Case Name: John A. Westlund, Inc. v. O'Bryan Construction Co., Inc.
Court: Vermont Supreme Court
Jurisdiction: Vermont
Decision Date: 1963-01-02
Citations: 123 Vt. 301
Docket Number: 
Parties: John A. Westlund, Inc. v. O’Bryan Construction Co., Inc.
Judges: Present: Hulburd, C. J., Holden, Shangraw, Barney and Smith, JJ.
Reporter: Vermont Reports
Volume: 123
Pages: 301–316

Head Matter:
John A. Westlund, Inc. v. O’Bryan Construction Co., Inc.
[187 A.2d 507]
September Term, 1962
Present: Hulburd, C. J., Holden, Shangraw, Barney and Smith, JJ.
Opinion Filed January 2, 1963
Edward A. John for the plaintiff.
Gannett, Oakes & Weber for the defendant.

Opinion:
Barney, J.
The plaintiff corporation was employed as a subcontractor on an industrial plant construction project in Brattleboro called the Case plant. It is suing the defendant corporation, the general contractor, for money claimed to be due for work done in connection with the erection of the plant. It is the defendant's position that the plaintiff was awarded a verdict below principally because the jury never had fully put before it the evidence or the law dealing with the duty of fidelity required of agents. The agency involved was that of Arthur Mosher, who was construction superintendent for the defendant. Neither party was able to produce him as a witness, either in person or by deposition.
The original contractual arrangement between the parties is not in dispute. The defendant, as general contractor, had bound himself by written agreement to construct the Case plant for $542,000. Because of changes in the plans during construction the final contract price was $656,444.61. The plaintiff, as one of some eighteen subcontractors, had entered into a written contract to perform certain portions of the construction as spelled out in the terms of the contract for $d5,821. There were nine written change orders applicable to plaintiff's part of the job. The defendant in fact paid the plaintiff $103,299.39.
In bringing suit against the defendant, the plaintiff claimed that an additional sum in excess of $149,000 was still owed to it by the defendant. The jury found the sum to be $40,000. The suit of the plaintiff was based, not on the performance of the original subcontract, but upon what it claimed was a modification of that agreement, subsequently entered into by the parties. The plaintiff's version of this transaction may be simply stated. Its evidence, given by John A. Westlund, its president, was that he and Harold Z. O'Bryan, president of the plaintiff corporation, had a conversation in the presence of Arthur Mosher, in which O'Bryan suggested and Westlund agreed that the contract between them be replaced by a cost-plus arrangement. According to Westlund, O'Bryan then directed Mosher to reduce this agreement to writing in the form of a letter to the plaintiff. Such a letter, signed by Mosher on behalf of the defendant, was put in evidence. The reason for this change, as testified to by Westlund, was that if the plaintiff, in its operation, unionized its workers, the defendant would be able to avert having to unionize its whole force. Westlund stated that when O'Bryan told him that the plaintiff would have to unionize, Westlund objected that his company could not perform in accordance with its subcontract at union wage levels. He claimed that O'Bryan, thereupon agreed to the change to cost-plus. This suit seeks to enforce that agreement.
The defendant claims that no modification of the original subcontract was ever in fact authorized. It contends that the letter written by Mosher was, to the knowledge of the plaintiff, the product of the concerted action of Westlund and Mosher and against the interest of the defendant, made without its knowledge.
The defendant produced evidence intended to demonstrate that the claim of an agreed modification was improbable on the face of it and was refuted by the conduct of the plaintiff itself. In this connection the defendant called attention to the fact that while the original contract consisted of a four-page standard form with detailed provisions executed in duplicate on May 12, 1960 by Howard Z. O'Bryan, president of defendant, and John A. Westlund, president of plaintiff, the modification was a one-page, handwritten document prepared and signed by Arthur Mosher alone, just eleven days after the execution of the original contract. The defendant's evidence showed that it was never informed as to the existence of this letter of modification until after suit was brought; that the original was never shown its officers, nor was a copy of any kind furnished them. The defendant was never billed by the plaintiff on a cost-plus basis. Back charges are not applicable to a cost-plus contract, yet in November 1960, Mrs. Westlund, treasurer of the plaintiff, prepared and sent a letter, signed by her husband, giving notice to the defendant that the plaintiff would not be responsible for back charges after November 28, 1960. Pricing change orders were unnecessary under a cost-plus contract, but there were letters from the plaintiff to the defendant in August and November 1960, stating that prices for change orders were being worked up. John Westlund testified that these letters misstated the facts and were written by him to the defendant at Mosher's direction.
The defendant also says that the relationship between Mosher and Westlund was such that Mosher's required loyalty to the defendant was overcome, and he came to act contrary to his employer's interest. The evidence of this relationship took many forms in the defendant's case, but may be summarized as follows:
Sometime prior to December 1959, Mosher was employed on a job in Keene, N. H., by the Ley Construction Company, as general construction supervisor. In connection with that job he contacted the plaintiff, whose office was in Keene, in connection with subcontracting some work on that job. The plaintiff was successful. Following that, some time in 1959, Mosher and the plaintiff entered a contractual arrangement by which plaintiff was to build a house for Mosher for $29,000. In January 1960, Mosher went to work as construction superintendent for the defendant. At that time Westlund and O'Bryan were not acquainted. However, the plaintiff, shortly thereafter, in March 1960, got a subcontract on a job in Claremont, N. H., for which the defendant was the general contractor. Mosher arranged the hiring. On May 12, 1960, the plaintiff got the subcontract here in question on the Case plant, on which the defendant was the general contractor. Mosher invited the plaintiff to come to defendant's office and discuss the bid. In August or September 1960, the plaintiff got a subcontract on a job in Keene, N. H., on which the defendant was the general contractor. Mosher was construction superintendent for the defendant during this whole period. Mosher's son was employed by the plaintiff during this time. On May 12, 1960, the plaintiff purchased a lot of land for $3,000. On July 7, 1960, the plaintiff conveyed this lot to Arthur Mosher's wife by a deed bearing no revenue stamps. On May 16, 1960, the plaintiff executed an instrument authorizing Mosher to act for it in purchasing materials for the Case plant job and for the construction of Mosher's house. Westlund testified that the lot deeded to Mosher was in the nature of a loan and not a gift.
With this evidence all in the case, Mrs. Westlund took the stand and the defendant cross-examined her in her capacity as treasurer and record keeper for the plaintiff corporation. She was questioned as to whether she had any note, letter, or any evidence of an obligation on the part of Mosher to pay $3,000 to either John Westlund or John A. Westlund, Inc. On objection, the trial court excluded further examination on the matter of the purchase of the land on the grounds it was an attempt to impeach a witness on a collateral matter.
At the bench the defendant stated that it expected Mrs. Westlund would testify that she signed a check of the plaintiff's for $3,000 in payment for the land, and that the plaintiff had never received from Mosher any note or other evidence of obligation. From this, the defendant argued to the trial court, the jury could find that the land was a $3,000 gift to Mosher. The defendant went on to point out that such a finding would impeach John Westlund's denial of gift, and also tend to support defendant's position that Mosher was acting for Westlund rather than the defendant when he wrote the letter of modification on which plaintiff relies. This, it was contended, goes to the validity of that modification and the heart of the case. However, the ruling of the trial court prohibiting further inquiry stood, and the defendant brings the question here.
In order to recover on its theory of the transaction, it was necessary for the plaintiff to establish the modification of the contract as a fact. This it could do in three ways: First, it could show that the new arrangement was arrived at orally between the parties themselves, so that Mosher's letter merely represented a reduction of the modified contract to writing after agreement; second, it could establish that Mosher's authority as defendant's agent was broad enough to make and bind the defendant to the modification represented by Mosher's letter; or, third, it could demonstrate that no matter what the background of the modification was, and no matter what the limitations of Mosher's authority were, the defendant, with full knowledge of the circumstances, ratified the new agreement.
John A. Westlund described the oral transaction relating to modification of the subcontract in the following testimony:
Q. Can you tell the Court and jury the substance of the talk you had with Mr. O'Bryan ?
A. Well, we discussed the work itself, how we wanted to do it. He said, "You have to go union to pay to do this job." I said I could not do it for the price I had now on there. So Mr. O'Bryan says, "Forget about that contract and you go union because I cannot afford to go union." And then I asked, "What can I get to show you decided to do so?" He said, "Arthur, why don't you make up some kind of a letter and give it to John." So sometime later, a day or so later I got the letter we have here now which says . . .
Court: You have answered the question.
Q. When you told Mr. O'Bryan you could not do the job was that after he told you you had to,go union?
A. I didn't tell him I couldn't do the job. Mr. O'Bryan told me I couldn't do the job unless I put union men on.
Q. Did you have some talk with him about the written contract?
A. Yes.
Q. What did you say to him?
A. I said, "I can't go against the written contract because it won't cover union wages." He said, "Forget about it. From now on you are working for me," more or less on a cost plus basis.
Q. Was Mr. Mosher present at the conversation?
A. Yes.
Later, the following testimony was given by Westlund:
Q. I believe you said at this conversation on the site that Mr. O'Bryan said you would be employed I think these are the words you used: "More or less a cost plus basis."
A. Well, that's a cost plus basis as far as money is concerned. I am not much on the language. Cost plus means to me 10% profit and 10% for overhead.
Q. You say he used the words "more or less cost plus basis?"
A. No, he used the words "cost plus basis."
Near the end of his testimony came the following:
Q. You claim that this letter confirms some conversation you had on the plant site with Mr. O'Bryan and Mr. Mosher ?
A. Yes.
Q. Do you say that this conversation you had up at the plant site that you discussed all of the items referred to in this letter of May 23 ?
A. I can't remember whether we discussed all the items but that is the agreement they gave me which I accepted.
Q. This agreement put you on a cost plus basis?
A. Right.
The letter of modification written by Mosher read as follows:
"To John A. Westlund May 23, 1960
Keene, N. H.
Subject — Case Plant Operations
Pursuant to a conversation with Mr. O'Bryan, yourself and the writer it is agreed that to properly man the job with union help and others according to the most advantage manner due to the work of the General Contractor being other than work not included in the basic contract with you and due to the involvement or difficulty of separating the work from "contract" and "not contract" we will supervise, hire, discharge and direct in your name and use your personnel as best fitted for whatever needs to be done at the Case Plant or where ever else necessary. You will invoice us as you do under your now voided contract for simplicity of payment and when necessary secure funds from the O'Bryan Co. for your payroll. Upon conclusion of all work of a nature involving your forces we will pay you the amount shown in your ledger plus insurance, overhead, profit and plant. It is further agreed that we may inspect your ledger at any time during the time or period of your activities, however, we accept your request that our inspection period shall be limited to seven days after conclusion of any men on your payroll working on our job or jobs. We relinquish the right to question or arbitrate or debate your billing if we do not register same in writing prior to ten days after the last working day of any of your personnel at the Case Plant. Any work done by us is only help or assistance in completing a job, and is not intended as a backcharge because as stated above your contract is voided by our actions and necessity.
Very truly yours,
O'Bryan Construction Company, Inc.
Arthur H. Mosher, Const. Mgr."
Agency enters the case only in connection with this letter. .It applies only to the second of the three ways in which the plaintiff can prevail. Nevertheless, since the evidence does not justify recovery as a matter of law, either on the basis of the oral transaction alone, or on the basis of ratification, the jury was free to consider the evidence with respect to all ways of establishing the plaintiff's claim. And, so long as the jury could properly look to the written version of the modification as a part or all of the transaction amending the subcontract, the relation of both parties to Mosher's agency remained a critical issue.
The laws of agency are designed to protect an innocent third party who deals with the representative of another. For this reason,-' a principal cannot avoid obligations and commitments to such a party made by his agent within the scope of such agent's real or apparent authority. Damon v. Hinckley Fibre Co., 96 Vt. 528, 530, 121 Atl. 579. But when a third person induces the agent to act on his behalf instead of the principal's, or against the interest of the principal, the law will not treat him as innocent. To such transactions the principal is given a defense, if there has been no ratification by him with full knowledge of the facts. Every agency is subject to the legal limitation that it cannot be used for the benefit of the agent himself, or of any person other than the principal, in the absence of an agreement that it may be so used. Arnold v. Somers, 92 Vt. 512, 521, 105 Atl. 260. The fidelity required by law of an agent is so high that a principal can, without any showing of loss or disadvantage, avoid a transaction in which, without his knowledge or consent, his agent undertook to act both for him and for another party to that transaction whose interests were adverse to those of the principal. 3 Am. Jur. 2d. Agency, §234, 237; see also Shurtleff v. Norcross, 95 Vt. 420, 425, 115 Atl. 494.
This means that if Mosher had sufficient authority to draft, on his own, the letter of modification and bind the defendant, the plaintiff could not enforce the new contract if the plaintiff had, unknown to the defendant, induced Mosher to use his authority in favor of the plaintiff and against the interest of his principal, the defendant. Likewise, if Mosher's only authority was to transcribe the parties' oral agreement, and the plaintiff induced him, unknown to the defendant, to draft the modification in terms other than those agreed upon, such modification could be repudiated by the defendant. Since no one ought to profit from his own wrong, a third party cannot claim the benefits against a principal of acts by the agent whose fidelity he has perverted. The defendant was entitled to present such a defense.
The evidentiary situation is very like that in any case where fraudulent practices are at issue. The evidence necessarily takes a wide range and objections on the ground of irrelevancy are not favored, so long as that evidence, either by itself or in conjunction with other evidence, contributes something to the establishment of a rational basis for inferring the ultimate fact. Girard v. Vermont Mutual Fire Ins. Co., 103 Vt. 330, 335-6, 154 Atl. 666. Since the purposes and arrangements of a defecting agent and his co-actors would, by their very nature, be kept hidden from his principal, large latitude in cross-examination of participants should be allowed. This is particularly true where evidence looking in the direction of possible duplicity has already come into the case.
The witness on the stand at the time of the adverse ruling under review was a principal officer of the plaintiff corporation. Under those circumstances, the right of cross-examination has no dependence on any direct examination and is specially authorized by 12 V.S.A. §1641a. Control of the extent of cross-examination is necessarily in the discretion of the trial court, provided the right to examine on any material issue is not denied. State Highway Board v. Loomis, 122 Vt. 125, 128, 165 A.2d 572. Not only was this examination directed to a material issue; not only did it involve a witness in the position of a party; not only did it relate to matters peculiarly within the knowledge of this witness; but, with Mosher unavailable to testify, it also, along with examination of Mr. Westlund, represented the only way the defendant could reach the unrecorded dealings between the plaintiff and Mosher. The defendant was denied a substantial right by the court's limitation of the cross-examination, and prejudicial error appears.
The defendant also complains that the court failed to instruct the jury on the consequences of divided loyalty in an agent. This issue was in the case and there was an obligation on the part of the trial court to deal with it in its charge. However, from the standpoint of establishing error in this connection, the defendant's position in this Court is compromised by certain shortcomings in its requests to charge on that issue. In the first place, the defendant was not entitled to instructions that barred recovery by the plaintiff on a showing that Mosher's fidelity had been corrupted, because the court was bound to take into account that the jury might have based a verdict for the plaintiff entirely on the testimony relative to the oral transaction, dis regarding what Mosher wrote. Also, an explanation as to what constitutes such duality of agency as to invalidate the agent's acts must be incorporated in requests to charge on that issue to make them proper for use by the trial court. Otherwise, error cannot be predicated on the court's refusal to comply with the requests.
Since the cause must be remanded for a new trial, a determination of the remaining claims of error is unnecessary .since they very likely will not again arise in the same form. However, in connection with one matter a comment at this time is appropriate.
When Mrs. Westlund was on the stand, a blackboard was used by the plaintiff in connection with her testimony about the financial operations of the plaintiff. During her examination the figures on the board were altered from time to time to conform with her testimony. She was cross-examined as to the data appearing on the board, and the defendant given opportunity for clarification and correction. The net result was that the figures were supported by the testimony of Mrs. Westlund and by exhibits in the case. The defendant objected to the manner of presentation by blackboard, with áccompanying erasures and alterations, as being confusing, misleading and prejudicial. The court in its charge instructed the jury that they should be guided by the evidence in the case and not by any figures on the blackboard. The blackboard was not put in evidence and the figures were erased.
Neither blackboards nor other forms of visual display may be used with uninhibited freedom. Bone v. General Motors Corporation, Mo., 322 S.W.2d 916, 71 A.L.R.2d 361; see also Killary v. Lake Champlain Chamber of Commerce, 123 Vt. 256, 186 A.2d 170. Courts set themselves against the use of these methods to mislead, or where the use is not fairly based on the evidence. But, by and large, this is an area where the trial court's authority over the conduct of the trial gives it large discretion, and its exercise of control will not be disturbed lightly. The complaining party must demonstrate prejudice to procure this Court's intervention. The defendant has not done so here.
Judgment reversed and cause remanded.