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Bonner v. Westbound Records





APPEAL from the Circuit Court of Cook County; the Hon. DONALD J. O'BRIEN, Judge, presiding.


The defendants Westbound Records, Inc. (Westbound), and Bridgeport Music, Inc. (Bridgeport), appeal from a summary judgment in favor of the plaintiffs. The circuit court held that two contracts dated March 24, 1972, between the defendants and a rock music performing group known as The Ohio Players, of which the plaintiffs were members, were void and unenforceable.

Westbound's business is making master recordings and selling them to others for production and distribution. The agreement between Westbound and The Ohio Players (the recording agreement) required The Ohio Players to make records exclusively for Westbound for a 5-year period. Bridgeport is in the business of owning and licensing copyrights to music compositions. The agreement between Bridgeport and The Ohio Players (the publishing agreement) provided that Bridgeport would employ The Ohio Players as authors and arrangers so long as the recording agreement was in existence, and that The Ohio Players would render these services exclusively for Bridgeport. Both agreements provided they were to be governed by and construed in accordance with Michigan law. The capital stock of both Westbound and Bridgeport was owned by the same person.

In the 21 months immediately following the execution of the recording agreement, The Ohio Players recorded four single records and two albums for Westbound. They were successfully distributed on a national basis, and one of the records, FUNKY WORM, was the recipient of a gold record, which in the record industry symbolizes sales in excess of $1,000,000. During the months these recordings were being made, Westbound advanced $59,390 for costs of recording sessions for The Ohio Players, artwork, travel expenses, and recording session wages paid to The Ohio Players. In addition, Westbound and Bridgeport advanced $22,509 to enable The Ohio Players to pay income taxes they owed and to settle litigation against them. Neither of the defendants was obligated to make the latter advances. The Ohio Players had no personal obligation to repay these advances; under the recording agreement and the publishing agreement, Westbound and Bridgeport could recoup the advances they made only out of royalties payable to The Ohio Players.

In January 1974, five of The Ohio Players, the plaintiffs in this case, repudiated the recording agreement, and signed an agreement with Phonogram, Inc., and Unichappell (hereinafter collectively referred to as Mercury Records), competitors of Westbound, to record exclusively for Mercury Records under the "Mercury" label. On March 8, 1974, they filed this action seeking a judgment declaring that the recording agreement was invalid and unenforceable, and that, consequently, they were no longer obligated to record for Westbound.

The defendants responded by filing a counterclaim. Thereafter, with leave of the circuit court, Westbound and Bridgeport filed a pleading in the action which they labeled a third-party complaint adding Mercury Records as third-party defendants. This pleading charged Mercury Records with tortious interference with the recording agreement by inducing The Ohio Players to breach their agreement with Westbound and to agree to record for Mercury Records instead. As in the case of the action of The Ohio Players seeking a declaratory judgment, the third-party complaint against Mercury Records raised the issue of the validity and enforceability of the recording agreement. Following the entry of summary judgment in favor of the plaintiffs in the declaratory judgment action, the circuit court entered summary judgment in favor of Mercury Records in the tortious interference action. The reason the circuit court judge gave for this summary judgment was that, because he had already determined the recording agreement and the publishing agreement were void and unenforceable, there was no contract in existence which Mercury Records could have caused The Ohio Players to breach. Westbound and Bridgeport have appealed that summary judgment to this court in a separate appeal also decided today (Westbound Records, Inc. v. Phonogram, Inc. (1979), 76 Ill. App.3d 359, ___ N.E.2d ___). We refer to Westbound Records in this opinion not only because it is related to this appeal, but also because of its relevance to the first issue to be decided in this case — the contention of Westbound and Bridgeport that Illinois courts> have no jurisdiction over them.

The defendants, both Michigan corporations with their principal offices in Detroit, were served in Michigan pursuant to the Illinois long-arm statute (Ill. Rev. Stat. 1973, ch. 110, par. 16). Both defendants maintain that they have never transacted business in Illinois, and consequently were not amenable to long-arm service.

The plaintiffs contend that not only was long-arm service valid, but that Westbound submitted to the jurisdiction of Illinois courts> by filing its counterclaim as well as by filing the tortious interference action against Mercury Records. Westbound, on the other hand, argues that it never voluntarily submitted to the jurisdiction of Illinois courts>. It asserts that it was compelled to file its counterclaim so as not to be barred from asserting it in a subsequent action. Westbound also contends that it was forced to file its complaint against Mercury Records in Illinois because any decision in The Ohio Players' declaratory judgment action that the recording agreement was void or unenforceable could have subjected Westbound to the bar of a res judicata or collateral estoppel plea in any suit it might institute against Mercury Records in another forum.

• 1 Westbound filed its action against Mercury Records in Illinois solely as a matter of convenience and tactics. Because a defense motion for summary judgment against Westbound was granted, Westbound's suit against Mercury Records is not subject to voluntary dismissal except on terms fixed by the court. (Ill. Rev. Stat. 1977, ch. 110, par. 52; City of Palos Heights v. Village of Worth (1975), 29 Ill. App.3d 746, 331 N.E.2d 190.) In view of the difficulty it would have in finding a jurisdiction with a statute of limitations long enough to accommodate an action for tortious interference more than 5 years after it took place, it is unlikely that Westbound would now choose to voluntarily dismiss its action against Mercury Records in Illinois so as to bring it elsewhere, even if that privilege were open to it. And, although any decision we reach in Westbound's action against Mercury Records regarding the validity of the recording agreement might be binding as an estoppel against Westbound in any action instituted by The Ohio Players in another jurisdiction, it would not operate as an estoppel against the performers. Thus, accepting Westbound's contention that this appeal should be dismissed for lack of jurisdiction over it, while at the same time proceeding to decide the tortious interference action which Westbound chose to file here, might lead to the impractical and undesirable result of contradictory holdings between this court and that of another State in which The Ohio Players might seek to determine the validity of the recording agreement.

• 2 Inasmuch as, in its action against Mercury Records, Westbound has invoked the jurisdiction of an Illinois court to determine the validity and enforceability of the recording agreement, it cannot question the propriety of an Illinois court deciding precisely the same issue in this action. Expediency, common sense, and the conservation of judicial time and effort, as well as the desirability of having the validity of the recording agreement decided the same way in both actions, lead to this conclusion. By choosing Illinois for its action against Mercury Records, Westbound subjected itself to the jurisdiction of our courts> in other actions involving issues identical with those raised in the action Westbound has elected to file here.

Proceeding to the merits, the plaintiffs contend that the recording agreement is unenforceable because no consideration passed from Westbound to The Ohio Players for their agreement to record exclusively for Westbound. Plaintiffs emphasize especially that the recording agreement lacked mutuality because even though The Ohio Players were obligated to make a minimum number of recordings, Westbound was not required to make even a single recording using The Ohio Players. An additional argument advanced by the plaintiffs is that the recording agreement was never effective because it was never submitted to the Board of The American Federation of Musicians for approval as required by the rules and regulations of that union. The plaintiffs also suggest that the exclusive service provision of the agreements violates a Michigan statute (Mich. Comp. Laws Ann. § 445.761 (1967)) prohibiting restraints of trade and for that reason the agreements are illegal as against public policy.

• 3, 4 Contrary to the conclusion reached by the circuit court judge, it is our view that consideration passed to The Ohio Players when they accepted $4,000 to enter into the agreements. The fact that this payment was made by Westbound and Bridgeport by a check containing the notation that it was "an advance against royalties" does not disqualify the payment from being regarded as consideration. If sufficient royalties were not earned to repay Westbound the $4,000, The Ohio Players would not have been obligated to return it. By making the $4,000 advance, Westbound suffered a legal detriment and The Ohio Players received a legal advantage. (See Central National Bank & Trust Co. v. Consumers Construction Co. (1972), 5 Ill. App.3d 274, 279, 282 N.E.2d 158.) Therefore, under both Michigan and Illinois law, the $4,000 payment constituted valid consideration. (Steinberg v. Chicago Medical School (1977), 69 Ill.2d 320, 371 N.E.2d 634; City of Highland Park v. Grant-Mackenzie Co. (1962), 366 Mich. 430, 115 N.W.2d 270; Nathan v. Leopold (1969), 108 Ill. App.2d 160, 247 N.E.2d 4.) It is not the function of either the circuit court or this court to review the amount of the consideration which passed to decide whether either party made a bad bargain (Harris v. Chain Store Realty Bond & Mortgage Corp. (1950), 329 Mich. 136, 145, 45 N.W.2d 5, 9; Levitz v. Capitol Savings & Loan Co. (1934), 267 Mich. 92, 255 N.W. 166; Sta-Ru Corp. v. Mahin (1976), 64 Ill.2d 330, 338, 356 N.E.2d 67; 1 Williston, Contracts § 115 (3d ed. 1957)) unless the amount is so grossly inadequate as to shock the conscience of the court. (Rose v. Lurvey (1972), 40 Mich. App. 230, 198 N.W.2d 839. But see Harris.) The advance The Ohio Players received, taken together with their expectation of what Westbound would accomplish in their behalf, does not shock our conscience. On the contrary, to a performing group which had never been successful in making records, Westbound offered an attractive proposal. The adequacy of consideration must be determined as of the time a contract is agreed upon, not from the hindsight of how the parties fare under it. Crail v. Blakely (1973), 8 Cal.3d 744, 505 P.2d 1027, 106 Cal.Rptr. 187.

Although the $4,000 payment to plaintiffs was not recited in either of the agreements, parol evidence was properly admitted to establish that the payment was made in consideration of the agreements. Where a contract is silent as to consideration, its existence may be established through parol evidence. (1 Williston, Contracts § 115B, at 471 (3d ed. 1957); Edoff v. Hecht (1935), 270 Mich. 689, 260 N.W. 93; Michalowski v. Richter Spring Corp. (1969), 112 Ill. App.2d 451, 251 N.E.2d 299.) The agreements are valid and enforceable even if they lack mutuality because they are supported by the executed consideration of $4,000 passing from the defendants to The Ohio Players. Consolidated Laboratories, Inc. v. Shandon Scientific Co. (7th Cir. 1969), 413 F.2d 208; Robey v. Sun Record Co. (5th Cir. 1957), 242 F.2d 684.

• 5 Even had the defendants not made the $4,000 advance, the plaintiffs could not prevail. The circuit court judge erred in finding that "there was no obligation on the part of the defendants to do anything under their respective agreements" with The Ohio Players. During the first 21 months after the date of the recording agreement, Westbound expended in excess of $80,000 to promote The Ohio Players and to pay their taxes and compromise litigation against them, and during this period the performers recorded four single records and two albums. The consistent pattern of good faith best efforts exerted by the parties during the first third of the term of the agreements demonstrates that they intended to be bound and to bind each other. Even contracts which are defective due to a lack of mutuality at inception may be cured by performance in conformance therewith. Adkisson v. Ozment (1977), 55 Ill. App.3d 108, 110, 370 N.E.2d 594.

• 6 Disregarding the performance under the agreements, the conclusion that the parties intended to be and were mutually obligated is also compelled by the rule that the law implies mutual promises to use good faith in interpreting an agreement and good faith and fair dealing in carrying out its purposes. (Mueller v. Bethesda Mineral Spring Co. (1891), 88 Mich. 390, 50 N.W. 319; Michigan Stone & Supply Co. v. Harris (6th Cir. 1897), 81 F. 928; Martindell v. Lake Shore National Bank (1958), 15 Ill.2d 272, 286, 154 N.E.2d 683; Wood v. Lucy, Lady Duff-Gordon (1917), 222 N.Y. 88, 118 N.E. 214.) In Wood v. Lucy, an often-cited decision, the plaintiff, a dress manufacturer, obtained exclusive rights to market dresses designed by the defendant, a prominent designer, in return for the plaintiff's agreement to pay the designer one-half of its profits. The designer endorsed fabrics and dresses of plaintiff's competitors, and defended the plaintiff's suit for damages ...

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