Schweinburg v. Altman

145 A.D. 377, 130 N.Y.S. 37, 1911 N.Y. App. Div. LEXIS 1795

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: June 9, 1911
• Status: Published

Opinions

Scott, J.:

This is an appeal by- defendant from a judgment for one year’s installment due to' plaintiff, as it-is claimed,-under an agreement for the payment of royalties.

Prior to the year 1901 plaintiff was the agent in this country for the firm of Zoeppritz, Óantz & Ziegler, corset manufacturers, of Oannstatt, Germany. He had the exclusive control of the sale of their products in this country, and owned certain of the trade marks under which their-goods were sold. His sole business was selling these goods. He had been engaged in this or a similar business for a number- of years and was well known to defendant. In the year 1901 defendant desired to acquire control in this country and Canada of the whole output of the aforesaid German firm, and in July of that year a tripartite agreement was entered into between plaintiff of the first part, the German firm of the second part and defendant of the third part. By this agreement plaintiff transferred to defendant “the entire and sole control of all grades of corsets made by Zoeppritz, Cantz & Ziegler for the United States and Canada, including all rights of the said party of the first part secured thereby for the United States and Canada; and the said party of the first part hereby agrees that the party of the third part shall become the sole agent of the said firm of Zoeppritz, Cantz & Ziegler for the United States and Canada.” The German firm on its part agreed to ship and sell to defendant all goods he might order for sale in the United States and Canada,, and that they would not manufacture and sell any corsets directly or indirectly for or to any one in the United States or Canada. The prices were to remain as theretofore except for new styles, which were to be invoiced at as low a price as possible. There were other conditions in the contract which it is not necessary to recite. The contract- contained the following clause as to its duration, which lies at the bottom of this controversy, and is, therefore, quoted at length: “This contract is to take effect on the first day of November, 1901, and is to continue in force for the term of fifteen (15) years, subject ..to termination, however, at the expiration of five (5) years by the giving of written notice, by registered mail, one (1) year in advance to. the said party of the first part, and to the parties of the second part; and further subject to the right of the said party of the third part to cancel this contract at any time by a written notice, sent by registered mail, to the said parties of the first and second parts, in case a change of customs should take place, by which the present rate of duties in the United States shall be increased to such an extent as, in the judgment of the said party of the third part, the further importation of corsets is proved unprofitable, and,' in this case, all outstanding orders shall be delivered and accepted by the party of the third part.

’ “ This contract is to be binding upon the parties hereto, their heirs, executors and assigns forever.”

Simultaneously with the execution of the above-mentioned contract plaintiff and defendant entered into a contract for the payment by defendant to plaintiff of a royalty, in annual installments, in consideration of plaintiff’s assignment to defendant of the sole control of the goods manufactured by the German firm, and to plaintiff’s agreement to give up and liquidate his business.

This agreement can be more conveniently quoted, than summarized. It reads as follows:

“Memorandum of Agreement made and entered'into this fifth day of July, 1901, by and between Emil Schweinburg, of the City of New York, hr the State of New York, party of the first part, and Benjamin Altman, doing business under the name of B. Altman & Co. of the City and State of New York, party of the second part.

“In view of the party of the first part waiving all his interests and profits of the business hitherto made by him in the United- States, by reason of his controlling and selling corsets manufactured by Zoeppritz, Cantz <⅛ Ziegler, of Cannstatt, Germany, and .in consideration of the party of the first part having transferred the said control for the United States and Canada to B.- Altman & Co., as per contract executed-this fifth day' of July, 1901, the party of the second part agrees to pay to the party-of the first part, during the term of said contract, and also for the terna to he agreed to at the time of expiration .of contract, an annual royalty of Seven thousand Five hundred ($1,500.00) dollars, payable quarterly, and-in addition to this amount, a commission of ten (10$) per cent, to he paid to the party of the first part on all purchases made by the party of the second part from Zoeppritz, Cantz & Ziegler, of Cannstatt, Germany, exceeding the annual guarantee amount of One hundred and Fifty thousand marks; the exact amount of commission to he calculated on the actual amount ■ remitted tó Zoeppritz, Cantz & Ziegler.

“It is also agreed that whenever the party of the second part should cancel the contract after five years, as stipulated, the annual royalty and commission shall cease.

“ The party of the first part agrees that he will not transfer, sell or assign any of the trade marks or trade names now used or to be used for corsets manufactured by Zoeppritz, Cantz & Ziegler, during the term this contract remains in force, and also in case of a renewal for the use in the United States by any other party or parties except by the party of the second part. The party of the first part gives party of the second part herewith the right to import and sell corsets thus stamped, branded and labeled with .the said marks and manufactured by Zoeppritz, Oantz <⅛ Ziegler for the parties which have hitherto dealt in them, and should these parties not continue to purchase from the party of the second part the said goods, .the. party of the second part has the right to sell the corsets bearing the trade marks or trade names and stamped, branded and labeled to other parties in the United States.

“The party of the second part agrees to uphold the various trade marks and trade names secured for the United States as far as possible, and promises to use the best efforts to increase the sale of corsets stamped, branded and labeled Z. Z. and £Au Coeur ’ by reason of his selling the said goods. '

“ The party of the second part further agrees that all rights for the said trade marks and trade names for use in the United States or Canada, shall revert to party of the first part whenever the contract before mentioned is discontinued.

“ Party of the first part further agrees that he will liquidate ' his present business immediately after this contract goes into effect, and that, during the term of this contract, and during its continuance, if renewed, he will not re-establish himself again in the same business in the United States.

“ This contract to be binding upon the heirs, executors and assigns of both parties.

“ (Signed)

“EMIL SOHWEINBUKG- [l. s.]

“B. ALTMAN & CO. [l. s.]

“ In the presence of

“ MilxoN M. KleiN.”

The plaintiffyhas recovered judgment for $7,500, with interest, representing the royalty due for the year commencing November 1, 1906. The defense to the action is that the contract between plaintiff, the German firm and defendant was terminated by the latter, in accordance with the terms of said contract, on November 1-, 1906; and that the contract for the payment of royalty thereupon by its own terms ceased. To this’plaintiff replies that the contract between himself, the German firm and defendant was never terminated actually and in good faith, but that defendant and the German firm pretended to terminate said contract and enter into a new one merely for the sake of eliminating plaintiff and avoiding the obligation to pay him the stipulated royalty. The case was submitted to the jury with instructions that under .his contract with plaintiff and the German firm defendant had the absolute right for any reason, or for no reason, to terminate the contract on November 1, 1906, upon giving the requisite notice, but that in order to cut off plaintiff's right to his stipulated royalty, the termination of the contract must be real and not merely pretended. After referring to the notice which defendant did give announcing his election to terminate the contract, the court said: “ Therefore the question of fact which will , come before you for determination is: "Was this a termination of the contract? Did Altman give a notice in good faith terminating that contract, and intending to terminate that contract, or-did he simply give that notice as a pretense to cut off Schweinburg from "his commissions, and did he then intend to and did they' go on with the contract in substantially the" same form, turning over the whole product of the factory to Altman on substantially the same terms as in the written contract to which those three interests were parties? That.is the question of fact for you to determine.” And again: “The question for you to determine is: Was this all a part of one scheme? Did Altman, under his contract, by giving the notice, according to his theory, do so merely as a pretense, and with the idea and fixed ■ design of continuing on substantially the same terms with Zoeppritz, Cantz & Ziegler? ”

To these instructions no objection or. exception was taken by defendant, and no request for any contrary instruction was made by defendant. Indeed no exception was taken by defendant to any part of the charge and no request made by defendant was refused. It, therefore, stands as the law of the case that while defendant had the absolute right to terminate- the contract on November 1, 1906, he could not by a pretended or sham termination cut off plaintiff’s right to be paid royalties. By their verdict the' jury have found that defendant did not terminate the contract, but only pretended to do so, and we cannot say that this finding is not justified by the evidence. That evidence consists of correspondence between defendant and the German firm, beginning with a final notice on defendant’s part on October 13, 1905, of his intention to terminate the contract on November 1, 1906, coupled with a statement that this action was taken with regret, and influenced by the large royalty which defendant was required to pay to plaintiff. Other correspondence followed resulting in an agreement reached in August, 1906, to continue the business relations .under substantially the same terms, with but slight variations from the original contract, and since that time the business has apparently gone on without break or interruption just as it did before, defendant continuing to receive and control all of the output for this country of the factories of the German firm, using the same trade marks which had been turned over to defendant by plaintiff. It is reasonably apparent and the jury were quite justified in finding that the original contract had never been terminated actually and in good faith, but that there had been only a pretended termination induced by a desire to avoid the obligation of paying plaintiff’s royalty.

There is, however, another reason why the judgment appealed from is right. The contracts already quoted from were evidently drawn with considerable care, and by some one accustomed to the preparation of legal documents. We must assume, therefore, that the words used to express the rights and obligations of the several parties were so used deliberately and with intention. Turning to the tripartite agreement, we find that it is to run for fifteen years, but may be sooner ended by the defendant in two contingencies. First. It might be terminated at the expiration of five -years by the giving of written notice to plaintiff and the German firm one year in advance. Bor the termination of the contract under this clause it was not necessary that any reason should be assigned or should exist, except the will of the defendant, but if thus terminated it must be on November 1, 1906, not earlier or later. (Goelet v. Spofford, 55 N. Y. 647.) Second. The defendant reserved the right to cancel the contract at any time ‘ ‘ in case a change of customs should take place, by which the present rate of duties in the United States shall he increased to such an extent, as, in the judgment of the said party of the third part [defendant] the further importation of corsets is proved unprofitable.” There was no time specified when this cancellation might take place. It might be at any time, before or after the five years, provided only the prescribed conditions arose. They did not arise, and the defendant never attempted to cancel the contract, under this clause, hut rests his case solely upon his right, to terminate the contract at the expiration of five years. Turning now to the contract between plaintiff and defendant we find that the clause respecting the cessation of royalties reads as follows: “It is also agreed that whenever the party of the second part should cancel the contract after five years, as stipulated, the annual royalty arid commission shall cease.” Here the cessation of royalty payments is made dependent, not .upon the termination of the contract at the expiration of five years, but upon the cancellation of the contract after five years. According to the strict letter of the' agreement a termination of the contract at the-end of five years, at the mere whim of defendant would not terminate plaintiff’s right to the annual royalty payment, and' no reason is suggested why the strict letter should not control. Indeed, there seems- to be some reason for asstuning that this particular phraseology was used with intention. Plaintiff had not only negotiated a contract between the German firm'and defendant, but had sold out absolutely to defendant- his own business for a royalty of an amount to justify the inference that the business had been profitable. It may well be that while he was unwilling to stake the permanence of .his royalty payments upon the unqualified option of defendant to abrogate the contract, yet that he was willing to take the same chance as to changes in the tariff law that defendant must take, and to be content, after receiving royalties for five years, to abandon them if an increased duty made the business unprofitable, for the same condition would have destroyed his own business if he had not sold it to defendant. "Whether this he the true explanation or not, the fact remains that, according to the letter of. the contract between plaintiff and defendant, the termination of the tripartite agreement at the end of five years was not the event which was to discontinue plaintiff’s right to receive the royalty, which was in the nature of a price paid for the sale of a business, and not mere commissions on the amount of business done.

In either view, therefore, the judgment was right and should be affirmed, with costs.

Laughlin and Clarke, JJ., concurred; McLaughlin, J., and Ingraham, P. J., dissented.