469 F.2d 456 (10th Cir. 1972), 72-1288, Smith v. Babcock Poultry Farms, Inc.

Docket Nº:72-1288, 72-1289.
Citation:469 F.2d 456
Party Name:Harry I. SMITH, d/b/a Harry Smith Enterprises, Appellee, Cross-Appellant, v. BABCOCK POULTRY FARMS, INC., Appellant, Cross-Appellee.
Case Date:November 14, 1972
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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Page 456

469 F.2d 456 (10th Cir. 1972)

Harry I. SMITH, d/b/a Harry Smith Enterprises, Appellee, Cross-Appellant,

v.

BABCOCK POULTRY FARMS, INC., Appellant, Cross-Appellee.

Nos. 72-1288, 72-1289.

United States Court of Appeals, Tenth Circuit.

November 14, 1972

Rehearing Denied Jan. 8, 1973.

Page 457

Harold A. Hintze, of Strong, Poelman & Fox, Salt Lake City, Utah, for appellant, cross-appellee.

W. Brent Wilcox, of Moyle & Draper, Salt Lake City, Utah, for appellee, cross-appellant.

Before MURRAH, SETH and DOYLE, Circuit Judges.

SETH, Circuit Judge.

Harry Smith entered into a three year franchise agreement with appellant, Babcock Poultry Farms, Inc. (Babcock), wherein he agreed to purchase from Babcock a stated number of breeding chickens each of the three years. Babcock

Page 458

had developed a new type of breeding chicken, called the B-300, and was anxious to establish a market for them in the Utah area where Smith resided and conducted business. These breeders produce hatching quality eggs from which chicks are hatched and sold to others in the business, or the eggs could be sold to others to enable them to hatch their own chicks. The eggs that are not considered to be of hatching quality are sold at somewhat lesser prices as consumer eggs to commercial outlets.

The first and second years of the agreement Smith purchased breeders in sufficient numbers to comply with his agreement. Also, during the second year, acting on the representations made by Babcock's national franchise manager that all hatching quality eggs that Smith could produce would be purchased by other franchisees of Babcock at sixty cents a dozen, Smith ordered and received an additional 10, 000 B-300 breeders. He was unable to pay for them when payment was due and later executed a non-interest bearing promissory note for their purchase price on November 27, 1967. Smith grew these additional 10, 000 breeders into production, but Babcock did not arrange the purchase of all the hatching quality eggs by its other franchisees, as it had agreed it would do. Because of this failure, Smith was forced to sell hatching quality eggs as consumer eggs for an average price of twenty cents a dozen, and was unable to pay the promissory note when it became due. Smith mailed letters to Babcock complaining that it had breached its representations and warranties.

After discussions of the representations and the note with Babcock's officers, an egg assignment was entered into on April 5, 1968. This assignment provided that Babcock was to be paid on the remaining balance of the promissory note one-half of the proceeds from all hatching quality eggs sold to its other franchisees by Smith. In the event that sales of hatching quality eggs to other franchisees did not produce...

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