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Fleetwood Enterprises, Inc. v. Coleman Co.

May 25, 2007

FLEETWOOD ENTERPRISES, INC., APPELLEE,
v.
THE COLEMAN COMPANY, INC., APPELLANT.



Appeal from Sedgwick District Court; JAMES R. FLEETWOOD, judge.

SYLLABUS BY THE COURT

1. Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. The trial court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. On appeal, we apply the same rules and where we find reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied.

2. In cases where there are undisputed facts, appellate review of the district court's grant of summary judgment is de novo.

3. A court may ascertain the existence and terms of an agreement from a combination of written instruments and the acts of the parties in connection therewith.

4. Documents which are executed at different times, but in the course of the same transaction concerning the same subject matter, will be construed together to determine the intent of the parties to the contract.

5. The law of guaranty is a part of the law of contracts; a guaranty is a type or kind of contract. For a guaranty contract to be created, there must be at least three parties: a guarantor, a creditor (the individual to whom the promise is made), and a debtor. The guaranty is an obligation collateral to another contractual duty to perform. The contract of the guarantor is a separate contract. It is in the nature of a warranty by the guarantor that the thing guaranteed to be accomplished by the principal shall be done, and it is not an engagement jointly with the principal to do the act.

6. Determining the applicability of the doctrine of merger involves mixed questions of law and fact. The interpretation and effect of legal instruments are questions of law. However, since the merger doctrine is based on the intention of the parties, the determination of the intent of the parties is a question of fact found from the contracts as well as the facts and circumstances surrounding their execution.

7. Equitable estoppel does not depend upon legislative authority; it is an inherent power of the courts used to punish unconscionable conduct and estop a guilty party from taking advantage of his or her fraudulent conduct.

8. The doctrine of equitable estoppel is based upon the principle that a person is held to a representation made or a position assumed when otherwise inequitable consequences would result to another who, having the right to do so under all the circumstances, has in good faith relied thereon.

9. A claim of equitable estoppel will fail unless a party can prove (1) he or she was induced to believe certain facts existed by another party's acts, representations, admissions, or silence when the other party had a duty to speak, (2) he or she relied and acted upon such belief, and (3) he or she would now be prejudiced if the other party were allowed to deny the existence of such facts. Those facts cannot be ambiguous or subject to more than one construction.

10. Courts will ignore corporate names to counter injustice in cases where the parent corporation exerted such dominion and control over its subsidiaries that they were not separate and distinct corporate entities but one and the same under an alter ego analysis.

11. Ten factors that should be considered when deciding if the alter ego doctrine should apply: (1) The parent corporation owns all or a majority of the capital stock of the subsidiary; (2) the corporations have common directors or officers; (3) the parent corporation finances the subsidiary; (4) the parent corporation subscribed to all of the capital stock of the subsidiary or otherwise caused its incorporation; (5) the subsidiary has grossly inadequate capital; (6) the parent corporation pays the salaries or expenses or losses of the subsidiary; (7) the subsidiary has substantially no business except with the parent corporation or no assets except those conveyed to it by the parent corporation; (8) in the papers of the parent corporation and in the statements of its officers, the subsidiary is referred to as such or as a department or division; (9) the directors or executives of the subsidiary do not act independently in the interest of the subsidiary but take direction from the parent corporation; and (10) the formal legal requirements of the subsidiary as a separate and independent corporation are not observed.

The opinion of the court was delivered by: Hill, J

Affirmed in part, reversed in part, and remanded with directions.

Before HILL, P.J, MARQUARDT, J., and KNUDSON, S.J.

This case arises from a summary judgment ruling that permanently enjoined Coleman Company, Inc., from licensing its name in the recreational vehicle industry. In order to prevent inequity, Kansas courts have found, under an alter ego theory, that a subsidiary corporation can bind its parent. The issue of whether one corporation is but an instrumentality of another is a question of fact. Because of the parent corporation's extensive control over its subsidiary in this case, we hold that the grant of summary judgment must be reversed. We reject the three other claims raised by Coleman Company, Inc.

Summary of Background Facts

Corporate Entities. This case involves several corporations. They are Coleman Company, Inc.; Coleman Recreational Vehicles, Inc.; Coleman Holdings, Fleetwood Enterprises, Inc.; Fleetwood Folding Trailers, Inc.; Coleman Company, a Delaware corporation; and Consolidated Leisure Industries, L.L.C. Their involvement in the case follows.

The Coleman Company, Inc., is a Kansas corporation (hereafter referred to as Coleman/KS). For some time it had manufactured and sold recreational vehicles such as pop-up tent campers. Anticipating a sale of its' recreational vehicle division, in July 1989 it created Coleman Recreational Vehicles, Inc., a Delaware corporation (hereafter referred to as CRVI). CRVI received all assets and liabilities of Coleman/KS recreational division. Then, Coleman/KS transferred its capital stock in CRVI to Coleman Holdings, Inc. (hereafter referred to as Coleman Holdings). Thus, Coleman Holdings owned all of the outstanding stock of CRVI.

Coleman Holdings agreed to sell all of its capital stock in CRVI to Fleetwood Enterprises, Inc., a Delaware corporation (hereafter referred to as FEI) in December 1989. On December 7, 1989, the parties signed a contract they referred to as the 1989 Stock Purchase Agreement. After the sale, CRVI changed its name to Fleetwood Folding Trailers, Inc. (hereafter referred to as FFT). In 1992, Coleman/KS and Coleman Holdings assigned all assets and liabilities to the Coleman Company, a Delaware corporation (hereafter referred to as Coleman).

Some Important Clauses in the 1989 Stock Purchase Agreement

"5.11 Covenant Not to Compete.

"(a) . . . [A]s an inducement for [FEI] to enter into this Agreement, [Coleman/KS and Coleman Holdings] agree that for a period of three years after Closing, neither [Coleman/KS and Coleman Holdings] or any of their Affiliates shall, without [FEI's] prior written consent, directly or indirectly, (i) own, manage or operate, or join, control or participate in the ownership, management, or operation of, any business which sells products of the type manufactured and sold by [CRVI] on the Closing Date in the United States. Notwithstanding the foregoing, nothing contained herein shall restrict [Coleman/KS and Coleman Holdings] or any of their Affiliates from (i) purchasing or making any other investment in any Person which competes with the Business [by CRVI] or does any of the things otherwise prohibited by the preceding sentence through one or more subsidiaries or (ii) purchasing any interest in any Person if, after such purchase, such Person will not be an Affiliate of any of [Coleman/KS and Coleman Holdings], so long as in any such case such Person does not use the Coleman Name or Coleman Logo.

"6.07 Shared Rights.

"(b) Notwithstanding any other provision hereof, with respect to (i) the name 'Coleman' and the registered trademark Coleman (together, the 'Coleman Name'), and (ii) the registered trademarks Coleman in Parallelogram and Coleman in Parallelogram with Lantern Logo (together, the 'Coleman Logo'), nothing in this Agreement shall be construed as granting [FEI] or [CRVI] any rights to the Coleman Name or the Coleman Logo at common law or otherwise except as provided in the Trademark Licenses [Agreements] annexed as Exhibits A-1 . . . and the Consent to Use and Register Agreement annexed as Exhibit A-3.

"6.12 Certain Trademark Covenants. [The Negative Covenant.]

"Prior to the Closing, [Coleman/KS and Coleman Holdings] will cause [CRVI] to apply to register the trademark 'Columbia' in the United States for recreational vehicles. On or prior to the Closing Date, [Coleman/KS and Coleman Holdings] will assign, or will cause one or more of their Affiliates to assign, to [CRVI] all right, title and interest of [Coleman/KS and Coleman Holdings] or such Affiliates in any trademark registrations or applications for the use of the name 'Columbia' in connection with tents and recreational vehicles, including, without limitation, all of Outdoor Products' right, title and interest in U.S. Trademark Registration No. 1,303,764 ('COLUMBIA'). From and after the Closing, [Coleman/KS and Coleman Holdings] will refrain from any use of the trademark registration 'Coleman' in connection with recreational vehicles, except as otherwise contemplated hereby or on products currently sold by Coleman or any of its Affiliates as accessories for recreational vehicles." (Emphasis added.)

Two Ancillary Contracts. On December 29, 1989, Coleman/KS and CRVI signed the Consent to Use and Register Agreement and then the Trademark License Agreement (hereafter referred to as the 1989 Trademark License Agreement). Both of these were license-related agreements, listed as exhibits to the 1989 Stock Purchase Agreement. FEI served only as CRVI's guarantor to both agreements and agreed to cause CRVI to abide by the terms of both agreements.

First, the Consent to Use and Register Agreement described the parties' rights and duties concerning the Columbia trademark. Second, the 1989 Trademark License Agreement, granted CRVI a nonexclusive royalty free license permitting use of Coleman's trademarks for 5 years. CRVI's intent in entering these agreements was to license its products under Coleman's trademarks for a limited period of time and then shift to manufacturing and selling recreational vehicles under a new Columbia Parallelogram Trademark, which resembled the Coleman Logo.

1994, 1997, and 2000 Contract Extensions. Prior to the expiration of the 1989 Trademark License Agreement, Coleman and FFT negotiated the continued use of Coleman's trademarks. In 1994, Coleman and FFT executed a Merchandise License Agreement (called the 1994 Trademark License Agreement), which licensed Coleman's trademarks to FFT in exchange for royalties. This agreement did not name FEI as a party or require FEI to remain FFT's guarantor. The agreement, however, included the following relevant provisions:

"11.0. Effect of Termination or Expiration.

"11.2 It shall not be a violation of any right of [FFT] if Coleman should at any time during the Term of this Agreement enter into negotiations with another to license use of the Licensed Trademarks within the Territory, provided that it is contemplated that such prospective license shall commence after termination or expiration of the license granted under this Agreement."

After amending the 1994 Trademark Agreement to extend its expiration term, Coleman renewed the license to its trademarks to FFT in 1997 and 2000, executing separate agreements (1997 Trademark License Agreement; 2000 Trademark License Agreement) with FFT. Both agreements also provided the provision that upon the termination of the Trademark License Agreements with FFT, Coleman retained the right to license its trademarks to other manufacturers.

Business relations between the companies broke down in 2003 when Coleman ended its relationship with FFT, alleging that FFT failed to remedy its breaches to the 2000 Trademark License Agreement. As a result, Coleman made a license agreement with Consolidated Leisure Industries, L.L.C., doing business as Coachmen RV Group (hereafter referred to as Coachmen) in January 2004. In that agreement, Coleman licensed its trademarks for Coachmen to use in connection with recreational vehicles. This led to legal action.

District Court Lawsuit

Requesting injunctive relief, FEI filed a petition in Sedgwick District Court, claiming that Coleman had breached paragraph 6.12 (the Negative Covenant) of the 1989 Stock Purchase Agreement. Granting summary judgment, the district court ruled in favor of FEI, holding that Coleman had indeed breached the Negative Covenant when it entered into a license agreement with Coachmen. The court then permanently enjoined Coleman from using or licensing its trademarks to persons or entities engaged in the recreational vehicle industry.

At the summary judgment hearing, both parties agreed that the 1989 agreements were unambiguous. The dispute centered on the Negative Covenant's legal effect. After examining both arguments, the court ruled in favor of FEI, holding that FEI was a party only to the 1989 Stock Purchase Agreement and, therefore, Coleman remained bound to those terms, which then were breached when Coleman licensed its trademarks to Coachmen.

In this appeal Coleman makes four general claims.

Incorrect Interpretation. In three ways, the district court made an erroneous interpretation ...


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