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Stone v. William Steinen Mfg. Co.

Decided: January 24, 1946.

MURRAY B. STONE, ALEXANDER H. STONE, E. DAVID STONE, SARAH STONE AND ANNA L. STONE, COPARTNERS DOING BUSINESS AS STONE & STONE CO., APPELLANTS,
v.
WILLIAM STEINEN MFG. CO., A CORPORATION, APPELLEE



On appeal from the Supreme Court.

For the appellants, Milton M. Unger.

For the appellee, Pitney, Hardin & Ward (Charles R. Hardin).

Bodine

The opinion of the court was delivered by

BODINE, J. The appeal is from a judgment of the Supreme Court whose opinion is reported in 133 N.J.L. 16. The judgment affirmed a determination in favor of the defendant in a case tried before the Circuit Court without a jury. The findings of the learned trial judge are reported in 22 N.J. Mis. R. 353. The defendant's counter-claim was struck but that is not inconsistent with sustaining the defenses interposed to the action.

The plaintiffs sought to recover two weekly installments of salary on the basis of $400 a week. The parties to this action on December 31st, 1942, entered into a written agreement operative and effective as of July 1st, 1941, whereby the defendant employed the plaintiffs for a period of three years commencing as of July 1st, 1941, and ending June 30th, 1944, at a salary of $400 per week payable weekly. The contract terminated a previous contract in which the plaintiffs agreed to assist the defendant in its dealings with the United States Navy Department respecting contracts for the manufacture

of supplies. Contracts were obtained and payment was made until September 11th, 1943, when the payments stopped and this suit was brought.

Every contract negotiated by the United States Navy, including those procured by the defendant, contain the following provision: "Article 11. Covenant against contingent fees. The contractor warrants that he has not employed any person to solicit or secure this contract upon any agreement for a commission, percentage, brokerage, or contingent fee. Breach of this warranty shall give the Government the right to annul the contract, or in its discretion, to deduct from the contract price or consideration the amount of such commission, percentage, brokerage, or contingent fees. This warranty shall not apply to commissions payable by contractors upon contracts or sales secured or made through bona fide established commercial or selling agencies maintained by the contractor for the purpose of securing business."

It was the defendant's contention at the trial that the agreement of December 31st, 1942, was a modification of a contract of July 1st, 1941, whereby the defendant agreed to pay the plaintiffs commissions on such contracts as it might procure for the manufacture of materials for the United States Navy. Clearly, it was since the Navy was disallowing the commissions which were paid to the plaintiffs and were deducting the amount thereof from the payments which were being made to the defendant. It was hoped that the new plan would thwart the ruling and the salary would be allowed as part of the administrative expense.

The plaintiffs are partners. The partnership was composed of Alexander H. Stone, his brothers and their wives. Mr. Stone, for a number of years, was engaged in the mortgage business in Newark. He went to Washington in 1934 and was employed for a period of six years in the Federal Housing Administration. On November 20th, 1940, he commenced the business of being an alleged manufacturers' representative, but his firm does not seem to have been regarded by the Navy Department as a bona fide established commercial or sales agency. Such finding was concurred in by the

Circuit Court Judge. He points out in his opinion that the plaintiffs maintained no office in Washington save the residence where Alexander H. Stone lived and where the other partners visited from time to time. There was no ...


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