Opinion
33135.
DECIDED SEPTEMBER 14, 1950.
Damages; from Fulton Civil Court — Judge Etheridge. April 12, 1950.
Smith, Kilpatrick, Cody, Rogers McClatchey, A. G. Cleveland Jr., for plaintiff in error.
Stanley P. Meyerson, Nall Sterne, contra.
Construing the allegations of the petition most strongly against the pleader, the petition does not allege facts sufficient to show that there was a joint enterprise entered into by the defendant and Calimode Inc., nor does the petition allege facts estopping the defendant from denying such an undertaking.
DECIDED SEPTEMBER 14, 1950.
Southeastern Wholesale Furniture Company Inc. sued Atlanta Metallic Casket Company, doing business as Cannon and Company, for damages allegedly sustained by it by reason of an alleged breach of warranty in a sale to it by the defendant of certain heating equipment. The allegations of the petition necessary to the consideration of the question to be decided are substantially: that the defendant is engaged and chartered to do the business of manufacturing and selling metal products; that the defendant engaged in a joint enterprise with the attributes of a partnership for the manufacture and sale of oil floor furnaces known as "Calimode Furnaces"; that photostatic copies of the written agreement between the defendant and Calimode Inc., are attached to the petition marked "Exhibit A and B" and are incorporated in the petition by reference; that Calimode Inc. was engaged in and chartered to sell and manufacture heating equipment; that the defendant and Calimode Inc. operated and carried on their business relation as a joint enterprise with the attributes of a partnership as to third parties in the respects: that the defendant and Calimode Inc. made joint contribution to capital; that the defendant was to furnish all raw materials, labor, engineering services, plant facilities, and shipping facilities; that Calimode Inc. furnished the sales force, maintained a sales office and contributed a design of the Calimode Furnace; that all invoices directed the customers to make all remittances; that all shipments of furnaces and all returns from customers were made at the plant of the defendant; that upon the sale of each furnace the defendant retained a portion of the remittance which represented the defendant's manufacturing cost-plus profit and that the defendant then remitted as to each furnace the amount due to Calimode Inc.; that no other provision for payment to the defendant existed other than the division of proceeds from the sales of furnaces; that a division of proceeds was made by the defendant to Calimode Inc. out of each sale regardless of whether there were outstanding deliveries of furnaces which had not been paid for; that the defendant and Calimode Inc. assumed the mutual risks of loss and profits depending upon the success or failure of the sales and cash receipts from the sales of said furnaces; that the defendant recognized and considered Calimode Inc. as its "sales agency" and as to third parties, including the petitioner, created the appearance of engaging in a joint enterprise with the attributes of partnership with Calimode Inc.; that Calimode Inc. had no facilities other than a small sales office; that Calimode Inc. is a small family corporation being practically without any net worth whereas defendant is a large corporation with substantial net worth and a good credit rating, thus third parties including the petitioner were thereby led to rely with confidence in purchasing said furnaces from defendant and Calimode Inc.; that the defendant is jointly and severally liable with Calimode Inc. to the petitioner for the damages sustained by the petitioner in the purchase of defective Calimode Furnaces; that Calimode Inc. is insolvent and is in receivership and that the petitioner has not recovered by judgment or otherwise any damages from Calimode Inc.; that the defendant, acting through Calimode Inc. by its agents and officers, sold and delivered to the petitioner certain oil floor furnaces known as "Calimode" floor furnaces; that the petitioner purchased such furnaces for the purpose of reselling them as a wholesaler to dealers in Alabama; that the furnaces were represented and warranted by the defendant, acting through Calimode Inc., as being floor furnaces of proper design and construction as to be fit for the intended purpose of providing heat at homes and similar places; that on the contrary the furnaces were not fit for the use intended but in fact were worthless and completely defective in that the furnaces after being installed and in use for several days would clog up with soot, grease and smoke so badly as to require that the furnace be turned off; that although demands were made upon the defendant, acting through Calimode Inc., its agents and officers, to correct the defects, the defendant, acting through Calimode Inc., its officers and agents did not correct the defects so as to make the furnaces function in a usable manner; that it was necessary for the petitioner to replace to its dealers 33 Calimode furnaces with furnaces of other makes and the cost of those replacements was $3980.11, being the reasonable market value therefor; that the petitioner was further injured thereby in enumerated particulars. Exhibit A attached to the petition was as follows: "Calimode, Incorporated, General Offices, Atlanta, Ga. August 19, 1947, Cannon and Company, 216 Elliott St., N.W., Atlanta, Georgia, Attention — Mr. R. A. Cannon, Subject — Open Account Shipments, Dear Mr. Cannon: Referring to our conversation of yesterday we are outlining in this letter a procedure for handling the invoicing of orders on open account whereby Cannon and Company will be fully protected and yet not have to be concerned with the details of invoicing, mailing, etc. In other words, Calimode Inc. will handle all of the office detail and Cannon and Company will manufacture and ship Calimode equipment. Shipments will be made by Cannon and Company for the account of Calimode Inc. Calimode will bill the customer and every such account so billed shall be assigned to Cannon and Company. Each invoice shall carry, prominently marked thereon, a notation to the effect that the account has been so assigned, and that payment must be made directly by the debtor to Cannon and Company. Settlements between Cannon and Company and Calimode Inc. will be made semi-monthly as per paragraph 9 below. 1. Calimode Inc. will make out invoices as orders are received. 2. We will send you shipping instructions, bills-of-lading, and address labels fully executed for each individual shipment, and with this a copy of the customer's invoice for your Bookkeeping Department records. 3. Cannon and Company will make the shipments and send Calimode Inc. daily two copies of the bill-of-lading after shipment has been made. 4. We will mail to the customer the invoice and bill-of-lading showing that shipment was made by Cannon and Company, and the invoice will show that payment is to be made to Cannon and Company. 5. Cannon and Company will receive all remittances. 6. No shipments will be made on open account unless the customer is rated in Dun and Bradstreet at `$25,000.00 high credit' or higher. 7. All other shipments will be made on a C.O.D. or Sight Draft, Bill-of-lading basis as in the past. 8. If for any reason any invoice is not paid in 30 days you notify us and we will take steps to collect the account at once. It will not be necessary for Cannon and Company to spend any time or effort in the collection of accounts. 9. On the 5th and 20th of each month Cannon and Company will send Calimode Inc. a statement and a check covering the amounts due Calimode Inc. The statement you send on the 5th of the month will cover all remittances you receive from the 16th thru the last day of the preceding month. The statement you send on the 20th will cover all remittances received from the 1st thru the 15th of the current month. 10. The books and records of Calimode Inc. shall at all times show the assignment of the aforesaid account to Cannon and Company as its interest may appear. It is suggested this arrangement be started as of August 16, 1947. In other words, on August 20th send us a statement and check covering all remittances received up to August 15, 1947, inclusive. Then, on September 5, 1947, an accounting covering the period from August 16 to August 31st, inclusive, and semi-monthly thereafter as outlined above. If this plan is acceptable to you will you please sign both copies of this letter, retaining one for your files. This will then serve as an informal working arrangement until such time as a formal agreement can be entered into. Very truly yours, Arthur W. Pugsley, Executive Vice-President. Accepted By: Cannon and Company, R. A. Cannon." Exhibit B attached to the petition is as follows: "March 27, 1947, Calimode Corporation, 7 Rhodes Center, N.W., Atlanta, Ga. Gentlemen: Please be advised that we will manufacture according to your blueprints and our sample rendered for approval oil burning floor furnaces for $86.00 delivered in Zone 1 (Within radius 250 Mi.), $87.00 delivered in Zone 2 (251 to 400 Mi.), $88.00 in Zone 3 (401 to 500 Mi.). On units not delivered the price will be $85.00. The heat exchanger will be fabricated from 16 gauge hot rolled or cold rolled, whichever is in stock. The outside casing will be fabricated from 22 or 24 gauge galvanized or black sheets.. If galvanized is used, this will be the finish. If black is used, one coat of prime gray will be applied. The inside casing will be fabricated from 24 or 26 gauge sheets and if galvanized this will be the finish and if black is used, one coat of gray heat-resisting paint will be used. The complete heat exchanger on all units will have one coat of gray heat resisting paint applied. Your company has furnished to us a list of supplies and out-buys that is applicable to the units and is acceptable to both parties. Production of these units will be started as soon as procurement and delivery schedules of out-buys can be accomplished or within the next 45 days from date. It is agreed that you will furnish us immediately a letter and break-down pertaining to the out-buys, furnishing complete specifications to be put into our purchase orders and confirming orders. We will be glad to use your inventory of 3/8" tubing, oil controls, and registers that you have in stock to be delivered to us on or before production dates and handled on a credit memorandum applying to your furnace purchases. We expect you to submit your inventory list to us as early as possible. With very best wishes, we remain, Sincerely yours, Atlanta Metallic Casket Company." The defendant filed general and special demurrers to the petition. The court overruled the general demurrer and certain special demurrers and the defendant excepts.
Whether there is a cause of action set forth hinges on the proper construction of the petition. The plaintiff's theory is that sufficient facts are alleged to show a joint enterprise or joint adventure under the definitions laid down by modern courts. Clement A. Evans Co. v. Waggoner, 197 Ga. 857 ( 30 S.E.2d 915); 40 Am. Jur. § 7, p. 681; Ib. § 3, p. 677; 33 C. J. § 2, p. 842. Broadly, there is a joint enterprise or adventure when two or more combine their property or labor, or both, in a joint undertaking for profit, with rights of mutual control, provided the arrangement does not establish a partnership. Paragraph six of the petition, considered alone, possibly alleges enough facts to show a joint enterprise. However, the allegations in paragraph six, considered in connection with paragraph four, have an entirely different meaning when the whole petition is construed against the pleader. Paragraph four alleges: "The defendant, during the period hereinafter mentioned, engaged in a joint enterprise with the attributes of a partnership as to third parties acting with the corporation, Calimode Inc., for the manufacture and sale of oil floor furnaces known as `Calimode Furnaces.' Photostatic copies of the written agreement between the defendant and Calimode Inc., are attached hereto marked `Exhibit A B' which are incorporated herein by reference." While paragraph four does not allege that the two attached instruments constituted the contract under which the alleged joint adventurers operated, the only reasonable construction is that they were the contract under which operations were had. In this view, the various allegations, apparently allegations of fact, in paragraph six, as to what was done to constitute a joint adventure, are nothing more than conclusions of the pleader as to what the plaintiff contends would have been done under the terms of the contracts attached. The conclusions pleaded are improper conclusions. Exhibit "B" contains no provisions which would render the parties joint adventurers. It is simply an agreement by the defendants to manufacture for Calimode floor furnaces at stipulated delivered prices, containing provisions as to details of construction. It is true that the exhibit provides that certain parts would be furnished by Calimode Inc., but it was nothing more than a sale of the materials to the defendant. Calimode did not agree to furnish labor or materials for the undertaking. Neither does exhibit "B" contain any element of joint enterprise. It is merely an agreement facilitating shipments and securing Calimode's indebtedness to the defendant. So, if the exhibits are the agreements under which the parties were operating, most of the allegations in paragraph six as to what was done in the nature of a joint enterprise are not true under our construction of the pleadings. It will be noted that the petition does not allege that the parties departed from the terms of the contract, nor that other agreements were made. Paragraph (6.d) of the petition alleges: "No other provision for payment to defendant existed other than the division of proceeds from the sale of furnaces. A division of proceeds was made by the defendant to Calimode Inc., out of each sale regardless of whether there were outstanding deliveries of furnaces which had not been paid for. In other words, regardless of whether there were outstanding accounts unpaid as to furnaces previously delivered, the defendant remitted and divided the proceeds with Calimode Inc., as each furnace was paid for." This allegation obviously means that there was no such provision in the written agreements referred to in the petition. This allegation does not amount to an allegation that the defendant did not and could not collect from Calimode Inc., for furnaces supplied to customers of Calimode, which did not pay for them. Under the agreements the defendant could certainly collect for every furnace sold to Calimode Inc., no matter how the collections on individual sales, on which collections were made, were handled. There are no facts alleged as to why the defendant should be estopped to deny a joint adventure, under the court's interpretation of the petition. Most of the so-called special demurrers are in fact a break-down and argument of the various phases of the general demurrer. Whether this is true or not, what we have said covers the rulings on the special demurrers also.
The court erred in overruling the general and special demurrers.
Judgment reversed. Sutton, C. J., and Worrill, J., concur.