Carlson v. Hannah, A--36

• Decision Date: 08 January 1951
• Docket Number: No. A--36,A--36
• Citation: 78 A.2d 83,6 N.J. 202
• Parties: CARLSON v. HANNAH et al.
• Court: New Jersey Supreme Court

Page 202

6 N.J. 202

78 A.2d 83

CARLSON v. HANNAH et al.

No. A--36.

Supreme Court of New Jersey.

Argued Nov. 6, 1950.

Decided Jan. 8, 1951.

Archibald Kreiger, Paterson, argued the cause for the appellant (Samuel L. Biber, Paterson, attorney).

Abraham J. Slurzberg, Jersey City, argued the cause for the plaintiff-respondent Gilbert W. Carlson (Harold K. Smith, Jersey City, attorney).

Paladeau & Foley, Jersey City, presented a brief on behalf of the defendant-respondent, Frank D. McHugh

The opinion of the court was delivered by

ACKERSON, J.

The record on this appeal discloses that on April 9, 1940, plaintiff, Gilbert W. Carlson, and Galler Beverages, Inc. (hereinafter referred to as Galler), manufacturer of a carbonated beverage known as '7 Up', entered into a contract whereby plaintiff was to have the exclusive distributorship of the beverage within the territory comprising all of the City of Paterson northerly of Market Street and a number of adjacent townships and boroughs. Plaintiff's remuneration was to depend upon the differential between scheduled purchasing and selling prices. The contract also provided that the distributor was to furnish his own truck and could not transfer his rights under the contract without Galler's consent.

Later, while in the performance of this agreement, plaintiff ascertained he was about to be drafted into the United States Army and accordingly, on May 22, 1942, with Galler's consent, he entered into a written contract with the defendant, James C. Hannah, whereby Hannah was to operate plaintiff's territory under the latter's agreement with Galler, pay plaintiff three cents commission on each case of beverage sold, and maintain his truck. This agreement further specified it was to be in force from the time of plaintiff's induction into the army until his discharge therefrom and also provided in paragraph 8 thereof as follows: 'It is hereby agreed that Frank McHugh shall have the power to alter this contract with the consent of the party of the second part (Hannah) when the same is deemed necessary.'

Contemporaneously with the execution of this agreement, plaintiff gave the said McHugh a power of attorney to act for him and do everything 'requisite and necessary to be done in said distributorship.'

Shortly thereafter Carlson was inducted into the army and Hannah and McHugh proceeded to operate under the agreement and power of attorney respectively. In August, 1944, business having increased, Galler required that an additional truck be put in operation--as it had the right to do under its contract with Carlson--and McHugh arranged for the lease of such a truck from Galler and Hannah engaged a driver to operate it in that portion of Carlson's territory lying in the northern section of Passaic County thereafter referred to as the 'up-county' route. The remainder of the territory in and about the City of Paterson continued to be serviced by Hannah.

Early in the summer of 1944 Hannah, expressing concern about his security after Carlson's return from service, began demanding of McHugh that he, Hannah, be assured of a part of the territory in which Carlson had the exclusive distributorship upon the latter's return from service. At first McHugh refused these demands, then Hannah threatened to cease operating under the existing agreement unless his demands were met. Finally, as the result of this threat, aided by pressure from Galler, and fearing, as he claimed, that Carlson's loss under war time conditions would be great if some such arrangement was not made, McHugh acceded to Hannah's demands. Accordingly on September 2, 1944, McHugh purporting to act under his power of attorney and paragraph 8 of the aforesaid agreement of May 22, 1942 between Carlson and Hannah, and with Galler's consent, entered into a written contract with Hannah providing that the original agreement of May 22, 1942, was to remain in full force and effect untilCarlson's discharge from the army and the resumption of his duties as a distributor, at which time there would be 'assigned outright' to Hannah a specified part of Carlson's original territory.

Thereafter Hannah continued to service Carlson's territory with the assistance of the driver who had been engaged to look after the 'up-county' route. Carlson returned from service overseas in late August, 1945. On September 5, 1945, while on terminal leave, he visited McHugh and learned for the first time of the so-called 'supplementary contract' which the latter had made with Hannah on September 2, 1944. Plaintiff expressed surprise and disappointment and shortly thereafter expressed his disapproval of this contract to both McHugh and Hannah. At the September 5th meeting McHugh made an informal accounting and turned over to Carlson approximately $2,190 representing commissions collected from the operation of the distributorship, which apparently was satisfactory except that objection was made to certain deductions therefrom for the cost of repairs to the truck, insurance premiums, etc., which totaled $970.85.

Early in December, 1945, Carlson notified the defendants that he would resume his distributorship on December 10, 1945. The driver operating the second truck in the 'up-county' district was notified that his services would be terminated on that date. At that time Hannah returned plaintiff's truck and plaintiff resumed distribution in the Paterson area which Hannah had been personally servicing. Plaintiff told Hannah that he could service the 'upcounty' route on the same basis as the discharged driver, viz.: payment of a two cent commission on each case of beverage sold, but inasmuch as the supply of merchandise was low at that time, Carlson said he would waive commissions until conditions improved as had been done with the former operator. This is disputed by Hannah who claims that he took over the route in his own right and it appears that no commissions were paid. However, on April 1, 1946, plaintiff received a new and larger quota of beverage to be distributed in the entire territory covered by Carlson and Hannah, part of which quota Carlson allocated to Hannah advising him at the same time that payment of commissions at the above mentioned rate would become effective immediately. Hannah rejected this proposition insisting that his agreement of September 2, 1944 with McHugh gave Hannah outright the exclusive distributorship in the 'up-county' territory without the necessity of paying any commission for that privilege. Carlson refused to honor the agreement. Despite their dispute the parties have continued to service the separate routes.

In December, 1945, negotiations were begun between Galler and a union which in March, 1945, had become the bargaining agent for the distributors, and this eventually resulted in a contract between Galler and the union. In the course of these negotiations a dispute arose as to whether or not the distributors who had theretofore obtained from Galler exclusive distributorships had such property rights in the territories assigned to them as would enable them to sell or assign their rights therein without Galler's consent. The award, dated March 11, 1946, was against the contention of the distributors but it was excluded at the trial of the instant case as irrelevant to the issues raised by the pleadings and the pretrial order. Parenthetically we agree with this ruling as will hereinafter appear.

While the foregoing negotiations were in progress the distributors were asked to submit descriptions of the territories being serviced by them respectively and that turned in by the plaintiff included only the Paterson route then being serviced by him personally and not that assigned by McHugh to Hannah. This apparently was done on the assumption that he was being asked to describe only the territory personally served by him at that time and it appears that during the aforesaid negotiations plaintiff continued to assert his claim to the whole territory both to Galler and the union officials.

It was Galler's practice to change its beverage quotas every three months and on July 1, 1946, it allotted separate quotas to plaintiff and Hannah for the respective areas then being personally serviced by each of them, but this was done without plaintiff's consent. In August, 1946, the union and Galler entered into an agreement which described Carlson and Hannah as having independent territories, although Carlson testified at the trial herein it was understood that the agreement was not to prejudice any rights which he might have against Hannah and that a certain clause therein was intended to effectuate this understanding. This agreement between Galler and the union was renewed in June, 1948.

The present action was begun on December 19, 1946, by the filing of a complaint in two counts against Hannah and McHugh. The principal relief sought in the first count is a determination that the contract of September 2, 1944, between Hannah and McHugh is null, void and of no effect on the grounds that it was beyond the latter's authority to make, was without consideration, and executed with Mala fides, and a further prayer asked for a discovery and accounting of the profits received by the defendants, or either of them, arising from the operation of the distributorship from May 22, 1942, on, and an injunction to permanently restrain Hannah from operating in any part of the territory originally assigned to the plaintiff by Galler. The second count of the complaint is not involved in this appeal. It related to the alleged damage to and disrepair of plaintiff's truck while in Hannah's use. Defendant Hannah filed an answer, later amended, denying generally the allegations of the complaint, without setting up any separate affirmative defenses, but containing a counterclaim asking for the assignment to him of the territory specified in his agreement of September 2, 1944 with McHugh. The latter's answer was, in effect, a general denial and an...