Richer v. Khoury Bros., Inc.

• Decision Date: 01 February 1965
• Docket Number: No. 14531-14532.,14531-14532.
• Citation: 341 F.2d 34
• Parties: Edwin G. RICHER, a/k/a E. G. Richer & Company, Plaintiff-Appellee, v. KHOURY BROS., INC., and Henderson Quality Shops, Inc., Defendants-Appellants. Edwin G. RICHER, a/k/a E. G. Richer & Company, Plaintiff-Appellant, v. KHOURY BROS., INC., and Henderson Quality Shops, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

341 F.2d 34 (1965)

Edwin G. RICHER, a/k/a E. G. Richer & Company, Plaintiff-Appellee, v. KHOURY BROS., INC., and Henderson Quality Shops, Inc., Defendants-Appellants.

Edwin G. RICHER, a/k/a E. G. Richer & Company, Plaintiff-Appellant, v. KHOURY BROS., INC., and Henderson Quality Shops, Inc., Defendants-Appellees.

Nos. 14531-14532.

United States Court of Appeals Seventh Circuit.

February 1, 1965.

Robert S. Solomon, Ira Bell, Chicago, Ill., Perlman, Rubin & Schulman, Chicago, Ill., of counsel, for Edwin G. Richer.

Howard Goldman, Robert Nystrom, Chicago, Ill., for Khoury Bros., Inc.

Before CASTLE, Acting Chief Judge, and DUFFY, SCHNACKENBERG, KNOCH, KILEY and SWYGERT, Circuit Judges.

CASTLE, Acting Chief Judge.

Edwin G. Richer, the plaintiff, instituted this diversity action in the District Court for a declaratory judgment that the defendants, Khoury Bros., Inc., and Henderson Quality Shops, Inc.,¹ are obligated to him for commissions on merchandise sold by the defendants to certain mail order companies. The cause was tried to the court which, after making and entering findings of fact and conclusions of law, entered judgment that the defendants account to the plaintiff for commissions on such sales as resulted from the listing and depiction of defendants' merchandise in certain of the mail order companies' catalogues and retail basic lists published for periods in 1962 and 1963; and that the plaintiff account to defendants for the time he devoted to his own or any other business during the period between November 1, 1961 and August 10, 1962, and for any ultimate profit he made from his business or employment, other than his employment by defendants, during that period. The judgment order designates a special master to take evidence concerning such accountings, to report findings and conclusions thereon, and to make a recommendation for a decree of accounting. It orders the costs of the accountings be apportioned equally between the parties and that each make an initial deposit of $500.00 as security for such costs.

The defendants appealed (No. 14531). The plaintiff prosecutes an appeal (No. 14532) from that part of the judgment order or decree which declares the defendants are entitled to an accounting from the plaintiff; directs such accountings before the special master; and orders an apportionment of accounting costs to, and a security deposit by, the plaintiff.

The substance of the District Court's factual findings which are pertinent to a resolution of the issues presented by the contentions advanced on these appeals may be summarized as follows.

The plaintiff, until August 10, 1962, was a manufacturer's representative for the defendants, manufacturers of unpainted furniture who sold primarily to large mail order companies. The relationship began in 1953 under an oral agreement which provided, in part, that plaintiff would attempt to induce mail order companies to insert descriptions and photographs of defendants' merchandise in the companies' catalogues and retail basic lists. For his services plaintiff was to receive a commission² computed on the basis of a percentage of the sales made by defendants to the mail order companies as a result of such listings. In October of 1961 it was agreed that as of November 1, 1961, the plaintiff would personally devote all of his time to performing services for the defendants and that he would not perform services for any other manufacturer after that date. This agreement, which was reduced to writing in the form of a "notice" defendants mailed to the plaintiff, provided that the plaintiff would "work for Khoury Bros., solely" and also reduced the percentage which plaintiff thereafter was to receive as his commission on sales to the mail order accounts serviced by him. On August 10, 1962, defendants terminated their business relationship with the plaintiff and after that date he performed no services for the defendants. The plaintiff had performed services in procuring the insertion of defendants' merchandise in 1962, 1962-1963, and 1963 catalogues and retail lists issued by the mail order companies. He had not been paid a commission on sales made by the defendants to the mail order companies after August 1, 1962. The plaintiff did not devote all of his time to the business of the defendants as contemplated under the October 1961 agreement but carried on a substantial business of his own during the whole of the period that followed.

The District Court concluded that during the life of the respective catalogue or retail basic list plaintiff is entitled to a commission on sales made by the defendants to the mail order companies of items of defendants' merchandise listed and depicted in 1962, 1962-1963, and 1963 catalogues and lists.³ The court concluded plaintiff had breached his October 1961 agreement to work solely for the defendants and defendants are entitled to an accounting from the plaintiff for "the value of the time spent by him in business other than that of the defendants" and for "the profit plaintiff ultimately received on account of carrying on said other business" for the purposes of arriving at an amount to be set-off against the commissions found to be due him.

The defendants do not assail the factual findings of the District Court as lacking such substantial evidentiary support as to be clearly erroneous but contend the court erred in concluding plaintiff is entitled to a commission on sales consummated after defendants terminated the contract with plaintiff on August 10, 1962. The defendants additionally contend that plaintiff's continued operation of his own business after his October 1961 agreement to work solely for the defendants not only constituted a material breach of an express provision of the contract, which precludes plaintiff from enforcing the contract, but also was a breach of the fidelity plaintiff owed defendants as their representative which operated to effect a forfeiture of plaintiff's right to compensation from the defendants.

The plaintiff concedes the contract was for no definite period and was terminable at the will of either party but contends that in the absence of a provision cutting off commissions on sales from listings already obtained before the contract's termination he is entitled to commissions on sales which resulted from those listings and which were made during the life of the catalogue although after the termination of the contract. Plaintiff further contends the trial court's finding that plaintiff breached his agreement to work solely for defendants by operating a substantial business of his own lacks requisite subsidiary findings and is not supported by substantial evidence and, in any event, if the finding is proper it affords no basis on the facts and circumstances disclosed by the record for either denying plaintiff compensation under the contract's provisions or for a set-off on the basis of time spent or profits earned by him in such other business activities.

The defendants admit that the volume of items ordered from them was dependent in turn on the orders received by the mail order companies from their catalogue customers; that since these ultimate customers ordered from catalogues it was imperative that the defendants' furniture be continued to be listed and depicted in the catalogues; and that it was the express function of the plaintiff to service the mail order companies, to do everything required or helpful to induce them to continue to list and depict the defendants' merchandise in their catalogues as they were issued.

The record discloses that since the mail order company catalogues were planned six to twelve months in advance of their publication, there was always a six to twelve months lag between the services plaintiff rendered in connection with procuring the insertion or retention of listings of items of defendants' merchandise therein and the time when he would first start to receive commissions on sales resulting therefrom. All commissions⁴ were paid to the plaintiff monthly on the basis of defendants' sales in the prior month. Such monthly payments included the commissions computed on the basis of sales of such listed items made by the defendants to the mail order companies in the prior month.

The record further discloses that prior to the time plaintiff agreed to work solely for defendants, he handled accounts for other manufacturers and the defendants knew this. When the October 1961 agreement was made p...