Intercontinental Engineering-Manufacturing Corp. v. C. F. Bean Corp.

• Decision Date: 12 June 1981
• Docket Number: No. 80-3768,ENGINEERING-MANUFACTURING,80-3768
• Citation: 647 F.2d 621
• Parties: INTERCONTINENTALCORPORATION, Plaintiff-Appellee, v. C. F. BEAN CORPORATION, Defendant-Appellant. Summary Calendar. . Unit A
• Court: U.S. Court of Appeals — Fifth Circuit

Page 621

647 F.2d 621

INTERCONTINENTAL ENGINEERING-MANUFACTURING CORPORATION, Plaintiff-Appellee, v. C. F. BEAN CORPORATION, Defendant-Appellant.

No. 80-3768

Summary Calendar.

United States Court of Appeals, Fifth Circuit.

Unit A

June 12, 1981.

John A. Hollister and H. Sloan McCloskey, New Orleans, La., for defendant-appellant.

Jones, Walker, Waechter, Poitevent, Carrere & Denegre, Robert B. Bieck, Jr., New Orleans, La., for plaintiff-appellee.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before BROWN, POLITZ and TATE, Circuit Judges.

TATE, Circuit Judge:

The C.F. Bean Corporation (Bean) challenges a judgment of the district court holding Bean liable in solido with the John Robinson Company (Robinson) for Robinson's breach of a sales contract. That judgment was predicated on the district court's determination that an escrow agreement embodying a conditional sales contract between Bean and Robinson expressly authorized and required Robinson to sell certain equipment belonging to Bean, that Robinson was therefore acting as Bean's agent in the subsequent sale, and that Bean and Robinson were therefore liable in solido as principal and agent for Robinson's breach of the subsequent sales contract.

For the reasons delineated below, we agree with the district court's interpretation of the Bean-Robinson relationship. Accordingly, the judgment below is affirmed.

Facts

The plaintiff-appellee in this Louisiana diversity action, Intercontinental Engineering-Manufacturing Corp. (Intercon), is a Delaware corporation with its principal place of business in the state of Missouri. Bean, the defendant-appellant, is a New York corporation with its principal place of business in the Eastern District of Louisiana. The defendant Robinson, which is not a party to this appeal, is a Texas corporation with its principal place of business in that state.

The ultimate issue is whether Bean is liable to Intercon for failure to deliver two Frame 5 gas turbines. The issue arises in a relatively complicated factual context surrounding the relationship of the three above-named corporations that warrants a fairly detailed exposition.

In 1977, Robinson acquired a lease to certain property fronting on the Industrial Canal in New Orleans, Louisiana. In the summer of that year, Bean entered into negotiations with Robinson for the purchase or assumption of that lease.

At the time of these negotiations, Robinson's representative, Glenn T. Cummings, believed from past transactions in which he had participated that Bean had three Frame 5 General Electric gas turbines on hand at its Salt Lake City, Utah, premises. ¹ Bean, however, informed Cummings that it did not know how many Frame 5 turbines it had on hand. Neither party ever inspected Bean's Salt Lake City premises to determine how many turbines were in fact located there.

As the negotiations between Bean and Robinson progressed, it became evident that Bean was reluctant to put up the amount of cash sought by Robinson. It was therefore agreed that Bean could put up a lesser amount of cash and tie in certain equipment (which Cummings believed included three Frame 5 turbines) to the deal.

An agreement was reached in early August of 1977. On August 5, Bean and Robinson executed an Escrow Agreement (Exhibit No. 2) which spelled out the terms of their transaction. Bean agreed to purchase or assume, and Robinson agreed to sell or assign, the lease on the Industrial Canal property for a total payment of $270,000. This sale, however, was conditioned upon the approval of Bean as the new lessee by the Board of Commissioners of the Port of New Orleans (Dock Board).

In pertinent part, the Escrow Agreement provided that Bean (purchaser) would deposit with the escrow agent $150,000 in cash as well as separate bills of sale to Robinson for the equipment located in Salt Lake City namely, "One (1) or more" Frame 5 gas turbines and two locomotive "A" cab units with the traction motors removed. ² Robinson (vendor) would deposit, in addition to the documents necessary to transfer its rights in the leased property to Bean, an agreement that it would use its best efforts to sell the Bean equipment as soon as possible, would apply the first $120,000 realized from that sale to the purchase price of the leasehold, and would evenly divide the remainder of the proceeds with Bean.

The Escrow Agreement also provided that in the event the Dock Board approved Bean as the new lessee of the Industrial Canal property, an agreement to purchase the lease would be executed by the parties within seven days and the escrow agent would release the escrowed items to the appropriate parties. In the event the Dock Board did not approve Bean as the new lessee by August 15, 1977, the Agreement provided for cancellation at the option of either party. In any event, the Escrow Agreement was to terminate on September 15, 1978, unless a written extension was entered into by both parties.

Meanwhile, independently of the Bean-Robinson negotiations, but with knowledge of them, Robinson's president, Paul McDaniel, was discussing the sale of Frame 5 turbines with Intercon. Intercon had developed a pressing need for a rebuilt Frame 5 turbine in approximately July of 1977. ³ Having once before discussed with Robinson the possibility of purchasing such a turbine, ⁴ Intercon's president, William Sales, contacted McDaniel to inquire whether a Frame 5 turbine was still available. Sales was informed by McDaniel that the turbine was still on the market and Sales restated his offer to purchase it for $65,000. McDaniel informed him that the offer was too low. Sales then offered $100,000, to which McDaniel replied that he would ascertain the reaction to that offer.

Sometime thereafter, McDaniel informed Sales that the asking price for the rebuilt turbine was $150,000, but that he would "sweeten" the deal by adding two locomotive "A" cab units and two cannibalized Frame 5 turbines, "as is," for the same price.

On August 5, 1977, McDaniel telexed Sales and offered to sell the package of three Frame 5 turbines (one rebuilt and two "as is") and two "A" cabs for $150,000, subject to the Dock Board's approval of the C.F. Bean Corporation as the new lessee of certain property fronting on the Industrial Canal in New Orleans (Exhibit No. 5). Sales accepted this offer via telex on August 12, 1977 (Exhibit No. 6).

On August 12, 1977, Robinson and Bean executed a document entitled "Amendment to Escrow Agreement and Instructions to Escrow Agent" (Exhibit No. 3). That document recited that the parties had located a purchaser for the Bean equipment described in the original Escrow Agreement specifically, that Intercon had agreed to purchase the equipment for $150,000 and instructed the escrow agent to return the separate bills of sale covering the equipment to Bean so that Bean could execute a new bill of sale for the equipment to Intercon. The Amendment further instructed the escrow agent, upon receiving the $150,000 payment from Intercon, to disburse $15,000 each to Bean and Robinson and to hold the remaining $120,000 in lieu of the Bean equipment pending Dock Board approval of Bean as the new lessee of the Industrial Canal property. In the event that Dock Board approval was secured, the escrow agent was instructed to release to Robinson both the $150,000 deposited by Bean and the $120,000 received from Intercon. In the event that Dock Board approval was not secured (the August 15, 1977, deadline being extended by one month), the escrow agent was to release the entire $270,000, with all interest earned, to Bean. The agent was further instructed to purchase United States treasury bills with the escrowed funds, with the interest thereon to be credited to Bean.

Subsequently, Intercon paid $150,000 to the Bean-Robinson escrow account. The escrow agent disbursed $135,000 to Robinson and $15,000 to Bean, as per the amended Escrow Agreement. Intercon received one rebuilt Frame 5 turbine and two "A" cabs, but did not receive the two "as is" turbines promised by Robinson. Although it is clear that the undelivered turbines did exist, they have never been located.

On May 30, 1979, Intercon instituted this diversity action against Robinson and Bean in the United States District Court for the Eastern District of Louisiana, seeking $150,000 in damages for Robinson's failure to deliver the two "as is" turbines as promised. Intercon's complaint alleged, in the alternative, either that Bean or Robinson were joint owners of the subject matter of the contract, or that Robinson had acted as Bean's agent in the sale.

Robinson failed to answer the complaint, and on July 30, 1979, Intercon took a default judgment against Robinson for the full amount of the damages sought. Bean did answer the complaint and on November 14, 1979, cross-claimed against Robinson seeking to be indemnified for the amount of any judgment assessed against it in favor of Intercon. Robinson likewise failed to answer the cross-claim, and a default judgment was entered in favor of Bean on April 8, 1980.

The issue of Bean's liability to Intercon was tried to the court without a jury. The trial court concluded that Bean was the owner of the equipment at the time of the Intercon sale, that Robinson was expressly authorized to use its best efforts to find a purchaser for that equipment, and that Robinson was therefore acting as Bean's agent in contracting with Intercon. Accordingly, the court held Bean, as Robinson's principal, solidarily liable with Robinson for the breach of the Intercon sale.

There is no question on this appeal that Robinson breached its sales contract with Intercon by failing to deliver the two Frame 5 turbines in "as is" condition, as per the terms of that agreement. The sole question brought before this court is the extent to which Bean is answerable for Robinson's breach. Bean's position is that the trial court erred in concluding that the...