Simplified Tax Records, Inc. v. Gantz
| Decision Date | 15 March 1960 |
| Docket Number | No. 30327,30327 |
| Citation | 333 S.W.2d 328 |
| Parties | SIMPLIFIED TAX RECORDS, INC., a Corporation (Plaintiff), Respondent. v. Gordon A. GANTZ and Simplified Tax Records, Inc., of Missouri, a Corporation (Defendants), Appellants. |
| Court | Missouri Court of Appeals |
Ziercher, Tzinberg, Human & Michenfelder, Albert A. Michenfelder, Jr., Clayton, for appellants.
Gleick & Strauss, Harry S. Gleick, St. Louis, for respondent.
This is an action in equity instituted by plaintiff, Simplified Tax Records, Inc., against defendants, Gordon A. Gantz and Simplified Tax Records, Inc., of Missouri. In said suit plaintiff sought an injunction against the use by defendants of the name 'Simplified Tax Records,' and other incidental relief. Defendants, with their answer, filed a counterclaim seeking an injunction and damages against plaintiff. The trial court found against defendants on their counterclaim and for plaintiff on its cause of action, and issued an injunction in accordance with the prayer of the petition. Defendants have appealed.
Plaintiff is a corporation organized under the laws of the State of New York. The date of its incorporation was October 11, 1937. It is engaged in the income tax service business. Its method of doing business is to sell to distributors throughout the United States a single-entry bookkeeping system which they in turn sell to businessmen in their territory. The system consists of an account book for use by the ultimate purchaser, together with tax bulletins sent out periodically to subscribers to keep them abreast of the tax laws which may affect them in their business. Also, in connection with what is referred to in the evidence as the 'de luxe' system, plaintiff agrees to prepare the subscriber's Federal income tax returns each year and answer all questions regarding a customer's income tax and bookkeeping problems. The answers to these questions are guaranteed to be correct. This guarantee appears in the book furnished subscribers and, by its terms, plaintiff agrees to pay all fines and penalties resulting from incorrect advice. Plaintiff sells the book only to its distributors, except where there is no distributor in a particular area and a person in said area writes to plaintiff and asks for the service. After the distributor has sold a book to one of his customers, plaintiff thereafter renders the service above referred to without any further charge.
Plaintiff, at the time of the hearing below had 210 distributors operating in 44 states. These distributors receive no salary from plaintiff. From the evidence, it is clear that the relation between plaintiff and the distributor is that of vender and vendee. Plaintiff's home office is in New York City. William Frankel is President of plaintiff. He is also known, and frequently referred to in the evidence, as Bill Foster. Howard S. Van Voorhies is Executive Vice-President, and his duties are, in general, to supervise the entire operation of plaintiff's business.
At the home office, plaintiff maintains a permanent staff of 30 people, which is increased during the tax return season by 100 to 125. Among the permanent year-round staff are four or five tax accountants, and a legal department of tax experts. In addition, plaintiff has a contract for accounting services with a firm of certified public accountants should the occasion arise when such service is needed. Ordinary tax questions submitted by subscribers are answered, but legal opinions are not given.
Plaintiff sells two kinds of service--one known as the Standard Service, which consists only of bookkeeping records; and the other, or more expensive, termed the DeLuxe Service. The latter, as heretofore indicated, includes the furnishing of tax bulletins, access to plaintiff's tax service department, and the preparation of Federal tax returns. The tax returns are made from information supplied by the subscriber on forms furnished by plaintiff. The price to the subscriber of the books and service at the time of the trial was $20 for the Standard Service, to $99.50 for the DeLuxe Service, the charge covering two years' service. The cost to the distributor was approximately 40% of the cost to the subscriber. Plaintiff, at the time of the trial, had 100,000 accounts and, since its organization in 1937, has sold over 300,000 tax systems in the United States.
Plaintiff at all times sold its books outright to its various distributors. It maintained no stock of merchandise in Missouri, and had no office for the transactions of business in this state. All of plaintiff's transactions and contacts with distributors and subscribers were by mail. Plaintiff had and exercised no control over any of defendants' employees, and did not hire or discharge any of them. Plaintiff paid no salaries to anyone in Missouri. The conclusion is inescapable that plaintiff had no agent for the transaction of its business in the State of Missouri.
The evidence further shows that upon the expiration of the original two-year period of the system's use by a subscriber, if there was no agent in the area, the subscriber was solicited for a renewal directly by mail from the home office in New York. If there was no response, a second or third letter was sent in an effort to secure a renewal.
Plaintiff's testimony was that if an individual distributor should establish his own independent bookkeeping service plaintiff would cancel the distributor's franchise, because, in the first place, plaintiff does not believe its distributors qualified to render that service and, secondly, because in so doing the distribtor is placed in competition with plaintiff. This was explained to defendant Gantz by Mr. Van Voorhies in 1949.
Defendant Gantz' first contact with plaintiff's service was in 1946 or 1947. At that time, Harold Blackwell held a franchise as a distributor for plaintiff in Missouri and several other states. Gantz met Blackwell at that time in response to an advertisement which the latter had run in the newspapers in St. Louis. An arrangement was then worked out between Blackwell and Gantz whereby the latter undertook to sell plaintiff's poducts in Missouri. He was given exclusive rights in Missouri. This relationship continued until 1950, when it was terminated due to a disagreement between Gantz and Blackwell. In April, 1950, there was a meeting in St. Louis at the Statler Hotel between William Frankel and Gantz. Mr. Gantz testified that the only persons present at that meeting, other than himself, were William Frankel and Blackwell. Van Voorhies testified that he was also present at this meeting. At said meeting it was arranged that Gantz would act as distributor for plaintiff in Missouri.
There is some conflict in the testimony as to what transpired at this meeting. Gantz testified:
'Now, then he (Frankel) said 'Well now, Mr. Gantz, we won't interfere with you in any way down here if you want to take over the state or we'll take over the state and sell these books down here.' And I said,
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'Mr. Frankel said, 'Well that's entirely satisfactory but we'd prefer that you incorporate in the name of Simplified Tax Records.' * * * Mr. Frankel said that he would prefer that we use and incorporate under the name of Simplified Tax Records, preferably of Missouri.
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Van Voorhies testified he was at the above mentioned meeting and that no mention was made of the proposed incorporation. He stated:
After this meeting, Louis H. Frankel, plaintiff's general counsel, wrote Gantz the following letter dated April 26, 1950: 'I was glad to get your letter but in the meantime I know you saw Bill Foster and met with Harold Blackwell and ironed out everything to your complete mutual satisfaction.'
Gantz testified he had in mind the formation of a corporation as early as 1950, and that some preliminary work on that project was done at that time. He further testified that he discussed the matter of incorporation with Van Voorhies the night of the Veiled Prophet's Parade in the fall of 1952. He stated that:
'I mentioned that we had not made the incorporation, but were contemplating going ahead with the plans we had discussed with Mr. Frankel, and he (Van Voorhies) said, 'Well, whatever Bill said was O.K.' * * *
'The Court: Are you saying you told Mr. Van Voorhies at that time that you were going to incorporate and use the plaintiff's name and add to it 'of Missouri'? Is that what you are testifying?
'The Witness: That is correct.'
Van Voorhies, in testifying on behalf of plaintiff, stated that at no time did he have any information that defendant was forming a corporation until about the time plaintiff terminated its relations with defendant in 1956, when an order or letter was received from defendant with the word 'incorporated' on it. He further testified that: Van Voorhies denied that there was any conversation with Gantz the night of the Veiled Prophet's Parade in 1952 concerning incorporation by Gantz. Van Voorhies testified: ...
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