Teitelbaum v. Hallmark Cards Inc., 87-495

• Citation: 520 N.E.2d 1333,25 Mass.App.Ct. 555
• Decision Date: 01 April 1988
• Docket Number: No. 87-495,87-495
• Parties: , 7 UCC Rep.Serv.2d 705 Seymour TEITELBAUM, et. al. 1 v. HALLMARK CARDS INCORPORATED, et. al. 2
• Court: Appeals Court of Massachusetts

Page 1333

520 N.E.2d 1333

25 Mass.App.Ct. 555, 7 UCC Rep.Serv.2d 705

Seymour TEITELBAUM, et. al. ¹ v. HALLMARK CARDS INCORPORATED, et. al. ²

No. 87-495.

Appeals Court of Massachusetts,

Berkshire.

Argued Feb. 16, 1988.

Decided April 1, 1988.

David W. Murphy, Jr., Pittsfield, for plaintiffs.

John A. Agostini, Pittsfield, for defendants.

Before GREANEY, C.J., and SMITH and FINE, JJ.

GREANEY, Chief Justice.

In this action in the Superior Court, the plaintiffs asserted that the defendants violated their obligation to supply the plaintiffs with inventory for the plaintiffs' greeting cards store in Pittsfield. Damages were sought from a jury on common law claims of breach of contract and "promissory estoppel," and damages and attorney's fees were sought from a judge for alleged violations of G.L. c. 93A, §§ 2(a ) and 11. At the conclusion of the evidence presented to the jury on the common law claims, the judge allowed the defendants' motion for a directed verdict. He then heard additional evidence on the c. 93A claim. He prepared a memorandum of decision which explained why he had allowed the defendants' motion for a directed verdict. The memorandum also contained findings of fact and conclusions of law on the c. 93A claim and ultimately concluded that the defendants had not acted unfairly or deceptively in their dealings with the plaintiffs. We affirm the judgment for the defendants.

In reviewing the granting of a directed verdict in a civil case, we consider the evidence in the light most favorable to the plaintiffs to ascertain whether any combination of circumstances can be found which would warrant a reasonable inference in their favor. Forlano v. Hughes, 393 Mass. 502, 504, 471 N.E.2d 1315 (1984). On the evidence, the jury could have found the following facts.

The plaintiffs are the owners of Richman's Card & Party Shop on North Street in Pittsfield. They acquired the store in July, 1976, from Arnold Richman, who had purchased a large percentage of the store's greeting cards, gifts, and other inventory from the defendants. After buying the store, the plaintiffs continued to purchase about ninety percent of their inventory from the defendants. The remaining ten percent was purchased from four other companies selling greeting cards and related merchandise. The plaintiffs' dealings with the defendants (and their other suppliers) were on an "open account" basis; that is, the plaintiffs were under no obligation to purchase any merchandise from their suppliers, and they could terminate their relationship with any supplier anytime. Bills sent by the defendants were always paid promptly, and the store was kept in satisfactory condition.

On November 17, 1980, a fire destroyed the store. The plaintiffs rented a temporary location where they sold the merchandise salvaged from the fire. About one month later, this location was closed, and the defendants closed the plaintiffs' account. ³

Discussions then began between the plaintiffs, representatives of the defendant corporations, and the plaintiffs' former lessor about the reopening of the store at the North Street site. Also discussed was the possibility of reopening at other locations. At a meeting in December, 1980, the parties agreed that the plaintiffs could return to the North Street location. The plaintiffs were represented by counsel during these discussions.

In February, 1981, the plaintiffs were advised by a representative of the defendants that someone intended to open another store on North Street which would sell Hallmark products. The defendants also advised that they would no longer sell merchandise to the plaintiffs at the North Street location because the defendants had determined that the new store would give Hallmark adequate distribution of its products in the area. The defendants' representative suggested to the plaintiffs other sites for stores in Great Barrington and North Adams at which the defendants would consider selling to the plaintiffs. Relocation to another community was rejected by the plaintiffs. In March and April, 1981, the plaintiffs ordered cards and other inventory from the American Greeting Card Company, intending to reopen with this company as their principal supplier. American accepted the order.

On May 3, 1981, the plaintiff Sylvia Teitelbaum wrote to the defendants' attorney complaining about what she perceived as the defendants' shabby treatment of the plaintiffs, who had been good customers. The letter asked the defendants to reconsider the decision not to sell Hallmark products to the plaintiffs at the North Street location and also requested a meeting with the defendants' representatives. The defendants' counsel replied by letter on May 18, 1981. In that letter, counsel indicated that the defendants would not commit themselves to opening another account at the North Street location but agreed to a meeting between the plaintiffs and the defendants' representatives to discuss the plaintiffs' plans for opening a new store. The letter further advised the plaintiffs that they should not rely on any discussions with the defendants' representatives as indicating a promise on the defendants' part to sell to the plaintiffs at the North Street location.

On June 4, 1981, the defendants' representatives met with the plaintiffs. The upshot of the meeting was an offer by the defendants' representatives to sell inventory to the plaintiffs on the conditions that: the plaintiffs (a) carry exclusively Hallmark products and (b) permit the defendants, in their discretion, to ship product lines that the plaintiffs had not previously carried. The plaintiffs accepted those terms. Floor measurements were taken of the North Street site, and a financial statement was requested from the plaintiffs. Based on the discussions at the meeting, the plaintiffs cancelled their order with the American Greeting Card Company.

On June 11, 1981, the plaintiffs met again with the defendants' representatives to review a proposed floor plan of the North Street store. The defendants rejected the plaintiffs' request to place a deposit on fixtures for the store. Despite this, the defendants' representatives indicated to the plaintiffs that "everything was go" for the reopening of the store. Another meeting was scheduled for June 25, 1981. That meeting was cancelled by the defendants' store planner.

On July 8, 1981, the defendants' representatives advised the plaintiffs that they intended to do business with another store owner at a different location on North Street and would not sell merchandise to the plaintiffs at their former location on North Street. Notwithstanding this news, the plaintiffs subsequently signed a five-year lease, with options to extend, with their former lessor at their former location on North Street. (The plaintiffs concede that they were not legally obligated to sign the lease but chose to anyway). The store reopened in September, 1981. Since then the plaintiffs have been selling merchandise purchased from the American Greeting Card Company and other suppliers.

1. The plaintiffs argue that, by June 4, 1981, the defendants had obligated themselves to supply the plaintiffs with inventory for their store at North Street for an indefinite period. According to the plaintiffs, the oral understanding that had been reached required the plaintiffs to sell Hallmark merchandise exclusively, including any products that Hallmark wanted them to sell. The defendants, in turn, had agreed to supply the merchandise on the "open account" basis that had existed prior to the fire, viz., monthly orders and shipments, prompt payments on invoices, etc. The plaintiffs maintain that the commitments on the defendants' part arose either by contract (the exchange of the mutual promises outlined above) or by the application of the doctrine of promissory estoppel to the defendants' conduct (as that doctrine is outlined in § 90 of the Restatement [Second] of Contracts [1981] ). ⁴

There never was any written agreement. We do not accept the contention (which was not developed at trial) that a franchise agreement existed. The dealings between the parties had involved, and were to continue to involve, "transactions in goods" governed by the Uniform Commercial Code, G.L. c. 106, § 2-102, inserted by St.1957, c. 765, § 1. On the evidence considered most favorably to the plaintiffs, we think that the jury could have found that an oral agreement had been reached between the parties providing for periodic shipments of inventory by the defendants to the plaintiffs on an open account basis for an indefinite but reasonable period of time. Performance of such an agreement is governed essentially by the following provisions of G.L. c. 106, § 2-309, inserted by St.1957, c. 765, § 1:

"(2) Where the contract provides for successive performances but is indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party.

"(3) Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable."

These provisions codify common law principles that existed before the adoption of the Uniform Commercial Code. See Emerson v. Ackerman, 233 Mass. 249, 252, 124 N.E. 17 (1919); Livingston v. George McArthur & Sons, 332 Mass. 83, 86, 123 N.E.2d 379 (1954).

Since there was no express agreement preventing termination, the arrangement that existed was terminable at the...