Aperm of South Carolina v. Roof

• Decision Date: 14 October 1986
• Docket Number: No. 0819,0819
• Citation: 351 S.E.2d 171,290 S.C. 442
• Court: South Carolina Court of Appeals
• Parties: APERM OF SOUTH CAROLINA, A South Carolina Limited Partnership, Respondent, v. Alvin R. ROOF, Appellant. . Heard

Page 171

351 S.E.2d 171

290 S.C. 442

APERM OF SOUTH CAROLINA, A South Carolina Limited Partnership, Respondent, v. Alvin R. ROOF, Appellant.

No. 0819.

Court of Appeals of South Carolina.

Heard Oct. 14, 1986.

Decided Nov. 17, 1986.

W.N. Moore, Jr., Columbia, for appellant.

Robert F. Fuller, Hyman S. Rubin, Jr., both of McDonald, McKenzie, Fuller, Rubin & Miller, Columbia, for respondent.

CURETON, Judge.

Aperm of South Carolina, A Limited Partnership (Aperm), filed a breach of contract action against Alvin R. Roof to recover royalty payments due it under a license agreement. Roof defended, alleging that there was no contract with Aperm to pay royalties. The trial court found a contract and ordered Roof to pay Aperm accrued royalties. We affirm.

The sole issue presented in this appeal is whether a valid contract to pay royalties existed between Aperm and Roof after December 31, 1981, or whether the contract had been previously terminated by Aperm. We hold that a valid royalties contract existed. Roof's second exception claims error by the trial judge in ordering him to pay Aperm royalties because the product "Aperm" was manufactured by a third party, Aperm Southeast, Inc. (Southeast). It is clear from his brief, however, that his real argument is that the license was assigned by him to Southeast, so that if Aperm has a contract it is with Southeast, not him.

Aperm, the owner of a roof coating composition and application method, entered into an option agreement with Roof on June 18, 1980 granting to Roof the exclusive license to research, develop, manufacture and sell the invention named "Aperm." The license agreement specified that Roof had the option, after conducting preliminary tests to determine the marketability of the product, of terminating the agreement between June 18, 1980 and August 1, 1980. If Roof failed to give written notice of termination by August 1, 1980, the license agreement would become "fixed" and the parties would be governed by its terms. The contract provided for a start-up period of a year during which time minimum royalties of $2,400.00 per month were to be paid by Roof to Aperm.

By August 1, 1981, Roof was required to present to Aperm a comprehensive manufacturing and marketing program in comformity with guidelines set forth in the agreement. The program was also required to include minimum royalty payments of $4,800.00 per month during the period August 1, 1981 to July 31, 1982, and increased monthly royalty payments thereafter. The marketing and manufacturing program was subject to Aperm's approval, but disapproval had to be reasonably related to the guidelines set out. The contract stated specifically that if the program provided for the minimum royalties, then objections to the program by Aperm would be subject to arbitration, but if the program failed to provide for minimum royalties, Aperm could cancel the contract.

The agreement also provided that the license was personal (emphasis added) to Roof and that assignment of the license was prohibited absent prior written consent by Aperm. In the event of an assignment, the assignee would be required to assume all of Roof's obligations under the license agreement. Roof had the right to terminate the agreement on December 31, 1980, and each year thereafter by giving written notice to Aperm by December 1 of the year in which termination was desired. Otherwise, the agreement would be automatically renewed each year provided Roof was not in default of any of the agreement's terms and conditions.

In August 1980, counsel for Roof notified Aperm by letter that Roof had "exercised his rights" under the agreement and was proceeding "to Phase I, i.e. further testing and marketing of Aperm".

By letter of August 7, 1981, Aperm notified Roof that he was seriously in default under the terms of the license agreement because he had failed to pay the required royalties and furnish it with a manufacturing and marketing program. The letter also advised Roof that the license would be terminated in thirty days if the defaults were not cured. As a result, the parties entered into an agreement on September 3, 1981 which confirmed the continuation of the license agreement and provided, inter alia, for the payment of commissions and extension of the time for submission of the manufacturing and marketing program until December 31, 1981.

On January 28, 1982, Aperm forwarded another notice to terminate in consequence of Roof's failure to pay royalties and for other violations of the license agreement. After this notice, both royalty payments and a marketing program were presented to Aperm, but were refused because both were deemed inadequate. After this notice was sent, much correspondence passed between Aperm, Roof, and Southeast, ¹ but no consensus was ever reached regarding the manufacturing and marketing program. In the meantime, Roof and/or Southeast continued to manufacture and sell the product. On August 11, 1982, Aperm wrote to Southeast's attorney advising him that the license would be terminated in thirty days.

The trial judge found that in August 1980, Roof exercised his right to transform the option contract into a "fixed" contract. He further found that "there was a continuing acknowledgement by [Roof] of the fixed contract with its minimum royalties of $4,800.00 per month, notwithstanding [Roof's] repeated entreaties for a modification thereof." The judge also found that the actual termination of the contract occurred on August 11, 1982 effective September 11, 1982. He additionally found Roof owed Aperm minimum royalties of $4,800.00 per month from January through September 11, 1982. He further found that Roof continued to sell the product through the middle...