Van Pelt v. Paull
| Decision Date | 28 June 1967 |
| Docket Number | No. 3,Docket No. 1746,3 |
| Citation | 150 N.W.2d 185,6 Mich.App. 618 |
| Parties | Mary Birrel VAN PELT, Plaintiff-Appellee, v. Frederick E. PAULL, Doris Eaton Travis, Arthur Murray Studios of Michigan, Inc., a Michigan corporation and Doris Eaton Travis, Inc., a Michigan corporation, Defendants-Appellants. May, 9, 1967. Rehearing Denied |
| Court | Court of Appeal of Michigan — District of US |
K. E. Thompson, Traverse City, Darden, Neef & Heitsch, Detroit, of counsel, for appellants.
William L. Wise, Running & Wise, Traverse City, for appellee.
Before McGREGOR, P.J., and BURNS and NEWBLATT, * JJ.
Plaintiff signed 2 contracts with 'Arthur Murray School of Dancing' at the Traverse City Arthur Murray studio which was being operated by the defendant Paull. She paid $3,687.50 for 315 hours of dance instruction. Subsequently, Paull had financial difficulties and ultimately was adjudged bankrupt. Plaintiff did not receive any lessons after August 1, 1962, although there remained 208 hours of lessons under the contracts.
Plaintiff commenced this action for the recovery of the value of the dance lessons. Defendants Arthur Murray Studios of Michigan, Inc., a Michigan corporation, Doris Eaton Travis, Inc., a Michigan corporation, and Doris Eaton Travis, individually, were joined because of an alleged agency relationship with the defendant Paull. Paull, however, was never served with process due to his bankruptcy proceedings.
At the conclusion of the trial, the circuit judge stated:
'This is a question of agency and a question of fact whether or not there was any holding out to the public which would justify Mrs. Van Pelt's recovery against Arthur Murray Studios of Michigan, Inc., or Doris Eaton Travis individually or as a corporation.'
The trial judge in a written opinion held that under the facts of this case an agency was established and granted a judgment to the plaintiff against all of the defendants except Paull.
In opposition to plaintiff's theory that Paull was an agent of the other defendants, the appellants claim that Paull was an independent sublicensee of Arthur Murray Studios of Michigan, Inc., and that, therefore, any contracts entered into by Paull, who was doing business as Arthur Murray Studios of Traverse City, were his sole responsibilities.
The appellants have appealed the judgment of the trial court on 7 specific grounds of error, each ground pertaining to one factual situation of the entire relationship between the parties. For our determination the issue in this case is: Were there sufficient facts in evidence for the trial judge to find that an agency relationship existed between the defendants?
To start, let us examine the contract in effect between the defendants, Arthur Murray Studios of Michigan, inc., and the defendant Paull. Some provisions of the contract which was designated as 'subfranchise agreement' are summarized below:
§ 1.02 provided that Paull pay to the corporation 11 1/2 percent of his gross receipts and maintain books and records to be available to the corporation § 1.03 provided that Paull conduct the school on premises owned or leased by the corporation or controlled by the corporation.
§ 1.05(a) allowed the corporation to set the minimum price Paull could charge for lessons; (b) obligated Paull to honor any unused lessons of Any pupil who purchased lessons from the corporation or any other person operating under the national Arthur Murray franchise; (c) obligated Paull to operate the school in accordance with standards and procedures set by the corporation; (d) obligated Paull to pay part of any state-wide advertising or promotional activities.
§ 1.07 prohibited Paull from borrowing money without the consent of the corporation.
§ 1.08 provided that Paull submit to the corporation in advance of employment the names of all persons to be employed by Paull.
§ 1.16 obligated Paull to furnish the corporation a monthly accounting statement and to pay the corporation $50 per month for bookkeeping services.
§ 1.17 provided that upon termination of the agreement in the event of strict compliance with § 1.19 of the agreement by Paull the corporation agreed to teach any untaught lessons contracted by Paull.
§ 1.18 obligated Paull to pay into a trust account 1 each week 3 1/2 percent of his gross receipts until the account equaled 15 percent of the average annual gross receipts for the most recent 3 years, provided, if the licensee (Paull) owed any past obligations to the corporation, then the said 3 1/2 percent would be paid to the corporation to reduce the debt. This section further provided that Paull was not allowed to draw in excess of $50 per week from the business until said trust account was fully funded.
The contracts executed by the plaintiff were signed at the Traverse City studio on a form furnished by the Arthur Murray Printing Service. The form did not specify with whom the plaintiff contracted, but stated 'Arthur Murray School of Dancing.' The plaintiff testified that she thought at the time she signed the contract that she was contracting with a national organization.
The testimony also indicates that defendant Paull had studios in Lansing and Jackson as well as in Traverse City, and that all of Paull's business transactions were made through a Lansing bank. Due to Paull's financial problems at the time, all checks on the Lansing account had to be countersigned by the defendant, Doris Eaton Travis.
The testimony indicates that when it was first contemplated that a studio would be opened in Traverse City, Doris Eaton Travis went to Traverse City and made arrangements to lease property from one William Votruba; the lease was consummated between Votruba and Doris Eaton Travis, Inc., which was controlled by Doris Eaton Travis, individually. Doris Eaton Travis, Inc., subleased the premises to Paull in accord with the 'sub-franchise agreement,' § 1.03.
The record also indicates that many of Paull's royalty checks were actually made payable to Doris Eaton Travis...
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