National Micrographics Systems, Inc. v. OCE-Industries, Inc., OCE-INDUSTRIE

• Decision Date: 08 September 1983
• Docket Number: No. 1275,OCE-INDUSTRIE,INC,1275
• Citation: 465 A.2d 862,55 Md.App. 526
• Parties: NATIONAL MICROGRAPHICS SYSTEMS, INC. v.
• Court: Court of Special Appeals of Maryland

Page 526

55 Md.App. 526

465 A.2d 862

NATIONAL MICROGRAPHICS SYSTEMS, INC. v. OCE-INDUSTRIES, INC.

No. 1275.

Court of Special Appeals of Maryland.

Sept. 8, 1983.

Dov Apfel, Rockville, with whom were Hoffman & Apfel, P.C., Stuart S. Greenfeig and Goldman, Walker, Greenfeig & Metro, Chartered, Rockville, on brief, for appellant.

Elliott B. Adler, Washington, D.C., with whom were John P. Wintrol and Perito, Duerk, Carlson & Pinco, P.C., Washington, D.C., on brief, for appellee.

Argued before MOYLAN, WEANT and BISHOP, JJ.

BISHOP, Judge.

National Micrographics Systems, Incorporated (NMS), appeals several rulings entered by the Circuit Court for Montgomery County in favor of the appellee, OCE-Industries, Incorporated (OCE). The trial court, ruled, inter alia, that OCE could recover payment due for goods sold and delivered to NMS; it also upheld jury findings that OCE breached oral and written contracts with NMS, but ruled that NMS could not recover compensatory or punitive damages. NMS urges that the trial court erred by ruling in favor of OCE's claim, by preventing NMS from recovering the aforementioned damages, and by failing to award NMS the full cost of depositions it introduced into evidence.

The Facts

OCE is a Chicago based firm that produces micrographic equipment, parts, and supplies. It sells these goods to customers directly, through branch offices, and also through authorized dealers throughout the country.

NMS is an independent retail dealer that represents various suppliers in the sale of micrographic products and other office equipment in the Baltimore-Washington area. NMS was a distributor for ten to fifteen competitors of OCE.

During the first or second quarter of 1974 OCE orally agreed that NMS would sell its products in the Baltimore metropolitan area and the District of Columbia. The parties operated under the oral agreement until September 1976, when they entered into a written dealership agreement.

NMS claimed that OCE promised not to compete with NMS's marketing of OCE micrographic products in the Baltimore-Washington area during the term of the oral agreement. This promise allegedly was made by OCE's branch manager during the fourth quarter of 1974. NMS contends that it was mainly in consideration of the promise not to compete that it agreed to enter into the written dealership agreement. This written agreement was to continue from year to year with termination upon two months' notice by either party. NMS knew that current government contracts listed both NMS and OCE as authorized agents for the sale and service of OCE equipment.

In December 1977 or January 1978, NMS discovered that OCE had been selling products authorized to be sold by NMS to customers located in the Baltimore-Washington territory. NMS told OCE that these sales violated its agreement not to compete, and demanded an explanation. On February 2, 1978, before the matter was resolved, OCE gave NMS notice of its intent to terminate the agreement under the two month termination provision; as a result, in April 1978, the contract terminated. NMS refused to make any payment on its outstanding account to OCE for the goods delivered and sold on behalf of OCE before the termination of the contract.

OCE initiated an action on September 28, 1978, against NMS for money due on account for goods it had sold and delivered to NMS from July 1977 through June 1978.

In response, NMS filed a counterclaim on May 14, 1979, alleging in three counts:

Count 1, breach of agreement not to compete with NMS during the term of the written contract;

Count 2, unfair competition;

Count 3, wrongful interference with contractual relations.

On December 16, 1980, NMS alleged in three additional counts in its amended counterclaim:

Count 4, breach of agreement not to compete with NMS during the term of the oral contract;

Count 5, fraudulent inducement to enter into the written contract by a promise not to compete;

Count 6, tortious interference with prospective economic advantage.

As a result of OCE's conduct, NMS claimed a loss of profit and claimed actual damages for each count. It also claimed punitive damages for Counts 2 (unfair competition), 3 (wrongful interference), 5 (fraud) and 6 (tortious interference).

The court sustained OCE's demurrer to counterclaim 2 (unfair competition) and granted OCE's motion for summary judgment on counterclaim 3 (wrongful interference with contractual relations) and 6 (tortious interference with prospective economic advantage). NMS has not appealed these rulings.

NMS is appealing the court's treatment of counterclaims 1 and 4 (breach of contracts not to compete) and 5 (fraud).

On April 30, 1981, before trial, the circuit court granted partial summary judgment on Count 5, holding that NMS was not entitled to recover punitive damages on its fraud claim. After the parties presented their evidence, the trial court reaffirmed its summary judgment; it also held that OCE was entitled to a directed verdict preventing NMS from recovering compensatory damages for fraud.

NMS had earned a commission from OCE for each of its sales of OCE equipment and reorders of OCE supplies. The commission was equal to the difference between the sale price and the dealer cost for each item. In order to establish its damages, NMS introduced a 66 page summary listing all of OCE's direct sales of micrographic equipment in the Baltimore-Washington region during the terms of both the oral and written agreements, for which NMS received no commission. NMS argued in the lower court and argues here that OCE's breach of its agreement not to compete caused NMS to suffer damages equal to the lost commissions and fees on all of these sales. NMS did not have any past commercial relationship with a number of the customers listed in the 66 page summary to whom OCE sold equipment.

The lower court limited the jury's consideration of damages to lost commissions on sales to customers with whom NMS had previous commercial relations, rather than on all micrographic equipment sales made by OCE in NMS's market area.

The case was then submitted to the jury. On May 20, 1981, it returned a special verdict in favor of NMS on the counterclaims of fraud (5), for which NMS received no compensatory or punitive damages, breach of oral contract (4), for which the jury awarded NMS $4,911.90; and breach of written contract (1), for which the jury awarded NMS $19,845.11.

On July 8, 1981, the trial court treated OCE's previous motion for a directed verdict as a motion for judgment notwithstanding the verdict. The trial court upheld the jury's findings that OCE had breached its contracts. Because it believed that NMS had not shown sufficient evidence of lost profits, however, the court granted OCE's motion for judgment notwithstanding the verdict as to the jury's damage awards for counterclaims 1 and 4 (breach of the written and oral contracts, respectively). Each party was held responsible for its respective costs. On November 24, 1981, the trial court entered a judgment against appellant NMS's counterclaims and in favor of appellee OCE's claims, ordering NMS to pay $22,535.64 for products delivered under the written dealership agreement of September 1, 1976.

On appeal, NMS asks us to review five of the lower court's rulings:

(I) The ruling that the jury, in calculating NMS's damages, could only consider OCE's sales to customers with whom NMS had had a commercial relationship.

(II) The judgment, n.o.v., which prevented NMS from recovering any of the commissions it claimed from the OCE sales. (III) The ruling that there was insufficient evidence to support NMS's claim for punitive damages under its fraud count.

(IV) The ruling that OCE was entitled to recover on its declaration.

(V) The refusal to award NMS the total cost of depositions it introduced into evidence.

I. and II.

DAMAGES FOR BREACH

NMS argues that the innocent party in a breach of contract case is entitled to receive damages that would place him in the same position in which he would have been had the contract not been breached. Dialist Co. v. Pulford, 42 Md.App. 173, 179, 399 A.2d 1374 (1979). In this case the amount of damages to bring this about is the profit that would have been realized had no breach occurred. NMS and OCE agree that under Maryland law the innocent party seeking to recover lost profits must prove (1) that the breach was the cause of the loss, (2) that the defendant could have foreseen when the contract was executed that a loss of profits would be a probable result of a breach, and (3) the amount of lost profits with reasonable certainty. Aeropesca Limited v. Butler Aviation International, Inc., 44 Md.App. 610, 632, 411 A.2d 1055 (1980); John D. Copanos & Sons, Inc. v. McDade Rigging & Steel Erection Co., Inc., 43 Md.App. 204, 206, 403 A.2d 402 (1979). NMS argues that the 66 page summary showing OCE's actual sales in the NMS territory was the best available evidence to assist the jury in reasonably ascertaining the amount of the damages. The trial court, however, found that NMS had no commercial relationship with many of the listed customers. It stated, "the court finds that any loss of commissions do not flow directly from the breach of the agreement, because there is no evidence to establish had OCE not been in the area, NMS would have either contacted them, sold them, or indeed in any way received those commissions". Consequently, it partially granted OCE's motion for directed verdict, ruling that the jury, when assessing damages, could only consider OCE's sales to the government and to prior NMS customers.

The jury, however, found in its special verdict that during the period of the oral contract, 1974-1976, OCE had agreed not to sell the same products as NMS to any customers in the Baltimore-Washington territory. The jury found that during the period of the written contract, 1976-1978, OCE had agreed not to contact NMS's prior customers to sell the same...