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Goodman v. Motor Products Corp.

FEBRUARY 6, 1956.

MANUEL GOODMAN, INDIVIDUALLY; MANUEL GOODMAN & COMPANY, INC., AND DEEP-FREEZE INTERNATIONAL CORPORATION, PLAINTIFFS-APPELLANTS,

v.

MOTOR PRODUCTS CORPORATION, A NEW YORK CORPORATION, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Lake county; the Hon. BERNARD M. DECKER, Judge, presiding. Affirmed in part, reversed in part and remanded.

JUSTICE EOVALDI DELIVERED THE OPINION OF THE COURT.

Rehearing denied March 8, 1956.

Manuel Goodman, individually; Manuel Goodman & Company, Inc., and Deep-freeze International Corporation filed a Complaint in the Circuit Court of Lake County against Motor Products Corporation, a New York corporation, L.J. Sorensen and B.G. Sanderson, charging that in October, 1940, the plaintiff, Manuel Goodman, entered into a contract with the defendant corporation, acting through Willard L. Morrison, its agent, giving the said Manuel Goodman an exclusive sales and distribution contract to sell food freezers manufactured by the defendant corporation under the trade name of "Deep-freeze" in the territory "outside the continental United States." The terms of the agreement, according to the plaintiffs' complaint, required Goodman to give up his other business ventures, competitive or otherwise, and devote his full time and attention to the sale and distribution of Deep-freeze appliances in territories outside the continental United States, to finance his own promotional activities and to render assistance in the formulation of domestic policy without further compensation other than the fruits of the contract. In return therefor, Goodman was granted the exclusive foreign distributorship and the right to set up corporations containing the word "Deep-freeze" in their name so long as they did not handle a competing product. The distributorship was to continue so long as Goodman devoted his full time and attention to the sale and distribution of Deep-freeze appliances, did not handle a competing line, gave adequate representation and so long as Motor Products Corporation was in the appliance business. The complaint further alleged that the plaintiff, Manuel Goodman, did organize and was the sole owner of the plaintiff corporation, Manuel Goodman & Company, Inc., which was organized for the purpose of buying appliances from the defendant corporation, and of the plaintiff corporation, Deep-freeze International Corporation, which was organized for the purpose of acting as a foreign sales agent for the food freezers manufactured by the defendant corporation; and that the defendant corporation and its sales manager, L.J. Sorensen, and the general manager of Deep-freeze Division of Motor Products Corporation, Ben G. Sanderson, invaded the plaintiff's territory through direct sales to a distributor appointed by it in Mexico and thereafter sent the plaintiff a notice purporting to terminate the agreement as of November 28, 1953, in derogation of its contract and to the damage of all three plaintiffs. The original complaint was in four counts: Counts I, II and III being claims for damages, and Count IV being in equity by Manuel Goodman, individually, and by the Deep-freeze International Corporation, praying that the defendant Motor Products Corporation be restrained and enjoined from using the names "Deep-freeze International Corporation," "Deep-freeze International" and/or "Deep-freeze" in connection with the advertising, distribution or sale of products manufactured and/or sold by the Deep-freeze Division of the defendant Motor Products Corporation, in any country of the world other than the United States of America; and from using any advertising material or conducting any activity whatsoever which tended to deceive the public and to trade upon and damage the reputation and good will of the plaintiff, Deep-freeze International Corporation. The defendants filed their answers, which included several Special Defenses to Counts I, II, and III and a counterclaim to Count IV, the prayer of which asked the court to enjoin and restrain the plaintiff Manuel Goodman from using the word "Deep-freeze" in the corporate name of any corporation controlled by him, or employing the term in any business activity, and directing him to dissolve the Deep-freeze International Corporation. The only claim submitted to the jury was the one contained in Count I of the complaint, and when the case was submitted the only plaintiff was Manuel Goodman, individually, and the only defendant was Motor Products Corporation. The demands for judgment by Manuel Goodman & Company, Inc., and by Deep-freeze International Corporation were dismissed and the de-dismissed from the case. The jury returned a verdict fendants L.J. Sorensen and Ben G. Sanderson were awarding damages in the sum of $130,000 to Manuel Goodman, individually. Count IV, which purported to state a claim for accounting and injunction in equity, was submitted to the court on the record made on the trial of the issues of Count I. Thereafter the court sustained the defendant's motion for judgment notwithstanding the verdict, or, in the alternative, granted a new trial. Judgment was thereupon rendered in favor of the defendant. A decree was also entered dismissing Count IV of the complaint, and enjoining the plaintiff and others from continuing the use of the word "Deep-freeze" in their corporate name, or employing the term in any business activity, and directing Manuel Goodman to dissolve the Deep-freeze International Corporation. The plaintiffs have appealed from the decree and judgment of the Trial Court.

The ultimate facts requiring consideration are substantially as follows: Plaintiff, Manuel Goodman, is an exporter who for most of his life has been engaged in the business of foreign trade. The defendant Motor Products Corporation is a New York corporation licensed to do business in Illinois. It carries on divers lines of manufacturing through numerous divisions and in particular operates a branch in North Chicago, Illinois, known as Deep-freeze Appliances Division devoted to the manufacture and sale of Deep-freeze appliances. In 1940, defendant Motor Products Corporation entered the freezer and refrigerator market and Willard L. Morrison, who had invented the low temperature machine known as the Deep-freeze and had developed the same in the plant located in North Chicago, Illinois, which is now the Deep-freeze Appliances Division of the defendant corporation, was placed in charge of this department of the corporation. There is considerable dispute as to Morrison's relationship with the defendant, the defendant referring to him as a development and experimental engineer, and the plaintiff referring to him as the general manager of the Deep-freeze Appliances Division of the defendant Motor Products Corporation. From the evidence it is clear that Morrison was in charge of the manufacturing activities of the plant and that he appointed distributors of the products being manufactured, both orally and in writing. The plaintiff, Goodman, introduced himself to Morrison after reading an article which depicted Morrison as the inventor of a new successful food freezer and the head of the organization manufacturing them. In October of 1940 Goodman called on Morrison to inquire about selling the machines in the foreign market. Morrison at first told Goodman that the company was not interested in spending any money or in undertaking advertising to promote Deepfreezes outside of the country. Goodman insisted that if he were given exclusive export rights he would finance his own enterprise, service his own goods, handle all his promotional activities and would at the same time pay the manufacturer the same price for the machines that domestic distributors were paying. After several days of discussion an agreement was reached which, when interpreted in a light most favorable to plaintiff, was substantially as follows: Goodman was to have the exclusive rights to sell Deep-freeze products in all countries in the world outside of the continental United States so long as he devoted his full time and attention thereto and gave adequate representation. Goodman was to refrain from the distribution and sale of any competing products so long as the agreement was in effect. Goodman was to devote his time and best efforts exclusively to the distribution and sale of Deep-freeze products in countries of the world outside the continental United States to the exclusion of any other business interest which he might theretofore have had. In the event Goodman failed to devote his time and best efforts exclusively to the distribution and sale of products manufactured and/or sold by the Deep-freeze Division of Motor Products Corporation the agreement would terminate and Goodman would get out of the appliance business. Goodman was to have the right of the use of the word "Deep-freeze" in his corporate name for so long as he did not sell a competing product. In the event Motor Products Corporation discontinued the manufacture and sale of products through its Deep-freeze Division, although continuing manufacture of other products, the agreement would thereupon terminate.

Goodman commenced selling and distributing appliances immediately after he and Morrison had settled the terms governing the conduct of the parties, and was given a desk in the North Chicago factory. He continued to distribute the products of the defendant corporation when they were available from 1940 to 1953. Goodman's allocation of the appliances during the war years, 1940 to 1945, was minute, and his orders far exceeded his supply. During the years 1945 to 1950 Goodman continued to distribute the appliances and was the only distributor of the company's products in the foreign market. About the middle of November 1951, Ben G. Sanderson, sales manager of the defendant corporation, phoned Goodman to say that he wanted to withdraw Canada from the plaintiff's territory. Goodman finally consented to this withdrawal of Canada from his territory on the basis of being promised by Sanderson he would be given the right to distribute air conditioners, which were to be manufactured by Motor Products Corporation in tropical and subtropical regions.

It appears from the testimony on the part of the plaintiff, that in September or October of 1952, a domestic distributor of the defendant corporation, known as Radio City Distributing Company, of Dallas, Texas, sold a one-half car load of Deep-freeze freezers and refrigerators to Jose R. Santos, an appliance dealer in Monterrey, Mexico. At the direction of said Radio City Distributing Company, the defendant corporation, Motor Products Corporation, caused the shipment of these appliances to Laredo, Texas, for transportation across the border. In the early part of 1953, one Joe Davis, district manager of the defendant company in Texas, made arrangements with the same Jose R. Santos, the former customer of Radio City Distributing Company, to act as distributor for the defendant company in Mexico.

The defendant corporation by registered mail on July 29, 1953, notified the plaintiff, in writing, that his distributorship was terminated as of November 28, 1953, and refused subsequent to that time to sell the plaintiff any of its products.

It is plaintiff Manuel Goodman's theory that in October 1940, he entered into a contract with Willard L. Morrison acting as General Agent for defendant; that by the terms of the agreement, Goodman was required to give up all other business ventures, competitive or otherwise, and devote his full time and attention to the sale and distribution of Deep-freeze appliances in the territory outside the continental United States, to finance his own promotional activity, and to render assistance in the formulation of domestic policy without further compensation other than the fruits of said contract; in return therefor, he was granted the exclusive foreign distributorship and the right to set up corporations containing the word "Deep-freeze" in their name, so long as they did not handle a competing product; the distributorship was to continue so long as Goodman devoted his full time and attention to the sale and distribution of Deep-freeze appliances, did not handle a competing line, gave adequate representation, and so long as defendant was in the appliance business; a further qualification was added, that in the event Goodman did not live up to his portion of the bargain and the contract was terminated through his fault, he would get out of the appliance business and not compete with defendant's Deep-freeze Division; that Goodman at all times carried out his part of the agreement; that after fourteen years of performance, the defendant invaded the plaintiff's territory through direct sales to a distributor appointed by it in Mexico and thereafter sent the plaintiff a notice purporting to terminate the agreement as of November 28, 1953, in derogation of its contract.

Defendant denies specifically that Goodman was granted any special rights to the use of the trade name and trade-mark "Deep-freeze" and that Goodman's agreement was to remain in force unless and until Goodman ceased to personally devote his time and efforts to effect the sale and distribution of Deep-freeze products. It contends that the Goodman distributorship was terminated as of November 28, 1953, by due and proper notice of termination, and it denies that Goodman has any claim for damages.

Under its second defense, it avers that the authority of said Willard L. Morrison, manager of its Deep-freeze plant, to make distributor's sales agreements was limited to making the usual and ordinary agreements in writing on the authorized and approved form, that he had no authority to make such an unusual and extraordinary agreement of the terms and conditions alleged by plaintiff, in so far as they differ from those in the standard form, and that if an agreement of the terms and conditions alleged was attempted to be made with Goodman in 1940, it was of no force and effect as the agreement of defendant, except in so far as it is of the same terms and conditions as those stated in the approved and authorized printed form.

Under its third defense, it avers that an agreement of the terms and conditions alleged by plaintiff was never brought to the attention of the officers of defendant, or any of them, or its Board of Directors, and that neither an officer nor the Board had any knowledge of the existence of an agreement of the alleged unusual and extraordinary terms and conditions, and that it never ratified or acquiesced in an agreement with such unusual terms and conditions.

Under its fourth defense, it avers that the alleged agreement lacks mutuality in that it may be terminated by its alleged terms only by Goodman and that it may be terminated by him at will, and that the relief sought is in effect a specific performance of the alleged agreement and that a contract will not be specifically enforced unless it is mutual and can be enforced by either party against the other.

As to the equitable issues, defendant denies specifically that there was any agreement granting to Goodman any rights to the use of the word "Deep-freeze," which is defendant's registered trade-mark, except the right to use the word during and in the course of his marketing of Deep-freeze products, and that all rights to use said trade name and trade-mark terminated upon the termination of the distributor's sales agreement between it and Goodman. Its position is more specifically stated in its counterclaim in which it asks that Goodman Deep-freeze International Corporation be enjoined from using the word "Deep-freeze" singly or in combination with any other word or words, as a part of a trade or corporate name or in connection with the advertising, distribution, or sale of products, on the grounds that a further continued use of defendant's trade-mark would be an invasion of defendant's property rights and a fraud upon the public.

Assuming that the oral agreement which Goodman alleged, and to which he testified, was made, it is one which was to run without a prescribed limit and which could be terminated only by Goodman in his uncontrolled discretion and was binding on defendant until Goodman of his own volition ceased to devote his time and efforts to selling and distributing Deep-freeze products. There is no evidence that Goodman agreed to devote his time and efforts to the selling for any period of time. It is admitted that Goodman had due notice of the termination. Under the doctrine of mutuality, such a contract in so far as it was executory, could be terminated by defendant by due notice at any time as to all or any part of Goodman's assigned territory. Joliet Bottling Co. v. Joliet Citizens' Brewing Co., 254 Ill. 215, involved an agreement under which the brewing company agreed to furnish beer for bottling and the bottling company agreed to bottle and market the beer as the brewing company's product so long as it furnished beer satisfactory in quality and in such quantities as the trade demanded. The brewing company terminated the contract and the bottling company brought suit for damages, alleging that it had expended a large sum of money in setting up its bottling works and in developing a market for the beer. Demurrer to the complaint was sustained and the bottling company appealed. Affirming the judgment, the Supreme Court said (pp. 218-9):

"The question presented for decision is whether the contract between appellant and appellee was valid and binding and capable of being enforced. Appellee's contention is that it is void for want of mutuality; that the period of its duration is not fixed but is indefinite, and it was therefore terminable at the will of either of the parties. An examination of the contract satisfies us that these positions are well taken. By the contract appellee agreed to deliver beer to appellant in sufficient quantities to supply appellant's demand, and not to bottle or cause to be bottled, or to furnish to any other person, firm or corporation, beer for bottling so long as appellant was bottling appellee's beer. . . . The only thing the contract bound appellant to do was to pay the price agreed upon and bottle the beer of appellee and to market the same as the product of appellee so long as it furnished beer satisfactory in quality and in such quantities as the trade demanded. No mention is made of any period of time the agreement should continue in force. No maximum or minimum quantity is stipulated in the agreement, but the quantity to be delivered is such as shall be sufficient to supply appellant's demand. Under this provision appellant might demand a quantity so small as to make it impracticable for appellee to manufacture it, or it might demand such large quantities as to be wholly beyond the capacity of appellee. The quality of the beer was to be satisfactory to appellant. Under this provision of the agreement appellant had the option of refusing to accept beer from appellee, at its pleasure, upon the ground that it was not satisfactory. (Citations) It cannot be doubted, we think, that the contract was unilateral and void for want of mutuality under repeated decisions of this and other courts. (Citations) Furthermore, no time being fixed during which the agreement should continue in force, it was terminable at the will of either party. (Citations)"

To the same effect is Gage v. Village of Wilmette, 315 Ill. 328, wherein our Supreme Court held that where no definite time is fixed during which an executory contract shall ...


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