Heaton Distributing Co. v. Union Tank Car Company

• Decision Date: 27 December 1967
• Docket Number: No. 18620.,18620.
• Citation: 387 F.2d 477
• Parties: HEATON DISTRIBUTING CO., Inc., Appellant, v. UNION TANK CAR COMPANY, a Corporation, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

387 F.2d 477 (1967)

HEATON DISTRIBUTING CO., Inc., Appellant, v. UNION TANK CAR COMPANY, a Corporation, Appellee.

No. 18620.

United States Court of Appeals Eighth Circuit.

December 27, 1967.

COPYRIGHT MATERIAL OMITTED

Truman Clare, Omaha, Neb., for appellant. George Nimmer, Omaha, Neb., was with Truman Clare, Omaha, Neb., on the brief.

Dean A. Olds, Chicago, Ill., for appellee; Robert M. Spire, Omaha, Neb., was with Dean A. Olds, Omaha, Neb., on the brief.

Before MEHAFFY and GIBSON, Circuit Judges, and STEPHENSON, District Judge.

MEHAFFY, Circuit Judge.

This is an appeal from a judgment awarding $7,500.00 damages and granting injunctive relief to appellee, Union Tank Car Company, a manufacturer of soft water equipment under the registered trademark and trade name of Lindsay, in an action tried to the court against appellant, Heaton Distributing Co., a former franchised Lindsay dealer, for breach of contract, unfair competition, and violation of certain provisions of the Lanham Trade-Mark Act (15 U.S.C. §§ 1051-1127).

The court found that Union's allegations were sustained by the evidence and permanently enjoined Heaton from all use of the name Lindsay, alone or in combination with other words, as part of a trademark or trade name or otherwise; false advertising that it is an authorized sales or service dealer of the Lindsay Division of Union; and palming off or substituting non-Lindsay products. Northwestern Bell Telephone Company, a co-defendant with Heaton, was permanently enjoined from accepting or publishing any telephone or yellow page listings from appellant which include the name Lindsay, but Northwestern Bell has not appealed.

At the time of the institution of the action by Union, Heaton was doing business as Lindsay Soft Water Corporation of Omaha, Inc., and the opinion of the Nebraska District Court appears as Union Tank Car Company v. Lindsay Soft Water Corporation of Omaha, Inc. and Northwestern Bell Telephone Company, 257 F.Supp. 510 (D.Neb.1966). We affirm the District Court's decision.

Heaton challenges the sufficiency of the evidence to support the court's finding that a valid and binding agreement existed between the parties, or, if one existed, that it was breached; that appellant was guilty of palming off spurious merchandise as Lindsay products; or that appellee is entitled to damages or injunctive relief. Appellant further contends that appellee had abandoned the trademark or trade name Lindsay, which was grounds for cancellation of the trademark registrations, and that the court erred in holding that there was no abandonment.

Union Tank Car Company is a New Jersey corporation with its principal place of business in Chicago, Illinois, and is duly qualified to do business in the State of Nebraska. Heaton Distributing Co. and Northwestern Bell are both Nebraska corporations with their principal places of business in Omaha, Nebraska. Diversity of citizenship and the requisite amount in controversy establish jurisdiction.

In 1949 or 1950, Union's predecessor, The Lindsay Company, entered into a franchise agreement with Ralph A. Heaton for the operation of a Lindsay dealership for the sale of Lindsay products in a certain prescribed territory surrounding Omaha, Nebraska. The business was first operated as a proprietorship under the name of Lindsay Soft Water Co., but was later incorporated under the name of Lindsay Soft Water Corporation of Omaha, Inc., Ralph A. Heaton being the sole stock owner and president of the corporation. In 1956, Union Tank Car Co. purchased the Lindsay trademark and trade name registrations from The Lindsay Company and Ralph A. Heaton continued to operate his business as a franchised dealership of Lindsay products by agreement with Union.

The last franchise agreement entered into between the parties was dated January 18, 1963. Both parties considered themselves to be bound thereby and operated in accordance therewith until February 24, 1964, when Union notified appellant that the agreement was being cancelled because of the failure of appellant to purchase the required quota of fifty water softeners per month as provided therein. The exercise of this option by Union was not questioned nor objected to by appellant; however, appellant continued to use the word Lindsay in its corporate name, on its trucks, in its advertising, etc., as well as the Lindsay mark or emblem, the upside-down umbrella, in violation of the terms of the agreement which provided that in the event of termination for any cause the dealer agreed "immediately to cease to use all of Lindsay's trade names, trade marks, labels and patent rights, in addition to removing at the Dealer's expense all Lindsay signs from the Dealer's place of business, discontinuing the use of the name `Lindsay' in the name of his business and discontinuing all Lindsay advertising. * * *" It was specifically provided, however, that the dealer could continue the rental and sale of the Lindsay water conditioners theretofore purchased. The evidence shows that demands were made by Union that appellant comply with this provision, although Ralph Heaton denies that he was ever personally contacted in this regard. Shortly after the cancellation of the agreement, Union began receiving information and complaints from customers that appellant was "palming off" Water King water softener units, a product of Borgerud Manufacturing Co., as Lindsay units, and that it was misleading the public into believing that it was still an authorized Lindsay dealer. An investigation of these complaints resulted in the institution of this suit on November 17, 1964.

Chief Judge Robinson found that a valid and binding agreement existed between the parties, that the evidence clearly established that the quota requirements under the agreement were not met, which entitled Union to cancel the agreement, that there had been no abandonment of the trademark or trade name by Union, and that spurious merchandise was purposely palmed off as Lindsay products by several of appellant's sales representatives, who represented themselves as authorized Lindsay personnel.

Appellant contended at the time of trial and now contends on this appeal that the franchise agreement was not a valid and enforceable contract, and, indeed, there were many defects in the instrument. In the first place, it was prepared by Union on an old form used by The Lindsay Company, although there was a designation at the top, "Division — Union Tank Car Company." The names of the parties were copied from a prior agreement which incorrectly referred to the manufacturer as "The Lindsay Company, a Minnesota corporation," and to the dealer as "Ralph A. Heaton, a Proprietorship Corporation — Partnership — Proprietorship — doing business under the name of Lindsay Soft Water Co." The agreement was signed by R. A. Heaton but was never signed by anyone representing Union or its Lindsay Division, although it specifically provided that "this agreement shall not be effective until signed by an authorized executive of Lindsay." According to a secretary, she inadvertently filed it away before presenting it to the proper Union official for his signature, Mr. Heaton having signed in the space provided for the officer of the manufacturer. Also, it bore the erroneous notation, "Superseded by New Agreement 10/25/63," since the new agreement, although prepared, was never entered into by the parties. This notation was also a clerical mistake by a secretary.

Concerning the validity of the agreement, Judge Robinson said (257 F.Supp. 515):

"We find, however, that despite the defects found in this written agreement, the parties did have a valid and binding contract. Both parties were aware of the identity of the party with whom they were dealing. This is obvious from the many years of association — about 13 years — prior to the entering of the agreement on January 18, 1963. And after that date, both parties acted under the contract and accepted the provisions thereof. We must therefore find that even if the contract was invalid at its inception, the parties subsequently ratified and accepted the written instrument as their agreement and were both bound by it. This was clearly the intention of the parties and we do not believe that Soft Water Heaton should now be allowed to claim that a clerical mistake the evidence tended to show that the contract was improperly filed by a secretary before having been signed and sloppy draftsmanship void an agreement under which both parties acted and considered themselves to be bound.

"In any case, the provision was for the benefit of Union to protect it against acceptance of a dealership agreement without the knowledge of an executive. We find that this provision has been waived and under the circumstances cannot be considered to be a condition precedent to the validity of the contract. It is elementary law that only the party to be charged need to have signed the contract in the absence of some agreement to the contrary. Restatement of Contracts, § 211. We are convinced that the parties here had a meeting of the minds, that both intended that a contract be entered, and that a binding contract between the parties did, in fact, exist."

Appellant argues that inasmuch as the agreement was for more than a year it had to be signed by an executive of Union, or else it was not enforceable under the statute of frauds. Under the terms of the agreement it was to be subject to the laws of Minnesota and was to be performed in Nebraska and Minnesota. Under both the Minnesota Statute of Frauds (M.S.A. § 513.01) and the Nebraska Statute of Frauds (R.R.S.1943 § 36-202), such an agreement or some note or memorandum thereof in writing must be "subscribed by the party charged therewith."

It is noted that the statute requires only that the agreement be signed by the party charged. Restatement, Contracts § 211 (1932), cited by the District Court provides:

"When a memorandum of an oral

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