Adams-Mitchell Co. v. Cambridge Distributing Co., 96
| Decision Date | 31 May 1951 |
| Docket Number | No. 96,Docket 21810.,96 |
| Parties | ADAMS-MITCHELL CO. v. CAMBRIDGE DISTRIBUTING CO., Limited. |
| Court | U.S. Court of Appeals — Second Circuit |
Dills, Muecke & Schelker, New York City, for plaintiff-appellee; Walter G. Schelker, Jr., New York City, counsel.
Clarence P. Greer, New York City, for defendant-appellant; I. Maurice Wormser, New York City, counsel.
Before AUGUSTUS N. HAND, CLARK and FRANK, Circuit Judges.
The plaintiff, Adams Mitchell Co., a wholesaler of liquor in the Boston area, brought an action in the United States District Court to rescind an oral contract for the purchase by it of 1100 cases of "Auld Malcolm" Scotch type whiskey at $16.92 a case from the defendant Cambridge Distributing Co., Ltd., which had the exclusive distribution of "Auld Malcolm" in Massachusetts. One thousand and sixty cases remained unsold at the time of the action. The plaintiff based its claim on the defendant's failure to maintain the price and to limit the number of distributors of "Auld Malcolm" in the Boston area as orally agreed at the time of the sale. The damages were stipulated to be $19,296.60 and the jury found for the plaintiff in that sum, which was the cost to the latter of the 1060 cases unsold. The trial court denied a motion by the defendant to dismiss the plaintiff's claim for rescission because of an oral agreement to fix prices in violation of the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1-7, 15 note; because Sager, its salesman, was without authority to bind the corporation to such a contract; and finally because the offer to return 1060 of the 1100 cases of whiskey was insufficient.
There was evidence from which the following was found: On or about June 15, 1946, at a time when the plaintiff was having difficulty in obtaining a supply of Scotch whiskey, it was approached by Sager, the defendant's salesman for Massachusetts, Connecticut and Rhode Island, who offered it "Auld Malcolm" in carload lots at $16.92 a case. The plaintiff was concerned about the amount of "Auld Malcolm" available in the area which could be offered in competition with it if it were to purchase such a substantial supply. Sager assured the plaintiff that there were then only two outlets for the sale of "Auld Malcolm" in the area, that one of them — Branded Liquors — was to be discontinued, and had only a small supply on hand, and that defendant would see that this supply was turned over to another regular distributor of "Auld Malcolm" so that the plaintiff and one other would be the only distributors of "Auld Malcolm" in the area. Plaintiff also claimed that Sager agreed that the defendant would see to it that the going wholesale price of "Auld Malcolm" of $54.80 a case would be maintained, but the jury disagreed as to the existence of this agreement. The plaintiff then ordered from Sager 1100 cases of "Auld Malcolm" which were delivered and paid for early in August. A written order by the plaintiff addressed to the defendant, dated July 3, 1946, followed which contained no reference to the oral agreements with Sager regarding price and the number of distributors. After this date, the defendant sold no more "Auld Malcolm" to Branded Liquors but failed to remove to another distributor the stock that Branded Liquors had on hand, or to divert substantial supplies en route to it, so that there were three wholesalers offering "Auld Malcolm" to the retail trade in the Boston area. The price of "Auld Malcolm" soon started to drop and, with the return to the market of genuine Scotch whiskey in October 1946, "Auld Malcolm" became almost unsaleable.
Shortly after receipt of the "Auld Malcolm" the plaintiff began to complain to Sager orally, and by letter, that Branded Liquors was continuing to sell "Auld Malcolm" and that both Branded Liquors and Gilman, the other authorized distributor, were asking a price of less than $54.80 a case. Sager assured the plaintiff that this was a temporary condition and would be quickly corrected. Negotiations dragged on without result, and in October 1946 the plaintiff finally demanded that Sager take back the merchandise as Sager agreed to do. After further delay occasioned by Sager's assurances and excuses, the plaintiff, on December 2, 1946, made a direct demand on the defendant to take back the "Auld Malcolm" then unsold. The present action was brought in March, 1947, after the defendant's refusal to comply with this demand.
In addition to its general verdict for the plaintiff the jury rendered a special verdict that the contract between the parties was not to be found solely in the writings exchanged by them, that Sager orally agreed that there would be only one wholesaler besides the plaintiff offering "Auld Malcolm" in the Boston area, that Sager had express or implied authority to make such a contract, that plaintiff relied on such authority, and that the contract was broken.
The defendant's first contention is that as the contract was illegal neither party acquired any rights under it and hence plaintiff did not have the right of rescission. The contract is said to violate both the Federal Alcohol Administration Act, 27 U.S.C.A. § 205(d) and the Sherman Act, 15 U.S.C.A. § 1, ff.
The pertinent part of the Alcohol Administration Act bars the purchase of liquor on consignment, conditional sale or with the privilege of return. While the plaintiff's original declaration contained counts alleging the breach of a contract to repurchase the whiskey, we need not reach the question whether such an agreement would violate the Alcohol Administration Act because the plaintiff withdrew the counts based on a contract to repurchase before the case went to the jury and relied solely on the right to rescind. Furthermore, the defendant vigorously denied the existence of any agreement to repurchase. Under such circumstances there is no violation of the Alcohol Administration Act for our consideration.
It may be conceded that agreements made between sellers, or between a seller and his customers, to fix the resale price of goods moving in interstate commerce, so far as not exempted by the Miller-Tydings Amendment, 50 Stat. 693, violate the Sherman Act, e. g., Kiefer-Stewart Co. v. Seagram & Sons, 340 U.S. 211, 71 S.Ct. 259. But the evidence here does not indicate such an illegal agreement. There are legitimate means of price maintenance in spite of the provisions of the Sherman Act, e. g., United States v. Colgate & Co., 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992. Such means include a refusal to sell in the future to those who had not maintained a suggested price. The situation in Kiefer-Stewart Co. v. Seagram & Sons, supra, was different for there competitors agreed on a price to be fixed with the customers of both and fixed the price with the latter. There was no evidence that the defendant agreed with Branded or Gilman that the prices to be charged by them would be limited to $54.80 per case. If there was an agreement to that effect between the plaintiff and the defendant which Sager denied, such an agreement did not purport to control the prices of Branded and Gilman and indeed went no farther than to suggest that if the latter cut prices they would be unable to obtain further supplies of "Auld Malcolm" from the defendant; in other words, the limitation of $54.80 per case was and only could be a suggested limitation to a purchaser which was lawful under the decision of the Supreme Court in the Colgate case.
The Miller-Tydings Amendment exempts from the Sherman Act price maintenance agreements of the type involved here where permitted by State law and Massachusetts — where the contract under consideration was made — has such a law. Mass.Stat.Ann. Ch. 93, § 14A. It is said in judge Frank's dissenting opinion that the Miller-Tydings Amendment does not apply because it only amended the Sherman Act of 1890 and did not affect the anti-trust provisions of the Wilson Tariff Act of 1894, 28 Stat. 570, 15 U.S. C.A. § 8 et seq. We do not think that the Miller-Tydings Amendment should be so limited. It was an amendment to the original Sherman Act enacted some 43 years after the passage of the Wilson Tariff Act when the Sherman Act and the Tariff Act each embraced like prohibitions on restraint of foreign commerce. When the Sherman Act was amended in 1937 to exempt cases where a local State statute permitted resale price maintenance it must be deemed to have superseded the Wilson Tariff Act so far as to sanction price maintenance in cases within the purview of the State Act.
The parties to a contract are presumed to contract in compliance with existing laws. Rackemann v. Riverbank Improvement Co., 167 Mass. 1, 44 N.E. 990; Meyer v. Price, 250 N.Y. 370, 165 N.E. 814; Michigan Millers Mutual Fire Insurance Co. v. Canadian Northern Ry. Co., 8 Cir., 152 F.2d 292. Furthermore, unless the illegality clearly appeared the defendant had the burden of pleading and proving this defense. 5 Williston, Contracts (Rev. Ed.) § 1630A. It failed to do either and denied the existence of the allegedly illegal price agreement. In addition to the foregoing, even if the arrangement as to prices to be charged by Branded and Gilman were assumed to have been illegal it would not bar rescission because the illegal part was executory. National Bank & Loan Co. v. Petrie, 189 U.S. 423, 23 S.Ct. 512, 47 L.Ed. 879; Restatement, Contracts § 605.
The defendant's next contention is that Sager as a salesman had no authority to make this agreement so that the question of his authority to limit the number of purchasers and to suggest resale prices should not have gone to the jury. But Sager testified without contradiction that Roer, the defendant's president, had decided on the two wholesaler policy and the $54.80 price prior to the sale in question and had authorized Sager to disclose this to buyers. Under the circumstances it was not error to let the jury...
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