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Bak-A-Lum Corp. v. Alcoa Building Products Inc.

Decided: January 28, 1976.

BAK-A-LUM CORPORATION OF AMERICA, A NEW JERSEY CORPORATION, PLAINTIFF-APPELLANT AND CROSS-RESPONDENT,
v.
ALCOA BUILDING PRODUCTS, INC., A PENNSYLVANIA CORPORATION, DEFENDANT-RESPONDENT AND CROSS-APPELLANT



For affirmance (defendant's appeal) and for modification (plaintiff's appeal) -- Chief Justice Hughes, Justices Mountain, Sullivan, Pashman and Clifford and Judge Conford. For reversal -- None. The opinion of the Court was delivered by Conford, P.J.A.D., Temporarily Assigned.

Conford

Plaintiff corporation ("BAL" hereinafter) sued defendant ("ALCOA" hereinafter) for an injunction and damages for alleged breach of an exclusive distributorship of aluminum siding and related products manufactured by ALCOA. It was denied an injunction but awarded damages for breach of contract; at the same time the trial court granted defendant judgment on a counterclaim for merchandise sold to plaintiff, together with interest thereon. Plaintiff appealed on the ground the damages awarded were inadequate; the defendant cross-appealed, asserting its conduct was not actionable. The Appellate Division affirmed. We granted plaintiff's petition for certification and defendant's cross-petition. 68 N.J. 138, 139 (1975). Plaintiff raises the additional issue that in the light of the nature of defendant's conduct plaintiff should not in equity be held for interest on its admitted debt to defendant.

We find the record to support the trial court's finding of fact that in or about 1962 or 1963 BAL entered into a verbal agreement with ALCOA whereby BAL would be exclusive distributor in Northern New Jersey for ALCOA's aluminum siding and certain related products. Although the agreement did not preclude BAL handling other lines of siding, the understanding was that it would maintain an adequate organization and exert its best efforts to promote the sales of the ALCOA products, and the evidence and

trial findings were that BAL produced to the satisfaction of ALCOA, even meeting fixed quotas of sales set by ALCOA during the latter phase of the relationship.

ALCOA terminated the "exclusive" in January 1970 by appointing four additional distributors to share the North Jersey territory with plaintiff, thereby precipitating the controversy that gave rise to this action. The trial court, although refusing a request for a preliminary injunction against the termination of the exclusive distributorship, held after trial that there was a binding agreement between the parties terminable only after a reasonable period of time and on reasonable notice. It found that a reasonable period of time had passed before termination but that a reasonable period of notice of termination would be seven months. It established plaintiff's damages at $5,000 per month and entered judgment in plaintiff's favor for $35,000 together with interest from September 1, 1970.

In addition to a complaint that it established losses in sales profits as a result of the termination of the exclusive at a rate of $10,000 per month rather than at the $5,000 rate determined by the court, plaintiff's major grievance is that in the Spring of 1969, at a time when defendant had already decided upon the termination of the distributorship but was secreting that plan from plaintiff, the latter undertook a major expansion of its warehouse facilities at substantial added operating expense. Plaintiff asserts that defendant knew of and encouraged this step, leading plaintiff to believe it was well warranted in view of the expected enlargement of the business of both of the contracting parties. On the basis of defendant's concealment of its intentions in the face of plaintiff's incurrence of a five year lease obligation for the new space, plaintiff asserts it is entitled to additional damages from defendant for the excess of its expense for the period of the lease over its operating expenses in its former headquarters -- a loss allegedly attributable directly to defendant's breach of contract.

The trial court found that if ALCOA's decision, made in January or February of 1969, to enlarge the number of North Jersey distributors, had been promptly communicated to BAL's president, "it is unlikely that he would have signed the lease [for the new quarters] in April [1969] without first getting from [ALCOA] the assurance of continuance of the distributorship which he sought to get after the lease was signed". The court further found that all the circumstances surrounding the defendant's attitude to and treatment of plaintiff preceding and attending the disruption of the contractual arrangement "bespeak a certain hypocrisy as well as ruthlessness on the part of [ALCOA] toward its distributor of many years". The court further "surmised" that the reason defendant had concealed during the year 1969 its intention to terminate plaintiff's exclusive even though it had arrived at that intent before plaintiff entered into the new lease in 1969 was "that the men at [ALCOA] in charge of sales thought a period of secrecy ending with a sudden announcement to Mr. Diamond [plaintiff's president] of the accomplished fact of new distributors would avoid any risk of cooling plaintiff's interest in selling ALCOA products during the several months before the new distributors were named and made ready to go". Indeed, defendant's salesman induced plaintiff in January 1970, just before the announcement of the termination of the exclusive, to order $150,000 worth of merchandise -- a very heavy order for that time of year.

In fixing seven months as a reasonable period of notice of termination of the exclusive agreement the trial court stated that the criterion for such a period of notice is the amount of time the notified party needs to make adjustments and to plan and arrange for business activities to replace those which are to be eliminated. However the court apparently placed little if any weight on the circumstances of the new lease as an element going to the reasonableness of the period for notice of termination, although it stated that the lease was a "factor" for consideration. It pointed out that the

decision to undertake the lease was plaintiff's and that plaintiff was able to use the space to store merchandise other than that purchased from defendant as well as defendant's lines.

Our review of the record leads us to concur in the trial court's holding that there was a valid distributorship agreement terminable only on reasonable notice. See Annot., 19 A.L.R. 3rd 196 (1968), § 12 [a] at 292; 9 Williston, Contracts (3rd ed. 1967) § 1017A at 150-152; J.C. Millett Co. v. Park & Tilford Distillers Corp., 123 F. Supp. 484, 492 (N.D. Calif. 1954); California Wine Ass'n. v. Wisconsin Liquor Co., 20 Wis. 2d 110, 121 N.W. 2d 308, 316-317 (Sup. Ct. 1963); Cromwell v. Gruber, 7 Wash. App. 363, 499 P. 2d 1285, 1288 (Ct. App. 1972); cf. Ass'n. Group Life, Inc. v. Catholic War Veterans, 120 N.J. Super. 85, 96 (App. Div. 1971), mod. 61 N.J. 150 (1972). Plaintiff's contention that the agreement was not terminable at all without "cause", based on the recent holding of this ...


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