Mayfran International, Inc. v. May Conveyor, Inc., 93-LW-2954

• Decision Date: 15 July 1993
• Docket Number: 93-LW-2954,62913
• Parties: MAYFRAN INTERNATIONAL, INC., Plaintiff-Appellee v. MAY CONVEYOR, INC., ET AL., Defendants-Appellants
• Court: Ohio Court of Appeals

MAYFRAN INTERNATIONAL, INC. Plaintiff-Appellee v. MAY CONVEYOR, INC., ET AL Defendants-Appellants

No. 62913.

93-LW-2954 (8th)

Court of Appeals of Ohio, Eighth District Cuyahoga

July 15, 1993

Civil appeal from Common Pleas Court Case No. 175267.

FOR PLAINTIFF-APPELLEE: CHARLES B. LYON, MITCHELL BLAIR, 1800 Society Building, E. 9th & Superior Avenue, Cleveland, Ohio 44114-2688.

FOR DEFENDANT-APPELLANT: KEITH A. VANDERBURG, PETER A. HESSLER Wegman, Hessler, Vanderburg, 6100 Rockside Woods Blvd., Cleveland, Ohio 44131

OPINION

PATRICIA A. BLACKMON, J.

This is an appeal from a judgment of the Cuyahoga County Court of Common Pleas, which judgment enforced a settlement agreement that bound May Conveyor, Inc., May Tool & Die, Inc., Leonard May and Patsy Anthony Bonitati, defendants-appellants, to terms with Mayfran International, Inc., plaintiff-appellee. Bonitati having been dismissed is not a party to this appeal. May Conveyor, May Tool & Die, and Leonard May challenge the judgment of the trial court and assign the following three errors for our review:

I. THE TRIAL COURT ERRED IN ITS DETERMINATION THAT THE MARCH 26, 1991, HANDWRITTEN DOCUMENT CONSTITUTED A BINDING AND ENFORCEABLE SETTLEMENT AGREEMENT IN THAT THE PARTIES NEITHER FORMED AN INTENT TO BE BOUND TO A SETTLEMENT NOR REACHED A MEETING OF THE MINDS NECESSARY TO THE FORMATION OF A FINAL AND BINDING AGREEMENT.

II. THE TRIAL COURT ERRED BY DEFINING THE TERM "ORDERS" FOR THE PARTIES TO THE MARCH 26, 1991 HANDWRITTEN AGREEMENT AND IN THE DEFINITION IT ADOPTED.

III. THE TRIAL COURT ERRED IN AWARDING ATTORNEYS FEES TO APPELLEE BASED ON THE CLAIMED BREACH OF THE PURPORTED SETTLEMENT AGREEMENT BY APPELLANTS.

Having reviewed the record and arguments presented, we affirm in part and reverse in part the decision of the trial court. The apposite facts follow.

On August 31, 1989, Mayfran filed a nine count complaint seeking injunctive relief, dissolution of May Conveyor, compensatory damages, attorneys fees, and costs for misappropriation of trade secrets and unjust enrichment. After alengthy period of discovery the case was set for jury a trial.

Prior to the trial, on March 26, 1991, Bruce E. Terry, President of Mayfran, and Leonard May, President of May Conveyor and May Tool & Die, executed a handwritten settlement agreement after two days of settlement negotiations. The agreement provided the following:

1) $300,000 to be paid by Mayfran for fully reconditioned tools and dies when last order filled, not later than 8/31/91.

2) All sales, cost and other records of May Conveyor to be transferred to Mayfran as of 4/1/91 (including prints). May Conveyor can keep original invoices and payment records for tax purposes as needed. CAD discs) to be transferred to Mayfran.

3) All Orders taken by May Conveyor cease 4/1/91.

4) May Conveyor inventory (generic) at Mayfran cost plus 20%, not to exceed $10,000, payable 8/31/91.

5) All May Conveyor and May Tool and Die principals and corporations out of steel conveyor belt business for 10 years, i.e., Leonard, Gus, Emil and Hannalore May. Noncompetes to be executed.

6) Pat Bonitati lifetime noncompete.

7) All terms of settlement confidential.

8) All inquiries after 4/1/91 referred to Mayfran.

9) Bonitati turns over all records re steel conveyor belting to May Conveyor before 8/31/91, to be turned over to Mayfran.

10) Leonard May and principals to train in use of tools and dies.

11) May Tool & Die gets right to bid and option to meet lower bid on rebuild or replace May Conveyor dies.

12) Complete mutual releases.

13) Subject to approval by Tompkins.

14) Subject to execution definitive agreement and any accompanying documents.

15) Each party to bear its own costs, including attorneys fees.

After execution of the handwritten agreement, the parties began drafting the definitive agreement. In substance they agreedto most of the material terms, except the phrase "and released" as it referred to orders. Mayfran proposed to refer to the orders that would cease on April 1, 1991 as "written and released orders." Leonard May deleted the phrase "and released" and what remained was the phrase "written orders'."

On June 1, 1991, counsel for May Conveyor sent a letter to Mayfran that settlement could not be reached and any offers of settlement were withdrawn. On June 7, 19914 Mayfran moved to enforce the settlement. On June 17 and 18 of 1991, the trial court conducted its first set of hearings on the motion, where Bruce Terry, Leonard May, and Patrick Patton testified. Terry testified as President of Mayfran. His company primarily manufactured conveyors but also manufactured the steel belting used in conveyors. May Conveyors manufactured steel belting and supplied it to Mayfran's competition in the conveyor business.

Based on his experience in, the steel belting and conveyor business, Terry testified that the definition given to orders "in the industry," was purchase orders received and accepted with some specificity for performance once it is accepted. Using steel belting as an example, he testified that an order for belting should include a specific model number and length of belting. In order to fill a purchase order, express specifications were necessary.

Terry further testified that he believed there was a settlement agreement on March 26, 1991 and drafting a definitive agreement was just a formality. He was able to get the needed approval from Mayfran's parent company, Tompkins, on or about March 29, 1991.

The purpose of giving May Conveyor until April 1, 1991 to take orders was to give them time to clean up their affairs and give them a reasonable time to finish backlog. He never expected them to book $1,800,000 in business in four days, when their level of business prior to that time was about $1,000,000 per year. He observed that some orders "looked like a wish list" of belting that customers would only dream of purchasing.

The only disputed language in the definitive settlement agreement was the language "and released." Terry explained that Mayfran did not attempt to change the terms of the settlement by adding the phrase "written and released." He described it as an "explication" of what is meant by an order. He admitted, however, that there was no discussion in settlement negotiations, on March 25 and 26, 1991, as to what was meant by the word "order."

He further testified that Mayfran and May Conveyor relied on the existence of a settlement. Mayfran stopped preparing for trial and cancelled pending depositions. May Conveyor referred a request for a belt quotation to Mayfran, did not attend the National Solid Waste Management Show, and discharged sales representatives and some other employees.

Leonard May testified as President of May Conveyor and Patton testified as the chief financial officer of the company. May and his sales representatives called customers between March 26 and April 1, 1991. The customers were told that orders could only be taken through April 1, 1991 and could only be shipped through August 31, 1991. These were the only terms of the settlement agreement disclosed to customers.

May and Patton believed the purpose of taking orders through April 1, 1991 was to book as many orders as possible, so they would have working capital to go into another business. With this goal in mind, they took "blanket orders," which allowed a customer to project how much belting he could possibly purchase through August 31, 1991. Blanket order customers were assured that they were under no obligation to purchase all or any of the material listed in their blanket order. They could give the model number and specific dimensions at a subsequent date, so long as it could be shipped by August 31, 1991. Customers had the option of ordering under the blanket order as needed. May and Patton both testified that they believed that the blanket orders did not violate the settlement agreement. Patton referred to their blanket orders as "open orders" for accounting purposes and testified that taking blanket orders was an ethical and good business practice.

May admitted that May Conveyor had terminated sales representatives, cancelled trade show appearances, and referred customers to Mayfran. He, however, believed that the language "and released" changed the whole meaning of the definitive settlement agreement and that was why the settlement revocation letter was sent on June 1, 1991. Believing that there was no settlement, he informed May Conveyors customer that they were back in business.

At the conclusion of the evidentiary hearing and arguments, the trial court made the following judgment: The disagreement of the parties as to the meaning of the word "order" did not invalidate their previously reached settlement agreement, which demonstrated a meeting of the minds. The handwritten agreement contains all the necessary terms chosen by the parties to reach a settlement of their dispute. There was overwhelming evidence the parties intended to be bound by the agreement, The trial court further held that:

Order was intended to have its usual commercial meaning in its usual commercial setting when they created the agreement and utilized the unadorned concept of an order in their handwritten contract. Order meant a customer (new or old) has specified with reasonable certainty a product desired in a certain quantity to be produced and delivered within a specific time or within a reasonable period of time.

A second set of hearings was held and the trial court determined the settlement agreement was violated. A third set of hearings was held to take further evidence of breaches of thesettlement agreement and determine damages.

Fin...