Robert F. Merrill, Appellee, v. the National Cash Register Company, a Maryland Corporation, Appellant, 492 F.2d 1037 (9th Cir. 1974)

Robert Merrill was employed as a senior salesman by the National Cash Register Company (hereinafter 'NCR') at its branch office in Phoenix, Arizona. Merrill, contending that NCR was obligated to him for a commission on a certain sale of NCR equipment, brought suit in an Arizona state court. NCR, as authorized by 28 U.S.C. 1441(a), then removed the action to the District Court.¹  The court, sitting without a jury, found that Merrill was entitled to the commission and entered judgment in Merrill's favor for $14,720, plus costs.

The NCR branch in Phoenix was composed of two divisions, the Accounting Machine Computer Division and the Cash Register Sales Division. Merrill was the senior salesman in the accounting division. According to the employment practices of NCR, each salesman was assigned a specific territory. Within that territory, the salesman was authorized to sell certain products. Under Merrill's contract, he was credited with a commission whenever there was a sale of his specified product within his assigned territory, even if he did not participate in the transaction.

In October, 1966, the home office of NCR in Dayton, Ohio sold two pieces of equipment, designated '420 Optical Scanners', to the General Electric Computer Division (hereinafter 'GE') in Phoenix. The sale was concededly made within the sales territory of Merrill, as that territory was specified in his contract.

The 420 Optical Scanner is a multiple-purpose piece of equipment. Depending upon the manner in which the scanner is programmed, the machine can convert, for input into a computer, information from any tape-producing equipment, including tape information produced by cash registers and accounting machines. The scanner's function is to 'read' the tapes and to transfer the information contained therein to a computer. GE originally contemplated constructing an adapter in order to utilize the scanner in conjunction with a GE computer. Before GE began its experiments with one of the scanners, it requested NCR to furnish tapes. NCR delivered cash register tapes to GE, apparently since those were the only tapes then available in NCR's Phoenix branch office. During the entire experimentation period with the 420 Optical Scanner, the scanner was programmed to receive tapes produced by cash registers only. Because of its program, the scanner was unable to receive or to function with accounting machine tapes. Ultimately the experimental procedures of GE proved unsatisfactory, and, at GE's request, the two scanners were repurchased by NCR in March, 1967, at a thirty per cent loss to GE.

Since the 420 Optical Scanner had many possible applications, NCR had previously anticipated that conflicting claims concerning sales commissions might arise between its cash register and accounting divisions. In an effort to classify the sales of the 420 Optical Scanner, H. C. Keesecker, a Vice President of NCR, had issued a policy letter on July 16, 1962. The letter attempted to allocate the sales of the scanner to either the cash register or accounting division by establishing four general categories.² 

Upon learning of the sales transaction with GE, Merrill applied for the sales commission. Considerable discussion was held by various officers of NCR, and the application was finally resolved on November 22, 1967. On that date, W. E. Giesting, Vice President of the Pacific Division, determined, adversely to Merrill, that the commission would be credited to the Phoenix cash register division. Within two years of NCR's final decision, Merrill instituted his suit.

Here, NCR attacks the District Court's conclusion that Merrill qualified for the commission. First, NCR contends that the employment contract required Merrill to submit his dispute, for a final decision, to a designated arbitrator.³  The short answer to this contention is that the District Court found that no arbitration proceeding was ever conducted by NCR. This finding is supported by substantial evidence, for NCR neither notified Merrill of an arbitration hearing nor afforded him an opportunity to appear and present evidence; therefore, no valid arbitration award occurred. See Ariz.Rev.Stat.Ann. 12-1505 (Supp.1973); Citizens Bldg., Inc. v. Western Union Tel. Co., 120 F.2d 982 (5th Cir. 1941).⁴ 

NCR next asserts that the two-year limitation period imposed by the contract bars Merrill's action. Its contention evidently is based on the premise that Merrill's claim for a commission accrued in March, 1967, the date that the second 420 Optical Scanner was delivered to GE. We agree, however, with the District Court's finding that Merrill's claim was not resolve until November, 1967 and that the contractual limitation period did not begin until that date. See Hawkinson Tire Co. v. Paul E. Hawkinson Co., 13 Ariz.App. 343, 476 P.2d 864 (1970), aff'd 107 Ariz. 255, 485 P.2d 825 (1971).

Finally, NCR contends that neither Merrill's employment contract nor established NCR policy entitled Merrill to a commission on the sale. NCR correctly maintains that in order for Merrill to qualify for the commission, he must find authorization under the policy letter of July, 1962.⁵  Although the court below upheld Merrill's claim, it failed to indicate which provision, either in Merrill's employment contract or in the Keesecker policy letter, obligated NCR to award Merrill the commission.

The only conceivable basis upon which Merrill could rely is the fourth category set forth in the policy letter, since, under the facts, the other three categories are obviously unavailing to him. That fourth category, designated 'Other Applications', declares that a sale of the 420 Optical Scanner 'will be credited to the territory selling man in accordance with the machine creating the original journal tape.' Both parties concede, and the District Court so found, that the original tape used by GE was produced by cash registers. Merrill emphasizes the District Court's finding that cash register tapes were employed by GE solely because those were the only tapes available from the NCR Phoenix branch office. This finding, however, in no way supports the court's conclusion that Merrill was thereby entitled to a commission under the provisions of the controlling policy letter, and it cannot justify a 'rewriting' of the controlling contractual terms. Merrill had the burden of proving that he was entitled to the commission, see Deck v. Hammer, 7 Ariz.App. 466, 440 P.2d 1006 (1968), but he was unable affirmatively to demonstrate that the 'original journal tape' was created by an accounting machine. Moreover, the evidence positively demonstrates that the 420 Optical Scanners, one of which was in the possession of GE for five months, were unable to receive accounting machine tapes during the entire experimentation period. There simply is no evidentiary basis upon which we can properly sustain the challenged judgment.

Upon remand, the complaint will be dismissed.

Reversed and remanded, with directions.