Portland Valve, Inc. v. Rockwood Systems Corp.

• Citation: 460 A.2d 1383
• Parties: PORTLAND VALVE, INC. v. ROCKWOOD SYSTEMS CORP. and Gulf & Western Manufacturing Co. (Eastern Group).
• Decision Date: 13 June 1983
• Court: Supreme Judicial Court of Maine (US)

Page 1383

460 A.2d 1383

PORTLAND VALVE, INC. v. ROCKWOOD SYSTEMS CORP. and Gulf & Western Manufacturing Co (Eastern Group).

Supreme Judicial Court of Maine.

Argued March 15, 1983.

Decided June 13, 1983.

Kelly, Remmel, & Zimmerman, U. Charles Remmel, II (orally), Leland N. Chisholm, Portland, for plaintiff.

Robinson & Kriger, Robert C. Robinson (orally), Portland, Skadden, Arps, Slate, Meagher & Flom, Henry P. Baer (orally), New York City, for Rockwood Systems.

Pierce, Atwood, Scribner, Allen, Smith & Lancaster, John J. O'Leary, Jr. (orally), Ralph Lancaster, Jr., Portland, for Gulf & Western.

Before GODFREY, NICHOLS, ROBERTS, CARTER, VIOLETTE and WATHEN, JJ.

CARTER, Justice.

The plaintiff, Portland Valve, Inc. (PVI), appeals a directed verdict entered in Superior Court, Cumberland County, in favor of one of the defendants, Gulf & Western Manufacturing Co. (GW). Rockwood Systems Corp. (RSC), the other defendant, cross-appeals a judgment entered in favor of PVI. We affirm the judgment rendered in favor of GW. We reverse the judgment entered against RSC.

I. Procedural and Factual Background

In 1973, GW manufactured and sold both government proprietary and nonproprietary ball valve parts for use in Navy submarines. GW designed the proprietary ball valve parts for the government; the drawings of these parts were the sole property of GW. The Navy designed and owned the drawings of certain nonproprietary ball valve parts. GW also manufactured and sold aircraft engine components, firefighting equipment, and commercial ball valves.

In June of 1973, GW sold to PVI a dealer franchise to sell the proprietary government ball valve spare parts. GW covenanted that it would "not appoint another Dealer to be primarily responsible for selling the spare parts in the United States so long as Dealer's sales and services performance and organization in the territory continue to be satisfactory." PVI paid GW $5,000 for the franchise, which included the use of the drawings of the proprietary spare parts line.

In October of 1973, GW sold all of its tangible and intangible assets, goodwill and business as a going concern to Universal Valve Corp. for $1.5 million. Universal Valve Corp. then transferred its acquisitions under the contract to RSC, its wholly-owned subsidiary. Although the agreement did not explicitly mention the contract between GW and PVI, the agreement provided that RSC would assume all dealer agreements terminable on thirty days notice. The GW and PVI contract contained such a termination provision.

In 1975, PVI filed a complaint against RSC claiming that by competing with PVI for the government ball valve spare parts market, RSC violated the contract that existed between GW and PVI. PVI subsequently amended the complaint to include claims against GW. Count I alleged that by placing RSC in competition with PVI, GW breached the contract which had established PVI as "a sole and exclusive dealer, agent or franchise to manufacture and sell in the United States" government ball valve spare parts. Count II against GW alleged that by placing RSC in competition with PVI, GW breached the contract which had established PVI as "primary dealer-agent or franchisor."

RSC moved for a summary judgment alleging that the agreement between PVI and GW did not provide any basis for PVI's claims against RSC. The motion was denied with respect to proprietary government ball valve spare parts. ¹

Before trial, GW filed a motion to dismiss Count I of the complaint. In that motion, GW claimed that the franchise agreement did not provide any basis for PVI's allegation that it had been appointed an exclusive dealer. The trial justice denied the motion.

In addition, both defendants, GW and RSC, filed a motion in limine arguing that because the contract was unambiguous on its face, parole evidence for the purpose of establishing that the agreement provided an exclusive right to sell should be excluded. The trial justice also denied that motion.

At trial, after the two negotiators of the agreement, Frank Curtis for PVI and William Clegg for GW, had testified but before the end of the plaintiff's case, the trial justice addressed GW's motion for a directed verdict on Count I. Count I alleged that the contract appointed PVI as an exclusive dealer. PVI objected on the basis that the motion was untimely. In granting the directed verdict, the trial justice reasoned that

based upon the evidence, both of Mr. Clegg and Mr. Curtis and the document as it has been introduced and accepted into evidence this Court is satisfied that there is not sufficient evidence as a matter of law to present that to the jury to determine whether or not it was an exclusive contract, and this Court as a matter of law would make such a ruling based upon the evidence thus far that it was not an exclusive contract.

Although GW requested a directed verdict on Count II, the motion was reserved for further consideration. The justice also granted a summary judgment in favor of GW on Count I.

After all its evidence had been submitted, PVI asked the court to reconsider the directed verdict and the summary judgment on Count I. The justice did consider the ruling but refused to change his decision. He again directed a verdict for GW on Count I.

GW then made a motion for a directed verdict on Count II. Count II alleged that GW had established RSC as a primary dealer, agent, or franchisee. Granting the motion, the justice reasoned that the contract between GW and RSC was an assignment and not the creation of a dealership.

Also at that time, RSC moved for a directed verdict. The separate complaint against RSC alleged that by competing with PVI, RSC breached the contract that existed between GW and PVI. The justice denied the motion.

At the end of all the evidence, the jury was instructed on a breach of contract theory. After deliberations, the jury returned a one million dollar verdict for PVI against RSC. PVI then moved for entry of a permanent injunction which the justice denied. RSC filed motions for new trial and for judgment notwithstanding the verdict. The justice denied both motions.

PVI subsequently filed a notice of appeal of the ruling on the motion for directed verdict and summary judgment in favor of GW and of the denial of the permanent injunction. RSC filed a notice of a cross-appeal of the one million dollar judgment.

II. PVI's Appeal

PVI contends that the justice erred in directing a verdict for GW. PVI argues that there is a genuine issue of fact as to whether the agreement granted PVI an exclusive right to sell spare parts and whether GW breached that agreement. An agreement providing an exclusive right to sell prevents GW from selling the spare parts. Under an agreement providing an exclusive agency, GW may not appoint another dealer to sell the spare parts line. Stahlman v. National Lead Co., 318 F.2d 388, 393 (5th Cir.1963); Dallas Electric Supply Co. v. Branum Co., 143 Tex. 366, 370-73, 185 S.W.2d 427, 430-31 (1945).

[T]he presiding Justice should direct a verdict only sparingly, as the exception rather than the rule. Only if the correctness of directing a verdict appears so clear to the presiding Justice that all reasonable doubts of possible error or uncertainty have been removed in his mind should he grant it.

Moore v. Fenton, 289 A.2d 698, 700 n. 1 (Me.1972), quoted in, 2 Field, McKusick & Wroth, Maine Civil Practice § 50.1 at 313 (2d ed. Supp.1981). In addition to that policy, GW has the heavy burden of establishing that no reasonable view of the evidence, including every justifiable inference most favorable to PVI, could sustain a jury verdict for PVI. See Emerson v. Ham, 411 A.2d 687, 689 (Me.1980); Boetsch v. Rockland Jaycees, 288 A.2d 102, 104 (Me.1972).

GW first asserts that the interpretation of an unambiguous contract is a question of law for the Court. GW argues that a franchise agreement which provides that GW will not appoint another dealer to be "primarily responsible" for selling spare parts so long as PVI's services remain satisfactory cannot reasonably be interpreted as granting PVI an exclusive right to sell spare parts.

The issue of whether contract language is ambiguous is a question of law for the Court. See Eskimo Pie Corp. v. Whitelawn Dairies, Inc., 284 F.Supp. 987, 995 (S.D.N.Y.1968); see also Clayman v. Goodman Properties, Inc., 518 F.2d 1026, 1034 (D.C.Cir.1973). The interpretation of an unambiguous written contract is a question of law for the Court; the interpretation of ambiguous language is a question for the factfinder. Zamore v. Whitten, 395 A.2d 435, 440 (Me.1978); T-M Oil Co. v. Pasquale, 388 A.2d 82, 85 (Me.1978). The interpretation of an unambiguous writing must be determined from the plain meaning of the language used and from the four corners of the instrument without resort to extrinsic evidence. See City of Augusta v. Quirion, 436 A.2d 388, 392 (Me.1981); T-M Oil Co., 388 A.2d at 85; see also Ames v. Hilton, 70 Me. 36, 43 (1879). Once an ambiguity is found then extrinsic evidence may be admitted and considered to show the intention of the parties. Palmer v. Nissen, 256 F.Supp. 497, 503 (D.Me.1966) (quoting Ames, 70 Me. at 43); T-M Oil Co., 388 A.2d at 85. Contract language is ambiguous when it is reasonably susceptible of different interpretations. Lee v. Flintkote Co., 593 F.2d 1275, 1282 (D.C.Cir.1979); accord Barham v. Barham, 33 Cal.2d 416, 422-424, 202 P.2d 289, 293 (1949); Martindell v. Lake Shore National Bank, 15 Ill.2d 272, 282-284, 154 N.E.2d 683, 689 (1958); Universal C.I.T. Credit Corp. v. Daniel, 150 Tex. 513, 516-518, 243 S.W.2d 154, 157 (1951); Young v. Schriner, 190 Va. 374, 378-379, 57 S.E.2d 33, 35 (1950).

The contract granted PVI a franchise to sell ball valve spare parts in accordance with GW's drawings. GW covenanted that it would not appoint another dealer to be primarily responsible for selling spare parts so long as PVI's performance remained satisfactory. GW also...