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March 24, 1952


Appeal, No. 242, Jan. T., 1951, from order of Court of Common Pleas No. 1 of Philadelphia County, Dec. T., 1947, No. 808, in case of Neal D. Ivey Company v. Franklin Associates, Inc., and House-Of-Charm Fabrics, Inc. Order reversed; reargument refused May 7, 1952.


George V. Strong, with him Strong, Sullivan, Saylor and Ferguson, for appellant.

David S. Malis, with him Malis, Malis & Malis, for appellees.

Before Drew, C.j., Stern, Stearne, Ladner and Chidsey, JJ.

Author: Chidsey

[ 370 Pa. Page 227]


Neal D. Ivey Company, appellant, filed a bill of complaint against Franklin Associates, Inc. and House-of-Charm Fabrics, Inc., appellees, for injunction and accounting. The proceeding was based upon a contract whereby Ivey was to conduct an advertising campaign for Franklin, payment therefor to be made out of gross proceeds of sales of Franklin's products. Ivey claimed monies were due to it under its construction of the contract between the parties. Franklin and House-of-Charm filed an answer setting up a different construction of the contract and denying liability. After hearing, the chancellor rejected Ivey's interpretation of the contract and dismissed the bill. Upon Ivey's exceptions the court en banc made an order directing an accounting, to be based, however, upon the construction placed upon the contract by the chancellor, Judge PARRY dissenting. Ivey excepted to this order. Franklin then filed an account and a supplemental account, to which accounting Ivey filed exceptions. During the course of the proceedings Ivey petitioned for examination of Franklin's records relating to a certain account known as the "1318 account". After answer to the petition and testimony taken, the rule issued was made absolute. Either by stipulation or in course all testimony

[ 370 Pa. Page 228]

    and evidence adduced in the case was before the court in passing on and dismissing plaintiff-Ivey's exceptions to the findings of fact, rulings and order of the auditing judge sur exceptions to defendant-Franklin's accounts. This appeal is from the court's final decree dismissing the bill.

Ivey, a corporation, is an advertising agency. Franklin, a corporation, manufactures and sells slip covers for furniture, draperies and other fabrics. House-of-Charm, a corporation, throughout the transactions here involved acted as a selling agency for Franklin. On August 8, 1947 Ivey and Franklin entered into a written contract under which Ivey was to plan and place in magazines and newspapers mail order advertising for Franklin's slip covers and draperies for the period of one year. Ivey was to advance the money for advertising costs, to be reimbursed therefor and also paid compensation for its services from gross proceeds of the sales, excluding therefrom return sales not exceeding 5% of the total sales resulting from the advertising. Franklin gave Ivey the exclusive right to place the advertisements (the extent and frequency of the advertising to be mutually agreed upon) and the slip covers and draperies were to be sold under the House-of-Charm trade name.

Paragraph 4 of the contract, out of which the issues in controversy principally arise, reads as follows: "4. In order that Party of the First Part [Ivey] may be reimbursed for the cost of advertising placed by it and be compensated for its services in planning and placing such advertising and for advancing all advertising costs, Party of the Second Part [Franklin] agrees to pay to Party of the First Part all the gross proceeds of sales resulting from each advertisement, as received, until the amount so paid by Party of the Second Part to Party of the First Part shall equal the amount of the published rate card of such advertisement.

[ 370 Pa. Page 229]

    of sales resulting from each advertisement must be paid Ivey by Franklin until the amounts so paid Ivey shall equal the publications' charge (or the published rate card) for such advertisement; (2) all additional proceeds of sales from each such advertisement shall be retained by Franklin until the amount theretofore paid Ivey shall equal 30% of the total or sum of the amount paid Ivey and the amount retained by Franklin; (3) further proceeds of sales from each such advertisement must be divided 30% to Ivey and 70% to Franklin. Thus if the charge of the publication for an advertisement paid by Ivey amounted to $3,000, Franklin would be obliged to pay Ivey the proceeds of sales resulting from the advertisement until Ivey received $3,000. Franklin would retain the proceeds of further sales to the extent of $7,000.If the proceeds of sales reached a sum in excess of $10,000, all of the excess would be divided 30-70. Ivey would be reimbursed for the advertising and receive no more than 30% of the gross sales. But if the proceeds of sales resulting ...

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