American Motor Inns, Inc. v. A. W. L. Advertising Agency, Inc.

McWilliams, J., delivered the opinion of the Court. Both parties are unhappy; both have appealed. The dispute arose out of a relationship claimed by the appellee (the agency) to be a contract but which the appellant (Motor Inns) says was nothing but a “budget allocation.” The trial judge, Grady, J., sitting without a jury, found the relationship to be a contract and he awarded the agency $3,492 as damages lor its breach. His subsequent reduction of this to $2,000 is the cause of the agency’s vexation.

Motor Inns owns and operates Holiday Inn Downtown, a Baltimore gasthof. The agency is well-known in the advertising business. In October 1966 Motor Inns sought the services of the agency for assistance in promoting and publicizing a new nightclub and in the remodeling and refurbishing of other rooms associated with the nightclub. Representatives of the parties met eight or nine times during October to develop ideas and plans.

They discussed in detail the motif to be adopted, the decor, the furnishings, the costumes for waitresses and ⁶⁵⁶ what in the trade is known as the “logo,” a format of unusual design for the name of the nightclub. The agency submitted a five page proposal of ways and means of attaining the objectives of the campaign. Budget allocations for advertising were discussed and revised several times. The final revision, dated 3 November 1966 and signed by both parties, is reproduced below : AMERICAN MOTOR INNS, INC.

BUDGET ALLOCATION Re-revised 11/3/66 OPENING PERIOD (4 wks. -plus 2 ’wks. Pre-Opening) Newspaper $ 4,440.00 Radio 3,000.00 Special Publications 600.00 Used at discretion of agency on any of the above 800.00 Total $ 8,840.00 ANNUAL BUDGET (Succeeding 10 months) Newspaper $ 8,880.00 Radio 6,000.00 Special Publications 1,200.00 1,700.00 Total $17,780.00 1. Plus 16^3% agency fee. 2. Plus $200 per month public relations fee (payable monthly).

Please sign and return this original in the space provided below, and retain two copies for your files. Very truly yours, Herbert A. Robinson /s/ Vice President Authorized: A. O. Krisch /s/ For: American Motor Inns, Inc. Date: 11/3/66 ⁶⁵⁷ The agency went to work immediately. For two or three weeks, according to the testimony, six or seven of the agency’s employees spent long hours, at night, on Sundays, and on holidays, doing what was required to get a “crash program” under way. Most of the preliminary work had been finished by 17 January 1967 when the agency received a letter from Motor Inns terminating its services.

No reason was given. Houck & Co. of Roanoke, Virginia was engaged by Motor Inns to continue the advertising program. The agency, at the request of Houck & Co., rendered assistance until the end of January after which it did nothing further. On 10 May 1967 the agency filed suit in the Superior Court of Baltimore City.

The details of its claim are as follows: To American Motor Inns, Inc. Unexpended Budget and Amount Owing Due To Cancellation One Year Budget Expended Unexpended $13,320.00 $ 8,081.05 $ 5,238.95 N ewspaper 9,000.00 4,233.10 4,766.90 Radio 1,800.00 2,021.00 -221.00 Spec. Publ. 2,500.00 2,132.83 367.17 Agency Discretion $26,620.00 $16,467.98 $10,152.02 Public Relations Fees $1,800.00 $2,400.00 $600.00 Amount Owing 16j^% of $10,152.02 Advertising $1,692.00 9 months Public Relations Fee 1,800.00 Total $3,492.00 At trial the parties were in sharp disagreement in respect of the duration of the agency’s engagement and the formula for its compensation. Herbert Robinson, the agency’s vice president, testified it was to receive commissions equivalent to 16%% of all amounts paid to advertising media during the 11% months and, in addition, a fee of $200 per month. Cas Applestein, the president, said his agency would not have been interested in ⁶⁵⁸ '.handling the account for less than one year.

The testimony of witnesses produced by Motor Inns was, in general, to the effect that nothing was said about a definite term, that “it’s .against * * * [Motor Inns’] policy altogether,” and that no ■one remembered any such discussion. The agency produced as a witness Ernest G. Schoenback who qualified as an expert in advertising matters. He testified that in Baltimore the practice concerning written contracts between advertising agencies and their clients is subject to considerable variation. Motor Inns offered the testimony of Gilbert Sandler who also qualified as an expert witness.

He said there was a difference between a contract and a budget. His agency, he continued, requires both a written contract and a budget with all of its clients. He said also that his agency requires a “non-cancellation clause” in its contract and that the period during which cancellation is precluded is a minimum of ¡one year. At the conclusion of the evidence Judge Grady announced, •from the bench, the reasons for his decision.

Excerpts therefrom are set forth below. “* * * It seems to me the logical way for the advertising agency to approach the situation is to find out how much money is going to be spent in a given period, agree on some percentage of that money and adjust their efforts accordingly. “Now, if the period of time over which the money is to be expended is not definite, then there isn’t any yardstick at all. “It seems to me, if an agency is led to believe that there is going to be a hundred thousand dollars spent in the next year in this undertaking, then they go ahead and spend several weeks laying out a campaign, and the campaign is adopted; but at the end of the month the client says ‘we are going to use your idea, we are going to make a few changes, but you are out of business, and somebody else is going to collect the other eleven months of percentage,’ this, it seems to me, is beyond normal expectation and certainly, to ⁶⁵⁹ me, could not have been within the expectation of the parties in this case. “I admit that this paper, which is offered as Plaintiff’s Exhibit Number 2, and headed ‘Budget Allocation,’ leaves a lot to be desired, but it is signed by the party representing the advertising agency and by a representative of the advertiser. “It sets forth, in my opinion, a period of time in which this money is to be spent and the compensation which the agency is to get from that expended money; and certainly the reference to public relations and advertising, newspaper, radio, and, et cetera, is certainly descriptive of the services that the agency is to render.” * * * “I find that the term is sufficiently fixed for a period of two weeks short of one year. Additionally, the percentage is set forth as is the $200 monthly fee. “I find that the contract was an enforceable one and that no sufficient ground for its cancellation has been demonstrated.” Within the required time Motor Inns moved for a new trial or, in the alternative, a judgment n.o.v. Judge Grady, on 25 June 1968, denied the motions and in the same order reduced the judgment nisi from $3,492 to $2,000. He set forth his reasons for so doing in a “Supplement to Order” filed 31 July 1968, from which the following is quoted: “At the time of the trial the Court’s assessment of damages in the amount of $3,492 was based on the following considerations: “Item I. The loss of income to the Plaintiff as a result of its not receiving the agency commission of 15% [sic] of the funds allocated for advertising which were in fact expended for advertising by the Defendant in accordance with the allocation; and “Item II. The loss to the Plaintiff of $200 per month allocated as ‘public relations fee.’ “With reference to Item I above, the Court found ⁶⁶⁰ from the evidence that the advertising motif and program conceived and produced by the Plaintiff had been continued by the Defendant without substantial changes for the balance of the term of the contract.

The commissions payable to the Plaintiff as a result of the continuation of this advertising program under these circumstances would have compensated the Plaintiff for the services it had already performed without any substantial additional expenses being incurred by the Plaintiff. After hearing argument of counsel on the Defendant’s Motion for a New Trial and upon reflection, the Court has concluded that this loss of income to the Plaintiff represents the only proper measure of damages. “With reference to Item II above, the Court has determined from the evidence that the monthly feé' of $200 • as ‘public' relations fee’ did not constitute compensation for services already rendered by the Plaintiff in the creation of the advertising program,' but rather was á fee which the Plaintiff would have: been required to earn by the rendition of continuing ¡ ser vices. Since earning this monthly fee would have undoubtedly resulted in continuing cost to the Plaintiff, and since the Plaintiff in fact neither rendered the services nor incurred the cost’ thereof, the Court has concluded" th^t Item II above was not recoverable by the Plaintiff.' “For these reasons the measure of damagés was reduced in- the .Order of June 25> 1968, to allow 1 compensation to!the Plaintiff for Item I only.” I. M-otor Inns insists “it is clear there was no agreement between the parties as to the exact nature of the services to be rendered!’, and that the agency was to receive commissions only “for advertising placed.’.’ The “B.u.dget Allocation” of 3 November . 1966, it-argues,'-was.npt a contract,,.according to the custom and usage of the business; it was. 'Simply a “guideline” which is .used to indicate the amount of money an advertiser thinks he may have to spend in a stated period and which can ⁶⁶¹ be revised whenever he feels the exigencies of the moment suggest a revision. And since it can be revised at any time it is terminable at will.

Motor Inns views the relationship between itself and the agency as “one of agency whereby the advertising agency was employed to place certain advertisements.” In its brief it has chosen to ignore the “public relations fee.” To sustain its position Motor Inns relies almost exclusively on two Missouri cases, H. W. Kastor & Sons Adv. Co. v. Grove Laboratories, Inc., 58 F. Supp. 1011 (1945) and Krupnick & Associates, Inc. v. Hellmich, 378 S.W.2d 562 (Mo. 1964). We shall not prolong this opinion with a full discussion of them because, in our judgment, neither has any applicability to the case at bar. We think there was quite enough evidence in this record to support Judge Grady’s finding that there was a contract between the parties and that “the term * * * [was] sufficiently fixed for a period of two weeks short of a year.” In Kastor the court said: “There is no evidence upon which a finding can be based that the relationship was to continue for any fixed period of time.

This Court cannot make a contract for the parties. We believe the reasonable deduction to be