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Ar-tik Systems, Inc. v. Lark Sales Co.

JANUARY 9, 1957.

AR-TIK SYSTEMS, INCORPORATED, PLAINTIFF-APPELLEE,

v.

LARK SALES COMPANY, AND L.S. MURCHIE, DEFENDANTS-APPELLANTS.



Interlocutory Appeal from the Circuit Court of Rock Island county; the Hon. DAN M. McNEAL, Judge, presiding. Decrees affirmed.

JUSTICE EOVALDI DELIVERED THE OPINION OF THE COURT.

These three cases were consolidated for argument and opinion.

No. 10,957 is an appeal from an interlocutory order entered April 9, 1956 granting a temporary injunction upon the complaint of plaintiff-appellee. The injunction was granted after notice, appearance and a full hearing consuming several days.

Thereafter the defendant-appellant filed a counterclaim and made an application for temporary injunction, which was presented to the court and a full hearing had and an order entered denying the injunction requested by the defendant and the defendant has prosecuted an appeal to this court from that order in case No. 10,987.

Thereafter the trial court on June 29, 1956 modified the order entered on April 9, 1956 and the defendant-appellant appeals from that order. This was the order entered in No. 10,988.

In No. 10,957 a temporary injunction was granted on April 9, 1956 upon the complaint of plaintiff restraining Lark Sales Company, an Illinois Corporation, and L.S. Murchie, defendants-appellants herein, from collecting any monies from any persons for and on behalf of plaintiff and from using, withdrawing or otherwise disposing of any funds which defendants then had which belonged to plaintiff. The court granted the temporary injunction on motion of plaintiff, after hearing argument based on the pleadings, affidavits attached thereto, and certain restricted evidence offered on behalf of the parties.

All of the pleadings are verified. They consist of plaintiff's complaint, plaintiff's motion for a temporary injunction, defendants' answer, answer of defendants to motion for issuance of a temporary injunction, and reply of plaintiff to said answers.

The prayer for the temporary injunction granted in this cause was by way of ancillary relief to plaintiff's complaint which was in three counts. The first count consisted of a demand by plaintiff for an accounting from defendant, Lark Sales Company, alleged to be acting in a fiduciary capacity, in its duty to collect and remit monies for Ar-Tik Systems. The second count is a prayer for damages for breach of the contract. The third count is a prayer for permanent injunction. Defendants-appellants' theory on this appeal is that the injunction violates the rule prohibiting temporary injunctions which do not maintain the status quo; that the effect of the injunction is to specifically enforce the contract and thus grant plaintiff substantially all of the relief obtainable by final decree; that the granting of specific performance or any other equitable relief to plaintiff in connection with the contract is improper where plaintiff has not complied with the provisions of the contract requiring performance on its part; that the granting of the injunction will result in greater and more substantial injury and inconvenience to defendants and other parties to the contract than would have resulted to plaintiff from the refusal of the injunction; that all of the parties to the contract should have been made parties to the action before the granting of any injunction; and that there were no sufficient allegations in the complaint or sufficient showing in the evidence of irreparable injury to plaintiff.

Plaintiff's theory of the case is that it made out a prima facie case for its right to an accounting, which right had in fact been admitted by defendants; that the evidence shows without question that defendants were acting as fiduciaries under a contract requiring them to collect and remit to the plaintiff all monies collected for plaintiff by the tenth of the month following collection; that defendants breached the contract in that, (a) they collected in excess of $60,000 which they failed and refused to remit to the plaintiff, despite repeated demands; (b) they converted the monies so collected to their own use; and, (c) they failed to comply with other plain provisions of the contract; that plaintiff had fully performed under the contract; that it had, pursuant to the terms of the contract, and prior to instituting suit, terminated defendants' right to act for it; that there was no showing of any hardship on defendants; that the injunction required nothing more of the defendants than that which they had agreed to do by the terms of the contract; that the alleged hardships, if any, grew out of contractual terms and defendants' breach thereof and not by virtue of the court's injunction; and that the court had before it all necessary parties, all others having been shown by the record to have assigned their rights to defendant, Lark Sales Company; that under these circumstances, the trial court, in its sound discretion, properly granted a temporary injunction restraining the defendants from collecting plaintiff's funds which were in the hands of defendants, pending a disposition of the lawsuit between the parties.

In No. 10,987 an order was entered on June 29, 1956 by the circuit court denying the motion of defendant, counter-plaintiff, for a temporary injunction, and allowing the motion of Ar-Tik Systems, Incorporated, counter-defendant, to strike said motion of counter-plaintiff for temporary injunction.

The counterclaim here involved was filed by leave of court on May 8, 1956. The pleadings involved on this appeal are the verified complaint of plaintiff; the motion for temporary injunction by plaintiff; the answer of defendant Lark Sales Company to the complaint; the answer of defendant Lark Sales Company to the motion for temporary injunction; and the verified counterclaim of Lark Sales Company filed on said 8th day of May, 1956; motion filed May 15, 1956 of Lark Sales Company for the issuance of a temporary injunction based on said counterclaim, supported by the affidavits of Henry N. Pieper, Secretary of Lark Sales Company, and the unverified motion of Ar-Tik Systems, Incorporated, to strike the motion of Lark Sales Company for a temporary injunction under the counterclaim.

The theory of Lark Sales Company, the defendant-appellant on this appeal, is that the counterclaim, motion for a temporary injunction under same, and supporting affidavits, stated an equitable case for the granting of a temporary injunction, and that the specific grounds set out in the motion of Ar-Tik Systems, Incorporated, to strike Lark Sales Company's motion for temporary injunction are not sufficient in law to constitute a defense to said motion so as to warrant its dismissal.

Plaintiff-appellee deems it material to this court's determination of the propriety of the trial court's action that consideration also be given to the other pleadings which the record shows were disposed of at the same time by the trial court being:

1. Motion of Lark Sales Company for modification of order granting temporary injunction, No. I;

2. Motion of Lark Sales Company for modification of order granting temporary injunction, No. II;

3. Motion of Lark Sales Company for modification of order granting temporary injunction, No. III; and,

4. Motion of Ar-Tik Systems, Incorporated for modification of order granting temporary injunction; all of said motions being filed June 29, 1956.

Plaintiff-appellee's theory of the case is that since the trial court had already entered one order in the cause with respect to injunction relief, which order had been entered after full hearings, the court did not err in requiring that all minutes relative to injunction relief be contained in one order, and that orderly procedure required a modification and conditioning of the present order rather than by the issuance of successive orders separately enjoining the various parties; that by accepting the court's suggestion in that regard by making three motions for modification to obtain the precise relief prayed for in the motion for temporary injunction (the motion for modification being considered in case No. 10,988), defendant-appellant has in effect waived any defect in the court's allowance of the motion to strike the motion for temporary injunction.

No. 10,988 is an interlocutory appeal from an order of the circuit court entered June 29, 1956, allowing the motion of the plaintiff for modification of the temporary injunction order granted April 9, 1956, and overruling the three motions of defendant Lark Sales Company, for modification of the temporary injunction order.

The only pleadings involved on this appeal are the three separate motions of defendant, Lark Sales Company for modification, and the motion of plaintiff, Ar-Tik Systems for modification.

The first motion of Lark for modification of the Order granting a temporary injunction stated substantially as follows:

"That the Order granting a temporary injunction should be modified in the following respects:

1. That the temporary injunction heretofore granted shall remain in full force and effect pending further Order of this court, but that said temporary injunction is subject to and conditioned upon the performance of the following terms by Ar-Tik:

(a) That Ar-Tik shall not collect or attempt to collect any monies from any persons for and on behalf of Lark.

(b) That Ar-Tik shall, upon receipt of any monies to which Lark is entitled, make report thereof and forward such monies to Lark not later than the 5th day of the month following the month in which they were received.

(c) That Ar-Tik shall forward to Lark on or before the 1st day of July, 1956, any and all monies which it has collected between the dates of April 9, 1956, and July 1, 1956, to which Lark is entitled.

(d) That Ar-Tik shall forward to Lark for the purpose of advertising and store services and to meet the commitments of the parties from the 4¢ per gallon received by Ar-Tik in the Western Territory the sum of 1 1/2¢ per gallon; and from the 2¢ per gallon received by Ar-Tik for its own behalf in the Eastern Territory the sum of 3/4¢ per gallon, said payments to be made not later than the 5th day of the month following the month in which said sums were collected.

(e) That Ar-Tik is not to commit any acts which modify or alter the contracts for commitments of Lark with third parties.

2. That Lark, upon receipt of any monies to which Ar-Tik is entitled, shall make report thereof and forward such monies to Ar-Tik not later than the 5th day of the month following the month in which they were received, after the deduction for advertising and store services on the basis of 1 1/2¢ per gallon from the 4¢ received in the Western Territory and after the deduction of 3/4¢ per gallon from the 2¢ received in the Eastern Territory.

3. That Lark shall forward to Ar-Tik on or before the 1st day of July, 1956, any and all monies which it has received between the dates of April 9, 1956, and July 1, 1956, to which Ar-Tik is entitled after the deductions according to paragraph 2 of this Order."

The second motion of Lark for modification of Order granting the temporary injunction stated substantially as follows:

"That the Order granting a temporary injunction should be modified in the following respects:

That the injunction Order of April 9, 1956, is subject to and conditioned upon the performance of the following terms by Ar-Tik:

(a) That Ar-Tik shall not collect any monies from any persons for and on behalf of Lark.

(b) That Ar-Tik shall not use, withdraw or otherwise dispose of any funds which Ar-Tik has now which belong to Lark."

The third motion of Lark for modification of Order granting the temporary injunction stated substantially as follows:

"That the Order granting temporary injunction should be modified as follows:

That the injunction Order of April 9, 1956, entered against Lark Sales Company is subject to and conditioned upon the performance of the following terms by Ar-Tik:

(a) That Ar-Tik shall not collect any monies from any persons for and on behalf of Lark, other than the 4¢ in the Western Territory and the 2¢ in the Eastern Territory.

(b) That Ar-Tik shall not use, withdraw or otherwise dispose of any funds which Ar-Tik has now which belong to Lark."

The motion of Ar-Tik for modification of Order granting the temporary injunction moves the court to modify the temporary injunction Order entered on its motion on April 9, 1956. This motion recites that inasmuch as defendants have moved the court that the Order granting the temporary injunction should be modified and have presented to the court three motions for modification setting forth the manner in which the Order should be modified, and inasmuch as Ar-Tik feels that none of the proposed Orders contained in such motions of defendants are proper, and inasmuch as the court has indicated that it will entertain a motion for modification of said injunction, Ar-Tik moves the court to modify the injunction by entering an Order in the terms hereinafter set out, the material portions of which are as follows:

1. That the injunction restraining defendant, Lark and L.S. Murchie from "collecting any monies from any persons for and on behalf of the plaintiff, Ar-Tik," is modified to permit Lark to collect any monies which may be owing by the various franchise holders under what is known as the "Lark Sales Territory Agreement" entered into between Lark Sales Company and certain State and District operators.

2. As to other royalty payments of 4¢ which may be due from the various State and District operators which have not, up until April 9, 1956, entered into the Lark Sales Territory Agreement, Ar-Tik shall be permitted to collect the entire 4¢ royalty payments.

3. That any payments made by State or District operators under paragraph 1 or 2 above shall constitute a discharge of their liability insofar as such payments do discharge it, with respect to both Ar-Tik and Lark.

4. That Lark shall forward to Ar-Tik on or before the 10th day of July, 1956, any and all monies which it has collected between April 9, 1956, and June 30, 1956, to which Ar-Tik is entitled, after deduction of the authorized commitments for advertising and store services.

That the aforesaid injunction as modified shall remain in full force and effect until further Order of this court, but that the said temporary injunction is subject to and conditioned upon the following terms as shall apply to Ar-Tik:

1. That Ar-Tik shall, upon receipt of any monies to which Lark is entitled, make report thereon and remit the same to Lark not later than the 5th day of the month following the month in which they were collected.

2. That Lark shall, upon receipt of any monies to which Ar-Tik is entitled, make report thereof and remit the same to Ar-Tik not later than the 5th day of the month following the month in which they were collected, after deduction of commitments for advertising and store services, provided, ...


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