291 F.2d 577 (5th Cir. 1961), 18697, Minute Maid Corp. v. United Foods, Inc.

Docket Nº:18697.
Citation:291 F.2d 577
Party Name:MINUTE MAID CORPORATION, Appellant, v. UNITED FOODS, INC., et al., Appellees.
Case Date:May 30, 1961
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 577

291 F.2d 577 (5th Cir. 1961)



UNITED FOODS, INC., et al., Appellees.

No. 18697.

United States Court of Appeals, Fifth Circuit.

May 30, 1961

Rehearing Denied July 17, 1961.

Page 578

William C. Garrett, Wilmer D. Masterson, III, Dallas, Tex., Kilgore & Kilgore, Dallas, Tex., for appellant.

H. T. Bowyer, Dallas, Tex., H. Fred Gober, Atlanta, Ga., Bowyer, Thomas, Crozier & Harris, Dallas, Tex., for appellee, United States Cold Storage Corp.

Before TUTTLE, Chief Judge, and HUTCHESON and BROWN, Circuit Judges.

TUTTLE, Chief Judge.

This is an appeal from a judgment of the trial court, sitting without a jury, denying a recovery from United States Cold Storage Corporation by the appellant for the purchase price of commodities sold by it to the United Foods, Inc.

Appellant's theory of recovery was that United Foods, Inc., a direct purchaser from it, was engaged in a partnership operation with the Cold Storage Corporation, thus making Cold Storage liable for the unpaid purchase price.

There is no dispute about the fact that United Foods was indebted to Minute Maid Corporation in the sum of $143,141.66 representing the purchase price of frozen food products sold to United. The question whether Cold Storage is equally liable for this sum must be answered in the light of the following history of the relationship between the parties: Commencing November 1, 1956, United Foods was an authorized direct buyer of products packaged by Minute Maid; Minute Maid's terms of sale for retail size packages to authorized direct buyers, such as United Foods, included discounts based upon the volume of goods included in a single order, which discounts were generally, referred to as 'quantity allowances' or 'freight allowances,' or described in the price list as 'truckload storage allowances' and 'carload storage allowances'; Minute Maid stored a substantial amount of frozen foods in Dallas, Texas, through arrangements with United Foods, paying United Foods at the rate of 20 cents per hundred-weight for such storage; at all times pertinent to this action Cold Storage owned and operated a cold storage warehouse in Dallas, Texas.

United Foods did not have the financial ability from its own resources plus normal credit sources to finance the carrying of a large inventory of frozen food products; that means that there were certain substantial price benefits that it could not get; Cold Storage did have and was willing to make funds available to assist United Foods in buying Minute Maid products in quantities that permitted the maximum discounts; the market conditions affecting frozen food products are such that the price of such goods tends to rise from the month of May to the end of the year, and such increases in

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price as to citrus food products is as high as 50% In years when weather conditions adversely affect citrus production; at all times pertinent to this action a direct buyer of frozen foods products, such as United Foods, was protected against price declines to the extent of inventories representing goods received during the last thirty day period; United Foods, without the knowledge of Minute Maid, operated so as to obtain an additional thirty days protection against price declines by taking goods owned by Minute Maid from warehouses approximately thirty days prior to notifying Minute Maid of the withdrawal. The effect of this relationship made it possible for a direct buyer, by buying large quantities, to profit as much as 50% On inventories by receiving notice from Minute Maid of proposed price increases a considerable time in advance of the price increase, whereas there was practically no risk of a loss on such inventories by reason of the sixty days protection against price declines above referred to. It is undisputed that this made peculiarly attractive the speculation in inventories.

On May 1, 1957, United Foods and Cold Storage entered into an agreement which spelled out their relationship with each other. Since we conclude that the essential question presented by this appeal must be resolved by reference to this written agreement we consider it essential to print the relevant portions of it in full as follows:

'Memorandum of Agreement

'May 1, 1957

'Between-- United Foods, Inc., referred to as United and United States Cold Storage Corporation, referred to as U.S.

'United is a broker of frozen foods in the Dallas, Texas, Area;

'U.S. operates cold storage plants at Dallas and Fort Worth, and will extend finance services to United on the following basis:

'1. Staple commodities bought by United, stored in U.S. plants, will be the collateral if acceptable to U.S., together with acceptable (to U.S.) accounts receivable resulting from sales of the commodities, for loans to be made by U.S. The aggregate amount of loans outstanding at both plants, taken together, shall not exceed $300,000.00.

'2. The amount of loan to United on any lot of product shall be United's gross cost delivered to the warehouse of U.S. The amount of the loan on any of United accounts receivable shall be the amount of the invoices.

'3. Notes to U.S. shall be given by United for each loan and shall bear interest at 6% Until paid.

'4. Notes for loans on commodities shall be paid when product is ordered from warehouse.

'5. Notes for loans on accounts receivable shall be paid to U.S. by endorsement of check received from customer to U.S. provided that United will itself pay U.S. for any invoices not otherwise paid in 45 days from date of invoice.

'6. Warehouse charges on staple product on which loans are made on these terms shall be 15¢/100 lbs. handling and 12 1/2¢/100 lbs. per month storage, based on the gross weight of package and contents, and a lot delivery charge of 50¢ as current at each plant. Interest, interest service charges and insurance charges shall be at the rates current at each plant. Tariff rates will apply on all other products stored.

'7. All warehouse, interest and insurance charges shall be billed by U.S. monthly, and charged to the 'Special Account' described below.

'8. The 'Special Account' on the books of U.S. is to be set up to accumulate charges as set forth in Paragraph 7 and to accumulate credits as follows:

'a. United shall pay to U.S. the 6¢ per dozen packer allowance on retail merchandise or any other quantity allowance, advertising, freight, allowance, incentive and profit to the Special Account;

'b. United shall pay to U.S. for the Special Account the incentive from any packer special proposals, as for instance, in forward buying, in anticipating

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of a price raise, or other inducements to move special product items, such as fish, shrimp, poultry and the like;

'c. United is paid 20¢/100 lbs./month by Minute Maid on institutional merchandise and this allowance will be paid to U.S. for the Special Account to which also U.S. will debit the warehouse charges on this product;

'd. It United shall charge any ot its suppliers or customers for storage at a higher rate than U.S...

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