
    Wilmer A. Baldwin and Joseph Mathers, as Surviving Partners of the Firm of J. W. Goddard & Sons, Appellants, Respondents, v. Harry Feder, Respondent, Appellant.
    First Department,
    December 10, 1909.
    Sale — contract construed — agreement constituting sale rather than agency — deductions for advertising — appeal — judgment not modified without consent of parties.
    Action to recover a balance due under a contract relating to goods manufactured under letters patent owned by the defendant and giving to the plaintiffs an' exclusive right to sell the goods in the United States for a certain period. Contract construed, and held, that the plaintiffs became purchasers of the goods manufactured under the patent rather than selling agents.
    Where such contract set a minimum price at which the plaintiffs must account to the defendant for goods received, whether sold or not, the law implies an obligation to account for that minimum price after the plaintiffs had a reasonable time to sell the goods, and at the expiration of the contract they were also required to account at that price for all goods then unsold.
    The contract of sale permitted the buyers to reserve certain percentages of sums received on sales as an advertising fund, and provided that any unexpended balance that might remain in said fund at the end of every six months should be paid to the seller. Instead, however, of accounting for the advertising fund at the end of every six months, a running account thereof was submitted to the defendant at various times without objection.
    
      
      Held, that, construing the contract in' the light of the acts of parties, they intended to have but a single advertising account instead of separate advertising accounts'for-each period of six months.
    As the' plaintiffs were obliged to pay a minimum price for goods received,, whether resold or not, they were entitled to deduct from the purchase price of unsold goods the percentage allowed by the contract for moneys expended in advertising.
    Where the referee rendered judgment for the defendant, although the plaintiffs were entitled to recover a certain sum, the appellate court cannot modify the j udgment without consent of parties, as it would involve changes in the finding of fact.
    Sepakate appeals by the plaintiffs, Whiner A. Baldwin and another, as surviving partners, etc., and by the defendant, Harry Feder, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Hew York on the 16th day of December, 1907, upon the report of a referee; also an appeal by the' plaintiffs from an order entered in said clerk’s office on the 23d day of July, 1907, granting the defendant an extra allowance.
    
      L. E. Warren [Jacob M. Grossman with him on the brief], for the plaintiffs.
    
      Moses Weinman, for the defendant.
   Laughlin, J.:

This action is based on a contract in writing, made on the 16th day of May, 1896, as modified and renewed for a period of three years from the 16th day of May, 1897, by an agreement in writ-' ing, made on the 29th day of April, 1897, and further renewed for two successive periods of one year each, the last of which expired on the 16th day of May, 1902. This contract was superseded for the period from February 17, 1899, to May 31, 1900, by a temporary agreement. Under the contracts the plaintiffs received: from the defendant a large quantity of goods. The action is brought to recover a balance which the plaintiffs claim to be due from the defendant on account of their business relations under the contracts.

The first question presented for decision involves the construction of the contract. The plaintiffs claim that they ' became selling agents for the defendant. On the other- hand, the defendant claims that the plaintiffs became purchasers of the goods. The contracts contain many conflicting provisions with respect to the relationship existing between the parties. They contain express provisions which sustain the plaintiffs’ theory and • express provisions which sustain the defendant’s theory. The contracts are very voluminous. They are set forth in the decision of the referee and discussed at length in his opinion. We do not deem it necessary to restate fully their provisions here. The defendant, was the party of the first part and the plaintiffs the parties of the second part to- the contract. It was recited in the original contract that the party of the first part had obtained letters patent on an improvement in skirt protectors, and was manufacturing skirt protectors pursuant to the letters patent, to be known as Feder’s Brush Skirt Protector, and the parties of the second part were desirous of obtaining the exclusive right to sell the goods in the United States for a certain period. The party of the first part then agreed that the parties of the second .part should be his sole and exclusive selling agents in the United States for said goods during the period covered by the contract,-and the parties of the second part agreed that they would not sell similar goods and that they would “ order and purchase from the party of the first part' not less than three hundred and" fifty gross of yards of said goods in each and every week; it being, however, understood and agreed that tliey shall have the right to have additional orders (over 350 gross of yards per week) filled upon giving a ninety days’ notice of such additional orders, which in no event shall, without the consent of the party of the first part, exceed three hundred and fifty gross of yards per week.

“ If additional orders be given the parties of the second part do hereby agree to take the guaranteed amount (350) gross-, together with the amount of the additional order for a period of three mouths after the first delivery under such additional order even though the said period of three months may lap over after the day upon which this contract expires by its terms, and the party of the first part agrees to begin the delivery of the goods under the additional order or orders within the period of ninety days after they are given. * * *

“ They will at no time account to the party of the first part for an average gross selling price less than $4.50 per gross of yards. In case they should conclude it is necessary to sell any goods for less than that price ($4.50), they shall before selling the goods, offer them to the party of the first part at the price for which they pro- ■ pose to sell them; in case he should refuse to purchase them upon these terms, they may then sell them to the trade at such price. But a sale to the party of the first part, or to the trade, at such reduced'price shall in no way affect the obligation of the parties of the second part to account for such goods, and pay for the same upon the basis of an average gross selling price of $4.50 per gross yards. '* * *

“ The parties of the second part hereby agree to pay for all goods that may be sold by them, and. they shall be deemed to be the only debtors of the party of the -first part, in regard to all sales of said goods which they may make. On the 15 th day of every month, beginning with the month of June, 1896, the parties of the second part shall account for and pay to the party of- the first part the total average price of the goods sold by the parties of the second part, during the previous calendar month, less the deductions in this agreement provided, and on the 15th day of every month during the term of this contract they shall make a similar - accounting and payment for the goods sold during the previous calendar month. The deductions to he made are the aforesaid percentages on the average gross selling price; the amount to be retained for the advertising account as hereinafter provided; a two per cent discount upon the net amount after deducting the said percentages and the sum retained for advertising.

“ At no time, however, will they account to the party of the first part for an average gross selling price less than $4.50 per gross of yards. But it is understood and agreed that on the 15th day of June, 1896, they will pay to the party of the first part on account of every gross yards of the said goods received by them- during the previous month at least the sum of $3.50, and as soon as the goods so received' are sold by tbe -parties of the second part, they will credit the party of. the first part with such additional sums as he may be entitled to, calculated in the manner above described, and they will account for such additional sums and pay the.sameoverto him with the next month’s accounting. On the 15th day of July, 1896, they will make the same payment upon account for the goods received by them during the previous month, and they will account for the average gross selling price on the 15tli day of the following month; and in this way they shall make payments and accountings on the 15th day of every month during the term of the contract.”

There is no express provision in the contract fixing the time within which the plaintiffs were to account for the goods unsold at the minimum price for which they agreed to account for all goods. Nor is there any. express provision for the return of goods unsold and requiring the defendant to refund the moneys advanced or paid thereon. If the plaintiffs were purchasers the law will imply an obligation to account at the minimum price after the lapse of a reasonable time to enable them to make sales, and at the expiration of the contract with respect to all goods then unsold. It does not appear that any accounting for goods unsold was demanded until the expiration of the last renewal contract. We are of opinion that the plaintiffs under the contracts became purchasers of the goods. The provisions indicating a contrary view are fairly explainable upon the theory that the defendant in giving the plaintiffs the exclusive agency, for advertising and selling the goods, was desirous of exercising some control over the price at which they were to be sold and over the extent to which they were to be advertised. We agree with the views expressed by the learned referee with reference to the construction of the contract on this point, and do not deem it necessary to consider the question further.

The remaining questions can best be understood and decided by next considering the defendant’s appeal. The learned referee construed the original contract, as supplemented by subsequent contracts between the parties, which are recited in the decision, interpreted in the light of the acts of the parties with respect thereto, as providing for a single advertising account and not for separate advertising accounts for each six months of the period during which the parties transacted business together. The defendant’s appeal challenges the correctness of this construction. The learned counsel for the defendant contends that the contract contemplated that the advertising account should be balanced at the end of each period of six months, and that if there should then be any surplus therein of moneys credited to the advertising account which had not been expended for advertising, the defendant thereupon became entitled thereto regardless of whether or not the plaintiffs in the next sugceeding or any subsequent period of six. months expended more • for advertising than was credited' to the advertising account pursuant to the provisions of the contracts. The original contract, as already stated, was made on the 16th day of Hay, 1896. The plaintiffs rendered monthly statements to the defendant of the goods received under the contract and accounted therein for goods sold to customers on the basis of the actual sales, deducting the-percentages as provided in the contract to which they were entitled, and the amount provided in the contract to be deducted for the advertising account, and also of the goods received which had not been sold to customers, and, as to those, accounted according to the contract for the amount which they were required to pay to the defendant before ' sales were tiiade. The first account, however, which the plaintiffs rendered to the defendant concerning the' advertising account, other' than showing deductions in the monthly statements of the amounts to be credited to the advertising account, was an account the last item of which is dated the 31s’t day of Hay, 1899, and it was probably received by the. defendant shortly after that date, for lie, testified that he received it shortly after receiving a letter from the plaintiffs dated Hay 18, 1899. - This account showed disbursements covering a period from the date of the contract to the 31st day of Hay, 1899, on account of advertising aggregating the sum of $75,780.43,. and the total of credits on account of the advertising account during the same period of $27,732.72, leaving a balance of $48,047.71 paid out by the plaintiffs for 'advertising in excess of the amount with which the advertising account was credited. These accounts were continuous for the period and there was no separation or balancing at the end of' each period of six months. The debit and credit items, however, are dated, and the amounts received and expended during each period of six months can be ascertained from the account; and by calculation therefroni it appears that during each" period of six months the plaintiffs expended more for advertising than the account was credited with. Therefore, on the defendant’s construction of the contract, tliére would at no time ' during that period have been a balance in the advertising account to which he would have been entitled. The defendant made no objection to this account and did not assert any claim that the account should have been for each period of six months, or that- no more should have been charged than was received for that account. The next advertising account rendered by the plaintiffs to the defendant is under date of September 29, 1900. In the first item of this account the account was charged with the balance of $48,047.71, being the excess shown by the preceding account of moneys expended by the plaintiffs over and above the moneys received to the credit of that account. Following this item the account was charged with the various items of disbursements on account of advertising, the" last of which was under date of September 25, 1900. The total amount of the debits thus shown was $74,336.03. This was followed by items of amounts with which the account was credited, the first item of which was dated June 30,1899, and the last was dated September 29,1900, and they showed that the total of the debit charges exceeded the total of the credit charges by the sum of $25,028.28, which sum was inserted at the foot of the credits as a balance for the purpose of balancing the account, and this, added to the credit items, showed the same figures as the total of the debit charges. We find no evidence, other than the date, showing when this account was rendered. It does not appear that the defendant made a'ny objection to this account or questioned the • manner in which it was made up, at least not until he wrote a letter to the plaintiffs under date of February 18, 1902, which will be considered presently. The next account of the advertising rendered by the plaintiffs to the defendant is under date of July 31, 1901, and the first debit item of this account charges it with the balance of $25,028.28, shown by the last preceding account as having been expended by the plaintiffs in excess of the moneys received to the credit of the account. It contains numerous debit .-items, commencing with October 2, 1900, and ending with July 26, 1901, which, with the first item, aggregate the sum of $27,742.38. It showed items of credit on account of moneys received for the advertising account, commencing with October 31, 1900, and ending with July 31, 1901, aggregating $15,741.92. To this is added a credit of $7 on account of a debit item for advertising which was canceled, and then a balance was shown of $11,993.46, which represents thé excess of moneys disbursed for advertising, considering the account as continuous from the start, over and above the amount received. There is no evidence that the defendant objected to any of these accounts or questioned the manner in which they were made up. There are certain letters in the record, however, written by tile defendant to the plaintiffs, upon which he relies as indicating that he objected to the plaintiffs’ theory that there was to be. one continuous advertising account, The first of these letters is. under date of February 18, 1902, and it refers to soihe statement of . account rendered by the plaintiffs' to the defendant, which, however, we do not find in the record, and evidently it was a monthly statement of the account of goods received and sold. In this letter the defendant objects.to the theory upon which the account" was made, the plaintiffs evidently having treated the payment made on account of the goods received, which had not been sold, as moneys advanced. The defendant asserted that the goods were purchased by the plaintiffs; then follows this statement in the letter: “The result shown by your statement seems to be brought about by your deductions for the Advertising Fund for the purpose of reimbursing yourselves for amounts paid several years ago for advertising. The intent and spirit of the contract was that the reserved amounts-were to be expended for continuous advertising during the term of the contract. The fact that the advertising has not been continuous, has been a great damage to the business.” The next letter bears date February 27, 1902, and is in answer to letters received from the plaintiffs, and- it merely reiterates'- in general terms the defendant’s.claim, referred to in his letter of February 18, 1902. The next letter is dated March 18, 1902, and refers to a statement of account under date of March fifteenth, and a letter from the plaintiffs. It is therein asserted that the statement of the account is incorrect and is based on an erroneous construction of the contract, and refers to his letter of February twenty-seventh. The defendant wrote another letter, under date of April 17, 1902, in which he asserted that a statement received from the plaintiffs under date of April fifteenth was incorrect, for the reasons which he had assigned in his prior letters. The last letter, relating to this subject, is under date of May 16, 1902, and refers to a statement received by him under date of the fifteenth of that month, which he asserts was incorrect, and he again refers to his former letters. The material provisions of the contract upon which the question as to whether there was to be a separate advertising account for each period of six months, or as to whether it was to be a continuous account, depends, will now be stated. The original contract, so far as material to this question, provides as follows:

Seventh. Out of the gross price received by the parties of the second part [plaintiffs] for each gross yards of said goods there shall be reserved by the parties of the second part the sum of fifty cents, and the amount so reserved shall constitute'what is herein designated as the ‘ Advertising Fund.’ The parties of the second part are to have the sole charge of the means contrived or selected by them in advertising the aforesaid goods which shall be described in any printed or written matter as ‘ Feder’s Brush Skirt Protector.’
“ The parties of the second part will act upon all reasonable suggestions in regard to the advertising that may be made by the party of the first part if • the same are adopted by them. The expense of. advertising shall be wholly paid out of the said so-called 1 Advertising Fund,’ and at the end of every six months any balance that may. remain in said fund after satisfying the expenses and the obligations for advertising, shall be paid to the party of the first part.”

This was amended by a supplemental contract under date of April 29, 1897, which, so far as material, provides as follows :

Eighth. The seventh paragraph of the said contract of May 16, 1896, is hereby eliminated and in lieu thereof it is agreed and understood that out of the gross price received by the parties of the second part for each gross yards, when sold, there shall be reserved by the parties of the second part a certain sum as hereinafter fixed, and the amounts so reserved shall constitute what is herein designated as the ‘ advertising fund.’ The parties of the second part are to have the sole charge of the means contrived or selected by them in advertising the aforesaid goods, which shall be described in any and all printed or written matter as ‘Feder’s Brush Skirt Protector.’ ' <
“ The parties of the second part will act upon all reasonable suggestions in regard to the advertising that may be made by the party of the first part if the same are adopted by them. The expense of advertising shall be wholly paid out of the said so-called ‘ advertising fund,’ and at the end of every six months any balance that may remain in said fund after satisfying the expenses and obligations for advertising shall be paid to the party, of the first part. The term ‘advertising’ in this contract shall include all written advertisements, all advertisements in printed publications and newspapers, also circulars, posters, cabinets, signs and placards, all samples that may be sent gratis to the trade and postage for mailing said matter and money paid to noted persons for use of their names.
“ The amounts tb be .reserved for advertising, as aforesaid, on all goods sold by the parties of the second part, after July 31, 1897, shall be as ‘follows : .
“ 18f cents per gross yards on the first 54,000 gross yards of goods.,
“43§ cents per gross yards on the next 54,000 gross yards of goods. ■ .
“ 50 cents per gross yards on the next 54,000 gross yards and upon all goods above that amount sold under this contract or under any renewal of the contract of May 16, 1896.”

On the 17th day of February, 1899, the parties entered into á temporary contract which, for the time being, superseded the other contracts with respect to their business relations, but that contract was terminated by mutual'consent on the 31st day of May, 1900,. and the business relations between the parties during the time it remained in force were adjusted according to its provisions and no question with respect thereto is presented by this appeal. It is significant that the contract provides for an advertising, account, not for advertising accounts. The practical construction of this contract by the parties removes any doubt there might otherwise be with respect to its meaning. It is. susceptible of the construction that it was intended that there should be an advertising account which should continue until it was closed, according to the terms of the contract, which would not be until it showed a balance due to the defendant, and that, treated as a continuous account, it never did. Therefore, we agree with the construction placed upon the con-, tract by-the learned referee in this regard also, and are of opinion that the defendant’s contention is untenable. This is the only point presented by the defendant’s appeal.

When the business relations between the parties were terminated , on, the 16th day of May, 1902, the plaintiffs had paid out on account of advertising, as claimed by their counsel in his points, the sum of $4,021.69 more than had been credited to the advertísing account, but the accounts as presented in the record indicate a large balance. The goods which had been received by the plaintiffs, and for the sale of which to customers they had not accounted to the defendant at that time, aggregated 11,589j-|j| gross. Construing the contract as providing for a sale of these goods by the defendant to the plaintiffs as we do, the plaintiffs were obligated to account to the defendant therefor at.not less than $4.50 per gross, making the purchase price thereof the sum of $52,154.01. The plaintiffs contended upon the trial that if the contract is to be construed as a contract for the purchase of the goods by them, they are entitled to deduct from the purchase price of these remaining goods, on account of the advertising account, the amount which the contract provides shall be deducted from the purchase price and credited to the advertising account in case of a sale of the goods, not to the entire extent of such amount, because the balance expended for advertising would not warrant that amount, but to a sufficient extent to reimburse them for the excess whiph they have expended on account of advertising over and above the amount with winch the advertising account was credited; in other words, the said sum of $4,021.69. This contention was overruled. On this point we are of opinion that the learned referee erred.- Although the plaintiffs did not sell the goods to customers and account, at the selling prices, yet since they became purchasers and the contract was terminated, they became obligated to account to the defendant as purchasers, for the minimum price at-which, in any event, the contract provided they should account for the goods. Therefore, under the contract, this became a sale - of these goods to the plaintiffs and they were, we think, as much entitled to be reimbursed on account of the advertising account for a sale forced upon them by virtue of the provisions of the contract as for a sale made to customers.

We are also of opinion that the learned referee inadvertently fell into error in adjusting the claims of the parties with respéct to these goods which had been delivered by the defendant to the plaintiffs and which had not béen sold to customers, according to the terms of the temporary contract, instead of in accordance with the terms of the driginal contract as modified and renewed. The learned counsel for the defendant does not claim that the temporary contract governed in this regard, but he asserts that the judgment is more favorable to. the plaintiffs than it would have' been if the rights of the parties had been adjusted pursuant to the provisions of the former and subsequent contracts. Counsel for the plaintiffs, however, disagrees with this view, and insists that if the rights of the parties had been adjusted under the former and subsequent contracts, the result would have been more favorable to his clients. We are of opinion that the contention in this regard made in behalf of the plaintiffs, is correct. The purchase price of the goods on hand, 11,589-^f gross, at $4.50 per gross, would be $52,154.01. From this amount the plaintiffs were entitled to deduct, for commission, ten per cent, aggregating $5,215.40 and 50 cents per gross on account of the advertising account to an extent sufficient to reimburse them for. the excess of $4,021.69, paid out on account of advertising over and above the amount with ' which tlie'aceount was credited. They were also entitled to "deduct from this balance by virtue of the provisions of the contract, two per cent in addition, aggregating $856.34, leaving a balance of $42,058.58. The referee found in accordance with a claim made by the plaintiffs to the defendant in a letter under date of May 16, 19.02, that they had paid' on account of the goods on hand the sum of $43,308.07, but in that letter the plaintiffs stated that the goods on hand aggregated 11,548^-Jf gross yards, which is less than the number of gross yards with which the referee has charged them. He charged them with the number of gross yards which they con- - ceded in an account rendered under date of June 2, 1902, they had on hand at the close of May 16, 1902, which is the date of said. letter. In this account they claim to have paid the defendant on account of these goods the sum of $43,420.56, which is $112,49 more than they have been allowed by the referee. They claim, and evidently the referee intended to allow their claim in this regard, that they had paid to the defendant the sum of $3,75' per gross for all of the goods which they had on hand at the . close of their business relations. That was the amount which they were required to pay - before selling the goods received by them under the original contract as modified, but during the early period of their business' relations they were required to pay only the sum of $3.50 per gross before making sales, and it is to be inferred that some of the goods oil hand at the close of their business relations were goods which they received during the period when they were required to account before sales for only $3.50 per gross, although the evidence oil that subject is not definite. If they had paid the defendant the sum of $3.75 per gross for all of the goods on hand at the termination of their business relations, it would seem that the learned referee inadvertently erred in taking their letter instead of their account as the basis for determining the amount which they had paid to the defendant on account of these goods, and that they should have been credited Xvith payments aggregating $43,420.56 instead of $43,308.07 on account of these goods, which would be more by $1,361.98 than they owed. This correction would leave a balance of $1,361.98 owing to the plaintiffs. The plaintiffs concede that the defendant is entitled to a further credit of $401.76 on account of “ imitation goods not paid for,” leaving on making the correction lastly discussed a balance of $960.22 due to the plaintiffs from the defendant. The plaintiffs claim a further credit of $1,077.18 on account of a balance of $426.44 claimed to be due from the defendant on account of sales made in the month of February, $252.72 on account of sales made in the month of March, $304.87 on accouut'of sales made in the month of April, and $93.15 on account of sales made in the month of May, 1902, for which counsel, in his brief, asserts that accounts were rendered in those months. Accounts for each of these months .were offered in evidence by the plaintiffs, but are not printed in the record. We find one account; in the record under date of April 15,1902, purporting to show a balance due to the plaintiffs from the defendant, “ on March accounting,” of $466.26, and showing a deduction therefrom of items aggregating $39,82, and a balance claimed to be due to the plaintiffs of $426.44, which corresponds in amount with the claim asserted by counsel in his brief with respect to the sales for February, but it does not purport to be the account of sales for February. No explanation is made in the points for the plaintiffs of the theory upon which the. vendor would become indebted to the vendees on account of sales, and we are cited to no evidence tending to show an overpayment other than that which has been considered herein with respect to the advertising account. The record contains some indefinite evidence tending to show that more goods were shipped to the plaintiffs than they had ordered and that the defendant was entitled to ship to them under the contracts, and that some of the goods shipped to the plaintiffs for which they had paid in part were returned to the defendant to be redyed, and that perhaps all of such goods were not again returned to the plaintiffs. It may be that this claim with respect to a further credit of $1,077.18 is based on these transactions, but the findings do not sustain the plaintiffs’ claim and the question may not be decided as one of law. As wé view the evidence, assuming the excess expended for advertising over the anioimt with which the advertising account was credited to be as claimed by counsel for the plaintiffs, and assuming that■ the plaintiffs paid the defendant $3.75 per gross for all of the goods which they had on hand at the expiration of the contract, the plaintiffs should have recovered the sum of $9.60.22, but the judgment is for the defendant and' to authorize a recovery, by the plaintiffs involves changes in the findings of fact, and, therefore, we cannot modify the judgment, without consent. .

It follows, therefore, that the judgment should be reversed and judgment directed in accordance with the view herein expressed, the judgment to be settled on notice.

If, however, either party insists that a new trial is necessary such a new trial will be ordered before the same referee.

Ingraham, Clarke, Houghton and Scott, JJ., concurred.

Judgment reversed and judgment ordered as directed in opinion. Settle order on notice.  