John B. Robeson Associates, Inc. v. Gardens of Faith, Inc.

• Decision Date: 11 July 1961
• Docket Number: No. 338,338
• Citation: 172 A.2d 529,226 Md. 215
• Parties: JOHN B. ROBESON ASSOCIATES, INC. v. GARDENS OF FAITH, INCORPORATED.
• Court: Maryland Court of Appeals

Page 215

226 Md. 215

172 A.2d 529

JOHN B. ROBESON ASSOCIATES, INC. v. GARDENS OF FAITH, INCORPORATED.

No. 338.

Court of Appeals of Maryland.

July 11, 1961.

J. Elmer Weisheit, Jr., Towson, and Arthur W. Marchen, Jr., Baltimore (Russell R. Reno, Jr., and Venable, Baetjer & Howard, Baltimore, on the brief), for appellant.

Charles O. Fisher, Westminster and, Richard C. Murray, Towson (Smith & Harrison, Towson, on the brief), for appellee.

Before BRUNE, C. J., and HAMMOND, PRESCOTT, HORNEY, and SYBERT, JJ.

PRESCOTT, Judge.

This suit was instituted in the Circuit Court for Baltimore County, in equity, for the construction of a sales agency contract and for an accounting in damages arising from its alleged wrongful termination. The decree of the chancellor dismissed the bill of complaint of the appellant for reasons stated in an oral opinion delivered from the bench. ¹

In the spring of 1957, Raymond F. Cushing, who had been in the cemetery business for a number of years, met with John B. Robeson, president of the appellant, to consider the making of a contract, whereby the appellant would handle the sales for a new cemetery to be known as 'Gardens of Faith.' After negotiations had at several meetings between Cushing and Robeson, a written contract was executed on April 27, 1957. It was understood between the parties that this contract would be assigned to a new corporation to be formed by Cushing, Gardens of Faith, Inc., and this, in due time, was done.

Under the terms of the contract, the appellant was employed as Director of Sales of the cemetery company for a period of three years, commencing on May 27, 1957. The agreement provided that the appellant should receive a 5 per cent commission on 'all net sales ² of pre-need cemetery lots [those not needed for immediate interment],' and a like commission on all 'at need' sales (those purchased for immediate interment). In addition, the appellant was to receive a commission of 5 per cent on 'bronze memorials' sold.

Under paragraph 9(a) of the agreement, the appellant was given full and exclusive responsibility for, and control of, the sales program, and Robeson [personally] was only required to 'devote as much time as he [deemed] necessary to the maintenance and operation of this program.'

The case turns upon the provisions of paragraph 9(b), so they will be set forth in full:

'Robeson guarantees a minimum of $700,000.00 gross sales over and above cancellations for the year beginning June 1, 1957, and the same amount for each subsequent year under this agreement. However, if Robeson exceeds his guaranteed quota the first two years of the term by $200,000 or more, his guarantee for the third year will be reduced to $500,000. Forty per cent (40%) of the annual guaranteed quota must be attained by December 1, 1957, and seventy-five per cent (75%) by March 1, 1958. On each of these dates, and quarterly thereafter, through the second year of the term, and semiannually during the third year, the quota attained by Robeson will be reviewable by the Cemetery, with the right in the Cemetery to terminate this contract at its option if Robeson has substantially failed to attain guaranteed quota.'

The appellant duly entered upon the performance of its duties under the contract, and it is agreed that in the first year it fully measured up to its contractual obligations. Gross sales, after cancellations, including service charges and receipts from bronze memorials were $758,579 for the year.

During the first year, the salesmen of the appellant had been working through a list of union members as prospective customers, but, by June 1, 1958, this list was nearly exhausted. In addition, many of the remaining prospects were out of employment due to a recession. Gross sales, including service charges and bronze memorials for the first quarter of the second year, amounted to only $102,081 and in the second quarter thereof to $153,882. Cushing testified that he reviewed these figures on the basis of a quarterly quota of $175,000 for the second year, and, although he talked to Robeson about them, he took no action concerning a termination of the contract.

These declining sales called for 'quite a transition' in the sales organization and the methods of obtaining leads. The appellant instituted an intensive program of direct door-to-door surveying; and Robeson, personally, went out in the field with the sales manager, divisional managers and salesmen in order to show them an effective way of securing leads.

The amount of the sales in the second year was a matter of great importance to Cushing, for the purchase of the cemetery property had been financed by the issuance of 'land certificates,' and Cushing had personally guaranteed the holders of these certificates that they would be repaid from the sales of lots the full amount of their investments ($200,000) in two years, which, upon the $700,000 quota per year, he 'figured would pay out in two years.'

In due time, Robeson's efforts were rewarded and he got his new program 'rolling.' Sales for the third quarter of the second year amounted to $225,290, and for the fourth quarter $204,631. The certificate holders received the full amount of their guaranteed $200,000 from the operation of the cemetery company in the first two years; hence Cushing's personal guarantee to them was exonerated.

Although the appellant's sales for the last two quarters had substantially exceeded the $175,000 quotas, on June 4, 1959, the appellee wrote a letter to the appellant terminating the contract for failure to achieve 'minimum guaranteed gross sales.'

The parties agree that if the words in paragraph 9(b) giving the appellee the right to terminate the contract 'if Robeson has substantially failed to attain guaranteed quota' were accorded their usual and ordinary meaning, Robeson did not substantially fail to attain the total guaranteed quota for the first two years. But the appellee contends that the parties imported to the quoted words a limited and special meaning, and argue its contention is supported by certain oral testimony admitted without objection. In the view that we take of the case, it will not be necessary to answer this claim.

It is, of course, necessary to consider what the parties intended by paragraph 9(b). It seems clear that the appellant guaranteed a minimum of $700,000 in gross sales, over cancellations, in each of the three years' existence of the contract (except in the third, if he had exceeded his quotas for the first two years by $200,000). However, in none of the three years was the $700,000 yearly quota to be determined on an overall annual basis, i. e., that sales amounting to $700,000, made at any time during the year, would constitute a compliance with the contract, and the $700,000 quota could only be 'reviewed' at the end of a year to determine whether it had been met. On the contrary, said sales had to be achieved in named quotas by a specified time in each year, or the quotas would be 'reviewable' by the appellee with the right to terminate the contract if the appellant 'substantially failed to attain guaranteed quota.' In the first year, forty per cent ($280,000) of that year's guaranteed quota had to be attained by December, 1, 1957, ³ seventy-five per cent ($525,000) by March 1, 1958, and 100 per cent ($700,000) by June 1, 1958; otherwise the quotas would be reviewable by the appellee on those dates with the right of termination. During the second year, the quotas were reviewable quarterly, which meant that the appellee had the right as of September 1, 1958, to review the amount of the sales then attained by the appellant, and if the sales were less than $175,000, to terminate the contract. It also meant that the appellee again had a right to review the secondyear's quota as of December 1, 1958, and if the sales at that time were less than $350,000, it once more had a right to terminate the contract, provided it had not waived or released any of its rights concerning termination. Likewise it had the right to review the quotas attained as of March 1, and June 1, 1959, and, if the sales were less than $525,000 and $700,000, respectively, it had the right to terminate the contract, if none of its rights relating to termination had been waived or released.

There are few principles of contract law better established or more uniformly acknowledged, than that a party to an executory bilateral contract, who keeps the same in existence after a known breach by the other party and accepts further performance from the party who has committed the breach, waives the breach, in the absence of an assertion of his intention to retain the rights accruing to him as a result of said breach, assented to by the other party; and if the injured party thereafter does not make good his promises of performance, he is responsible for such failure. 3 Williston, Contracts (Rev. ed.), § 688, states it thus:

'The principle is general that whenever a contract not already fully performed on either side is continued in spite of a known excuse, the defense thereupon is lost and the injured party is himself liable if he subsequently fails to perform, unless the right to retain the excuse is not only asserted but assented to.'

In Restatement, Contracts, § 309, we find:

'Where the duty of a party to a bilateral contract has been discharged by the failure of a condition to exist or to occur or by the actual or threatened non-performance of a return promise, he is again subjected to the duty if he renders any further performance, or assents to the rendering by the other party of any further performance of a condition or promise beyond what is due as the exchange for performance previously rendered, provided that he renders or assents to such further performance.

'(a) with knowledge of the facts establishing his discharge, or * * *.'

See particularly Comment a, thereunder. Professor Corbin states the same principle in 3 A Corbin on...