A. Santaella & Co. v. Otto F. Lange Co.

• Citation: 155 F. 719
• Decision Date: 17 June 1907
• Docket Number: 2,364.
• Parties: A. SANTAELLA & CO. v. OTTO F. LANGE CO. et al.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

155 F. 719

A. SANTAELLA & CO. v. OTTO F. LANGE CO. et al.

No. 2,364.

United States Court of Appeals, Eighth Circuit.

June 17, 1907

On Rehearing, September 3, 1907.

George W. Kiesel and D. J. Lenehan (L. G. Hurd, on the brief), for plaintiff in error.

Nathan E. Utt (Alphons Matthews and John P. Frantzen, on the brief) for defendants in error.

Before SANBORN and HOOK, Circuit Judges, and PHILIPS, District Judge.

PHILIPS District Judge.

The plaintiff in error (hereinafter designated the plaintiff), an Illinois corporation, with its principal place of business in Chicago, sued the defendants in error (hereinafter designated the defendants), a copartnership, doing business at Dubuque in two counts. The first count is predicated of a promissory note, executed by the defendants to the plaintiff February 23, 1903, for $1,200, due in three months thereafter. The second count is based upon an open account for cigars sold by plaintiff to the defendants between the 6th day of March and the 5th day of May, 1903, amounting to $4,415. The answer, in effect, admitted the debts as alleged, and then set up a counterclaim for damages in the sum of $30,000, resulting from an alleged breach of contract in the failure and refusal of the plaintiff to ship to the defendants cigars as required. On trial to a jury, at the close of the evidence, the plaintiff moved for a directed verdict, which was refused. The jury returned a verdict for the defendants in the sum of $3,262.25, which, including the admitted sums owing to the plaintiff, amounted to $9,087.75.

As counsel for the plaintiff insisted in argument here only upon the error assigned in the refusal of the court to direct a verdict, it is made necessary to disclose the case made on behalf of the defendants. The alleged contract was not in writing, and its character is to be found in the allegations of the counterclaim and the testimony of Otto F. Lange representing the defendants in making the alleged contract. The answer, after some preliminary statements by way of inducement leading up to the contract, disclosed that the plaintiff was engaged in the manufacture and sale of a cigar known as the 'Optimo' brand, which it was anxious to exploit in certain territory in Iowa and vicinity, and wished the defendants, as experienced dealers in cigars, to undertake this exploitation in the interest of both concerns. The answer states that the same was 'to be furnished at the times and in the quantities, sizes, shapes, and qualities as might be thereafter ordered by the defendants, all of the said cigars to be sold and furnished subject to a discount of two per cent. if settled for thirty days from the date of shipment or invoice, such settlement to be made by cash or notes of the said defendants, bearing five per cent. interest and running thirty, sixty or ninety days at the option of the said defendants, and would continue to manufacture, and supply exclusively such 'Optimo' cigars to said defendants, at such prices, on such terms, and in such sizes, shapes, and quantities as ordered by the defendants, in the territory named, and such other territory as might thereafter be given to them, so long as the trade therein would continue. ' It is further averred that the plaintiff failed and neglected to furnish, as ordered, said Optimo cigars in the sizes, qualities, shapes, and quantities as demanded and as was necessary for the trade in said territory.

The testimony of said Otto F. Lange was to the effect that by request of one Glaspell, traveling salesman representing the plaintiff, they met in Dubuque, Iowa, about the 13th of August, 1900; that Glaspell wanted the defendants to buy from the plaintiff said brand of cigars known as the 'Optimo,' which he thought the defendants could build up a trade and create a large market therefor. His version of the agreement was as follows:

'The terms were 60 days net, without discount, or 2 per cent. discount if paid in 10 days, but that he would give me 30 days from date of bill in which to take the 2 per cent. discount if I wanted to take it. He said that the goods were made in Tampa, Fla., but that they were shipped from Chicago. If our business grew so that they shipped in case lots from Tampa, that the date of the bill should be the date of the arrival of the goods.'

This was followed by some other details as to the mode of settlement. Further on he testified:

'I said to Glaspell I would accept the contract. * * * Glaspell said they would stop others from selling the cigars in the territory given me. He would sell me as many as I desired for my wants, and continue during the life of the brand, as long as I cared to sell them. * * * My orders were to be filled the same day they were received, if they had the goods.' While there are some variances between the versions of the contract in the testimony between said Lange and Glaspell, for the purposes of this case, it is not necessary to rest it upon other testimony than that of Lange.

Orders thereafter were sent in by defendants for cigars as needed in their business, and were generally satisfactorily complied with by the plaintiff. Some complaint in January, 1902, and perhaps later, on the part of the defendants was made that some orders had not been promptly filled; but after explanation by plaintiff the business relations were continued. Shipments of cigars were only made as and when ordered by the defendants. In December, 1902, and the forepart of 1903 the orders were sent in most frequently. On the 7th day of May, 1903, the defendants telegraphed to the plaintiff to 'Cancel all our orders.' The plaintiff immediately answered by letter as follows:

'Your telegram of to-day is at hand, and in compliance with same we have wired our factory to cancel all of your orders.'

And in a postscript said that it (the plaintiff) had received check for $1,000, which was placed as a credit on the note of $2,000, due May 2, 1903, and requested the defendants to send check for the balance not later than Monday. The defendants followed up said telegram of May 7th with a letter giving in explanation of the direction to cancel all orders that 'we have lost track of what we have ordered. ' In the letter they requested shipment of certain specific cigars. This letter evidently having been received on the 9th of May, 1903, the plaintiff wrote the defendants that it was very much surprised at the telegram of the 7th of May, 'as you canceled all your orders and we wired our factory to that effect. ' In this letter the plaintiff inclosed the defendants a statement of account, stating that they owed the plaintiff bills amounting to about $3,500, reminding the defendants of the necessity in its business of having prompt payments made, alleging that in the past they had been quite lenient, that 'we find that you seem to take your own time and do your business with us all your own way, leaving us nothing but to ship you goods as fast as you want them, and you pay for them when you get good and ready, and make deductions when you feel like it. ' Thereafter considerable correspondence took place between the parties respecting the payment of past accounts and notes, resulting in the refusal of the plaintiff to fill any more orders from the defendants until the past arrears were paid, and under a new arrangement. As much of this correspondence ensued after the controversy arose, it contains much of self-serving statements, which are not important to a proper decision of the case.

The controlling question for determination is: Did the defendants have an enforceable contract with the plaintiff? It must be conceded that, if the defendants had such a contract, it was essential to its validity that it should have been mutually obligatory upon both parties. If the defendants could compel the plaintiff to ship cigars, the plaintiff ought to be in a position to compel the defendants to take. Were the defendants under any obligation to send in orders within any particular time, or for any specified quantity or quality of cigars? The allegations of the counterclaim and the version given of the agreement in the testimony of Otto F. Lange answer these questions. It was entirely at the option of the defendants, dependent upon the conditions of their business and trade, as to whether they would send in any orders at all. From any cause, such as depression in business, or other more desirable arrangements, or a desire to get out of that line of trade, the defendants were at liberty to cease at any time to send orders to the plaintiff, without liability for breach of contract. As shown by the entire dealing between the parties, both unquestionably understood that the plaintiff could only ship cigars as and when ordered by the defendants. So, notwithstanding that prior to the 7th day of May, 1903, the defendants had sent in a large number of orders, which had not then been met by shipments, and although the plaintiff had placed them with the factory at Tampa, both parties acted upon the understanding of the contract, that the plaintiff could not ship save as and when the defendants might direct. It would be a work of supererogation to review the authorities touching the law applicable to such situation, as Judge Sanborn, speaking for this court, in Cold Blast Transp. Co. v. Kansas City Bolt & Nut Company, 114 F. 77, 52 C.C.A. 25, 29, 57 L.R.A. 696, laid down the following postulates as expressing the correct rule of law:

'The rules applicable to contracts of this class may be thus briefly stated:

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