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08/27/87 GEORGE SKWERES v. DIAMOND CRAFT COMPANY

Filed: August 27, 1987.

GEORGE SKWERES, DEFENDANT-APPELLANT
v.
DIAMOND CRAFT COMPANY, PLAINTIFF-APPELLEE



APPEAL FROM THE BROWN CIRCUIT COURT The Honorable Samuel R. Rosen, Judge, Cause No. 84-C-225.

Neal, J.; Garrard, P.j. and Robertson, J., Concur.

Author: Neal

NEAL, J.

STATEMENT OF THE CASE

Defendant-appellant, George Skweres (Skweres), appeals a judgment of the Brown Circuit Court, sitting without a jury, in favor of plaintiff-appellee, Diamond Craft Company (Company), on Company's suit to recover excess advances on commissions.

We affirm.

STATEMENT OF THE FACTS

Company, a sole proprietorship owned by Donald Wegner, is engaged in the retail selling of cookware, flatware, china, stemware, and related items. All of Company's sales result from door-to-door home solicitations, and its salespersons, who have the status of independent contractors, are paid on a commission basis. As Wegner succinctly testified: "[T]hey are paid on what they sell." Record at 68. In April of 1973, Company and Skweres entered into a written agreement whereby Skweres began selling Company's wares. The standard, beginning commission rate for Company salespersons was 15 %, but Skweres started at 40 % because he was an experienced salesman. In late 1977, Skweres informed Company that he would be wintering in Las Vegas every year. To avoid having to open a checking account in Nevada, Skweres requested that Company deposit $500.00 weekly in his Indiana checking account as advances against his commissions. Although such an arrangement was against Company's policy, as stated in its sales manual, Wegner agreed to the advances because Skweres was one of Company's better salesmen and had become a personal friend. The arrangement was never reduced to a writing because Wegner considered it a temporary measure to maintain Skweres's cash flow for the two to three months the salesman would be in Nevada, and because Wegner believed Skweres would generate enough commissions to cover the advances. Wegner did suggest to Skweres that he attempt to reactivate several former Company salespersons who resided in Utah. Unfortunately, the arrangement did not prove to be a temporary situation and Skweres's commissions usually did not equal the advances. The advances were made steadily from 1977 on into 1982. Company maintained records reflecting the status of Skweres's commission account, and whenever Skweres's earned commissions exceeded the advance paid for a particular week, the excess was applied to reduce the debit balance. On occasion, Company would also transfer funds from Skweres's reserve account to reduce the debit balance. However, Skweres rarely had an excess and soon the debit balance was quite large. On several occasions when Skwerespicked up his advance and commission statement in person, he referred to the amount as "the national debt." Record at 265-66. At one point Skweres asked Company's bookkeeper, Elaine Key, not to include his commission statement with the advance sent to his bank, because he did not want his bank to know how indebted he was to Company. In January 1982, Don Wegner and Elaine Key met with Skweres and two other Company salesmen, Ken Foster and Steve Bayman, who had also amassed sizable debit balances from advances. Wegner explained to the three men that the outstanding amounts had gotten out of hand and had created a cash flow problem for Company. To alleviate the problem Wegner informed them that, starting July 1, 1982, Company would begin assessing 18 % interest on the outstanding balances. As Wegner recalled later in his testimony, "[T]here was no objection whatsoever to the debt or to the obligation." Record at 95. Skweres terminated his employment with Company shortly thereafter, without repaying the advances.

Company eventually brought a suit against Skweres for the unpaid debt balance, $27,494.36, plus accrued interest from July 1, 1982. At a one-day bench trial, the testimony of Don Wegner and Elaine Key related the foregoing facts. Not surprisingly, Skweres's testimony presented a sharply different version of the events. According to Skweres, the $500.00 weekly advance was Wegner's idea. He maintained that he performed extra duties -- conducted seminars, supervised sales meetings, and presided at banquets -- and he "just assumed" the $500.00 per week was a salary for these additional tasks. Record at 217. Skweres did admit that Company did not withhold any taxes or social security contributions from the payments. He also admitted that he received, for tax purposes, Form 1099's, which are used to report, among other things, commissions, rather than Form W-2's, which are used to report salaries. Skweres denied receiving weekly commission statements and also denied that he ever acknowledged or agreed to repay the excess advances.

The trial court, in its Findings of Fact and Conclusions of Law, determined that Company had advanced commissions to Skweres at his request, and that the amount of commissions advanced exceeded the commissions earned. It also determined that, whenever possible, Company had applied excess commissions earned and funds from Skweres reserve account to reduce the outstanding balance and that Skweres never objected to this practice, even though it was reflected in the weekly commission statements he received. Based on these findings, the trial court concluded that the parties had modified their original agreement and that Skweres was obligated to repay the excess advanced commissions. Having found that Company had failed to prove any agreement as to interest, and that Skweres had not been properly credited on two occasions, the trial court entered judgment in favor of Company in the amount of $21,683.64. Skweres then instituted this appeal.

ISSUE

Skweres presents two issues for our review, which we will discuss as one. It is:

Whether the trial court erred as a matter of law and against the weight of the evidence in finding that the parties had modified their contract so that Skweres was obligated ...


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