with the Nelson company were concerned, but sought only to repudiate it in order to escape the payment of plaintiff's commission.

Under the circumstances it is considered that the contract was validly executed on December 30, 1942, and plaintiff is entitled to commissions on all orders shipped in 1943 pursuant to said agreement. By the Court. — Judgment. reversed. Cause remanded with directions to enter judgment for plaintiff in accordance with this opinion.