Bandag of Springfield, Inc. v. Bandag, Inc.

• Decision Date: 18 November 1983
• Docket Number: No. 12515,12515
• Citation: 662 S.W.2d 546
• Court: Missouri Court of Appeals
• Parties: BANDAG OF SPRINGFIELD, INC., Plaintiff-Respondent, v. BANDAG, INCORPORATED, Defendant-Appellant, and Sedalia Bandag Tire & Service, Inc., and Tire Corral, Inc., Defendants.

Page 546

662 S.W.2d 546

BANDAG OF SPRINGFIELD, INC., Plaintiff-Respondent, v. BANDAG, INCORPORATED, Defendant-Appellant, and Sedalia Bandag Tire & Service, Inc., and Tire Corral Inc., Defendants.

No. 12515.

Missouri Court of Appeals,

Southern District,

Division Two.

Nov. 18, 1983.

Motion for Rehearing or Transfer Denied

Dec. 14, 1983.

Application to Transfer Denied

Jan. 17, 1984.

John C. Monica, Elwood L. Thomas, Laura D. Stith, Shook, Hardy & Bacon, Kansas City, George T. Mobille, Cushman, Darby & Cushman, Washington, D.C., F. William Joyner, Miller, Sanford, Joyner, Westbrooke & Charles, Springfield, for defendant-appellant.

Robert W. Schroff, James W. Newberry, Schroff, Glass & Newberry, P.C., Springfield, for plaintiff-respondent.

HOGAN, Judge.

I

Plaintiff Bandag of Springfield, Inc., (plaintiff) filed a five-count petition seeking recovery against defendant Bandag, Inc., (Bandag) for: a) breach of contract; b) fraud and misrepresentation, and c) injury and damage by prima facie tort. As grounds for recovery against defendants Tire Corral, Inc., and Sedalia Bandag Tire & Service, Inc., plaintiff averred: a) tortious interference with contract, and b) injury and damage by prima facie tort.

The cause was tried and submitted to a jury against all three defendants. Plaintiff chose to submit its case against Bandag on the ground of prima facie tort only, and against the other defendants solely on the ground of tortious interference with contract. Defendants Tire Corral and Sedalia Bandag had verdicts, but the jury found in favor of plaintiff and against Bandag in the amount of $180,000 as actual damages and $4,000,000 as punitive damages. Bandag appealed.

In this court, Bandag has briefed and argued ten diffuse assignments of error. Discussion of each point would produce an opinion of interminable length, and the record, though it is extensive, is insufficient to permit a confident resolution of all the tangential questions tendered. We have therefore focused our attention upon Bandag's assertions that: a) plaintiff's petition failed to state a claim upon which relief could be granted; b) the trial court erred in refusing its motion for directed verdict made at the close of all the evidence, and c) plaintiff made no submissible case.

There is no record indication that the sufficiency of the petition to state a claim was raised before the verdict was received. In such cases, the rule is that the petition will be held sufficient if, allowing reasonable inferences and implications from the facts stated, it advises the defendant with reasonable certainty as to the cause of action it is called to meet and is sufficient to bar another action for the same subject matter. Otherwise put, a petition which imperfectly pleads a claim but is susceptible to amendment to state the claim intended without changing the cause of action is good after verdict. Davis v. City of St. Louis, 612 S.W.2d 812, 814 (Mo.App.1981); Barber v. Allright Kansas City, Inc., 472 S.W.2d 42, 44[3, 4] (Mo.App.1971). Plaintiff's averments charging injury by prima facie tort meet these tests.

By electing to submit its case against Bandag upon the theory of prima facie tort only, plaintiff abandoned the other pleaded grounds of recovery. Thaller v. Skinner & Kennedy Company, 315 S.W.2d 124, 126 (Mo.banc 1958); Carter v. Matthey Laundry & Dry Cleaning Company, 350 S.W.2d 786, 795 (Mo.1961); Page v. Hamilton, 329 S.W.2d 758, 762 (Mo.1959); George v. Howard Const. Co., 604 S.W.2d 685, 688-91 (Mo.App.1980).

Therefore, the sole question before this court is whether plaintiff made a submissible case against Bandag under the prima facie tort theory.

II

(Background facts)

(A)

The "Bandag Method" is a patented method of reprocessing used tires. It is called a "retreading" process, but involves the application and bonding of precured rubber to the casing. The product of the Bandag Method is what one ordinarily considers a "recap" but the process is nevertheless consistently referred to as a "retreading" process, and we shall consider it such. Bandag, an Iowa corporation, holds domestic and foreign patent and trademark rights to the process, and what it describes as "extensive detailed know-how" in retreading tires by the Bandag Method. Bandag markets those rights by granting franchises to independent business organizations. This case involves two such franchises.

Bandag grants what are called "exclusive" and "non-exclusive" franchises. An "exclusive" franchise gives the franchisee the right to use the Bandag Method of manufacturing retreads in a prescribed territory. Bandag agrees it will grant no other franchise in the territory described in the agreement. A "non-exclusive" franchise usually allows Bandag to grant at least one other franchise in the prescribed area. Bandag does not, however, grant exclusive marketing rights to any franchisee, because it believes a grant of such rights would be unlawfully anticompetitive. Since 1973, Bandag's franchises have explicitly stated that no exclusive marketing rights are granted. The franchises are granted for a period extending through the term of the last to expire of the Letters Patents and may be terminated only for "good cause."

Plaintiff and the other defendants, Tire Corral and Bandag of Sedalia are closely-held Missouri corporations. Eugene S. (Pat) Haley and Joe Massey are plaintiff's two principal shareholders. Each owns 50 percent of the plaintiff corporation, which was chartered in 1973. Haley and Massey were formerly employed by Bandag; Massey helped to develop the Bandag Method. Haley and Massey were familiar with the Bandag franchising system when they obtained their present franchise in 1973. The counties included in their manufacturing territory include Springfield and a considerable part of the Springfield trade area to the north, south and east of Springfield.

Defendant Tire Corral is a Missouri corporation owned by Nolan Sparks, Jerry Baker and Doyle Collins. This corporation was chartered in 1975; its primary business is the sale of new and reprocessed tires, and before July 1979, Tire Corral sold Bandag retreads "within a hundred mile radius of Springfield." Before defendant Sedalia Bandag was organized, Tire Corral was one of plaintiff's best customers. There was evidence that before Sedalia Bandag was organized, Tire Corral consumed as much as 10 percent of plaintiff's recap output.

By contrivance or by fortuitous but lawful coincidence, Sedalia Bandag was chartered and received its franchise on July 23, 1979; it is a Missouri corporation and Sparks and Collins each own 50 percent of the corporate stock. Both Tire Corral and Sedalia Bandag employ the same corporate counsel and the same accountant; both corporations employ the same registered agent for corporate service. Sparks, Collins and Baker are Tire Corral; Sparks and Collins are Sedalia Bandag. So, if the plaintiff's basic complaint can be summed up in a phrase, it is that Bandag has tortiously misused its economic and perhaps its monopoly power to convert a good customer into a local competitor.

(B)

The circumstances in which Sedalia Bandag was organized and given a franchise must be briefly noted. In 1976, Bandag had entered into a franchise agreement with a Sedalia corporation which was in fact a subsidiary of a St. Louis truck leasing firm. The "exclusive" manufacturing territory assigned to this franchisee included Pettis County and six counties surrounding that county. The general area is just north of plaintiff's exclusive manufacturing area, but is not contiguous to it. The retail marketing areas surround Sedalia, the county seat of Pettis County. Sedalia is about 117 miles north of Springfield.

Sixty-five percent of this franchise's output was consumed by its parent organization. In 1978, the owner of the firm decided to liquidate his business and stop manufacturing retreads altogether. Sparks heard from another franchisee that the business was for sale and he contacted the owner of the Sedalia business. Desultory negotiations looking to the purchase of the Sedalia organization were conducted for several months by Tire Corral, Bandag and the owner of the Sedalia business. Mr. Loomis, Bandag's Kansas City district manager, actively encouraged Sparks to acquire the Sedalia business. A jury could infer from the evidence that Loomis attempted to conceal the negotiations from the plaintiff, although he had been instructed to keep existing franchisees advised of contacts with prospective dealers.

It is clear that during this period of negotiation--from early October 1978 to July 1979--plaintiff had a valid business expectancy with Tire Corral. It is also clear that from about October 6, 1978, up to the time Bandag of Sedalia was chartered and granted a franchise, Bandag had knowledge of that business expectancy. Tire Corral made application for a franchise as early as October 1978; a "pro forma" (an extrapolative prospectus) was sent forward to Bandag's corporate headquarters in late November or early December 1978. The prospectus is susceptible of the interpretation that Tire Corral expected to purchase $120,000 worth of Bandag recaps in 1979 and perhaps $136,000 worth of such tires in the following year, if the Sedalia franchise were granted to the owners of Tire Corral.

It is beyond cavil that Bandag's grant of a franchise to two of Tire Corral's three owners was an intentional act. Although plaintiff's officers were initially unaware of the prospective transactions, they were later informed of the negotiation by Bandag's corporate president. In April 1979, Massey met two of Bandag's corporate officers at a national convention. Plaintiff's complaints then were much as they are now: Tire Corral was a good customer and plaintiff would lose that customer; the owners of the new franchise were in effective control of Tire Corral, and in consequence, there would be another service-oriented dealer in their...