Court Opinion

ID: 9536683
Source: CourtListenerOpinion
Date Created: 2023-08-07 07:05:18.195227+00
Date Added: 2024-06-11T14:55:03.178386
License: Public Domain

FOX, J.
I dissent.
In my opinion, the judgment against defendant Buttress & McClellan (hereinafter referred to as B&M), should be affirmed.
*821The record discloses that when plaintiff became B&M’s sales manager, the company’s main offices were in Los Angeles but its job sites were in various parts of the state. It maintained a branch office in San Jose, California, to handle its northern operations. Plaintiff’s employment contract provided that in addition to a fixed salary, he was to receive .0025 per cent of “gross sales.” He was paid this commission on the basis of the contract price regardless of whether he personally contributed to the consummation of a contract and regardless of whether a profit or loss was made on the project.
In the summer of 1951, B&M initiated work on the Convair project under a preliminary agreement dated July 20, 1951, known as the Letter of Intent. J. E. McClellan, who was president of B&M and was the person who engaged plaintiff, testified that he informed plaintiff that in the event B&M should get the Convair project, no commission on that project would be given him or any other salesman. He stated he told plaintiff he believed it would be illegal to award any commission on a government defense project, and that plaintiff expressed his assent. Plaintiff categorically denied that he was ever told no commission would be paid him on the Convair contract.1
As has been indicated, B&M was also engaged in construction activities near San Jose. In September, 1951, McClellan asked plaintiff to take charge of the B&M operation there to replace a man who had suffered a heart attack. Plaintiff assented reluctantly, and left to supervise B&M operations in that area. McClellan testified that a new compensation agreement was made at that time under which plaintiff was to receive a salary and 25 per cent of the profits of the northern business. Plaintiff testified that no alteration was made of the terms of his original agreement.
In November, 1951, McClellan organized a corporation named Panelcrete to take over B&M’s San Jose operations. Panelcrete’s main office was located at the Los Angeles address of B&M and it also occupied the former office of B&M in *822San Jose. The record discloses that in the early part of 1952, McClellan owned all the stock of Panelcrete and he had then also acquired all the stock of B&M. McClellan became president of Panelcrete, the same office he held with B&M. The offices of Panelcrete were virtually identical with those of B&M, except that plaintiff was made vice president of Panelcrete in the fall of 1952 so that he would have authority to execute contracts. Some of the jobs which B&M had undertaken around San Jose were transferred or assigned to Panelcrete by B&M at McClellan's direction. Plaintiff’s duties with respect to Panelcrete’s operations “fell within the same pattern” as his functions in San Jose for B&M prior to Panelcrete’s existence.
The evidence further showed that while plaintiff was supervising Panelcrete’s operations he was never relieved of his title of sales manager for B&M. He continued to so designate himself with McClellan’s knowledge. He received his salary at all times not from Panelcrete, but from B&M, and- his living quarters, the cost of meals, and the use of a car were provided him by B&M while he was in San Jose. He received commissions on sales made by B&M before and after he was sent to San Jose. In communicating with McClellan, plaintiff referred to his San Jose assignment as “the Panelcrete branch of Buttress and McClellan.”
Until early in 1952, B&M was working on the Convair project under the Letter of Intent. The definitive contract was drawn up in final form and signed by B&M and Convair on January 15, 1952. However, the parties agreed that the date of the contract should appear as of July 20, 1951, to correspond with the date of the Letter of Intent. This latter date was therefore inserted in place of the date on which the contract was actually signed. The total cost of the Convair project was aboiit $18,234,000. Under the fixed fee formula based on percentage of actual cost provided in the contract, B&M earned $435,219.90 as its fee for designing and constructing the plant.
In June, 1953, plaintiff severed his connection with Panelcrete and B&M. The Convair project was completed sometime prior to July 14, 1953. No commission was paid to plaintiff on that job. Plaintiff thereupon instituted the present action to recover commissions owing him under his contract of employment. In accordance with the jury’s verdict, plaintiff was awarded a judgment in the sum of $44,723.90 against B&M, Panelcrete and J. E. McClellan.
*823The principal ground upon which the majority opinion bases its reversal is that as a matter of law it must be held that the total price of the Convair project could not be encompassed in the term “gross sales” as used by the parties. The majority holds that as a matter of law it was error to award plaintiff any commissions on the total cost of the Convair project because it was merely a contract for work and services and not a sale within the meaning of plaintiff’s employment contract. As a corollary, it holds that because B&M received only a fee of $435,219.90, plaintiff’s commission, as a matter of law, must be limited to a percentage of that amount. It derives this result by assuming—-contrary to the implied finding of the jury—that the term gross sales “was actually the equivalent of ‘gross receipts.’ ” But by this interpretation what the majority is actually doing is to equate the words ‘ ‘ gross sales ’ ’ with ‘ ‘ gross profits. ’ ’ For as McClellan himself testified, the B&M fee on the Convair deal was its gross profit on the job. I regard it as entirely unwarranted to arbitrarily ascribe to the term “gross sales” the circumscribed meaning arrived at by the majority. And the law is certainly otherwise.
The term “gross sales” cannot be said to convey the same definite and inflexible significance under all circumstances and whenever used. Its meaning depends on the connection in which it is employed and the result intended to be accomplished. (Commeford v. Baker, 127 Cal.App.2d 111, 117 [273 P.2d 321] ; W. F. Boardman Co. v. Petch, 186 Cal. 476, 482 [199 P. 1047].) As stated in Commeford v. Baker, supra, page 120; “The understanding of the parties as to the meaning of the term ‘gross sales’ cannot he determined as a matter of law. . . . Evidence should be received and all facts should be considered which would aid the court in reaching a decision as to the meaning the parties attributed to the term ‘gross sales.’ The duty of interpretation is that of the trial court.” (Italics added.)
The B&M corporation was not engaged in the business of an ordinary vendor of property, real or personal. Its function was to procure business on a “package deal” basis wherein, at an agreed price, it would furnish its client with industrial buildings or facilities commensurate with its needs. In so doing it gave counsel to prospective clients and formulated proposed plans, it provided the preliminary engineering and architectural services, it arranged for the procurement of labor and materials and it supervised the construction of the entire project to its conclusion. Its business, in effect, *824was the sale of its integrated “know how” to industrial clients desirous of erecting new or expanded physicial facilities. Its salesmen searched out and endeavored to obtain contracts for the design and construction of industrial projects.
In the instant case, it was for the jury to ascribe to the term that meaning which would make it conform to the intent of the parties. (Gommeford v. Baker, supra.) The jury unquestionably concluded that the Convair contract was a sale in consonance with the type of business B&M was engaged in, and that the total cost of the project was the “gross sales” yardstick by which plaintiff’s commission was to be measured. This was an entirely reasonable determination of a factual question. The Convair project was the general type of undertaking B&M characteristically engaged in, although larger than any it had previously done. It was apparently considered a “sale” by McClellan, within the contemplation of the agreement, for he testified he told plaintiff he could not pay him a commission on the Convair deal because it would be illegal to do so, not because it was not a “sale.”
The mere fact that the contract price was to be arrived at on a cost-plus fee basis did not as a matter of law transmute it into a category outside the pale of the commission agreement. The usual methods for paying for construction work are by lump sum, by item charges, or by cost plus a fee based on a percentage of costs. In a lump sum contract, the contractor makes up a bid from his knowledge of the cost of materials, cost of labor and the particular engineering and architectural specifications of the job, adding thereto a sum ,which will represent his profit. Such bid is ordinarily final, any changes being the subject of settlement between the owner and contractor. Whether the contractor’s profit is larger or smaller than he anticipated, or whether he makes any profit at all, depends on how favorably anticipated conditions turn out to be. Under the cost-plus fee contract, the risk of loss inherent in the lump sum contract is minimized, the owner being charged all proper costs but receiving the benefit of favorable conditions which might reduce anticipated costs, while the contractor’s profit is derived from the percentage of cost which makes up his agreed fee. In the one case, the contractor’s anticipated profit is an item included in the bid made for the work; in the other it is included in the amount finally fixed as his fee when the cost of the completed project is ascertained. But under either system, where an employee’s compensation agreement is based on “gross sales,” the trier *825of fact is entitled to compute such commission on the basis of the total cost of the project to the client where it finds this corresponds to the intent of the parties. The jury was not required to limit plaintiff’s commission to .0025 per cent of $435,219.90, which was B&M’s fee, and constituted its gross profits on the job. There was no testimony that the amount of plaintiff’s commission was a percentage of gross profits; his percentage was based on “gross sales,” which has no relationship to profits. On all other projects plaintiff was paid his commission on the total cost of the job; he even received commissions on such basis on jobs which lost money.
It was therefore entirely proper to use the total cost of the Convair project as the figure upon which plaintiff’s commission was to be calculated. This is further borne out by the practical construction McClellan himself put on the contract when he allegedly told plaintiff it would be illegal to pay him a commission. Clearly it could not be considered illegal for B&M to pay an employee any amount it wanted out of its own profits (the fixed fee) on the job. The document offered by McClellan in support of his belief was Exhibit F, the Armed Forces Procurement Regulations. This was properly excluded as irrelevant, since it does not purport to indicate that commissions to an employee of a contractor are illegal, but simply that a commission paid was not an item for which the contractor would be reimbursed by the government on a cost-plus type contract. So it is reasonable to infer that McClellan was thinking of the entire contract cost when he purportedly told plaintiff that he could pay him no commission. To uphold the majority view, that no more than the amount of B&M’s fee could be taken into consideration by the jury, would compel us not only to decide as a matter of law what was intrinsically a question of fact but would also distort the meaning of the term “gross sales” as used in this factual context to something less than the totality which its use imports.
The majority opinion attaches significance to the fact that plaintiff “never made any claims to a commission” on the Convair job. It fails to note, however, that this job was not completed until approximately a month after plaintiff’s employment was terminated. His right to commission, of course, did not finally accrue until the project was completed.
Defendants’ contention that the court committed prejudicial error in failing to instruct the jury as to what constituted gross sales within the meaning of the agreement is *826specious. As the majority concedes, “all such instructions requested by defendants were inept and properly denied for that reason.” The trial judge is under no duty to revise inadequate, improper or erroneous instructions to make them state the law correctly. (Tossman v. Newman, 37 Cal.2d 522, 525 [233 P.2d 1] ; Austin v. Riverside Portland Cement Co., 44 Cal.2d 225, 235 [282 P.2d 69].) The jury was instructed that if plaintiff was entitled to recover he should receive “one quarter of one percent of all the sales made by the defendants.” They were told that “if there is any uncertainty in the contract the acts of the parties under the contract afford one of the most reliable means of arriving at their intention” and that “the construction thus given to a contract by the parties before any controversy has arisen should, when reasonable, be adopted.” The jury was sufficiently oriented with respect to the fact that there was ambiguity regarding the amount of compensation to which plaintiff was entitled. Nothing would have been added to their deliberations by instructing them that “gross sales” could either be construed as the total cost of the project or the amount of the fee B&M received. For this is the question they must in all events inevitably have considered in arriving at their verdict. The phrase “gross sales” could not have been defined for the jury as a question of law since this was a pure question of fact—there being no unalterable or immutable definition of the term as a proposition of law.
Defendants’ argument that plaintiff was not entitled to a commission on the Convair deal because that contract was signed in January, 1952, at which time plaintiff was working for Panelcrete in San Jose, is unfounded. The short answer to this is that B&M dated its agreement July 20, 1951, at which time there is no question plaintiff was a B&M employee. “The time at which an instrument becomes operative or has the legal effect for which it is made is its date.” (Knight v. City of Los Angeles, 26 Cal.2d 764, 771 [160 P.2d 779].) It is fundamental that where parties to an agreement provide that a written contract be entered into as of an earlier date than that on which it is executed, the agreement is effective retroactively as of the earlier date. (Wright v. Prudential Ins. Co., 27 Cal.App.2d 195, 219 [80 P.2d 752]; Bremer v. National Surety Corp., 119 F.2d 926, 928.)
Furthermore, under the evidence the jury could have impliedly found that despite plaintiff’s transfer to San Jose to supervise Panelcrete’s operations, he remained, neverthe*827less, an employee of B&M under the original agreement and that he was entitled to commissions until termination of his employment in June, 1953. Plaintiff testified that the original oral agreement as to the amount of his compensation was never changed and he denied that any other remuneration agreement was in effect. This was undoubtedly believed by the jury despite contrary testimony. Although plaintiff was ostensibly a Panelcrete official, the evidence was such that the jury was warranted in disregarding the corporate entity of Panelcrete and impliedly finding that it was merely an instrumentality or business conduit of B&M and that plaintiff continued to be employed under his original contract despite his transfer to a new arena of activity under a different corporate entity.2
However, I agree with the contention that liability should not be fastened upon Panelcrete or McClellan, individually. It is true, of course, that because the individual and his corporate alter ego have identical duties and obligations (Wenban Estate, Inc. v. Hewlett, 193 Cal. 675, 697 [227 P. 723] ; Llewellyn Iron Works v. Abbott Kenney Co., 172 Cal. 210, 214 [155 P. 986]), it is often appropriate to bind both under a liability incurred by either. (Gordon v. Aztec Brewing Co., 33 Cal.2d 514, 522-523 [203 P.2d 522] ; Mirabito v. San Francisco Dairy Co., 8 Cal.App.2d 54 [47 P.2d 530]; Thomson v. L. C. Roney & Co., 112 Cal.App.2d 420 [246 P.2d 1017].) However, it is unnecessary to go so far in the instant case. There is no suggestion that B&M is insolvent or that it could not respond to the judgment or that fraud or injustice would occur unless Panelcrete and McClellan were also bound. “The fact that the corporate entity has been disregarded for some purposes does not warrant its being disregarded for all purposes.’’ (Grant v. Weatherholt, 123 Cal.App.2d 34, *82839 [266 P.2d 185].) For that reason, I would amend the judgment by striking therefrom the names of Panelcrete and J. E. McClellan.
A brief word regarding defendants’ assertion that the court erred in refusing to consider, on the motion for a new trial, the affidavit of Juror Alex Hahn and defendants’ counsel. Reference is made in the briefs to the purported contents of these affidavits. However, they have not been included in the record on appeal and are not before the court for examination. Under such circumstances they may not be considered in proof of any fact therein stated and without them an appellate court cannot review the propriety of the order denying the motion for a new trial. (Drummond v. Drummond, 39 Cal.App.2d 418, 421, 422 [103 P.2d 217] ; Toomes v. Nunes, 24 Cal.App.2d 395, 399 [75 P.2d 94].)
A petition for a rehearing was denied June 18, 1956. Fox, J., was of the opinion that the petition should be granted. Respondent’s petition for a hearing by the Supreme Court was denied July 18, 1956. Traynor, J., was of the opinion that the petition should be granted.

Of course, if such commissions were in fact illegal, this would be a complete defense to plaintiff’s claim. It is significant that defendants did not interpose the defense of illegality to defeat plaintiff’s claim, nor do they contend on appeal that the payment of such a commission is illegal. Furthermore, it may be noted that if plaintiff were in fact entitled to such a commission, there would be no consideration for the purported modification agreement. (Peachy v. Witter, 131 Cal. 316, 319 [63 P. 468].)

The jury had before it evidence (1) that McOlellan was president of both corporations; (2) that McClellan owned all the B&M stock early in 1952; (3) that he was the dominant stockholder of Panelcrete at the time of its formation and early in 1950 acquired all its stock; (4) that both corporations used the same offices; (5) that both corporations had substantialy the same officers; (6) that contracts of one were transferred to the other with no apparent consideration; (7) that McClellan dominated and controlled the policies of both corporations; (8) that Panelcrete was simply used as an instrumentality for carrying on the Northern California operations of B&M; (9) that after McClellan sent plaintiff to San Jose, B&M continued to pay his salary and other expenses while he was in charge of Panelcrete operations; (10) that McClellan allowed plaintiff to use the title of sales manager for B&M while he was managing Panelcrete; (11) that at no time was plaintiff paid by Panelcrete for his services.