Mall Tool Co. v. Far West Equipment Co.

• Decision Date: 12 August 1954
• Docket Number: No. 32414,32414
• Citation: 273 P.2d 652,45 Wn.2d 158
• Court: Washington Supreme Court
• Parties: MALL TOOL CO. v. FAR WEST EQUIPMENT CO.

Page 158

45 Wn.2d 158

273 P.2d 652

MALL TOOL CO. v. FAR WEST EQUIPMENT CO.

No. 32414.

Supreme Court of Washington, Department 2.

Aug. 12, 1954.

Rehearing Denied Sept. 25, 1954.

Witherspoon, Witherspoon & Kelley, Spokane, for appellant and cross-respondent.

Ennis & Herman, now Paine, Lowe, Coffin, Ennis & Herman, Spokane, for respondent and cross-appellant.

HILL, Justice.

This started as an action on an open account for goods, wares and merchandise sold and delivered, but the cross-complaint raised the issue of damages for the violation of an exclusive distributorship contract.

Far West Equipment Company, a corporation, hereinafter referred to as Far West, became the exclusive sales agent and distributor for chain saws manufactured by the Mall Tool Company, a corporation, hereinafter referred to as Mall, in certain 'protected' territory which was changed in extent from time to time. (By 'protected' is meant that Far West would receive credit for any sales made in that area, regardless of who made them.)

It is conceded that Far West owes Mall $23,730.94 for chain saws and other equipment sold and delivered to it, and the major controversy centers around the amount to which Far West is entitled as commissions or discounts on sales of chain saws and parts made by Mall in Far West's protected territory, either directly or through other distributors. The trial court found that Far West is entitled to $19,765.85 on its cross-complaint, thereby reducing Mall's net recovery to $3,965.09. Mall appeals, contending that Far West in not entitled to any commissions or discounts on sales made in its protected territory through Montgomery Ward & Company after August 1, 1947, and that Far West had no protected territory after March 1, 1948; and Far West cross-appeals, contending that it is entitled to discounts or commissions which were disallowed on certain Canadian sales.

It may seem to Mall that in the foregoing statement we have disregarded or somewhat cavalierly treated its first four assignments of error, which present its contention that there was no contract between the parties because their agreement lacked mutuality and was unenforcible except in its contemplation of a series of independent, executory transactions, consisting of separate sales of saws by Mall to Far West. While we recognize the importance of the questions presented and the ability and earnestness with which they have been argued, we agree with the trial court that our decision in Sargent v. DrewEnglish, 1942, 12 Wash.2d 320, 121 P.2d 373, is controlling on the question presented by those assignments of error. See, also, Federal Iron & Brass Bed Co. v. Hock, 1906, 42 Wash. 668, 85 P. 418. Any extended quotation from those cases or discussion of those assignments of error would be unnecessarily repetitious.

We agree with the trial court that Far West had a protected territory agreement which was subject to termination by Mall 'within thirty days after notice if we see fit.' So far as the discounts or commissions to which Far West may be entitled in consequence of this agreement are concerned, the determinative questions relate to the date of its termination and whether it was modified prior to its termination with reference to sales made by Montgomery Ward. The trial court found that no notice of termination was given

'* * * as concerns the portion of the said protected territory lying within the United States of America prior to March 1, 1948, the date * * * [Mall] commenced this action.'

Commissions of twenty-five cent were allowed Far West by the trial court on all chain saw sales made by Mall in the territory within the United States covered by the agreement of the parties, to and including March 31, 1948 (thirty days after commencement of this action). Mall's assignments of error are insufficient to challenge the trial court's finding that no notice of termination of the contract was given until March 1, 1948, the date on which this action was commenced.

Mall insists that in any event the evidence establishes a modification by the terms of which Mall chain saws were to be sold within Far West's protected territory (and, in fact, all over the United States) by Montgomery Ward beginning August 1, 1947. With this we agree, but with recognition of an additional provision of the modification proposal, to the effect that Far West would be given what is referred to throughout the testimony as an 'override' of five per cent on all sales made by Montgomery Ward in Far West's protected territory.

The agreement being terminable at will, Mall could at any time propose a modification thereof as a condition of its continuance. Flint v. Youngstown Sheet & Tube Co., 2 Cir., 1944, 143 F.2d 923; Swalley v. Addressograph-Multigraph Corp., 7 Cir., 1946, 158 F.2d 51. When a modification was proposed (to use a more euphemistic expression than the realistic 'announced') by Mall, Far West had the choice of accepting the modification or refusing to accept it, knowing that refusal would mean the termination of its exclusive distributorship agreement.

Far West asserts that it never agreed to the modification whereby Mall chain saws were to be sold in its protected territory by Montgomery Ward, with Far West receiving a five per cent override on such sales. A letter by Far West dated June 27, 1947, indisputably extablishes that it had notice prior to that date of Mall's intention to so modify the agreement effective as of August 1, 1947, and that Far West's concern was to get an agreement in writing, if possible, conforming the modification, with some assurances as to how long the five per cent override would continue. We can agree that Far West was never happy about the modification, but it never refused to accept it, and it is our view that there was a reluctant acquiescence.

Whether Far West would have acquiesced in such a modification without the five per cent override, we do not have to determine unless the agreement was further modified by the elimination of the override on the Montgomery Ward sales. On this point we conclude, contrary to Mall's contention, that no definite and final notice that the override agreement was to be withdrawn was given Far West prior to the commencement of this action on March 1, 1948. Mall insists that a letter of August 23, 1947, was notification of the termination of any exclusive distributorship, and notice that 'there will be no over-ride credit on sales not made directly by yourself.' This letter does not purport specifically to eliminate the Montgomery Ward override, but refers to all overrides.

Mall's contention may be precluded by the finding of the trial court that no notice of termination was given prior to March 1, 1948. In any event, we are satisfied that the letter is not unequivocal in wording when considered as whole. The testimony is that, in consequence of an immediate protest by telephone to Mall's sales department, Far West was advised to disregard the letter, and that the Mall management decided to 'let it lay for a bit.' Nor is that letter consistent with Mall's pleadings, wherein it is alleged that 'finally on or about January 30, 1948,' Mall and Far West terminated their agreement. While we cannot agree that anything that happened 'on or about January 30, 1948,' either terminated the agreement or constituted notice of intent to terminate, this allegation does indicate that Mall did not regard the letter of August 23, 1947, as such termination. A letter dated September 29, 1947, from the Mall sales department, also negatives any intent to terminate the agreement and indicates that whether Far West was to receive the override on sales made by Montgomery Ward was still an open question, and we find nothing in the record which closed it prior to the commencement of this litigation.

In the absence of notice to Far West of a definite withdrawal of the five per cent override on the Montgomery Ward sales in its protected territory, Mall was bound by its modification as originally proposed, for, limited as Far West's choices were in the matter of proposed modifications, it at least had a right to know what they were.

Montgomery Ward sales subsequent to August 1, 1947, and prior to March 31, 1948, amounted to $46,454.03. Other sales by Mall in the protected territory prior to March 31, 1948, amounted to $32,609.38. The trial court allowed Far West $19,765.85, or twenty-five per cent of the total of the two amounts, as damages for the sales made in its protected territory.

Mall urges that the damages awarded to Far West are speculative, because Far West failed to prove the expenses which would have been incurred to produce the sales for which commissions are claimed. We do not think that the general rule governing proof of damages resulting from breach of contract, and the authorities which Mall cites, are applicable to a consideration of the amount which Far West is entitled to recover for sales wrongfully made within its protected territory. The trial court found that by the terms of its contract with Mall, Far West was entitled to a twenty-five per cent commission or discount on all Mall chain saws and chain saw parts sold in the protected territory. The conduct of the parties over the period of time that the contract was in force is consistent with and supports such a finding. In particular, Mr. Sanders, of Mall, testified that the business term 'protected territory' meant that Mall could not make sales in that territory without some further agreement with the exclusive distributor; that generally in such a case it is agreed that the exclusive distributor will be paid a five per cent or ten per cent override, but that:

'An override credit can also mean the full amount. If we sold it, and the customer paid the full price and didn't get any override, it might mean the full 25%. * * *'

In other words, so far as Mall was concerned, it was accountable for a twenty-five per cent discount on...