603 F.2d 1065 (3rd Cir. 1979), 78-2400, Publicker Industries, Inc. v. Roman Ceramics Corp.
|Citation:||603 F.2d 1065|
|Party Name:||CA 79-3053 PUBLICKER INDUSTRIES, INC. and Continental Distilling Corporation, Appellants, v. ROMAN CERAMICS CORPORATION.|
|Case Date:||August 08, 1979|
|Court:||United States Courts of Appeals, Court of Appeals for the Third Circuit|
Argued June 4, 1979.
[Copyrighted Material Omitted]
Harold Cramer, Anthony E. Creato (argued), Jeffrey Cooper, Mesirov, Gelman, Jaffee, Cramer & Jamieson, Philadelphia, Pa., for appellants.
Meyer J. Myer (argued), Chicago, Ill., David H. H. Felix, Philadelphia, Pa., Myer New Berlin & Braude, Chicago, Ill., for appellee.
Before ADAMS and ROSENN, Circuit Judges, and LAYTON, District Judge. [*]
ROSENN, Circuit Judge.
In contemplation of the American Bicentennial celebration, Publicker Industries, Inc. ("Publicker") conceived of the idea of putting four-fifths of a quart of whiskey in miniature ceramic replicas of the Liberty Bell and retailing the "patriotic product" for $19.99 each. Continental Distilling Corp. ("Continental"), Publicker's wholly-owned subsidiary, became involved in the implementation of this idea, and Roman Ceramics Corporation ("Roman") agreed to supply the uniquely-shaped containers at prices ranging between $6.35 and $6.55 per bottle. A snag in the plan developed when Roman discovered a similarity between 40,000 of the bottles it had manufactured and the original design it was copying: each of the bottles, like the Liberty Bell itself, had a crack in its side rendering it unsuitable to hold liquor. Unsuccessful efforts to find a suitable disposition of these defective bottles led to a suit by Publicker and Continental against Roman in the United States District Court for the Eastern District of Pennsylvania. The district court entered judgment in favor of Roman, and Publicker and Continental appealed. Because the district court did not make certain critical findings, we will vacate the judgment and remand the case for further proceedings.
Although the design for the bottles was originally drawn in 1975 by Publicker and Roman, the actual purchase orders came from Continental. Roman had been manufacturing the bottles and billing Continental for several months when the problem arose. Roman discovered and advised Continental in January 1976 that 40,000 bottles were defective and unusable as whiskey containers. Letters were exchanged, the effect of which culminated in a dispute. Roman contended that Continental agreed to purchase the defective bottles at $2.50 each, and Continental claimed no agreement had been reached. In May, Continental suggested that Roman dispose of the bottles elsewhere, but Roman responded that there was a firm contract and billed Continental for $100,000. The bottles remained undelivered and in Roman's possession.
In August 1976, Roman began direct negotiations with Publicker concerning the disposition of the bottles. A new agreement was reached in September 1976, under which Publicker agreed to purchase the 40,000 defective bottles at $1.00 each and to purchase 12,000 new bottles at $6.55 each. Publicker paid Roman $40,000, but subsequently learned that approximately 1200 of the defective bottles had been sold by Roman to an outside party. Publicker viewed this as a breach of its contract with Roman justifying rescission and demanded that the $40,000 be returned. Roman refused. Thereupon, Publicker and Continental sought a judgment in this proceeding in the amount of $40,000 and a declaration that the contract to purchase 12,000 additional bottles had been rescinded.
Roman, incorporated in Delaware with its principal place of business in Illinois, moved to dismiss the suit because of lack of diversity between it and Continental. Continental has its principal place of business in Pennsylvania but is incorporated in Delaware. (Publicker is incorporated and has its principal place of business in Pennsylvania.) The district court dismissed the motion without prejudice for failure to comply
with the local rule concerning notice. 1 Rather than renew the motion, Roman chose to file an answer and counterclaim. In its answer, Roman again controverted the jurisdictional allegation, made in plaintiffs' complaint, that Roman was incorporated in Illinois, and stated that it was incorporated in Delaware. The counterclaim averred that the plaintiffs' original contract to purchase the bottles at $2.50 each was still valid, and that an invoice in the amount of $9,864.30 for bottles previously shipped remained unpaid. (The unpaid invoice is not in issue on this appeal.) After reduction for the $40,000 already paid, the counterclaim sought damages of $69,864.30 plus interest.
The district judge, following a bench trial, entered judgment for the defendant against both plaintiffs on the original claim and the counterclaim. In so doing, he made the following findings:
1) The September 1976 contract had been rescinded and the parties were relieved from any obligations under it.
2) The January 1976 contract was still binding on the parties.
3) Roman did not breach the January contract by selling approximately 1200 bottles to outside parties.
4) The plaintiff corporations acted as "alter egos for each other" and could be treated interchangeably, "as one in the same."
5) Plaintiffs were obligated to pay the price set forth in the January contract of $100,000, less $40,000 already paid, and less $3,259 received by Roman for the 1200 bottles, together with certain other adjustments.
Thus, the court entered judgment for the defendant and against both plaintiffs in the amount of $73,047.17.
Plaintiffs then filed a motion to vacate the judgment or in the alternative to amend it, alleging in part that the lack of complete diversity required the court to dismiss the action. The trial judge vacated the judgment, dismissed Continental from the suit in all respects, and reentered the judgment in full in favor of Roman against Publicker.
Publicker and Continental filed this appeal, contending that the district court erred: 1) in failing to dismiss the suit entirely for want of complete diversity; 2) in treating Continental and Publicker as alter egos, thereby imposing liability on Publicker for the January contract; 3) in not holding that the September contract was a novation...
To continue readingFREE SIGN UP