Foster-Porter Enterprises, Inc. v. De Mare

Markell, J., delivered the opinion of the Court. These are cross-appeals from a decree (1) dissolving a restraining order and (2) declaring that an agreement dated March 13, 1950, between plaintiff and defendant, Foster-Porter Enterprises, Inc., is still in full force and effect and is the only agreement or contract between them. Defendants appeal from the declaration that the March 13, 1950, agreement is still in full force and effect; plaintiff appeals from dissolution of the restraining order. Plaintiff filed a bill against Foster-Porter, Thomas R. Foster, Edward J. Foster and Richard T. Porter, officers and directors of Foster-Porter, alleging that by written agreement dated March 13, 1950, he was constituted by Foster-Porter the exclusive distributor of mechanical devices for the pitching of baseballs, known as “Foster ²³ Pitching Arms”, in New Jersey and Florida, and at the time of the execution of the agreement it was verbally understood that by supplemental agreement he would be constituted a national distributor “in all and any place or places throughout the United States where he desired to set up an agency, provided that he purchased and paid for at least five machines at a price which would give them a fair return”, that defendants had failed and refused to exercise the supplemental agreement and that by written notice dated July 11, 1950, Foster-Porter had advised plaintiff that the agreement of March 13, 1950, was cancelled by reason of his breaches of it.

The bill prayed injunction against cancelling the agreement of March 13, 1950, execution and specific performance of a supplemental agreement constituting plaintiff national distributor of defendants’ products, injunction from entering into any agreement with any person or persons for the purpose of selling or distributing “Pitching Arms” in contravention of defendants’ agreements with plaintiff, and accounting. On August 14, 1950, the day the bill was filed, without notice to defendants, an order was signed “that a writ of injunction be issued as prayed in said bill” upon the filing of a bond in the penalty of $2,000. In view of ambiguity in the prayers of the bill as referred to in the order and apparent contradiction between the order and the injunction issued by the clerk, the scope of the order and the injunction is not clear. As neither party has made any point of this, we need not consider it.

Nor has any question been raised as to the scope of the two appeals. They seem to be regarded by both parties as appeals from so much of the decree as is contrary to or falls short of the contentions of the respective parties. We shall so regard the appeals. On September 5, 1950, defendants filed an answer (including a demurrer) to the bill and a motion to dissolve the restraining order of August 14, 1950.

On September 25, 1950, the case was heard, before Judge Moser, on the merits as well as on the motion to dissolve. ²⁴ On September 20, 1950, plaintiff had filed an amended bill, making additional parties, Automatic Baseball Equipment Corporation, incorporated in August, 1950, to take over Foster-Porter, as licensee and distributor, Mitchell-Hoffman and Company, Baltimore investment bankers, who on June 17, 1950, had contracted to make a public offering of 600,000 shares of stock of Automatic in connection with reorganization and expansion of Foster-Porter, and Telecoin Corporation of New York, a national distributor of Foster-Porter under an agreement dated August 1, 1950. Telecoin was not served with process. The other defendants answered and all except Mitchell-Hoffman have appealed. At the hearing extensive testimony was taken, much of it relating to conversations between the parties prior to or at the time of the execution of the contract of March 13, 1950.

Because the bill charged fraud, the court admitted much testimony subject to exception. After the close of the testimony, the court, finding no fraud, on motion struck out the testimony admitted subject to exception. On October 11, 1950, Judge Moser entered the decree from which these appeals are taken and filed the following memorandum opinion: “The court finds there was no fraud in connection with the written contract of March 13, 1950, and, therefore, conversations between the parties prior to or at the time of the execution of said contract are not admissible and should be stricken from the record. Were this not so, however, the court would further find that such conversations did not amount to any contract or agreement, but merely a hope or expectation of an indefinite something that might eventually materialize.

The court further finds that the written agreement of March 13, 1950, was not properly terminated by the Foster-Porter Enterprises, Inc., in accordance with the terms thereof, or for any good, sufficient or valid reason; and further, that such contract is not terminable at will and is still in full force and effect. A decree when presented will be signed in accordance with above.” ²⁵ Plaintiff and defendants, in pleadings and testimony and, through counsel, in briefs and arguments, flatly— and uninhibitedly — contradict each other as to facts and make charges and counter-charges of fraud and bad faith. On disputed questions of fact we are not convinced that the judge, who saw and heard the witnesses, was wrong. Foster-Porter, incorporated in 1948, is (or was) engaged in the manufacture and sale of Foster Pitching Arms, a mechanical device, invented or at least designed by the two Fosters, which throws overhand balls in much the same way as a human pitcher.

The arm was originally designed for use by professional baseball clubs in batting practice, though the Fosters say it was designed primarily for outdoor amusement purposes. They say that before March 13, 1950 it had been purchased by the Brooklyn Dodgers, New York Yankees, Boston Braves, Washington Senators, numerous clubs on the West Coast, San Diego, San Francisco, and about eighty percent of the “big league clubs” are using them, that they set up “an experimental public batting range” in Baltimore in the summer of 1948, and in August, 1949 advertised it in a magazine, as guaranteeing “big profits for any amusement parks, concessions, fields, and other places of outdoor entertainment.” The fact is, however, that prior to March 13, 1950, the arm was not used in any commercial public batting range or other amusement park. Plaintiff says he saw the arm in use by the Brooklyn Dodgers, and decided “it would be a terrific idea for a baseball batting range”. He ascertained that defendants were the manufacturers, and in February and March, 1950 met the Fosters first in Baltimore and twice in Brooklyn.

At the second Brooklyn meeting on March 13, 1950 the contract of that date, which had been first drafted by defendants’ counsel, and later revised, rewritten and further revised, was executed. Plaintiff had told the Fosters that their machine, which was hand-fed, could not be used on a batting range, because ²⁶ without an automatic feed labor costs would be “terrific”. The Fosters undertook to add an automatic feed. By the agreement of March 13, 1950, between Foster-Porter, “Seller”, and plaintiff, “Distributor”, “The Seller agrees to sell and the Distributor agrees to purchase Foster-Porter Pitching Arms on the following terms and conditions; 1.

Distributor shall be the Seller’s exclusive representative to sell, lease or otherwise dispose of * * * Arms * * * to concessions, amusement parks and any others who charge a fee for the use of the * * * Arm. The Distributor is not authorized to sell the * * * Arm for use by baseball teams, whether professional or amateur, or for use by any party who charges admission fees to baseball games or to individuals for private use. Distributor will not represent, handle or use any type of machine similar to the * * * Arm. 2. The Distributor shall be limited to the following territory: New Jersey and Florida.

Any sale in this territory by any party other than the Distributor shall be treated in all respects as if sold by Distributor. * * 3. The price to Distributor will be $975 f.o.b. Baltimore, including the automatic feed. Distributor will be allowed a discount of ten per cent for orders of not less than five, and an additional ten per cent in any thirty day period in which twenty or more are purchased or in any year period in which fifty or more are purchased. “Seller agrees that prices and discounts will be the same to all distributors who sell to the same class of buyers as are covered by this contract.

Both’ parties agree * * * at the request of the other to renegotiate in good faith” to determine whether changes should be made in prices to compensate for a substantial increase or decrease in manufacturing costs, due to changes in costs of raw materials or to increase in volume. 4. Distributor hereby orders five machines, one-third of purchase price having been paid herewith. “Distributor is not obligated to purchase additional machines for a period of six months subsequent to the date of this agreement upon the understanding ²⁷ that the Distributor will construct a single baseball batting range as promptly as the construction work can be completed, which work is to begin as soon as five machines are delivered. After the end: ef the six months^ period fee Distributor is obligated to purchase-machines in any twelve months- period;” 5. Seller agrees to ship machines with reasonable promptness, on terms stated herein, and will hold itself in a position to step up production to fill all orders received upon reasonable notice. 6.

Seller warrants the machine to be well made of good material and free from basic defects which cannot be corrected within a reasonable time, and shall furnish new parts free should a defect in part or parts develop in one year after arrival at destination. 7. Seller shall not be responsible for delay from fires, strikes or other cause unavoidable or beyond Seller’s control. “8. The Distributor shall act as independent contractor and not as agent of the Seller. 9. Patents are pending which, in the opinion of patent counsel, will result in full coverage to the Foster-Porter Pitching Arm.” Seller will defend any suits against Distributor or any purchaser from him for patent infringement and will pay any damages awarded. “10.

The following shall be deemed to be events of default hereunder: (a) If either party shall breach any obligation contained in this agreement, and such default shall continue for a period of ten days after written notice from the party not in default specifying the nature of the breach; (b) If the Distributor is unable to continue in this business on an active basis, bearing in mind its seasonal character; (c) If Distributor does net sell -ma-chinos, or mere, during each twelve months^ period after fee expiration of a six months’ experimental period, dated ■from the first of fee month after fee execution hereof,' and (d) If proceedings of any kind in bankruptcy or insolvency or receivership, State or Federal, shall be brought against either the Distributor or the Seller, and such proceedings are not vacated within thirty days after institution; then and upon the happening ²⁸ of any one of said events of default the party not in default shall have the right to terminate this agreement by written notice to the other. 11. This agreement is entered into on a personal basis with the Distributor and it may set be assigned and Distributor's estate will set acquire any rights hereunder.” At the time of March 13, 1950 agreement defendants were not in a strong financial condition. They had no factory, but sub-leased a portion of a machine shop, where they made their machines. Plaintiff was not then financially able to establish a distributorship for the entire United States, but hoped to develop into such a position.

He says defendants had said they wanted five machines to a state — presumably a “show room”, i.e., a batting range — for a distributorship, and a total order of one hundred machines for the whole national distributorship. He wanted an option, a first refusal, to handle whatever states he could possibly handle. Testimony printed, of plaintiff, the Fosters and others, covers conversations before execution of the March 13, 1950 contract and conversations, correspondence, transactions and acts throughout, and after, the period from March 13, 1950 to July 11, 1950, when Foster-Porter wrote plaintiff, “Our counsel advises that your activities as distributor, of which we have conclusive evidence, amount to a serious and flagrant breach of your agreement with us. Accordingly we advise immediate cancellation.” This testimony relates to both of the basic questions of fact, (1) whether there was any oral agreement to give plaintiff an option, or first refusal, of a national distributorship or additional state distributorships and (2) whether plaintiff was guilty of any breach of contract which entitled Foster-Porter to terminate the contract.

On both questions the testimony is contradictory. Opposing witnesses assert and deny an oral agreement to give a distributorship option and to sign and send to plaintiff a form of “option letter” which plaintiff drafted and handed to the Fosters on May 11, 1950. As to breach of contract by plaintiff, the prin ²⁹ cipal question is whether plaintiff broke the contract by failing or refusing to sell machines or take orders or was unable to sell or take orders because the Fosters were unable to deliver. Of plaintiff’s initial order for five machines one was delivered on April 30th, the other four on May 11th.

A second order for five on May 24th was delivered on June 26th. In May and June extended negotiations between plaintiff and his father and the Fosters, with a view to improved operating facilities and organization, included meetings at Boonton, Newburgh, (New York), and Baltimore, and culminated in refusal by the Fosters, at the Baltimore meeting on June 7th, of an offer by plaintiff’s father of $50,000 for a half-interest in Foster-Porter, coupled, the Fosters say, with a national distributorship for plaintiff. The subject of a New York or national distributorship was continued in letters from plaintiff to the Fosters on June 20th and June 24th, complaining of delays and defective parts and also asking for the “letter of option”, a telephone conversation on Sunday, June 25th, between Boonton and Baltimore, regarding a proposed one hundred machine contract and distributorship, and a lengthy letter to plaintiff from the Fosters’ counsel as to distributorship (without mentioning delays or defective parts), containing a statement, “No agreements have been entered into with you except the distributorship agreement dated March 13, 1950, covering New Jersey and Florida.” To discuss the testimony or mention it with any particularity, would prolong this opinion to intolerable length. On the question of an oral agreement plaintiff has the burden of proof, on the question of breach of contract the defendants.

On both questions Judge Moser’s decision was against the party who had the burden of proof. After careful consideration of the testimony and other evidence we are not convinced that Judge Moser was wrong on either question or that on either question the burden of proof has been sustained. With respect to plaintiff’s claim of an oral agreement to give him an option on a national distributorship or ³⁰ additional state distributorships, we agree with Judge Moser that Foster-Porter did not procure the March 13, 1950 contract by fraud, and therefore parol evidence of prior or contemporaneous conversations was inadmissible; and also that “such conversations did not amount to any contract or agreement, but merely a hope or expectation of an indefinite something that might eventually materialize”. We may add that we are of the same opinion as to the effect of conversations subsequent to March 13th, which perhaps cannot be barred by the parol evidence rule.

Plaintiff’s testimony at most indicates no oral option agreement but only oral promises to make a written option agreement. In reaching these conclusions we do not imply, and we think Judge Moser did not imply, that plaintiff’s claim was made without plausible ground for belief on his part that the Fosters had agreed to realize, or would realize, his hopes in a legal contract. On the one hand, plaintiff’s draft of option letter was too indefinite to be either businesslike, or legally binding. On the other hand, testimony for defendants shows that from the beginning and as late as June 25th the Fosters were eager to deal with plaintiff whenever and wherever they could do so on terms they regarded as advantageous to themselves.

The March 13, 1950 contract, defendants contend, is not legally enforceable, particularly not in equity by injunction or negative specific performance, for two distinct but related reasons, viz., that it was terminable at will (1) for lack of mutuality and (2) in the absence of any definite term in the contract. Both contentions rest on elementary principles of