Bach v. Friden Calculating Mach. Co., 10098.

• Decision Date: 13 May 1946
• Docket Number: No. 10098.,10098.
• Citation: 155 F.2d 361
• Parties: BACH et al. v. FRIDEN CALCULATING MACH. CO., Inc., et al.
• Court: U.S. Court of Appeals — Sixth Circuit

155 F.2d 361 (1946)

BACH et al. v. FRIDEN CALCULATING MACH. CO., Inc., et al.

No. 10098.

Circuit Court of Appeals, Sixth Circuit.

May 13, 1946.

Hugh McD. Ritchey and Joseph S. Graydon, both of Cincinnati, Ohio (Joseph S. Graydon, Joseph H. Head, and Hugh McD. Ritchey, all of Cincinnati, Ohio, on the brief), for appellants.

Carl M. Jacobs, of Cincinnati, Ohio, and Ashley M. Van Duzer, of Cleveland, Ohio (Carl M. Jacobs, of Cincinnati, Ohio, Ashley M. Van Duzer, of Cleveland, Ohio, Carl Phares and Smith Warder, all of Cincinnati, Ohio, on the brief), for appellees.

Before HICKS, SIMONS, and ALLEN, Circuit Judges.

SIMONS, Circuit Judge.

The corporate appellee is a manufacturer of calculating machines and the appellants were its distributors in the Cincinnati area from June 13, 1935 until on May 15, 1944 the manufacturer undertook to dissolve the arrangement and appoint appellee Gunderson as its distributor in the territory. Appellants promptly sued to restrain interference with their franchise. Permanent injunction was denied and the cause dismissed. An earlier appeal was remanded for findings of fact, 148 F.2d 407. After making such findings and announcing conclusions of law, the district court again dismissed the cause upon its merits, and this appeal followed.

Appellants were partners in the sale and repair of accounting machines, when in 1943 they learned of the Friden calculator which had just been put upon the market. The Cincinnati territory was occupied by Gaylord from whom they secured a sub-agency and from whom they obtained replacement parts. In May, 1935, Gaylord decided to make no more purchases from Friden until imperfections in machines already purchased were corrected, and in June of that year, Lund, Friden's general manager, negotiated with the appellants for taking over the Cincinnati distributorship directly. They reviewed in detail a sales plan under which it was proposed that they operate. The plan provided that machines were to be sold to distributors at list prices less 50% discount, the distributor to do the servicing with repair parts furnished by Friden during the guarantee period, and Friden furnishing national advertising. The sales plan contained the following provision:

"Sales Organization: Exclusive sale-franchises will be assigned to Distributors upon a basis that will enable them to create for themselves an Independent Business that should not only be profitable, but permanent as well."

There was also a provision that in case of termination of the distributorship the factory reserved the option of taking over the inventory at 50% of list prices for new or unsold equipment, and a representation that the sales plan enables every distributor an opportunity to establish himself in his own business with a freedom and independence impossible when employed by a branch office organization.

Bach testified that after going over the plan Lund said to him, "On this plan, we can't nor nobody else can check you out; this is yours individually as long as you live and do a good job right through." The appellants were willing to take over the Cincinnati territory. Lund, however, insisted upon their purchase of the machines which they had on consignment from Gaylord. The appellants demurred on the ground the machines were old and mechanically imperfect. Lund would consider no compromise, however, and the appellants finally agreed. On June 13, 1935, at a meeting arranged by Lund in Louisville, they paid Gaylord $2350 for the machines. Promptly the appellants began the development of the Cincinnati distributorship in territory which included besides Cincinnati, 8 counties in Ohio, 3 in Kentucky and 2 in Indiana. The assignment of territory was confirmed in writing by Lund, and in a letter from Friden, the manufacturer's president, the hope was expressed that the association would of long standing and mutually beneficial.

The appellants built up their sales organization and operated without incident until October, 1941. Their business grew from a volume of a little more than $23,000 in 1935, to a volume of over $80,000 in 1941, and the percentage of Friden business to their total business grew from 14.6% to a peak of 80%.

In October, 1941, the Federal Excise Tax went into effect, and Friden, fearing the possibility of double taxation, felt that it was necessary for the factory to do the billing, that the appellants should no longer buy their inventory outright, and that the commission should be reduced from 50 to 40% in view of the reduction in necessary bookkeeping and capital outlay on the part of the distributors. However, before any machines had been sold under the new arrangement, Friden revised its views and agreed that the business should be conducted on the original basis. In March, 1942, however, the War Production Board issued Order No. L-54-B, restricting the manufacture of calculating machines and the filling of orders except on certificate of the WPB. It was again agreed in September of 1942, that the Friden Company should do the billing so as to comply with the limitation order. In all other respects the distributors continued to operate the business as they always had. In March, 1944, the appellants received from Friden a document entitled "Sales Agent's Agreement," and at a distributors' meeting in Cleveland they were asked to sign it. The agreement was a comprehensive outline of manufacturer-distributor relationship, and provided that it could be canceled and the distributorship terminated by either party after one year on 90 days written notice. The appellants declined to execute the proposed agreement, and on May 15, 1944, were notified that effective June 15 they would no longer represent Friden, and on that date Gunderson appeared at their office and advised them that he was taking over.

When the appellants filed their suit on June 16, they obtained a temporary restraining order, but in July, when the case was heard, this order was dissolved and judgment entered for Friden and Gunderson. The court based decision on the ground that the contract was without consideration, lacked mutuality so long as it remained executory, that the arrangement was neither perpetual nor for the lives of the plaintiffs, that it was terminable at the will of either party and was rightfully terminated by Friden. The court further concluded that Lund had no authority to make any arrangement other than that contained in the sales plan, that in any event the arrangement was terminated by the agreement of October 21, 1941, that the operation of government orders had made the contract impossible of performance, that the plaintiffs had an adequate remedy at law, and finally that the contract was too indefinite to be supervised by a court of equity.

There is no substantial factual controversy since the motion to dismiss was made and granted at the conclusion of the plaintiffs' evidence. In this situation the evidence must, under familiar rules, be considered in the light most favorable to them. Insofar as findings of fact are based upon inference, a reviewing court remains free to draw the ultimate inferences and conclusions which evidentiary findings reasonably induce. Harris Stanley Coal & Land Co. v. Chesapeake & Ohio R. Co., 6 Cir., 154 F.2d 450; Letcher County et al. v. De Foe, 6 Cir., 151 F.2d 987; Globe-Union, Inc., v. Chicago Tel. Supply Co., 7 Cir., 103 F.2d 722; Kuhn v. Princess Lida of Thurn & Taxis, 3 Cir., 119 F.2d 704. Insofar as the court undertook to determine the existence or validity of the alleged contract, whether in findings of fact or conclusions of law, it involves legal determinations which we ourselves are competent to make and may do so notwithstanding Federal Rules of Civil Procedure, rule 52(a), 28 U.S.C.A. following section 723c.

Whatever the contract, it was based upon a valid consideration. In order to obtain the distributorship the appellants were required to buy an inventory of...