Opinion ID: 1993950
Heading Depth: 1
Heading Rank: 12

Heading: snelling & snelling

Text: Baltimore Snelling reads the provision of the license agreement of 5 July 1960, which grants the exclusive right to use the name Snelling and Snelling and/or Snelling and Snelling of Baltimore, Inc. in connection with one office only to be opened by Licensee in Baltimore, Maryland. to mean that Dundalk-Essex Snelling is prohibited from listing its telephone in the Baltimore telephone directory (which contains listings for subscribers in Dundalk and Essex); from advertising in Baltimore newspapers or on Baltimore radio and television stations and perhaps from advertising in newspapers which circulate in Baltimore or Baltimore County or on radio or television stations heard there. In its cross appeal, Baltimore Snelling challenges the lower court's decree because it falls short of this goal and fails to enjoin the A.S. Abell Company and the Telephone Company from accepting such advertising. In support of this contention Baltimore Snelling insists that Snelling and Snelling has acquired a secondary meaning in Baltimore, by dint of Baltimore Snelling's extensive program of newspaper, radio and television advertising, costing well over $100,000. The chancellor concluded, and we agree, that Baltimore Snelling's use of the name Snelling and Snelling is based on its rights under the agreement of 5 July 1960, and not on a common law right, since the name acquired no secondary meaning as a result of Baltimore Snelling's use of it; that by contract, Baltimore Snelling was given the exclusive right to use the name Snelling and Snelling in connection with its office in Baltimore, Maryland; and that Baltimore, Maryland, as used in the agreement, means the corporate limits of Baltimore City. We agree, however, with the appellant's argument, that the grant of an exclusive right to use the name Snelling and Snelling in connection with one office in Baltimore is not an unrestricted right. Philadelphia Snelling retained a right, and could assign to others the right, to use the name in Baltimore in ways not connected with the Baltimore office. To hold otherwise would give rise to the conclusion that Baltimore Snelling might, if it wished, prevent Philadelphia Snelling from advertising in national magazines which circulated in Baltimore. This was clearly not intended by anyone. The agreement of 5 July 1960 between Philadelphia Snelling and Baltimore Snelling provided that it was to be construed in accordance with the laws of the Commonwealth of Pennsylvania. Where contract language is plain and unambiguous, its meaning should be determined without reference to extrinsic facts or aids. Sternbergh v. Brock, 225 Pa. 279, 74 Atl. 166 (1909); Kennedy v. Erkman, 389 Pa. 651, 133 A.2d 550 (1957). Words are to be given their ordinary meaning Pines Plaza Bowling, Inc. v. Rossview, Inc., 394 Pa. 124, 145 A.2d 672 (1958). However, if the language under consideration is ambiguous or uncertain a court must then determine the intention of the parties. In such a case a court may consider evidence of extrinsic factors: i.e., negotiations of the parties, the circumstances surrounding execution of the contract, the parties' own construction of the contract and the conduct of the parties. DeMoss v. Beryllium Corporation, 358 Pa. 470, 58 A.2d 70 (1948); Sternbergh v. Brock, supra ; Kennedy v. Erkman, supra . The lower court also found that the licensing of Dundalk-Essex Snelling by Philadelphia Snelling permitted the invasion by one licensee of another's territory and that this invasion and the resulting confusion mounted up to unfair competition, entitling Baltimore Snelling to equitable relief. We agree that an element of confusion was introduced by the licensing of Dundalk-Essex Snelling. We concede that Dundalk-Essex Snelling gained access to the communications media located in Baltimore; but we do not agree that this was the degree of confusion or the sort of invasion which warrants the granting of relief, as a matter of law. There is ample authority for the proposition that a trade name may seldom be licensed or assigned, except as an incident to the sale of a business or of its good will. Gault v. Wagner, 227 Md. 521, 525, 177 A.2d 691 (1962); Nims, The Law of Unfair Competition and Trademarks, 4th Ed. 1947, §§ 17, 22. The reason for the rule is that such transactions are likely to break the continuity of business reputations on which customers are likely to rely. Emerson Electric Mfg. Co. v. Emerson Radio & Phonograph Corp., 105 F.2d 908, 909 (2d Cir.), Cert. Denied, 308 U.S. 616 (1939), and result in confusion and deception. Nims, supra, § 17, at 86. There is an exception, however. A trade name, like a trademark, may be assigned, as long as it remains associated with the same product or business with which it has become associated in the public mind    And upon the same conditions it may be licensed or lent, and its exclusive use may be resumed by its owner according to the terms of the lending. Cardinal v. Taylor, 302 Mass. 220, 19 N.E.2d 58, 59 (1939). For, as stated in Corkran Hill & Co. v. A.H. Kuhlemann Co., 136 Md. 525, 533, 111 Atl. 471 (1920), It may be enough that they [the articles] are manufactured for him, that he controls their production, or even that they pass through his hands in the course of trade, and that he gives to them the benefit of his reputation, or of his name and business style. Or, as was said in Gault v. Wagner, 227 Md. 521, 526, 177 A.2d 691 (1962): She [the licensor] is in a position to judge the quality of the work, and to exert a measure of control, through the right to terminate the license at will. See also, Howard D. Johnson Co. v. Robbins Light, Inc., 328 Mass. 46, 101 N.E.2d 348 (1951). In a case involving a multiple-licensing arrangement similar to the one here involved, Arthur Murray, Inc. v. Horst, 110 F. Supp. 678, 679 (D. Mass. 1953), the court said: In the light of the provisions of the agreement as set forth, it appears    that `precautions were taken to insure that the Arthur Murray name would continue to indicate to the public what it had in the past, namely, a type of instruction conforming to the standards and methods of Arthur Murray'. It is plain we are not dealing here with a naked license. See also, E.I. du Pont de Nemours & Co. v. Celanese Corp., 167 F.2d 484, 489, 35 C.C.P.A. (Pat.), 1061, 3 A.L.R.2d 1213 (1948). Having satisfied ourselves that the granting of the license was valid; that the licensor, having retained broad control, could fix the conditions, delineate the territory, and recover its rights on breach or termination, Howard D. Johnson Co. v. Robbins Light, Inc., supra , we turn to a consideration of the element of unfair competition. As Judge Delaplaine, speaking for this Court, said in Edmondson Vil. Theatre, Inc. v. Einbinder, 208 Md. 38, 43-44, 116 A.2d 377 (1955): Like most doctrines of the common law, the law of unfair competition is an outgrowth of human experience. The rules relating to liability for harm caused by unfair trade practices developed from the established principles in the law of torts. These rules developed largely from the rule which imposes liability upon one who diverts custom from another to himself by fraudulent misrepresentation that the goods he is offering are the goods produced by the other. In England this type of fraud is commonly called `passing off' or `palming off' one's goods as those of another. The American Law Institute made the following comment in 3 Restatement, Torts, ch. 35, pages 539, 540, on this constantly developing doctrine: `The law has not yet developed a complete generalized standard for measuring trade practices like the standard of reasonable care in negligence. In part this is due to differing standards of commercial morality in the various industries; in part it is due to the fact that this branch of the law developed eclectically from the law dealing with the older wrongs which were not directly related to trade practices and competition. But the tendency of the law, both legislative and common, has been in the direction of enforcing increasingly higher standards of fairness or commercial morality in trade.' A definitive discussion of recent developments in the field can be found in Developments in the Law  Trade Marks and Unfair Competition 68 Harv. L. Rev. 814 (1955). Parkway Baking Company v. Freihofer Baking Co., 255 F.2d 641 (3d Cir.1958) involved the question of competition between licensees in a multiple licensing arrangement. In that case, National Bakers Service, Inc., which owned a secret formula for baking low calorie bread and the trade mark Hollywood, granted to Parkway an exclusive license to bake and sell Hollywood bread in a carefully defined area in Greater Philadelphia. Freihofer held the license for the territory, including the city of Allentown, immediately north of Parkway's. For a time, both Parkway and Freihofer sold to American Stores in their respective territories. American, desiring to deal with a single supplier, commenced to purchase its entire requirements from Parkway, which made deliveries to American's Philadelphia warehouse, although some of the bread was ultimately reshipped to American Stores in Freihofer's territory. Freihofer retaliated by making deliveries of Hollywood bread baked by him to a controlled distributor who took delivery of the bread in Allentown and redelivered to customers in Philadelphia. The court held that Parkway's sale to American in Philadelphia did not violate its license to bake and sell bread in Philadelphia, but that Freihofer's retaliatory sales, not being made in good faith, were a violation of its franchise. In so holding, the court construed the provisions of Parkway's license agreement in accordance with its literal terms [7] and concluded that there had been no invasion of Freihofer's territory. The doctrine of confusion, relied on by the lower court in the case before us is of relatively recent development. Originally, unfair competition consisted of passing off or palming off one's goods as those of another through the practice of deception. As the law developed, proof of fraudulent deception was no longer essential for relief, and this is the Maryland rule. Edmondson Vil. Theatre, Inc. v. Einbinder, supra , and at the same time, the earlier cases, holding that lack of competition between the parties was a defense, were being overruled. Compare Borden Ice Cream Co. v. Borden's Condensed Milk Co., 201 F. 510, 514, (7th Cir.1912) with Ward Baking Co. v. Potter-Wrightington, 298 F. 398 (1st Cir.1924). In the course of this development, confusion came to be recognized as a ground for equitable relief, even in the absence of deception or direct competition. For the complaining party to obtain injunctive relief on grounds of confusion, in cases where a trade name is at issue, the existence of a secondary meaning must be established, National Shoe Stores Co. v. National Shoes of New York, Inc., 213 Md. 328, 131 A.2d 909 (1957); Baltimore Bedding Corp. v. Moses, 182 Md. 229, 34 A.2d 338 (1943); Nims, op. cit., § 334; Annot. 150 A.L.R. 1067. In the absence of a finding of secondary meaning, there must be proof of deception. National Shoe Stores Co. v. National Shoes of New York, Inc., supra ; Drive It Yourself Co. v. North, 148 Md. 609, 614, 130 A. 57 (1925); Afro-American Owls v. Talbot, 123 Md. 465, 91 A. 570 (1914); Annot. 150 A.L.R. 1067. In the case before us, the court below found no evidence that the name Snelling and Snelling had acquired a secondary meaning in consequence of its use by Baltimore Snelling. With this we agree, since should we conclude that a secondary meaning had been developed, it follows that it had been developed by Philadelphia Snelling, and that Baltimore Snelling and Dundalk-Essex Snelling were derivative beneficiaries of the secondary meaning by virtue of their license agreements. While the lower court found that destructive competition and confusion existed, there was no direct finding of fraud or deception, nor would such a finding have been supported by the evidence. A multiple franchise operation of the sort conducted by Philadelphia Snelling is a comparative newcomer to the business world. Philadelphia Snelling cites Howard Johnson as comparable, but others readily suggest themselves: Quality Courts, Holiday Inns, Arthur Murray Dance Studios, and Sunkist Oranges are typical. Adopting the characterization contained in the opinion in Quality Courts United, Inc. v. Quality Courts, Inc., 140 F. Supp. 341 (M.D. Pa. 1956), Snelling and Snelling, like Quality Courts could be regarded as a collective trade name, [8] analogous to the collective marks [9] registerable under the Lanham Act, 15 U.S.C.A. 1054, which are used in connection with the services of any person other than the owner to certify the quality and characteristics of the services. See also, Huber Baking Company v. Stroehmann Bros. Co., 252 F.2d 945 (2d Cir.), Cert. Denied, 358 U.S. 829 (1958). While the contractual arrangements and legal relationships between the multiple licensees may vary, all multiple franchise operations have one element in common  the complete subordination of the identity of the individual owner or operator to the group image. The confusion of which Baltimore Snelling complains is not only a natural result, but may even be a desired product of the structure, and must be sharply differentiated from the situations considered by this Court in A. Weiskittel & Son Co. v. Harry C. Weiskittel Co., 167 Md. 306, 173 A. 48 (1934) and Neubert v. Neubert, 163 Md. 172, 161 A. 16 (1932). No better example of the monolithic facade of the Snelling system can be found than in Drossner's own operation. His advertising would leave the uninformed to believe that Baltimore, Highlandtown, Towson and Glen Burnie are integral parts of a nation-wide system, which they are, for there is nowhere in the advertising an intimation that each of the four offices is a separately organized and owned business entity. In recent times, the doctrine of unclean hands which Dundalk-Essex Snelling asserted in its answer has been regarded as a doctrine applied for the protection of the court and not of the parties, Space Aero Products Co. v. R.E. Darling Co., supra, 238 Md. at 120, and is seldom a defense available in an unfair competition action. Chafee, Coming Into Equity With Clean Hands, 47 Michigan L. Rev. 1065, 1076-1080 (1949). The case which denied relief to the manufacturer of Balm of Thousand Flowers soap, which contained no flowers; [10] to the formulater of California Fig Syrup, which contained no figs; [11] and the problem faced by this Court in the He-No Tea case, where a blend of tea sold as the kind of tea the Chinese drink was shown to be unknown in China, [12] in today's world would be resolved on broader equitable grounds. As Judge Learned Hand said in the Second Circuit's opinion in Dwinell-Wright Co. v. White House Milk Co., 132 F.2d 822, 825 (2d Cir.1943): Here, as often, equity does not seek for general principles, but weighs the opposed interests in the scales of conscience and fair dealing. Putting this another way, equitable estoppel may bar the relief sought. In the White House case, the complainant knew of the defendant's use of the brand name on its cans of evaporated milk, and was selling White House tea and coffee to the defendant for resale. In denying relief, the court said    the owner may have so conducted himself as impliedly to assure the newcomer that he does not object, and the newcomer may have built upon that assurance. 132 F.2d at 825. Or, as was said in Holly Hill Citrus Growers' Assn. v. Holly Hill Fruit Products, Inc., 75 F.2d 13, 17 (5th Cir.1935): There is a kind of evidential estoppel which, though it may not amount to a complete estoppel in pais, is raised when persons who have spoken or acted one way under one set of circumstances, and with one objective in mind, undertake under other circumstances and when their objective has changed, to testimonially give a different color to what they formerly said and did. We think that principle applies here. Drossner is estopped from challenging the validity of a licensing system which he used to his own advantage when he obtained the Towson and Glen Burnie franchises, and from attempting to impose upon Mascaro limitations with respect to access to communications media which he did not assert against Towson and Glen Burnie. To permit him to do so would be to sanction the weaving of the very web of broader exclusivity which he failed to achieve by contract. Baltimore Snelling's bill of complaint should have been dismissed. Decree reversed; injunction vacated; costs to be paid by the appellee. BARNES, J., dissenting: I dissent because in my opinion (1) the Chancellor's construction of the licensing agreement of July 5, 1960, was correct, and (2) the defense of estoppel, although sound as an abstract principle, is not applicable and, in any event, is not available in this case because it was not raised in the lower court and was not briefed by the appellant in this appeal. 1. The Chancellor, in my opinion, correctly construed the licensing agreement of July 5, 1960, as an agreement by Philadelphia Snelling to grant to Baltimore Snelling the exclusive right to use the name Snelling & Snelling in Baltimore City. This exclusive right was to be used in connection with one office only which was to be opened by Baltimore Snelling in Baltimore City. As I read paragraph 1(a) this is what the licensing agreement states. This is confirmed, in my opinion, by the provisions of paragraph 9 of the licensing agreement whereby Baltimore Snelling agreed when requested by Philadelphia Snelling to waive objections which Baltimore Snelling might legally have against the use of the name Snelling and Snelling in territories other than the territory granted to Baltimore Snelling. It is well established that the primary source for determining the intention of the parties to a contract is the language used by the parties. Kelley Construction Co. v. Washington Suburban Sanitary District, 247 Md. 241, 230 A.2d 672 (1967); Cadem v. Nanna, 243 Md. 536, 221 A.2d 703 (1966). The words of the contract are to be understood in their plain, ordinary and popular sense, unless they have acquired a peculiar sense by trade usage or for some other cause. Highley v. Phillips, 176 Md. 463, 5 A.2d 824 (1939). It is only when the words of the contract, used in their ordinary sense, are vague, doubtful or ambiguous, that extrinsic evidence is admissible to determine the intention of the parties. Coopersmith v. Isherwood, 219 Md. 455, 150 A.2d 243 (1959). As pointed out in the majority opinion, the Pennsylvania law is to the same effect. The Chancellor concluded that Baltimore Snelling acquired the legal right, by the terms of the licensing agreement, to the exclusive use of the name Snelling and Snelling in Baltimore City in connection with its office located in that area, that the operation of Mascaro, by soliciting and advertising, could not be effectively confined within his Dundalk-Essex franchise area without invading some sections of Baltimore City, and that this operation violated Baltimore Snelling's exclusive right to use the name Snelling and Snelling in its franchise area. In my opinion the Chancellor's conclusion was correct and carries into effect the intention of the parties to the licensing agreement as disclosed by the words of the contract itself. The purpose of the exclusive grant was to protect the franchisee from competition within the franchise area and this was a lawful provision. The majority indicates that the exclusive right to use the name in Baltimore City in connection with one office in that City is not an unrestricted right and that Philadelphia Snelling retained a right and could assign to others the right to use the name in Baltimore in ways not connected with the Baltimore office. To hold otherwise would give rise to the conclusion that Baltimore Snelling might, if it wished, prevent Philadelphia Snelling from advertising in magazines which circulated in Baltimore. It was further stated This was clearly not intended by any one. With great respect, this appears to me to beg the question. The language of the contract gives an unrestricted right against those who can compete with Baltimore Snelling, not against national advertising generally or advertising by franchisees who geographically cannot compete with Baltimore Snelling as a practical matter. There is no contention that Philadelphia Snelling could grant another franchise for another office to someone other than Baltimore Snelling in Baltimore City. It seems clear that Baltimore Snelling then has the exclusive right to use the Snelling name in Baltimore City in connection with that one office and no one else can be granted any right to use the name in Baltimore City in competition with Baltimore Snelling. The conclusion of paragraph 1(a) provides: Licensee (Baltimore Snelling) shall not directly or indirectly establish an office or place of business, or move to any locations outside of such territory; nor shall licensee [Baltimore Snelling] change its name without obtaining the written consent of Snelling [Philadelphia Snelling]; nor shall licensee [Baltimore Snelling] establish any branch or additional office without the written consent of Snelling [Philadelphia Snelling]. This provision indicates that there are two prohibitions on the activities of Baltimore Snelling, (1) that only one office will be maintained that one in its territory, and (2) that there will be no change in its name. Paragraph 9 provides for waiver by Baltimore Snelling in territories other than the territory granted to Baltimore Snelling. This language clearly indicates that the territory granted to Baltimore Snelling is Baltimore City (it is the only territory mentioned in paragraph 1) and there is no provision that there will be any waiver of objection to the use of the name Snelling and Snelling in that territory. This language confirms the exclusive nature of the grant to Baltimore Snelling. Assuming, arguendo, that the licensing agreement is ambiguous, the extrinsic evidence, in my opinion, confirms the Chancellor's construction of the contract. When the licensing agreement was negotiated, the prior franchisees in the Baltimore area had failed badly in their operation, leaving a collection of unpaid bills and ill will behind them. The name Snelling and Snelling was at that point a liability rather than an asset. In short, the situation gave rise to a franchisee's market, as it were, and Philadelphia Snelling was obliged to give Baltimore Snelling a licensing agreement most beneficial to the franchisee and at a small license payment in order to obtain a competent and qualified operator who would enter the unfortunate situation in Baltimore. In addition to the specific situation in the Baltimore area, Philadelphia Snelling in 1960 had not enlarged its licensing operations to the substantial size it enjoys at the present time. Here again it was necessary to give favorable licensing agreements to its franchisees in order to build up its business at that time. It is significant that after the situation in Baltimore was rectified and Philadelphia Snelling's business had substantially expanded, a different form of contract from which the word exclusive was removed was used by Philadelphia Snelling, and more substantial original license payments were required. It seems clear that Philadelphia Snelling believed that there was a substantial legal difference between a licensing agreement containing the word exclusive and one from which that word was excluded. It is unreasonable to suppose that Baltimore Snelling would have proceeded to make the very substantial payments for advertising and other promotional items [1] if it had not believed that it had the exclusive right for which it had successfully bargained. Then too, the licensing agreement of July 5, 1960, was prepared by Philadelphia Snelling. It is well settled that in the event of ambiguity in the contract, it is to be construed against the party preparing it. Hughes & Co. v. Pioneer, 230 Md. 36, 185 A.2d 383 (1962). Applying this maxim of construction to the licensing agreement, the ambiguity would be resolved against Philadelphia Snelling and the Chancellor's construction sustained. 2. In the majority opinion, as an alternative ground for reversing the Chancellor's decree, it is indicated that Baltimore Snelling is equitably estopped from challenging the validity of the licensing system which Drossner used to his own advantage when he obtained the Towson and Glen Burnie franchises and from attempting to impose upon Mascaro limitations with respect to communications media he did not assert against Towson and Glen Burnie. Although the basic principle of estoppel is sound in a proper case, in my opinion, it is not applicable in the present case, as Drossner was himself one of the principals in the Towson and Glen Burnie franchises. The granting of these franchises was not injurious to the exclusive franchise granted to Baltimore Snelling inasmuch as a substantial part of the profits of their operation accrued to the principal in Baltimore Snelling. The obtention of the Glen Burnie and Towson franchises might possibly establish an equitable estoppel, prima facie, against Drossner in his contention that Baltimore Snelling's franchise included areas outside of Baltimore City, but it would not, in my opinion, operate as an estoppel to insist on the exclusive franchise as against Mascaro, a competitor. More importantly, it would seem that merely because Drossner permitted one person to infringe his exclusive franchise, he would not be prevented from enforcing that franchise against another infringement by a different person. Assuming for the argument that the estoppel would otherwise be effective against Drossner, in my opinion the estoppel is not available to Mascaro in this case because it was not raised, considered or passed upon by the Chancellor in the trial court and was not briefed or argued before us on this appeal. It is indicated in the majority opinion that Mascaro in his answer to the bill of complaint asserted the defense that the plaintiff was guilty of unclean hands and the inference is that this affirmative defense sufficiently raised the question of estoppel. In my opinion, the raising of this affirmative defense does not raise the question of estoppel against Drossner by his acquisition as one of the principals of the Towson and Glen Burnie franchises. Paragraph 20 of the Mascaro answer alleges: 20. Further answering, Complainant is guilty of unclean hands in that the Bill of Complaint, which prayed under oath an ex parte injunction which was successfully obtained and then dissolved on motion of Defendant, fails to make a full and frank disclosure of all the facts, to wit, that both Complainant and Defendant are licensees of Snelling and Snelling, Inc., owners of the registered trade name Snelling and Snelling by virtue of contracts dated July 5th, 1960, and November 4th, 1965, respectively. There is nothing alleged in paragraph 20 to suggest any estoppel of Drossner by having acquired, as one of the principals, the Towson and Glen Burnie franchises. The reference in paragraph 20 is to licenses acquired under the licensing agreements of Baltimore Snelling and Mascaro, dated July 5, 1960 and November 4, 1965 respectively. The Chancellor does not mention or pass upon any estoppel point in his written opinion and there is nothing concerning it in the final decree. The point is not mentioned in the briefs of the respective parties and the cases cited on this point by the majority are not cited. There was no argument before us on the point. Under these circumstances the point is not available to Mascaro as a ground for reversal in this case. Maryland Rule 885 provides that this Court will not ordinarily decide any point or question which does not plainly appear by the record to have been decided by the lower court. In my opinion, the point was not presented to the lower court and I see no reason to decide the point here. See Elko v. Elko, 187 Md. 161, 49 A.2d 441, 168 A.L.R. 256 (1946). Then too, we have rather consistently held that even if a point were raised and decided by the lower court, it will be deemed to be waived on appeal if the point is not briefed in this Court. Harmon v. State Roads Commission, 242 Md. 24, 217 A.2d 513 (1966); Myers v. Chief of Baltimore County Fire Bureau, 237 Md. 583, 207 A.2d 467 (1965). For this additional reason, the estoppel point is not available to Mascaro in this case as a ground for the reversal of the Chancellor's decree. I would affirm the decree.