Mascaro v. Snelling & Snelling of Baltimore, Inc.

Citation243 A.2d 1,250 Md. 215
Decision Date31 May 1968
Docket NumberNo. 207,207
Parties, 159 U.S.P.Q. 110 Angelo R. MASCARO v. SNELLING AND SNELLING OF BALTIMORE, INC.
CourtCourt of Appeals of Maryland

William R. Dorsey, III, Baltimore (Ambler H. Moss and Semmes, Bowen & Semmes, Baltimore, on the brief), for appellant.

Benjamin Lipsitz, Baltimore (Hyman K. Cohen and Eleanor J. Lipsitz, Baltimore, on the brief), for appellee.

Before HAMMOND, C. J., and HORNEY, MARBURY, BARNES and SINGLEY, JJ.

SINGLEY, Judge.

This case comes to us on an appeal and cross appeal from a decree of the Circuit Court of Baltimore City entered in an equity proceeding brought to resolve a dispute which had arisen between two licensees of a national employment agency.

At the trial before the chancellor, the testimony was extensive and voluminous exhibits were introduced. We have no quarrel with the chancellor's findings of facts, which are carefully set out in his opinion. Maryland Rule 886 a; Wood v. Wood, 227 Md. 211, 176 A.2d 229 (1961); Parker v. Parker, 222 Md. 69, 158 A.2d 607 (1960); Moran v. Moran, 219 Md. 399, 149 A.2d 399 (1959). We are not, however, bound by his conclusions of law. Pallace v. Inter City Land Co., 239 Md. 549, 212 A.2d 262 (1965); Space Aero Products Co. v. R. E. Darling Co., 238 Md. 93, 208 A.2d 74 (1965).

Snelling and Snelling, Inc. is a Pennsylvania corporation which had its principal office in Philadelphia and later in Radnor, Pennsylvania. Although not a party to the case, it will be referred to in this opinion as 'Philadelphia Snelling.' Its operations have two aspects: In Philadelphia, commencing as a partnership in 1950, and later as a corporation, it has operated an employment agency. The other phase of Philadelphia Snelling's activity commenced in 1955 and involves the licensing of franchisees, under which individuals or corporations are permitted to operate similar employment agencies in various sections of the country under the trade name 'Snelling and Snelling,' using the techniques, office procedures, business forms, trade name, and after 1961 the trade mark 'Fort Snelling.' 1 The consideration for such a license usually consists of an initial lump sum payment by the franchisee, plus a 7% commission or override on the gross monthly billings of the franchisee, of which 2% was originally allocated to the cost of a program of national advertising contracted for by Philadelphia Snelling. While the agreements under which franchisees have been licensed have varied, all of them contain stringent provisions restricting assignment, controlling the operation of the franchise, and insuring uniformity in stationery, forms and advertising.

On 5 September 1956, Philadelphia Snelling entered into a licensing agreement with Lionel Jacobs and James A. MacDougal, who paid $12,000 for a franchise which gave them 'the exclusive right to use the name 'Snelling & Snelling" in a territory:

'Comprised of Baltimore, Maryland, and the surrounding counties * * * limited to the following Counties * * *: Queen Anne, Harford, Baltimore, Carroll, Howard, Anne Arundel and Kent; it being expressly understood between the parties that the right to solicit applicants within said territory shall not be granted to any other Licensee.'

The Jacobs-MacDougal effort proved unsuccessful, and the agreement was ultimately revoked by Philadelphia Snelling.

On 5 July 1960, Philadelphia Snelling entered into a licensing agreement with Snelling and Snelling of Baltimore, Inc., a Maryland corporation (Baltimore Snelling) of which Maynard Z. Drossner was president, treasurer and principal owner. Drossner had considered other franchises, including one in Atlantic City and possibly another in Norristown, Pennsylvania (this testimony is disputed, however); knew that Philadelphia Snelling had licensed independent franchisees in the environs of Philadelphia; was aware of the failure of the Jacobs-MacDougal franchise; and knew also that their territory had included not only Baltimore City, but the surrounding counties.

The agreement with Baltimore Snelling contained two provisions which are particularly significant '1. (a) Snelling (Philadelphia Snelling) hereby grants to licensee (Baltimore Snelling) the exclusive right to use the name Snelling and Snelling and/or Snelling and Snelling of Baltimore, Inc. in connection with one office only to be opened by licensee in Baltimore, Maryland. Licensee shall not directly or indirectly establish an office or place of business, or move to any locations outside of such territory; nor shall licensee change its name without first obtaining the written consent of Snelling; nor shall licensee establish any branch or additional office without the written consent of Snelling. (Emphasis added.)

'9. * * * Licensee and shareholders (Baltimore Snelling) agree, when requested by Snelling (Philadelphia Snelling), to waive any and all objections licensee may legally have against the use of the name 'Snelling and Snelling' in territories other than the territory granted to licensee herein.'

Baltimore Snelling commenced operations in August, 1960, and was immediately successful. In 1962, Drossner wished to expand his business to include Towson, the county seat of Baltimore County, which is beyond the corporate limits of Baltimore City. When Drossner failed to reach agreement with Philadelphia Snelling on the amount of the franchise fee, he began to press the contention that Towson was a part of the metropolitan area within the contemplation of the parties when the licensing agreement of 5 July 1960 was signed, granting to Baltimore Snelling a franchise for Baltimore, Maryland. Philadelphia Snelling resisted this, relying on a literal interpretation of the agreement: i. e., that Baltimore, Maryland, meant the corporate limits of Baltimore City.

Although the agreement with Baltimore Snelling limited it to one office in Baltimore, in 1963 Drossner wanted to open a second office in the heavily industrialized area in Highlandtown, which lies within the City's eastern boundary.

In 1963, Drossner and his wife formed a Maryland corporation, Snelling and Snelling of Highlandtown, Inc. (Highlandtown Snelling) and on 20 December 1963, Highlandtown Snelling entered into a licensing agreement with Philadelphia Snelling. While structured similarly to the agreement of 5 July 1960, which had been entered into with Baltimore Snelling, the contract was patently more sophisticated, and probably reflected Philadelphia Snelling's experience in the franchise field. Two provisions are of particular importance. Paragraph 1(a) omits the word 'exclusive' and precisely limits the territory subject to the franchise:

'1. (a) (PHILADELPHIA) SNELLING hereby grants to Licensee (Highlandtown Snelling) the right to use the registered tradename 'Snelling and Snelling', the Fort Snelling registered trademark, 2 and to be identified as a member of the Snelling and Snelling System in connection with the operation of a personnel consulting and employment agency business (herein sometimes called 'Licensee's business') to be conducted at an office located within the following area: Bounded on the North by Pulasri Highway; on the East by Kresson Street; on the South by Eastern Avenue and on the West by Broadway. All located within the city of Baltimore.' (Emphasis added.)

For that portion of Paragraph 9 of Baltimore Snelling's agreement (which required Batimore Snelling to waive any objections which it might legally have to the use of the Snelling name in other territories) Paragraph 1(c) was substituted in Highlandtown Snelling's agreement:

'1. (c) In connection with the operation of Licensee's business, Licensee shall use only the name 'Snelling and Snelling' and Licensee shall identify itself as a member of the Snelling and Snelling System, unless state law requires other or additional identification. SNELLING shall not grant to any other person, firm or corporation the right to use the name 'Snelling and Snelling' in connection with the operation of a personnel consulting and employment agency office within the area described in paragraph 1(a) hereof; provided, however, that in the event SNELLING shall open offices or grant such right to others outside the described area but within the State where Licensee's office is located, Licensee does hereby release and waive any objection to the use of the name 'Snelling and Snelling' in connection therewith.' (Emphasis added.)

Drossner paid no franchise fee for Highlandtown. Robert O. Snelling, president of Philadelphia Snelling, testified that it was not his company's policy to exact a franchise fee for the opening of a second office in a territory already franchised, but because of Highlandtown's close proximity to the Essex-Dundalk industrial complex, he believed that there was a possibility that the value of a Dundalk-Essex franchise might be prejudiced by the close proximity of another office. Consequently, Baltimore Snelling was required to amend its 1960 agreement, with the result that a 7% override with no allocation for national advertising was substituted for the earlier override of 5% and a 2% contribution to Philadelphia Snelling's national advertising budget.

On 28 January 1964, Drossner and Stanley Sackett entered into an agreement with Philadelphia Snelling for the licensing of an office in Towson. The franchise fee was $3,000; the agreement, substantially similar to Highlandtown Snelling's, except that the territory was described as 'the city of Towson, Maryland, as of this date'; and on 16 March 1964, the agreement was assigned, with Philadelphia Snelling's consent, to Snelling and Snelling of Towson, Inc. (Towson Snelling). On 14 June 1965, Philadelphia Snelling again entered into a substantially similar agreement 3 with Snelling and Snelling of Glen Burnie, Inc. (Glen Burnie Snelling). A franchise fee of $2,600 was paid for a territory described as 'the city limits of Glen Burnie, Maryland as of this date.'

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