DAIRY QUEEN v. WOOD

Print this transcript Transcript: 

Argument of Michael H. Egnal

Chief Justice Earl Warren: Number 244, Dairy Queen, Incorporated, Petitioner, versus Honorable Harold K. Wood, et al.

Mr. Egnal.

Mr. Michael H. Egnal: Mr. Chief Justice and may it please the Court.

This case involves the right to a trial by jury in a civil action.

The District Court judge denied the demand for a jury trial and his reasons briefly were that upon a consideration of the issues raised in the complaint and answer, he concluded that the action was purely equitable although he found that this complaint included a demand for the payment of $60,000, allegedly do by reason of the breach of contract of a facts or rather scan.

The petitioner in this case held a franchise for the use of the trademark, Dairy Queen, in the State of Pennsylvania.

And this agreement was made in October of 1949.

The agreement provided that the total consideration for the payment of this franchise was $150,000, which a thousand was paid at the execution of the agreement and the balance was to be paid from the proceeds, 50% of the proceeds of the sale of sub-franchises provided that beginning with October of 1955, there was to be paid not less than $18,625 per annum.

This payment was made regularly until October of 1954, and it was not made at that time.

But the parties in January of 1955 reached a normal agreement that thereafter, the obligation of the petitioner was to merely pay 50% of the sales of sub-franchises and there would no longer be any need to meet this annual minimum payment.

This continued for six years thereafter.

The parties were harmonious until August of 1960 when the plaintiff in the action below, took the position that there was now due and owing the entire balance which was some $60,000 payable under the contract and the contention of the petitioner raised that was a repudiation of the oral agreement which had modified the original written agreement and which had been implemented for some six years.

Justice John M. Harlan: You're the respondent or the defendant, original defendant (Voice Overlap)

Mr. Michael H. Egnal: Yes sir.

That is correct sir.

Justice John M. Harlan: And your defense was this alleged oral agreement?

Mr. Michael H. Egnal: Yes sir, made in January of 1955, and as I say, implemented for the next six years.

Now, when the complaint was filed, it -- or I'm ahead of myself.

In August of 1960, the position of the plaintiff below changed and it then demanded the payment of the balance to one of the contract which was indicated by a letter.

That's Exhibit C attached to the complaint.

And in that letter, it expressly recited that unless you pay the balance due and owing under the contract, we will consider that a material breach and we will cancel the franchise.

That position was not recognized by the petitioner and subsequently a complaint was filed.

In the complaint, it was sort to enjoin on the theory that the -- that the franchise had been cancelled by this x-party declaration of the plaintiff below to cancel the franchise, restrain the petitioner from many further use of the trademark and they will restrain the petitioner from collecting any moneys which it would be an incident of a continued use of the franchise and for a judgment of the amount due and owing under the contract.

Our position briefly is that while there was cloth in this complaint, some equitable attire that basically, before there could be any equitable relief, this plaintiff had to establish that there was a breach of a contract, that there was an amount due under the contract.In other words, he would have to sustain the -- the legal course of action.

And if that could be sustained, he would then become entitled to equitable relief.

Justice John M. Harlan: What is the equitable relief or the equitable attire, whatever that phrase that you (Voice Overlap)?

Mr. Michael H. Egnal: Well he -- in his prayers, in his prayers, he uses the conventional prayers that would be found in a complaint equity asking that the Court enjoin this defendant, the petitioner, from any further use of a trade name.

He uses a phrase that the Court should grant an accounting for the amount due and owing under the contract and uses the -- the terminology which is peculiar to equity proceeding.

That is what I mean by the attire.

Now, we take the position that regardless of how much there is in evaluating this complaint, how much there maybe a scribe for the legal course of action, if there is a legal course of action involved in this preceding, a right to a jury trial cannot be denied.

And of course, we -- we rely on what this Court said both in its majority and my minority opinion in Beacon Theatres versus Westover which has recently been put directly, it seems to me in point on this proposition in the Thermo-Stitch case.

Justice John M. Harlan: What you're saying in essence is that the substance, the real guts of this cause of action is simply an action for breach of contract?

Mr. Michael H. Egnal: Yes sir.

Justice John M. Harlan: That's the essence.

Mr. Michael H. Egnal: That is it sir.

Justice William J. Brennan: Is this -- this is the case I -- that I gathered (Voice Overlap)

Mr. Michael H. Egnal: Yes and Mr. Justice Brennan, this is the case where Judge Wood after denying the jury trial, fixed the case for trial on August 1 preemptively, a trial before him without a jury.

You were branded a stay on July, the 31st.

I -- I'll reserve whatever time I have with Your Honor's kind permission for rebuttal.

Argument of Owen J. Ooms

Mr. Owen J. Ooms: Mr. Chief Justice, Honorable members of this Court --

Chief Justice Earl Warren: Mr. Ooms.

Mr. Owen J. Ooms: Thank you Your Honor, I'm sorry for (Inaudible).

The question here involved is a very simple one.

And that is whether the complaint states a legal cause of action entitling this defendant to a jury trial.

Petitioner in its question presented to the Court, has limited himself to the complaint although we do not have to so limit it in order to find that all that is involved here are matters of equity consideration as we have long understood them.

I would like to point out to the Court, however, that the question presented is an error for two primary reasons.

The question presented assumes the conclusion that there is a legal cause of action found in this complaint as he states where a complaint asserts a legal cause of action and an equitable cause of action.

In other words, the question presents, assume there is a legal question presented which we disagree and we will point out to the Court.

Further in the question presented, it is stated that the basis of both cause of action is the omission of defendant to pay some of money.

Now, this is not a true nor an accurate presentation.

The basis of this cause of action is not based on a contract which was cancelled and which the District Court which I will go into has so found on a preliminary injunction hearing but the fact, what the defendant did subsequent to the cancellation of the contract.

Now, in the complaint, there're several very important statements made which have nothing at all to do with an alleged $60,000.

It is true that the statement is made in the complaint as a background operative fact that this defendant, petitioner here was in default in the amount of $60,000.

It further states that the plaintiff, the respondent herein, is the owner of the Dairy Queen trademark in Pennsylvania and throughout the United States.

By a system of franchise agreements and territory agreements throughout the United States, it has under its various licenses over 3000 such Dairy Queen stores.

These stores are similar in appearance and the purpose of having a strict control over these stores is so that the public may know and believe that this product which they purchased is the same throughout the United States.

The defendant was licensed among other things to use this trademark.

It's so used it.

It complied with the contract and so far as making basic annual payments for a period of time.

It ceased making these annual payments and as the defendant asserts in its answer, not by way of a counter claim or a cross claim that this agreement was modified whether we call it a reformation of the contract or a novation in the contract.

He says it was modified so that he no longer had to make this annual payment.

Furthermore, the complaint also averse that after this contract was cancelled by the defendant for a failure to pay not only this sum of money but other sums of money through a third independent person that the defendant thereafter began unjustly in reaching itself, continue to hold itself out as a licensed Dairy Queen operator, continue to receive the moneys and so forth.

In August of 1960, pursuant to paragraph 9 of the agreement, which is attached to the complaint as Exhibit A, the plaintiff cancelled that contract which it had a right to do.

Now, it is true that one of the issues raised by the answer is whether we had a right to cancel or not and I will get to that as it is a very basic premise in this matter.

In December, we filed a motion for preliminary injunction, and that preliminary injunction was heard, evidence and witness is produced, oral argument and briefs.

On December 28, the District Court, the same judge herein, has denied the petitioner here, his right to a jury trial, made findings of facts.

These findings of fact are in the appendix D in brief and opposition by the respondent herein.

We do not say that these findings of fact and conclusions of law are res judicata as to the petitioner hearing.

But they do have a certain standing as to what were the facts are in this matter, and this is what we get to the crux of the problem that the complaint herein is not based on the contract.

The District Court found that the contract was breached whether it'd be for reason of default of payment of money.

That is only the operative fact for bringing the complaint into being.

The fact that it was breached, this defendant continued to collect moneys, it had no right to do.

It continued to use the Dairy Queen trademark.

It continued to hold itself out as a licensed Dairy Queen operator.

The Court granted, under the question of balancing the equity in the case, a limited preliminary injunction.

This was December 28, 1960.

Defendant, although the complaint had been filed in November, had not filed an answer of any type at this time.

It appealed the preliminary injunction which was affirmed but approximately two months after -- after the Court had rendered this decision in the preliminary injunction, it filed its answer and the answer did not again include any counterclaim or cross complaint, it merely raised some antitrust issues, the same that we were barred from any relief, not asking for any affirmative relief and further stated this modification in the contract.

We say --

Justice Felix Frankfurter: (Voice Overlap) did it challenge the contract -- that the original contract was breached?

Mr. Owen J. Ooms: Yes, Your Honor.

The letter was stated that it was breached.

We considered it breached.

Justice Felix Frankfurter: Did the present petitioner, in the answer, challenged the claim in the complaint or the -- what you call the background operative fact?

Mr. Owen J. Ooms: Yes, they did challenge.

They said there was a modification with the --

Justice Felix Frankfurter: But did they -- did they challenge if -- if they insist that the old contract was still alive?

Mr. Owen J. Ooms: They insisted it was alive as modified by some oral agreement.

Now, they don't use the word novation or renovation or reformation.

The District Court in its opinion, call it an attempt at (Inaudible).

Justice Felix Frankfurter: Then the existence of the original contract or is not an issue in this litigation or was it?

Mr. Owen J. Ooms: The existence of the continuation of this license agreement is an issue in this litigation.

Justice Felix Frankfurter: Well --

Mr. Owen J. Ooms: Yes, Your Honor.

Justice Felix Frankfurter: -- isn't that an -- an issue antecedent, necessarily antecedent determination whether you can claim what you claim namely that they are operating outside of the agreement and therefore all these things.

Mr. Owen J. Ooms: That is correct Your Honor.

If in fact the contract had not been canceled or that we did not effect a proper cancellation because in -- in effect, there was a novation or reformation of this contract then we have no standing before the Court.

Justice Felix Frankfurter: And so you're -- you're in conflict on whether that original contract on the date which they were licensees still alive, are you not?

Mr. Owen J. Ooms: I don't think so at all, Your Honor.

The mere fact --

Justice Felix Frankfurter: Well, I misunderstood you.

Mr. Owen J. Ooms: -- the mere fact that a contract has been breached does not necessarily mean that a legal issue has been intruded into the scene.

One made by breaching a contract or cancelling a contract as for specific performance.

Justice Felix Frankfurter: Yes I know, but if they -- if they stand on their rights under the contract, is that not an adjudicable issue in this controversy?

Mr. Owen J. Ooms: That is correct.

Framed within the equitable --

Justice Felix Frankfurter: Yes, but before you get to the equitable thing, you must decide whether they still have a contract under which they're legally operated.

Mr. Owen J. Ooms: That is correct Your Honor.

But the --

Justice Felix Frankfurter: So why is that antecedent to any equitable relief?

Mr. Owen J. Ooms: Well, the Court didn't make that finding already on witnesses and everything else that the -- and -- and testimony and exhibits that this contract in the hearing for preliminary injunction was in fact breached and have not been cured.

Justice Felix Frankfurter: And did the -- did the present petitioner accept that?

Mr. Owen J. Ooms: The present petitioner appealed it.

Justice Felix Frankfurter: (Voice Overlap) the petitioner will say yes.

Mr. Owen J. Ooms: Obviously, not -- you'll feel it Your Honor.

Justice Felix Frankfurter: The original contract is no longer in existence.

Yes, we're not operating under that (Voice Overlap) then the rights we may have are outside of it.

Mr. Owen J. Ooms: At no time did he do that.

He appealed the decision of the -- granting the preliminary injunction to the Court of Appeals and they affirmed the District Court.

Justice Felix Frankfurter: Is it bound by that when it goes back to the permanent injunction?

Mr. Owen J. Ooms: As res judicata, no sir.

He's entitled to a full hearing on that.

Justice Felix Frankfurter: Well, then -- then I -- if you'll forgive me, I'll repeat my question.

Why isn't the determination, the resolution of that conflict you say the original conflict is gone, he should not leave.

Mr. Owen J. Ooms: That's correct.

Justice Felix Frankfurter: Why is that not a -- a legal question?

Mr. Owen J. Ooms: Well, the mere fact that a contract whether it has been cancelled or not, Your Honor does not immediately makes this a legal question.

The question is, what if --

Justice Felix Frankfurter: It doesn't -- it doesn't decide what the -- what the relief should be.

Mr. Owen J. Ooms: No, that is correct Your Honor.

Justice Felix Frankfurter: But it does bring in to controversy whether a contract exists or is dead.

Mr. Owen J. Ooms: That is correct and on the --

Justice Felix Frankfurter: Is that not a legal question?

Mr. Owen J. Ooms: No, sir, Your Honor.

Justice Potter Stewart: (Voice Overlap) an issue, that very issue could be presented as the main issue in a purely equitable proceeding --

Mr. Owen J. Ooms: That is --

Justice Potter Stewart: -- for specific performance of a contract.

Mr. Owen J. Ooms: That is absolutely our reformation (Voice Overlap)

Justice Potter Stewart: The answer would deny the existence of the contract.

Mr. Owen J. Ooms: Judge Wood in his opinion cites the fact of a cancellation of a contract framed within the equity forms as we know it, is one that has been cognizable by courts of equity from time and memorial.

In other words, if we had come in here --

Justice Potter Stewart: That is what we've got here.

We have -- this is a suit within four specific performance of a contract.

And the defendant said, there is no contract or this is a -- there is no contract.

Here, you've got a suit based for money, the antecedent of which is that the contract is no longer in existence.

Mr. Owen J. Ooms: I disagree, Your Honor.

This is not a suit based for -- for money, there is much more.

We say we have effectively canceled the contract.

It is true the defendant herein contest that fact.

We say that the acts subsequent to our effective cancellation makes it necessary for a court of equity to enjoin this defendant on a preliminary injunction basis until a final hearing from doing these various acts and to take whatever money he is receiving and pay them into the registry of a court.

Now, in effect what he is doing by his answer and he -- and this, we have to distinguish from the Beacon versus Westover case and so forth.

The Beacon versus Westover case was where the defendant filed a counterclaim which clearly raised legal issues.

And the Court thereby -- the opinion by Justice Black stated that he was entitled to a jury trial on these legal issues.

And that he was entitled to go forward with them before the hearing, before the chancellor for the simple reason that because he had filed, that is that plaintiff had filed a declaratory judgment relief, he couldn't have anticipated and -- and removed any chance for the defendant to have a trial.

Therefore, the legal issue should be heard first since there might be collateral, estoppel or estoppel by judgment.

We don't have that issue here.

We have set forth a fact that this defendant has banned in default in 60 -- to the amount of $60,000.

This is the operative fact for -- one of the operative facts might I add.

Justice Hugo L. Black: What do you mean by default?

Mr. Owen J. Ooms: The contract says that he must pay the money that's sent forth under the contract or else we can immediately cancel the agreement.

And -- in paragraph 9, it says this is of the essence of the contract --

Justice Hugo L. Black: Do you mean --

Mr. Owen J. Ooms: -- 9 and 12.

Justice Hugo L. Black: -- do you mean by that that he breached the contract?

Mr. Owen J. Ooms: That is correct.

Justice Hugo L. Black: Is that a preliminary which you have to determine before you admit to a case, decided in your favor?

Mr. Owen J. Ooms: That's right and we had --

Justice Hugo L. Black: Is a breach of contract traditionally or legal claims?

Mr. Owen J. Ooms: If a breach of contract was a claim for money damages as Judge Wood stated in his lower opinion, if it's for money damages then it's clearly cognizable by law and he's entitled to a right for a jury trial.

But that is what we're here for --

Justice Felix Frankfurter: But a breach of contract by which the defendant seeks to escape money damages is not a legal question you can say.

Mr. Owen J. Ooms: Please rephrase that again Your Honor.

Justice Felix Frankfurter: In this case, if I don't know more than what you've stated to me because that's what I read with Judge Wood's opinion.

In this case, you say a contract is no longer in existence and therefore it is subject to other liabilities.

Mr. Owen J. Ooms: That is correct.

Justice Felix Frankfurter: -- injunction, not to misuse the name for which he's entitled to, money that he's improperly collected.

He denied this.

He said, "They are not subject to those moneys that are coming."

Mr. Owen J. Ooms: That's correct.

Justice Felix Frankfurter: Because if contract is alive and I'm merely a subject to the terms of that contract in whatever parts, monetary duties arrived out of that contract, I suppose he subjects himself.

Mr. Owen J. Ooms: That would be a correct position on his part and he perhaps could have done this by availing himself under the declaratory judgment statute after we had told him that he had breached the contract.

But we are proceeding --

Justice Felix Frankfurter: (Voice Overlap) can he -- can he resist your -- your prayers for relief based on the assumption that he -- that your assumption that he breached this contract which he denies and he says, “I'm not subject to that.

This contract is still alive, you can sue me for whatever -- for whatever rights you have under this contract.”

Mr. Owen J. Ooms: Let me --

Justice Felix Frankfurter: Suppose you sued for rights -- your rights under this contract where would that be, on the law side or equity side?

Mr. Owen J. Ooms: We'll be on the equity side in this case Your Honor because he's trying to reform a written instrument and as Judge Wood has cited the cases and if we had cited --

Justice Felix Frankfurter: Well you --

Mr. Owen J. Ooms: -- on the last page of our brief.

Justice Felix Frankfurter: You've now said something, you give a different answer to what my whole question is based on, namely that he insists that the original contract is alive, not that he insists that it should be reformed.

Mr. Owen J. Ooms: Well, Your Honor --

Justice Felix Frankfurter: All my questions derived from what I expect from counsel, you -- who know this record and I don't.

Does he or does he not say the original contract (Inaudible) its original integrity?

Mr. Owen J. Ooms: The answer then is no Your Honor.

Justice Felix Frankfurter: Alright.

Mr. Owen J. Ooms: He says it has been modified.

Now, it does not remain in its entirety.

In other words, we are not proceeding under a contract as it was originally drafted.

Justice Felix Frankfurter: Does he inform in -- in effect grant a written modification of this contract to which there has been an oral -- about which has been an oral change?

Is that what he want?

Mr. Owen J. Ooms: I couldn't answer that question.

No one has asked him and I don't know.

Justice Felix Frankfurter: Well he really get it -- to the seek reformation of the contract?

Mr. Owen J. Ooms: That is correct.

Justice Felix Frankfurter: Do you seek reformation?

Mr. Owen J. Ooms: I used the word reformation in the District Court.

Justice Felix Frankfurter: Who seeks reformation, you or he?

Mr. Owen J. Ooms: He does where --

Justice Felix Frankfurter: Then he is seeking -- if he seeks reformation then he certainly is asking for equitable relief.

Mr. Owen J. Ooms: I would say that the answer certainly, he speaks exactly what he is not saying here, namely when he was in modification, it's framed in the equitable side, in our prayer for the complaint, we asked for three things, an injunction enjoining him from the use of this trademark, from holding himself as the license operator and from collecting money as a Dairy Queen operator.

Number two, and accounting for all damages.

Now --

Justice Hugo L. Black: Can you have any of that relief unless he has breached his contract?

Mr. Owen J. Ooms: Unless he has breached this contract in total, no, Your Honor.

That is absolutely correct.

Justice John M. Harlan: Or put it the other way around, what he stands on is a contract right which he has do what you claim he has no license.

Mr. Owen J. Ooms: That is correct and we say --

Justice John M. Harlan: So that ultimately your issue between you is whether there's a breach of contract.

Mr. Owen J. Ooms: That is correct Your Honor and we --

Justice John M. Harlan: Why isn't that a legal cause of action?

Mr. Owen J. Ooms: Because the fact that this breach of contract as he is saying, we have a good contract.

Here's the position he is in, we have a good contract but it's been modified as such.

If it's been modified as the District Court said then there's a no novation.

A novation of a contract is one cognizable in equity.

If it is as I say, an attempt at reformation of the contract, that is still under the law that we have cited.

Justice John M. Harlan: (Voice Overlap) in reformation of the contract is there -- you just said that the contract is -- just made the right to do this.

Mr. Owen J. Ooms: No, the contract does not give him the right to do this at all.

Justice John M. Harlan: That's what he said at times.

Mr. Owen J. Ooms: No, he does not say that.

He says that “I am still under this contract but we have modified the oral payment -- the payments of this by some oral agreement.”

We modify it if that is -- the party has modified it.

We deny this and we asked him for strict accounting for the moneys, not only the $60,000.

Now, it's unfortunate.

But let me phrase the hypothetical if it please, Justice Harlan.

If we had never mentioned the $60,000 as the background operative fact for the breach of the contract as well as other sums of money, and merely said that he breached the contract, the question would then arise, have we in anyway injected anything, any money amounts as what he claims we have here, we have a debt -- an action in debt.

We don't claim the action in debt.

We claim this $60,000 as only one element of the accounting which we ask for.

Now, could it be said then if we never mentioned the $60,000 as there was here, a legal action.

When he -- when he says, “No, I didn't breach, we didn't breach the contract because what we have done --”

Chief Justice Earl Warren: Finish your sentence.

Mr. Owen J. Ooms: Alright, because what we have done has orally modified this agreement.

In other words, we either inserted, made a novation in it or reformation of it.

Chief Justice Earl Warren: We'll recess now.

Print this transcript Transcript: 

Argument of Owen J. Ooms

Chief Justice Earl Warren: Dairy Queen, Incorporated, Petitioner, versus Honorable Herold K. Wood, et al.

Mr. Egnal, you may continue your argument.

Mr. Ooms, I beg your pardon, sir.

Mr. Owen J. Ooms: Mr. Chief Justice, Honorable Members of the Court, at the recess, we were having some colloquy with respect to whether in the question presented here, the breach of a contract involved a question of law or not.

I believe, I may in the colloquy which Justice Frankfurter engendered some confusion.

The question of whether the breach of a contract must be determined as to whether the plaintiff is entitled to relief or not does not necessarily involve a question of law.

It is a question of fact that the Court may and must determine before it can grant whatever relief the plaintiff asks.

Now, the fact that the Court must determine a question of fact is nothing uncommon or unusual.

We find that in all and many cases of equity.

If I may use a phrase and an illustration, if I alleged that a tort has been committed against me and file a suit to enjoin further torts, the common question of fact is whether in the first place a tort was committed.

That still does not take it outside the purview of a cause of acton for the chancellor alone.

Similarly, in a suit by one in possession of real property to acquire a title or to remove a cloud on the title, the court of equity may determine the legal title.

There still is the common question of facts.

In a suit for a specific performance of a contract, the court of equity may determine the making, the validity and terms of the contract.

Justice Felix Frankfurter: Are you going to move on from there?

Mr. Owen J. Ooms: I have just one more simple illustration, Your Honor.

Justice Felix Frankfurter: Now, before you move to another illustration, I'd like to ask you this.

Mr. Owen J. Ooms: Yes, Your Honor.

Justice Felix Frankfurter: And I ask for information because I do not know.

In view of -- in view of the Seventh Amendment, what do the cases tell us or tell me that doesn't know.

Well, if you bring your suit for a specific performance and the answer is one that the so-called agent purported to make this contract for me had no authority.

And therefore, there was no contract.

And two, in the alternative for appropriate equitable reason, there shouldn't be specific performance.

And I claim a jury trial for on -- my first defense as to both defenses can be pleaded on the modern loose or free or rational pleading?

Mr. Owen J. Ooms: That's right.

The alternative pleadings may be employed, Your Honor.

Justice Felix Frankfurter: Now, I suppose I make -- I put up those two defenses to your suit bill in equity for a specific performance.

Challenge one, challenging the existence of the contract because the fellow purported to be my agent was my agent or -- and two on ground of equity, there shouldn't be specific performance.

Mr. Owen J. Ooms: Your Honor, there is a common question of fact to be determined in both cases.

One, whether there is an existence of a contract, this is a question of fact and not law to be determined by this specific relief asked for their specific performance.

Justice Felix Frankfurter: I'm just -- I'm -- I don't want theory.

Not not the quality --

Mr. Owen J. Ooms: No, the -- the case is a --

Justice Felix Frankfurter: -- I think we have to leave the theory as (Voice Overlap) --

Mr. Owen J. Ooms: Pomeroy.

Justice Felix Frankfurter: I want to know whether this question has arisen under the requirement of the Seventh Amendment.

Mr. Owen J. Ooms: Specifically, I could not answer whether the specific illustration given by the Court has been.

Justice Felix Frankfurter: To be divided into this case, isn't it?

Mr. Owen J. Ooms: No, it's -- it's closed.

It's akin to it but not quite.

Not quite, Your Honor.

It's somewhat different.

And the illustrations that I am quoting come from Pomeroy which Justice Stewart quoted in one of his decisions.

Justice Felix Frankfurter: Well, does Pomeroy consider our problem namely what restrictions or what demands the Seventh Amendment makes for the right to ask for a jury in the federal court?

Mr. Owen J. Ooms: The Section on Pomeroy, which I am quoting from Your Honor, deals specifically whether one is entitled to a question of jury.

Justice Felix Frankfurter: Yes.

But is he dealing, what I want to know --

Mr. Owen J. Ooms: Under the Seventh Amendment.

Justice Felix Frankfurter: Is he talking Seventh Amendment or is he talking English equity procedure?

Which?

They are very different as you well know.

Mr. Owen J. Ooms: I understand that Your Honor.

And they -- he has been quoted in subsequent cases as under the Seventh Amendment which Justice Stewart did deal with in his opinion.

Justice Felix Frankfurter: Of course, if it was settled -- if it was settled before the Constitution, before the Seventh Amendment that a particular question is on the equity side rather on the more side that is a gloss on the Seventh Amendment, I take it.

Mr. Owen J. Ooms: It might be but as I understand the cases Your Honor, they say that the Seventh Amendment did not in any way changed whether it is an equity question or a legal question.

Justice Felix Frankfurter: That's what I just meant to convey in my offered advised.

Mr. Owen J. Ooms: Right.

Now, what do we have in this case, Your Honor?

We first must determine the breach of the contract.

This is the question of fact which the trier must try.

In terms of what the relief is asked and under all the cases, as I have been able to see it, as Judge Wood has said, this is an equity case.

We have asked for injunctive relief for trademark infringement in the county and another injunction pendent lite for money is unjustly received to be paid in to the Registry of the Court.

Justice Felix Frankfurter: Well, the fact that you ask, the fact that has suited as for equitable relief doesn't settle the question, does it?

Mr. Owen J. Ooms: Not necessarily.

Justice Felix Frankfurter: Well, not --

Mr. Owen J. Ooms: You must look at the complaint in its entirety and the answer in its entirety.

And there are always going to be questions of fact which necessarily do not mean they're questions of law.

And the court of equity, the chancellor is in just as good at position to answer them as -- as a jury, if I might say, without violating the Seventh Amendment to the Constitution.

Justice Felix Frankfurter: Nor can we take that test with the rules?

Mr. Owen J. Ooms: Pardon?

Justice Felix Frankfurter: Nor can we take that test whether the judge -- justice capable of the jury.

Mr. Owen J. Ooms: No, I don't think that's --

Justice Felix Frankfurter: You might have (Voice Overlap).

Mr. Owen J. Ooms: That's an ultimate test at all.

Let me, in conclusion because I see my time is rapidly coming to an end, Your Honor, state that and read from what the -- Judge Wood found and stated what the complaint involves.

The complaint seeks in effect a declaration that the licensing contract is null and void and accounting of profits illegally obtained by the defendant since 1942 to date and a permanent injunction restraining the defendants from any use of plaintiff's trademark.

Now, what do we have here as it is presented here?

A preliminary injunction was granted December 28, 1960.

On March 1, this defendant came in after he felt the ill win of the chancellor's viewpoint as to what was involved here.

And we obtained a preliminary injunction.

What he is seeking here now is to get a new trier of the facts and further delay for his final day of accounting.

Your Honor, under these circumstances, we ask the Supreme Court here to invoke Rule 562 that is set forth on page 56 of the Court's rules.

Thank you, Your Honor.

Argument of Michael H. Egnal

Mr. Michael H. Egnal: Mr. Chief Justice, may it please --

Chief Justice Earl Warren: Mr. Egnal.

Mr. Michael H. Egnal: I think Mr. Justice Frankfurter that your question may find an answer in a case cited here by the respondent on behalf of this plaintiff in Chappell which is a case that came out of the First Circuit.

In that case, the opinion, as I recall, it indicated -- excuse me -- that a question as to whether or not a contract was made is a question of fact that would be determined by a jury.

Now, it seems --

Justice Felix Frankfurter: What's the case?

Mr. Michael H. Egnal: Chappell versus Palermo.

Justice Felix Frankfurter: You mean, Mr. Ooms cited the case --

Mr. Michael H. Egnal: He cited that case.

Justice Felix Frankfurter: -- put him out of Court?

Mr. Michael H. Egnal: I beg your pardon sir?

Justice Felix Frankfurter: Are you suggesting that Mr. Ooms cited the case put it out of court?

Mr. Michael H. Egnal: Well, that's what the case does indicate.

Justice Felix Frankfurter: Is that the only case that you know of?

Mr. Michael H. Egnal: Well, we sought --

Justice Felix Frankfurter: It's strange that this should have been written before that there isn't a specific answer to my question because I should think it -- it must be a frequent occurrence that when specific performances sought, you challenge the justness of a contract because of lack of agency of the agent.

Mr. Michael H. Egnal: Well, it may be that this is more or less regarded as hornbook because --

Justice Felix Frankfurter: Everybody that you'll leave it.

So what would be the case?

Mr. Michael H. Egnal: It would seem that way.

Justice Felix Frankfurter: That these four judges below didn't, did they?

Mr. Michael H. Egnal: No.

Now, it seems self-evident in this case that Mr. Ooms, with an awareness of the fact that his demand in the complaint for the balance due under the written contract creates a legal course of action is attempting to obscure that.

But, I think, Your Honors will find that the complaint in itself says that rather specifically and Judge Wood below understood it quite clearly because in his opinion, which is at page 36 of the record, he said in clear language, “Incidental to this relief, the complaint also demands the $60,000, now allegedly do and owing plaintiffs under the aforesaid contract”.

And we took his phrase of “incidental to this relief” to mean that he was giving it a subordinate position that the dominate phase of the case in his opinion was equitable.

And we submit that this is where Judge Wood erred in not accepting the teachings of Beacon that regardless of what evaluation, the two courses of action should be given, if there was present illegal course of action which he recognized, this defendant was entitled to a jury trial.

Now, I'd like to conclude with just two short paragraphs.

It seems to me that in Beacon, where you had two separate courses of action, one equitable, one legal, and this Court denied the right of the -- of the court below to postpone the trial of the legal course of action as a deprivation of the rights under the Seventh Amendment and in Thermo-Stitch, which followed that in the Fifth Circuit where you had two independent courses of action, one legal and one equitable, in which the same result was imposed.

We come to our case which seems to be even more compelling because in this case, it seems to me we have a legal course of action and an equitable which are dependent.

It seems to me that there can be no equitable relief in this case until this plaintiff has established the legal course of action because this case being heard by a jury would first determine whether there was a breach of the contract, whether any sums were due under the contract.

Justice Felix Frankfurter: Does this question of jury or not jury have to be determined initially on the -- on the pleadings or later stages?

Because, if -- if the question is raised on the pleadings, then the plaintiff in the suit doesn't have to establish existence of a contract.

He alleged it and the denial of the existence comes from the defendant.

And therefore the plaintiff can prove this case without -- just on his inequitable demand.

Mr. Michael H. Egnal: Accepting that, Mr. Justice Frankfurter, you get then to the question of fact which is common to both his position and the defendant's position.

Justice Felix Frankfurter: But you don't mean to suggest of every question of fact that may arise in an equity suit when you try and it's hard to think of an equity suit in which questions of fact do not arrive has to be sent to a jury.

Mr. Michael H. Egnal: No, sir.

Justice Felix Frankfurter: The chancellor made call in the jury to aid him.

Their determination is just advisory when he does.

Mr. Michael H. Egnal: Yes, sir.

Justice Felix Frankfurter: And I can't imagine along with the Seventh Amendment every time a question of fact arises in an equity suit, you have to summon the jury.

Mr. Michael H. Egnal: I agree with that, sir.

Justice Felix Frankfurter: Therefore, saying there's a question of fact doesn't take you very far from here.

Mr. Michael H. Egnal: No, sir.

I should go on and say where the question of fact involves an issue which is a legal course of action.

And the legal course of action in this case is that demand for the --

Justice Felix Frankfurter: Then my question, if I make a deal with that, then if -- if a question is raised by the defendant that the agent exceeded his powers, you think then you'd have to summon the jury for a jury determination.

Mr. Michael H. Egnal: Yes, sir.

Justice Felix Frankfurter: Do you?

Mr. Michael H. Egnal: Yes, sir.

For the reason that that this question of fact, if it is left to the chancellor, would -- would be in the nature of a res judicata or an estoppel that would determine a legal course of action without a jury trial.

Justice Felix Frankfurter: Well, but every determination of fact by the chancellor has the term or is -- is the basis for res judicata.

I don't see that that helps me much.

Mr. Michael H. Egnal: I think that, as I read the cases, the distinction is not whether there is a question of fact but whether the questions of fact are involved in an issue that make out a legal course of action or to put it in a converse that do not, in anyway, fall within the scope over either equity or admiralty.

Justice Felix Frankfurter: Or take -- take proceedings brought by a corporation where specific performance of reformation of a contract or whatnot in almost every such case, a proper corporate proceeding may come an issue in fact that challenge do come an issue.

Was there a meeting of directors?

Did the directors have powers as inappropriate minute et cetera, et cetera, et cetera?

Now, those issues, if the corporation didn't act according to the requisite form or corporate procedure, the plaintiff is out but the defendant is out in his -- in his defense.

Now, what bothers me to get some guidelines to find out when a jury must be summoned or when the jury may be summoned, must be the Seventh Amendment chan -- made the chancellor's judgment.

Mr. Michael H. Egnal: Well, apparently, if the question is closed, the -- the chancellor or the jury -- the Court must favor the implementation of the Seventh Amendment.

Now, if there is a clearly an equitable course of action that involves questions of fact, I would say that a jury trial would not be available and in the cases that have preceded this.

Justice Felix Frankfurter: Are you saying anymore than money is in doubt, you better have a jury trial because the Supreme Court may reverse it?

Is that what you're saying?

Mr. Michael H. Egnal: I'm -- yes, sir.

I'm saying that because --

Justice Felix Frankfurter: -- that doesn't give me -- that doesn't enable me to say to decide or I should think about this matter.

Mr. Michael H. Egnal: Well, I would say --

Justice Felix Frankfurter: I again just say where it had been bettered just would've called the jury?

I think it would've been.

We would have this argument here.

Mr. Michael H. Egnal: Well, I would say that if this case did not have present, what appears in the pleadings and from the judge's opinion that in this case, the plaintiff is seeking to recover $60,000 which admittedly is an action for debt.

Justice Felix Frankfurter: Yes.

But there has been no contract at all, equity can, in addition to giving its impersona relief saying mustn't do this in the future or should say you've been unjustly wrong, unjustly and unjustly enriched and walk out.

Mr. Michael H. Egnal: Well, I think in that --

Justice Felix Frankfurter: You wouldn't have to -- you don't have to call a jury.

Mr. Michael H. Egnal: No, sir.

Justice Felix Frankfurter: Because equity is going to give a money -- an incidental money damage.

Mr. Michael H. Egnal: No, sir.

Now, I think that that may point out the distinction.

And, I think you've mentioned that in your question yesterday.

Whether this particular demand for the $60,000 as empty seat where if in this case the defendant was a wrongdoing ab initio and it was sort to restrain further acts, equity would have jurisdiction and if the consequences of that were to make for damages as there would be no right to a jury trial but this case is distinguished by the sequence in reverse.

In this case, the plaintiff is saying, you breached the contract by not paying me $60,000.

And because you owed a $60,000, having established that, I want the Court to enjoin you permitting for the rights under this contract.

The complete reverse of what might be an equitable course of action.

Justice Felix Frankfurter: Suppose, he hasn't asked for money damages in this suit, what would the situation then be?

Or if he said that I'll leave that for another day?

Mr. Michael H. Egnal: Well, if he had said that in his initial complaint.

Justice Felix Frankfurter: He said that, it once was a -- just as by way of a recital, a way of exhaust in the beginning, by way of -- of certain reasons.

He says there once was a contract and no longer is a contract, therefore I have no business to use my trade name and he's engaged in unfair trade practices, I want him enjoined.

Mr. Michael H. Egnal: Alright.

Now --

Justice Felix Frankfurter: And you reply and say “yes”, the contract is still subsisting.

Now, would that be a jury trial in that case?

Mr. Michael H. Egnal: I would say yes for this reason that the cases indicate that the -- the consideration must be given to both the complaint and the other pleadings in the case.

In a -- in a -- in a Beacon, the consideration was given to the complaint, the answer the counterclaim in the course of action in the Thermo-Stitch to the complaint similarly.

Justice Felix Frankfurter: Well, in Beacon -- in Beacon, you had an acknowledged action at law joined with an action in equity.

And, the question was whether the District Court, as I understand it, the District Court would say, “Well, I'll deal with the equity problem first,” isn't that right?

Mr. Michael H. Egnal: Yes, sir.

Justice Felix Frankfurter: That's all there was.

Mr. Michael H. Egnal: That's correct, sir.

Justice Felix Frankfurter: You rather --

Mr. Michael H. Egnal: -- But in --

Justice Felix Frankfurter: -- conceded action at law requiring a jury trial and that involve in the main to be at least the question of what discretion you should leave to the trial judge.

This is a very different problem.

Mr. Michael H. Egnal: Yes, sir.

Justice Felix Frankfurter: More confusing to me.

Justice Charles E. Whittaker: Mr. Egnal.

Mr. Michael H. Egnal: Yes, sir.

Justice Charles E. Whittaker: May I ask you, please?

Mr. Michael H. Egnal: Yes, Mr. Justice Whittaker.

Justice Charles E. Whittaker: I -- do I understand -- do I correctly understand that the petitioner here -- the plaintiff is bound by the prayer used to complaint and does not it seek merely an injunction and an accounting and an award of whatever is found due upon the accounting as do that to prayer on page 15 of the record?

Now, is there anything illegal there?

You do not deny, as I understand it, that there was a contract.

I understand your claim to be and your answer that the contract was modified.

Mr. Michael H. Egnal: And subsisting.

Justice Charles E. Whittaker: But still subsisting?

Mr. Michael H. Egnal: Yes, sir.

Justice Charles E. Whittaker: Now, then under the prayer on page 15 doesn't -- isn't it true that what is asked is an injunction and an accounting and for the payment into the Registry of the Court of any that was found to be due on the accounting?

Mr. Michael H. Egnal: Yes, sir.

That -- that is --

Justice Charles E. Whittaker: Under the contract whatever it is.

Mr. Michael H. Egnal: That is correct, sir.

Justice Charles E. Whittaker: Now, where -- where is the legal -- legal in the jury issue?

Mr. Michael H. Egnal: Yes, sir.

To answer the first part of your question, Mr. Justice Whittaker, I don't think the prayers are controlling because under our Rule 54 (c), if during the trial of the case, it should appear that there is facts to support a judgment.

Irrespective of the prayers, the Court would have or the jury would have the right to find that kind of a judgment.

I think the prayers are merely in an advisory category.

However, this prayer does throw light on what the plaintiff is seeking.

The preliminary paragraphs in the complaint of where the failure to pay the $60,000, they call attention to the fact that it was because of the refusal to pay the $60,000 that this action was instituted.

You can see that from the letter of cancellation, purported letter of cancellation which is Exhibit C on page 27 in which they said this letter is to advise you that your failure to pay the amounts required in your contract then further, unless it's completely satisfied to the amount due and owing.

So, I say that upon a consideration of the complaint and the prayer, this is seems to be on unequivocally a demand to recover from this defendant $60,000 which is the balance, according to the plaintiff's position, now due and owing -- and due and owing under the contract.

And Judge Wood found that that was so.

Justice John M. Harlan: What is the basis on which they claim the $60,000?

What do they allege you have done to entitle them to $60,000?

Mr. Michael H. Egnal: The issue there is their repudiation of what we contend was the oral agreement made in January of 1955.

Justice John M. Harlan: What does that mean?

Do they claim that you breached or abided by your contract?

Mr. Michael H. Egnal: They claim that we didn't make the payments in a strict accordance with the written contract.

Justice John M. Harlan: Strict accordance with contracts?

Mr. Michael H. Egnal: With the written contract.

Justice John M. Harlan: And I, suppo --

Justice William J. Brennan: Per year?

Mr. Michael H. Egnal: Five minimum per year.

Justice William J. Brennan: That they say you have not paid it and were at fault under the original --

Mr. Michael H. Egnal: That's correct, sir.

Justice William J. Brennan: -- that's the amount of $60,000.

Mr. Michael H. Egnal: And that totaled to approximately $60,000.

We had paid $90,000 by making four -- the first four years, we've paid the minimum of $18,625.

Justice John M. Harlan: I suppose instead of couching that complain and the prayer and the language they did and it simply said that it were the truth in the proceeding that you have breached your contract to their that you needed an accounting because they didn't know exactly what you got and what you're going to get, so that in addition to suing you for the breach of contract, they wanted to supplement that by common lawsuit but an -- equitable accounting.

Would you say that that would give them a right to file the breach of contract issue because they later wanted to collect their money by either to discover an equity together?

Mr. Michael H. Egnal: You mean, try that just before a chancellor alone?

Justice John M. Harlan: Yes.

Does it make any difference that they in collecting the money which they alleged to use them because of the breach of contract, they also wanted an accounting in order to forbid you to do some things in the future by injunction?

Mr. Michael H. Egnal: No, sir.

Justice John M. Harlan: That's separate and distinct, was it not?

Mr. Michael H. Egnal: Yes, sir.

Yes, sir.

Now, the one is superimposed on the other.

And our position here is that you can't get to the other until they've established that claim.

Justice John M. Harlan: Your argument is that if we follow the Beacon case --

Mr. Michael H. Egnal: Yes, sir.

Justice John M. Harlan: It was the duty of the Court first to try that issue which was plainly an issue if breach of contract which traditionally has been a common law of cause of action.

Mr. Michael H. Egnal: Yes, sir.

Justice John M. Harlan: Before they -- that they shouldn't have exercise discretion in connection with the other.

Isn't that about what you've said in the Beacon case?

Mr. Michael H. Egnal: Yes, sir.

And you said it in ringing terms and your descending opinion in Galloway.

Now, it would have been a simple matter here to proceed with the trial of this case before a jury because if there was any equitable relief available to this plaintiff, it could've been afforded in the -- in the single proceeding.

Justice William J. Brennan: Does the (Inaudible) asked for money that's additional to this $60,000?

Mr. Michael H. Egnal: Well, as we read the complaint, that would be a fair inference.

That in addition of a $60,000, they are reaching out some place for alleged damages which would come after we've been establish as a wrongdoing.

Justice William J. Brennan: (Inaudible)

Mr. Michael H. Egnal: Well, along the theory that -- that this is a little hard for us to comprehend because the total consideration is $150,000 if we pay that.

It seems to me that all of the rights have been satisfied but they think there might be something in addition to that.

Justice John M. Harlan: Could that be in the nature of a tort, wouldn't it?

Mr. Michael H. Egnal: Yes, sir.

That would --

Justice John M. Harlan: -- Something like a malicious interference with contract or --

Mr. Michael H. Egnal: Yes, sir.

Justice John M. Harlan: -- maliciously interfering with their patent rights or their copyright rights or trade -- trade rights?

Mr. Michael H. Egnal: Yes, sir.

And that would come at the -- at the terminal end of a case.

As a matter of fact, they did go in with a motion for preliminary injunction which is not part of these proceedings and got such relief as the chancellor thought they should've gotten which was at minimum.

Thank you very much, sir.