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Ambassador Foods Corp. v. Montgomery Ward & Co.

SEPTEMBER 9, 1963.




Appeal from the Superior Court of Cook County; the Hon. ABRAHAM L. MAROVITZ, Judge, presiding. Affirmed.


This is an interlocutory appeal from denial of plaintiff's motion for a temporary restraining order.

Defendant appeared in the trial court, but filed no pleading, so the case comes before us solely on the complaint. Under those circumstances, the facts properly pleaded will be considered as true.

The verified complaint consists of three counts: Count I in equity for injunction and other relief; Count II in law for damages of a half million dollars; and Count III the same as Count II with the addition of an allegation of malice. All three counts are based on the same allegations of fact.

The parties entered into an agreement on August 15, 1960, a copy of which is incorporated into the complaint. *fn1 Plaintiff was given the exclusive right to operate a concession for the sale of cookies, doughnuts, and the like, in defendant's store at Livonia, Michigan, for a five-year period ending August 31, 1965. Plaintiff agreed to pay defendant a commission equal to 15% of its total net receipts, but not less than $10,000 per year. Plaintiff was to turn over to defendant its daily gross receipts, and at the end of each week defendant was to return to plaintiff the balance remaining after payment of its commission and certain other sums including the compensation due to plaintiff's employees. Defendant also voluntarily withheld funds from time to time for the purpose of paying plaintiff's suppliers.

The complaint alleges the general conclusion of fact that plaintiff "has conducted [its] business in a proper, lawful and businesslike manner, within the provisions of said contract, and is not in default or in violation thereof." On the other hand, it is asserted that defendant undertook a hostile course of conduct toward plaintiff for the purpose of embarrassing plaintiff financially and appropriating its business and equipment. This was done, allegedly, by withholding monies due plaintiff for periods of several months.

The heart of the complaint relates to a letter from defendant to plaintiff dated April 12, 1963, which also is incorporated by reference. Pursuant to this letter, which was mailed and received by plaintiff on April 15, defendant terminated plaintiff's business in defendant's Livonia store. The pertinent parts of the letter read as follows:

Be advised that under Section 4(a) of the [license agreement of August 15, 1960] Ambassador Foods Corp. guarantees Montgomery Ward & Co., a certain minimum commission per contract year. As you know Wards' commission on net receipts from your Livonia concession during the contract year ending August 31, 1962, did not equal the guaranteed minimum and we have been attempting for some time to recover the deficiency from your organization. If we understand your letter of March 13, 1963 correctly, it is your position that some downward adjustment in the guaranteed amount is in order due to loss of selling space and sales never contemplated by our agreement and that we deduct some unspecified amount from current receipts to cover the deficiency. Neither request is acceptable to this company.

In addition we have just been advised that garnishment proceedings, Case No. 3228158, have been commenced against Ambassador Foods Corp., in Common Pleas Court, Detroit, Michigan. This action requires that we hold certain proceeds arising in connection with your Livonia concession.

In view of the foregoing, we hereby cancel and terminate the above described agreement effective as of midnight, April 13, 1963. This notice of termination is given pursuant to Section 11 of said License Agreement dated August 15, 1960, and you are hereby further notified that Wards shall avail itself of any and all rights or remedies occurring [sic] to it thereunder.

The contract terms as to termination rights alluded to in this letter provide:

Should a voluntary or involuntary petition in bankruptcy be filed by or against Licensee; should a receiver be appointed for any of Licensee's business or property; should Licensee fail to pay any of its obligations to any persons when due; should Licensee fail, for any reason, to perform any of the terms of this Agreement, including failure to keep the concession open for business; or should Licensor for any reason, discontinue the operation of any store or stores specified in Section 2, Licensor may terminate this Agreement with respect to such store or stores forthwith by mailing notice to Licensee. (Emphasis supplied.)

The complaint does not deny the truth of the specific factual statements contained in defendant's letter but only raises a question as to their legal sufficiency to support the termination. It does this by alleging that "[n]othing contained in said letter warranted or justified the said action theretofore taken by said defendant in respect to the cessation of the operations of the plaintiff's business in Livonia, Michigan."

The complaint further alleges on information and belief that defendant's agents have urged plaintiff's suppliers and other creditors to bring suit against plaintiff for outstanding bills, and have spread false ...

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