Ted R. Brown and Associates, Inc. v. Carnes Corp., 860182-CA

• Decision Date: 11 April 1988
• Docket Number: No. 860182-CA,860182-CA
• Citation: 753 P.2d 964
• Parties: TED R. BROWN AND ASSOCIATES, INC., Plaintiff and Respondent and Cross-Appellant, v. CARNES CORPORATION, a corporation, and Long Deming Utah, Inc., a corporation, Defendants and Appellants and Cross-Respondents.
• Court: Utah Court of Appeals

Page 964

753 P.2d 964

TED R. BROWN AND ASSOCIATES, INC., Plaintiff and Respondent and Cross-Appellant, v. CARNES CORPORATION, a corporation, and Long Deming Utah,

Inc., a corporation, Defendants and Appellants and

Cross-Respondents.

No. 860182-CA.

Court of Appeals of Utah.

April 11, 1988.

Joseph J. Palmer, Reid E. Lewis (argued), Jeffrey Robinson, Moyle & Draper, Salt Lake City, for defendants and appellants and cross-respondents.

Robert S. Howell, Michael F. Jones, Jeffrey R. Oritt (argued), Tibbals, Howell & Jones, Salt Lake City, for plaintiff and respondent and cross-appellant.

OPINION

Before JACKSON, ORME and GREENWOOD, JJ.

JACKSON, Judge:

Carnes Corporation ("Carnes") appeals from a judgment awarding $20,000 in sales commissions and prejudgment interest from January 1, 1978 to Ted R. Brown and Associates, Inc. ("Brown"). ¹ Brown cross-appeals, seeking two additional types of commissions and prejudgment interest from January 1, 1972. We reverse the judgment of the trial court.

On May 24, 1961, the parties entered into a written sales agreement in which Brown was granted an exclusive territory (all of Utah and portions of Idaho and Wyoming) in which to solicit--strictly on a commission basis--orders for sales of Carnes's ventilation equipment. Pursuant to the explicit terms in addendum 3 of that agreement, Brown was potentially entitled to three different types of commission (alternately called "credits" in the agreement) on a sale of equipment: a specification credit if Brown obtained specification of Carnes's equipment in construction plans within its territory; an approval (or order) credit if purchase of Carnes's equipment was approved by a project architect or engineer in Brown's territory; and a territorial credit if Carnes's equipment was ordered elsewhere but shipped into Brown's territory. A formula was prescribed for allocating these credits among sales representatives from other territories who became involved in a single transaction. The credits were due and payable the month after Carnes received full payment for the material purchased.

With regard to the termination of the agreement by either party and the payment of commissions in the event of termination, addendum 4 to the sales agreement provided:

Either party shall have the right to terminate this agreement, by giving the other party thirty (30) days notice in writing of his intention so to do, and in the event of such termination, rights granted by this agreement shall terminate. If termination notice be given by Carnes, distributor or representative shall upon receipt discontinue all bidding activity on the products covered by this agreement and immediately furnish a copy of all active quotations dated prior to this cancellation notification for Carnes'[s] records. Any such quotations which develop into accepted orders within 30 days from the date notice is so given by Carnes shall entitle the distributor or representative to resale discounts at the same rate and upon the same terms as though this agreement had continued in effect.

If terminated under this provision, Brown was not entitled to any type of sales credit unless Carnes's equipment was specified, approved and ordered within thirty days of the termination notice.

The Church of Jesus Christ of Latter-Day Saints ("Church") began planning a multi-story administrative office building in Salt Lake City during the early 1960's. Beginning in 1963, Ted Brown, the owner of Ted Brown and Associates, Inc., expended considerable time and effort to have Carnes's equipment specified in the Church's construction plans. As Carnes's exclusive Utah sales representative, he consulted repeatedly with the Salt Lake City architect and engineer who planned the structure and with Bridgers & Paxton, the associate mechanical engineers based in Albuquerque, New Mexico. He and his staff traveled to Carnes's Wisconsin headquarters to advance their mutual cause. He rented building space in Salt Lake City and presented customized samples of Carnes's equipment for examination by the architect, the engineers, and Church officials in order to help insure Carnes's selection as the ventilation equipment supplier.

On June 2, 1965, Ted Brown sent the following letter to Dan Nevaiser, Carnes's national sales manager:

The samples that were charged partially to us for the

L.D.S. CHURCH OFFICE BLDG.

job were used to seek specification for Carnes products for that job. Having done as much as we have with Bridgers & Paxton, and with the architect, who is located in Salt Lake, and who is really the ultimate specifying agent, we are reluctant to accept the idea that a specification split with the representative in Albuquerque should be made at the time of the sale.

We would like to have a letter from you in our file confirming our idea that we should get specification credit as well as territory and order credit for the L.D.S. Church Office Building when it is finalized. The fact that Bridgers & Paxton has their home office in Albuquerque does not seem to justify a split on specification with the Albuquerque representative for this job.

Kenneth Watts, Carnes's western regional sales manager in California, responded in a letter to Ted Brown that recognized Brown's efforts but emphasized that Carnes's New Mexico representative had also done considerable work with Bridgers & Paxton on the Church office building over the previous three or four years. Because of this, Watts concluded, it was only fair that Brown split the specification credit with Carnes's Albuquerque representative. Notwithstanding Watts's position on the matter, Nevaiser sent the following message to Brown on June 15, 1965:

This is to state that you are to receive specification credit as well as territory and order credit for the Latter Day Saints Church office building when it is finalized.

There is no question in our mind that the specification originated in Salt Lake City, and although Bridgers & Paxton have their home office in Albuquerque, all of the activity that they have been involved in has been in your area.

You certainly deserve this order in its entirety.

By December of 1965, the specifications for the office building were still not finalized. The Church apparently put the project on hold from the fall of 1965 until early 1968. At that time, Carnes's Albuquerque representative, Johnston, requested Carnes's current price list for Bridgers & Paxton, which was anticipating the start of the project bidding process.

After receiving a copy of that inquiry letter, Ted Brown responded in a letter to Carnes on February 5, 1968 in which he reviewed his company's prior efforts in getting the project to the specification stage. He requested that his company be sent the current prices so they could be passed on by him to the project architect and to Bridgers & Paxton, adding: "We would feel somewhat more than put upon if we anticipated a territory split with Johnston where he would tend to claim specification [credit]."

On August 29, 1968, Carnes's new national sales manager, Harry Griese, sent a letter to Brown terminating their May 24, 1961 sales agreement. Echoing the terms of the termination provision, Griese requested a copy of all active quotations dated prior to the cancellation letter, noting that only such quotations that developed into accepted orders within thirty days of the cancellation would entitle Brown to sales credits. Carnes entered into a new sales agreement in September with the firm of Long Deming Utah, Inc. ("Long Deming"), which took over Brown's former territory. ²

Ted Brown's September 4 reply letter to Griese again reviewed in detail the time, money and effort Brown had spent on the Church project and expressed concern that Brown's investment could not be recovered within the contractual thirty-day period, especially in light of the fact that bidding on the project was not scheduled to begin until after January 1, 1969. Brown also provided a list of its orders that were still awaiting Carnes's approval and a list of its outstanding quotations which had not yet developed into orders; because the Church office building project had not yet moved to the quotation stage, it did not appear on either. The letter concluded:

We have worked for, and we feel deserve credit for the work that has been done. This is particularly true if we no longer represent Carnes....

We shall appreciate your immediate answer confirming commission protection on the above jobs, and particularly the L.D.S. Office Building.

Griese responded on September 10, 1968:

According to the terms of our contract, your commission claims would end on any job not already quoted. However, because of the important work done on this very attractive piece of business, we have agreed to make an exception. I discussed this matter briefly with Wills Long [of Long Deming Utah, Inc.] and he agreed that there should be an equitable settlement made if we are awarded the contract.

Ted, since the job has not been bid, you would have no claim on either the order or job site credit. We do believe that you should receive some commission credit on the specifications. Based on the work already done and the position of [project engineer] Tregeagle and the L.D.S. Headquarters in Salt Lake City, we would see to it that you receive half of the specification credit on this project. In other words, of a total of 40% commission for specification, 20% would go to Albuquerque for their work with Bridgers & Paxton, while the other 20% would go to your operation.

This commitment is based on the project being bid and a contract awarded to a General Contractor by March 1, 1969. Should the General Contract award be delayed beyond March 1, 1969, commission paid to you for specification credit would have to be worked out between you and Long Deming Utah.

Three months later, on December 13, Ted Brown wrote to Griese again, complaining about the 50/50 split of the specification...