Ehret Co. v. Eaton, Yale & Towne, Inc.

• Citation: 523 F.2d 280
• Decision Date: 11 September 1975
• Docket Number: No. 74-1836-7,74-1836-7
• Parties: EHRET COMPANY, a corporation, Plaintiff-Appellant, v. EATON, YALE & TOWNE, INC., an Ohio Corporation, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 280

523 F.2d 280

EHRET COMPANY, a corporation, Plaintiff-Appellant, v. EATON, YALE & TOWNE, INC., an Ohio Corporation, Defendant-Appellee.

No. 74-1836-7.

United States Court of Appeals, Seventh Circuit.

Argued June 5, 1975.

Decided Sept. 11, 1975.

Harold C. Hirshman, James M. Goff, Chicago, Ill., for Eaton, Yale & towne.

Jerome A. Frazel, Jr., D. Kendall Griffith, Chicago, Ill., for Ehret.

Before FAIRCHILD, Chief Judge, SWYGERT, Circuit Judge, and CAMPBELL, Senior District Judge. ^*

FAIRCHILD, Chief Judge.

This appeal raises questions concerning the interpretation of an exclusive sales contract and the application of the parol evidence rule and promissory estoppel. It also raises the question whether the trial judge abused his discretion by offering a remittitur and granting a new trial. Jurisdiction is founded on diversity. All parties to this appeal have accepted Illinois law as controlling.

The plaintiff, Ehret Company, acted as a manufacturer's sales representative for the defendant, Eaton Company, in the Milwaukee and Chicago territories until the termination of their 1966 contract. This termination was effected by notice in compliance with the "Duration of Agency" clause and took effect on September 30, 1968.

There was evidence that the defendant's products, worm gears and lubricating systems, required the plaintiff to engage in "Development Work" of up to ten years prior to the consummation of a sale. It was necessary, during this pre-sale development, for the plaintiff to engineer, design and adapt the defendant's products into either the customers' finished product or into the customers' own manufacturing equipment. Before signing the 1965 contract, Mr. Ehret objected to the "Duration of Agency" clause which reads 12. Duration of Agency

This Sales Agreement may be altered by our mutual consent and may be terminated by either of us upon thirty (30) days' notice in writing. In the event of cancellation of this Agreement or abridgment of the territory herein covered, no commission will be paid on any orders which have not been properly received, in writing, and accepted by us in writing before the termination of the Agreement or abridgment of the territory, or on orders which purchasers will not accept delivery of and pay for within three (3) months from the date of cancellation of the Agreement or abridgment of the territory.

His objections were raised in an April 28, 1965 letter to the General Sales Manager of Eaton Company, Mr. Witzenburg. Mr. Ehret showed concern for the possibility that Eaton Company could cancel the contract after Ehret Company had expended considerable time and money in procuring a sale, but before an order was placed, and also that orders placed prior to termination may not be shipped within 90 days.

On April 29, 1965, Eaton Company responded, with a letter from Mr. Witzenburg declining to change the contract, stating:

It is true in the event of cancellation by either party, our company would not be obligated to pay a commission on orders that were received before the date of final cancellation but were not released for shipment three months after cancellation. However, in those few cases where the contract has been cancelled by us we have always been much more liberal than provided for in the contract.

The normal procedure is to allow full credit for all orders received within 30 days after final cancellation date, provided that they resulted from quotations made prior to the date of cancellation and if released for shipment within five months of the date of cancellation. In fact, in two cases, we have extended that protection to orders received under the same circumstances but shipped within a period of one year after cancellation.

Neither you nor we expect that the new contracts will be cancelled by either one of us, so that this discussion is probably academic only. However, we cannot alter the terms of the contract the same contract must exist with you as with all of our other representatives and in the very unlikely event of cancellation, you will have to rely on receiving extremely fair treatment.

After receiving Mr. Witzenburg's letter, Ehret Company entered into the Commission Sales Agreement containing the "Duration of Agency" clause on April 30, 1965.

On March 31, 1966, Eaton, Yale and Towne, Inc., formerly Eaton Company, sent a letter to the Ehret Company requesting that a new contract be signed reflecting the defendant's name change. This new contract, signed and dated June 2, 1966, contained the same "Duration of Agency" clause as the 1965 contract. In addition, the new contract contained an integration clause which stated that, "Upon its receipt, it will constitute an entire Agreement between us as of the date set forth above (January 1, 1966.) This Agreement cancels all prior Sales Agreements between us, including the latest one dated May 1, 1965."

On August 28, 1968, Eaton, Yale and Towne, Inc. sent a letter to Ehret Company terminating their 1966 agreement as to both the Chicago and Milwaukee territories, effective September 30, 1968. In this letter the defendant expressed its intent to construe literally the "Duration of Agency" clause stating, "In effecting this cancellation, full credit will be given your office for all acceptable orders dated September 30, 1968, and before, provided they are shipped prior to December 31, 1968." Later, and after negotiation, Eaton, Yale and Towne, Inc. agreed to pay Ehret Company on all orders received prior to termination regardless of when shipped. Eaton tendered this amount, $51,000.00, to Ehret Company, of which $44,000.00 was accepted.

The plaintiff contends that it is entitled to better treatment than described in the "Duration of Agency" clause, (and better than Eaton actually extended) relying on Mr. Witzenburg's April 29, 1965 letter which stated that, "you (Ehret Company) will have to rely on receiving extremely fair treatment."

The defendant's motion for summary judgment was denied. The plaintiff's motion for partial summary judgment was granted, determining that defendant was estopped from asserting the "Duration of Agency" clause of the contracts to limit commissions. At trial, the defendant's motion for directed verdict was denied and the jury's verdict awarded plaintiff $546,000.00. The defendant's motion for judgment N.O.V. was denied and the defendant's motion for a new trial was granted after the plaintiff refused a remittitur of $408,119.25. The jury's verdict awarded $120,000.00 to the plaintiff in the second trial.

The plaintiff appeals challenging the order setting aside the first jury verdict and the granting of a new trial. On its appeal the defendant contends that the 1966 contract on its face is a complete representation of the agreement between the parties, and that in any event the plaintiff failed to prove damages based on the meaning of the "extremely fair treatment" letter.

The trial judge correctly held, as a matter of law, that the defendant was estopped from asserting the "Duration of Agency" clause of the 1965 and 1966 contracts. As stated in Dill v. Widman, 413 Ill. 448, 109 N.E.2d 765, 769 (1952):

The general rule is that where a party by his statements or conduct leads another to do something he would not have done but for the statements or conduct of the other, the one guilty of the expressions or conduct will not be allowed to deny his utterances or acts to the loss or damage of the other party. The party claiming the estoppel must have relied upon the acts or representations of the other and have had no knowledge or convenient means of knowing the true facts. Fraud is a necessary element but it is not essential that there be a fraudulent intent. It is sufficient if a fraudulent effect would follow upon allowing a party to set up a claim inconsistent with his former declarations.

All of the elements necessary to form an estoppel are present in this case. The plaintiff was induced to sign the 1965 and 1966 contracts only in reliance on the defendant's representation that it would not enforce the "Duration of Agency" clause, but would give "extremely fair treatment" in the unlikely event of termination. The plaintiff also relied on a letter, which preceded the 1966 contract, from Eaton Company stating that a new contract must be signed to reflect Eaton Company's name change. If the defendant were allowed to disclaim its representations after receiving the benefits therefrom, this would have the fraudulent effect that an estoppel was designed to prevent. Usually the question of estoppel is for the jury except where, as in this case, the facts presented leave but one inference; then it becomes a question of law. Bituminous Casualty Corp. v. City of Harrisburg, 315 Ill.App. 243, 42 N.E.2d 971 (1942).

The Milwaukee territory was not mentioned in the written contracts, but evidence was adduced that the parties understood it to be covered by the same terms and conditions as the written Chicago agreement. The question was submitted to the jury, which found that the "extremely fair treatment" letter was also applicable to the Milwaukee contract and territory. This finding was not contested on appeal; therefore both territories are treated similarly for the purpose of this order.

The question of damages was submitted to the jury on the theory of a possible breach of a contract to give the plaintiff extremely...