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Kozasa v. Guardian Electric Mfg. Co.





APPEAL from the Circuit Court of Cook County; the Hon. JAMES H. FELT, Judge, presiding.


M. Matthew Kozasa brought an action against Guardian Electric Manufacturing Company alleging breach of contract and seeking commissions allegedly due him. The trial court, sitting without a jury, found for plaintiff in the amount of $517,664.10, plus costs. Defendant appeals.

In the mid-1960's, plaintiff, a trade consultant, designed a relay (an automatic switch used in electrical products) which was superior to those available at that time. Plaintiff's idea was to incorporate insulating barriers in miniature 1 cubic inch relays which could qualify for Underwriters Laboratories approval. Plaintiff and a machinist built samples of his relay. In 1967, plaintiff went to Japan and agreed to let Koike Electrical Industrial Company, Ltd., manufacture the relays. Under the oral agreement, plaintiff would receive a manufacturing fee or royalty of 2 percent of the sales price. In the event Koike ceased making the relays, its interest in the design would revert to plaintiff. Plaintiff returned to the United States to locate a distributor and met with Donald O. Boucher, the assistant general manager and assistant to the president of defendant Guardian Electric. Plaintiff told Boucher that he had designed the relay.

On November 16, 1967, plaintiff met with Boucher and Frank Rowell, Jr., president of Guardian. At trial, Rowell testified that at this meeting in Rowell's office in Chicago, the parties orally agreed to an arrangement whereby plaintiff would be a "finder" for a source of relays in Japan for Guardian and that the arrangement related only to those relays manufactured by Koike and purchased by Guardian in the future. Rowell testified that plaintiff was not authorized to negotiate or sign a contract for Guardian. In return for his efforts, plaintiff was to receive commissions at the rate of 10 percent of the purchases by Guardian from Koike of the subject relays. These commission payments were due prior to the close of the month immediately following the month in which shipments and invoices were received by Guardian. No mention was made of the 2-percent fee to be paid by Koike to plaintiff.

Pursuant to his oral contract with Guardian, plaintiff brought Guardian and Koike together. On January 1, 1968, Guardian and Koike entered into a written contract whereby Guardian acquired the exclusive rights to sell and distribute the relays (designated as series 1310AC and series 1315DC relays) in the United States and Canada, with the exception of Idaho and Wyoming. Plaintiff took no part in the contract negotiations. The parties agree that plaintiff's obligations under the November 16, 1967, oral contract were fully performed upon bringing defendant and Koike together.

On January 2, 1968, defendant attempted to "renegotiate" its oral contract with plaintiff and sent him a proposed written contract. This proposal provided for declining percentage commissions rather than a straight 10 percent but was identical in all other respects to the oral agreement. Plaintiff did not accept this offer and did not return the writing to defendant.

On February 24, 1968, plaintiff entered into a written contract with Koike granting Koike exclusive rights to manufacture and sell the relay in exchange for a royalty of 2 percent of Koike's selling price. Koike began producing the relays, but early in 1969 encountered some manufacturing difficulties which slowed production and decreased profits. In an effort to offset these losses, plaintiff voluntarily reduced his commission rate from Guardian to 5 percent from the agreed 10 percent until the production problems could be cured.

On December 15, 1969, Boucher wrote plaintiff concerning Boucher's recent trip to Japan to visit Koike and another supplier. The letter expressed appreciation for plaintiff's locating a supplier for Guardian and went on to say:

"Inasmuch as you act as a `finder' for Guardian, as compared to a sales representative, we have decided to give you an annual retainer for your services. We have discussed this with Koike and Toyo and advised them that we would be completely responsible for your compensation. We believe that the amount stated in the enclosed agreement [providing for an annual retainer of $5,000] is fair for the services rendered."

This letter impliedly shows that defendant was then aware of plaintiff's 2-percent fee from Koike. Nevertheless, defendant offered plaintiff a new contract for expanded services at an annual retainer fee of $5,000.

By letter of January 6, 1970, plaintiff rejected defendant's offer and insisted that the commissions of 10 percent continue. Defendant's response to this rejection was made on January 19, 1970, when defendant mailed plaintiff a "final check * * * under the old arrangement as a `finder' for Guardian Electric." The January 19 letter went on to say that Frank Rowell, Jr., would answer plaintiff's January 6 letter personally when he returned from a trip. Rowell replied on February 10 and, in regard to plaintiff's rejection of the annual retainer offer, stated, "Frankly, Matt, if I were you, I would consider the situation from this basis; something is better than nothing."

Guardian stopped making payments to plaintiff, as did Koike, apparently at Guardian's request. Having already been paid for the December 1969 shipments of relays, the next commission payment from defendant to plaintiff was for the January 1970 shipments and was due on or before February 28, 1970. Throughout 1968 and 1969 plaintiff was paid commissions on relays sold through defendant's Canadian sales representative, A.C. Simmonds, because defendant had the exclusive distribution rights in Canada. On January 26, 1970, defendant requested Simmonds to cease making commission payments to plaintiff because defendant was "going to pick up" the payment of those commissions.

Plaintiff filed his original complaint for breach of contract on February 5, 1975, and filed an amended complaint for breach of contract on October 24, 1978. Defendant moved to dismiss the amended complaint on the basis of the 5-year statute of limitations (which both parties agree governs the subject oral contract) and the Statute of Frauds. The trial court denied defendant's motion and this court denied defendant's subsequent motion for an interlocutory appeal. Defendant's answer raised the affirmative defense of fraud based on plaintiff's concealment of his fee arrangement with Koike.

By agreement of the parties, the case was tried without a jury and with the liability and damages portions bifurcated. Because a number of defendant's invoices were lost or destroyed by defendant, an accountant estimated the probable purchases from Koike for these missing periods. The trial court found defendant liable in the sum of $517,664.10 for commissions on the relay purchases from January 1, 1970, to ...

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