Zelensky v. Viking Equipment Co., 38528

• Decision Date: 29 December 1966
• Docket Number: No. 38528,38528
• Citation: 70 Wn.2d 78,422 P.2d 293
• Court: Washington Supreme Court
• Parties: Eugene D. ZELENSKY, Respondent, v. The VIKING EQUIPMENT CO., Inc., a Washington corporation, Appellant, Simonsen Radio A/S, a corporation, Respondent.

Page 78

70 Wn.2d 78

422 P.2d 293

Eugene D. ZELENSKY, Respondent, v. The VIKING EQUIPMENT CO., Inc., a Washington corporation, Appellant Simonsen Radio A/S, a corporation, Respondent.

No. 38528.

Supreme Court of Washington, Department 1.

Dec. 29, 1966.

Matsen, Clark, Cory & Matsen, Newman H. Clark, Seattle, for appellant.

Pomeroy, Zelensky, Furnia & Munro, Ernest M. Furnia, Seattle, for respondents.

SOULE, Judge. ^*

This proceeding started as a simple action by Eugene Zelensky, the assignee of a Norwegian manufacturer, to collect an account from a local distributor. It developed into a sharp controversy arising from a counterclaim by the distributor.

Simonsen Radio A/S is a Norwegian corporation which manufactures echosounding and sonar equipment suitable for use on fishing vessels. It also manufactures a very advanced line of experimental electronic equipment for research purposes. For the purposes of this action, plaintiff Zelensky's interests are identical with Simonsen Radio A/S, and in the opinion hereafter we will refer only to Simonsen Radio A/S, the true party in interest, and for brevity will refer to it as Simonsen.

The Viking Equipment Company is a Washington corporation which distributes machinery. In 1959 it entered into a written contract with Simonsen whereby it became the exclusive distributor for Simonsen in Washington, Oregon, and California. On October 9, 1960, a new contract was executed similar in terms, but enlarging Viking's territory to include Alaska and Hawaii. That contract provided, in part, as follows:

I. DISTRIBUTORSHIP. The Company grants to the Distributor the exclusive right to sell the marine line of the Company's products, including its Radiotelephones, Echo Sounders, Asdic Sounders and Supplementary gear and White Line Recorders directly and through qualified dealers appointed, serviced and contracted with by the Distributor in the states of Alaska, Washington, Oregon, California, and Hawaii, for a period of 2 years--two years from date hereof and Thereafter as this Agreement may be extended through mutual consent of the parties hereto.

IV. GOVERNMENTAL SALES. In addition to the territory of the five states above named, the Distributor or its dealers may sell to the agencies of the United States Federal Government of the five states named, And will be protected in their selling rights according to sales instigated by the Distributor. (Italics ours.)

Under the contract Viking was to actually buy the articles and resell them for its profit rather than to be compensated by commissions.

Relations between the parties eventually came to an end though not precisely on October 9, 1962. By informal mutual agreement, manifested by letters in evidence the relation continued into the month of February 1963, but after October 9, 1962, the relation was terminable at will.

By February 1, 1963, Viking owed Simonsen the sum of $16,404.28, for merchandise received but not paid for. This amount is not disputed, but Viking asserts a counterclaim based upon loss of profits from four sales which Simonsen allegedly made directly to the ultimate purchasers in violation of the agreement. Claims based on two of the sales were withdrawn during trial.

Additionally, Viking asserts that the contract provision protecting it on governmental sales 'instigated' by Viking was violated to its damage by virtue of a direct sale by Simonsen to the United States Department of the Interior, Fish and Wildlife Service, Bureau of Commercial Fisheries, in Seattle on March 7, 1963. This is the sale upon which Viking claims to have been working for more than a year prior to the unilateral termination of the distributorship agreement. For convenience we will hereafter refer to this customer as the Bureau of Fisheries.

The case was tried to a jury, but at the end of all the evidence the trial judge took the matter from the jury, granted judgment on the primary debt, and dismissed the cross complaint in its entirety. In so doing we believe that he was in error as to that portion of the counterclaim addressed to the sale to the Bureau of Fisheries and to that based on the transaction with one Nick Trutanich.

We will consider first the problem of the sale to the Bureau of Fisheries. Section IV of the distributorship contract, as previously noted, provides that the distributor and dealers will be protected in their selling rights according to sales Instigated by the distributor.

The word 'instigated' is an unusual one in this context. In The Oxford English Dictionary (1st ed. 1933), we find: 'Instigate--to spur, urge on; to stir up, stimulate.'

Whether the benefits of the protection clause can properly be applied to a sale 'instigated' by Viking but not consummated at a time when Simonsen chose to terminate the contract relation was not discussed by the trial judge in his oral opinion. He rested his decision entirely on the ground that the contract had expired.

The subject of the sale was a unique electronic device not available from any source other than Simonsen. The eventual sale price was $163,500, so the dollar value of the sale made it of great interest both to Simonsen and to Viking. Its installation had to be carefully planned in advance in close correlation with the planning of the research vessel upon which it was to be installed. That this was known to Simonsen is shown by its letters of January 2 and 11, 1962, in which it recommended to Viking a course of action in seeking to get the equipment placed on a Bureau of Fisheries' vessel.

The details of the sales efforts Viking made from that time forward are not entirely clear, but by letter of January 24, 1963, Viking informed Simonsen that the call for bids would be issued soon. This letter further informed Simonsen that Viking had been working for the past year on the promotion of the sale.

No reply was received to the letter, but on February 21, Viking sent a cable to Simonsen asking for a price to be used as a basis for the bid. This was followed by another cable on February 25, noting that Viking had submitted complete specifications and drawings and that the customer wanted a firm price.

The reply received was a cable of February 28, 1963, in which Simonsen requested that Ted Jules, Viking's former sales manager, go to the Bureau of Fisheries and get certain bid forms and airmail them to Simonsen.

In early March Viking's president, Mr. Isaacson, went to Oslo, Norway, to try to get the quotation. His requests for information were met with evasions. The requested price was never furnished and thus Viking could not bid. Simonsen submitted a direct bid which was successful.

The fact pattern here presented is very similar to that of Hamilton v. C. L. Best Gas Traction Co., 123 Wash. 488, 494, 212 P. 1077 (1923). In that case the plaintiff was granted the exclusive right to sell defendant's products in certain parts of Eastern Washington and Northern Idaho. The contract contained provisions very similar to the one presently under consideration insofar as the method of buying and paying for the wares was concerned. It also contained a clause which permitted cancellation on written notice.

The plaintiff entered into negotiations with a prospective purchaser. Negotiations were protracted. The plaintiff notified defendant of the pending sale and kept it informed of the progress. Just before the sale was to be consummated defendant terminated plaintiff's contract.

We declined to permit the defendant to use its right to terminate to defeat the claim for compensation. This court said:

(A)s to sales of which plaintiff should become the efficient procuring cause, consummated by the defendant even after the termination of the written agreement, following continuous negotiations from the time of the commencement thereof by the plaintiff, before termination of the agreement, until consummated by the defendant, this original written agreement should, as to such sales, be construed as an agency agreement so as to entitle plaintiff to compensation for the making of such sales, * * *.

In so doing we relied on cases which protect brokers who, having no fixed term of employment, are discharged in the midst of negotiations which are thereafter concluded directly by the principal. Knox v. Parker, 2 Wash. 34, 25 P 909 (1891); Norris v. Byrne, 38 Wash. 592, 80 P. 808 (1905); Lawson v. Black Diamond Coal Mining Co., 53 Wash. 614, 102 P. 759 (1909); Merritt v. American Catering Co., 71 Wash. 425, 128 P. 1074 (1912); Duncan v. Parker, 81 Wash. 340, 142 P. 657, L.R.A. 1915A, 804 (1914).

In its brief Simonsen argues that the first notice Viking had of the request by the Bureau of Fisheries for bids was received by it on March 1, 1963. This position finds no support in the record in view of Viking's letter of January 24, 1963, and its cables of February 21 and 25, 1963.

We hold that, although Simonsen had the right to terminate the distributorship at will, and apparently did so in February of 1963, that as to the government sale then pending, it could not terminate Viking's right to compensation if Viking was the procuring cause of the sale. On the record before us, viewing the evidence and reasonable inferences therefrom in the light most favorable to Viking, we believe that this was a question for the jury.

The contract actually provides that Viking will be protected on sales instigated by it. If the record were more definite it might be possible to hold, as a matter of law, that Viking is entitled to compensation simply because it stimulated or spurred on the sale, even if its efforts were not the procuring cause, but the record is confused as to what specifically was done by Viking after it received Simonsen's letters of January 2 and 11, 1962.

The claim for damages from the sale to Nick Trutanich arises from the efforts of Viking and its San Pedro distributor, Benrad, to sell a commercial sonar installation to Nick Trutanich for use on his vessel,...