Lichnovsky v. Ziebart International Corp.

Per Curiam.

This case is here on remand from the Supreme Court. It involves a claim by defendants that plaintiff breached a licensing agreement entered into in 1963. The circuit court ruled that plaintiff was not in breach of the agreement and that plaintiff had a legal right to use the trade name Ziebart in the operation of his business. The court issued an order restraining defendant from terminating the agreement and from "harassing or obstructing or interfering in any way with the conduct of the [plaintiffs] business”.

In its prior opinion, this Court ruled that plaintiff was required to comply with reasonable performance standards which were included in the 1963 agreement, but we held that the trial court was correct in its finding that defendants failed to satisfy their burden of proving the standards which applied in 1963 and that plaintiff breached those standards. However, we reversed the trial court’s decision on another ground. We ruled that the 1963 agreement was terminable at will subject to the requirement that the agreement continue for a sufficient duration to permit plaintiff to recoup his investment. Therefore, we ordered the case remanded to the trial court to determine whether such recoupment had in fact occurred. 93 Mich App 60; 285 NW2d 795 (1979).

The Supreme Court reversed our decision in Lichnovsky v Ziebart International Corp, 414 Mich 228; 324 NW2d 732 (1982). The Court ruled that the agreement was terminable only for cause and agreed that cause had not been shown. Therefore, it remanded the case to this Court to resolve the remaining issues raised by defendants.

Defendants claim that the trial court’s finding that the 1963 agreement entitled plaintiff to use the Ziebart trade name was clearly erroneous. We disagree.

In paragraph three of plaintiffs complaint, he alleged that the license agreement gave him the exclusive right in Genesee County to operate an auto body rustproofing business using "the name Ziebart”. In their answer, defendants admitted the truth of that allegation. Defendants did not move to amend their pleadings thereafter. Therefore, they are bound by their admission. GCR 1963, 604; Ambo v Holcomb, 29 Mich App 258; 185 NW2d 59 (1970).

Defendants’ remaining claims relate to the injunctions issued by the trial court. The trial court’s entry of the permanent injunction following the issuance of its opinion renders moot defendants’ claim concerning the injunction issued prior thereto. Therefore, we find it unnecessary to address that claim. However, we do agree with defendants that the form of the second part of the permanent injunction fails to comply with the requirements of GCR 1963, 718.9.

The first part of the injunction restrains defendants from terminating the licensing agreement. However, the second part of the injunction enjoins defendants from "harassing or obstructing or interfering in any way with the conduct of the [plaintiffs] business”. The difficulty with that order is that although defendants failed to establish at trial that plaintiff did not comply with the required performance standards, it does not follow from that finding that those standards no longer govern plaintiff’s operation. On the contrary, plaintiff is required to comply with those standards as long as he continues to operate pursuant to the licensing agreement. Furthermore, it is apparent that those standards have little meaning if defendants are precluded from monitoring plaintiffs operations and from enforcing the standards. Since such conduct would constitute "interference” with plaintiffs business, defendants would be violating the court’s order merely by attempting to enforce their rights under the contract.

Therefore, we remand the case to the trial court to conduct a hearing at which the court is to determine whether and under what conditions defendants’ employees may enter plaintiffs business premises to inspect his operations. The court shall then enter an order which provides in detail the conduct which is prohibited. GCR 1963, 718.9(3).

The findings of the trial court are affirmed. The case is remanded for proceedings in accordance with this opinion.