Arnolt Corp. v. Stansen Corp.

Decision Date28 May 1951
Docket Number10277.,No. 10276,10276
Citation189 F.2d 5
PartiesARNOLT CORP. v. STANSEN CORP. (two cases).
CourtU.S. Court of Appeals — Seventh Circuit


Harold A. Smith, Edward J. Wendrow, George B. Christensen, all of Chicago, Ill. (Winston, Strawn, Shaw & Black, Chicago, Ill., of counsel), for Arnolt Corp.

Nicholas J. Constantine, George A. Bosomburg, Chicago, Ill., for Stansen Corp.

Before KERNER, FINNEGAN and LINDLEY, Circuit Judges.

FINNEGAN, Circuit Judge.

Both parties appeal from a judgment order entered on July 21, 1950 by the United States District Court for the Northern District of Illinois, Eastern Division. In the first appeal numbered 10276, Stansen Corporation, defendant below, appeals from that part of the order which directs that its cross-complaint against Arnolt Corporation, the plaintiff, be dismissed, claiming that the Court should have entered judgment in its favor on said cross-complaint in the sum of $40,450. In the second appeal numbered 10277, the Arnolt Corporation, plaintiff below, appeals from that part of the said order which awarded judgment in its favor against the defendant, Stansen Corporation, in the sum of $674.05, contending that the judgment should have been for the sum of $12,341.37.

The record discloses that Arnolt Corporation filed its original complaint on August 4, 1947. On August 28, 1947, defendant appeared and filed its motion for a bill of particulars. No disposition of this motion is shown, but it does appear that on September 15, 1947, the Stansen Corporation filed its answer to the original complaint.

On May 18, 1948, plaintiff filed an amended and supplemental complaint which Stansen Corporation answered on June 4, 1948. The cause remained pending until November 21, 1949, when it came on for hearing before the District Court, waiver of jury having been filed by both parties.

As a result of hearing then held, the trial court suggested that Arnolt Corporation file a second amended complaint.

At the same time, on the representation that Stansen Corporation had just discovered that it had a claim for damages against Arnolt, the court ordered that it be permitted to file its counterclaim, and adjourned the proceedings for further hearing.

Subsequently, and on November 29, 1949, Arnolt filed its second amended complaint which was answered by Stansen on December 7, 1949. On the same day Stansen filed its counter-complaint, which Arnolt answered on December 30, 1949.

Plaintiff's second amended complaint, as amended on final hearing in February 1950, declared in substance that Stansen was indebted to it in the sum of $12,341.37 for parts of water sprinklers for which Stansen had failed to pay. It was charged that some of the parts had been delivered on Stansen's orders and that it refused to accept and pay for the remainder. The complaint, as amended, also alleged that there was an account stated between the parties showing $12,341.37 due to Arnolt. In its answer Stansen admitted that it owed plaintiff $674.05 for parts delivered on its orders. It further alleged that on April 29, 1947, Arnolt sold to Stansen the remaining sprinkler parts, to be paid for 10 days after shipment; that on August 7, 1947, it requested Arnolt to ship the parts to a South Bend company so that they might be manufactured into sprinklers but that Arnolt refused to ship unless paid in advance. Stansen denied there was an account stated.

In its counterclaim, Stansen alleged that on April 29, 1946, it had placed an order with Arnolt which had called for the manufacture and delivery of 15,000 water sprinklers, 5000 in June; 5000 in July; 3000 in August, and 2000 in September, 1946; that Arnolt had failed to deliver the 5000 sprinklers in June and 5000 in July, by reason whereof Stansen had suffered $25,000 damages. The counterclaim also alleged that on April 29, 1947, Arnolt sold to Stansen sprinkler parts to the value of $11,667.32, which sale was alleged to be on credit, payment to be made ten days after shipment; that Stansen had requested shipment on July 31 and August 7, 1947, but that Arnolt had refused to make shipment except for cash; that by reason thereof Stansen lost $3,000. The ad damnum clause of the counterclaim demanded $28,000 damages.

In order to arrive at the facts concerning the transactions which form the background of this litigation it has been necessary to disregard the relationship between plaintiff corporation, its predecessors and affiliates, all acts of such corporate bodies are regarded as acts of the plaintiff. So, too, the acts of Stansen Corporation and its allied corporation, Milton Sturm & Company, are regarded as acts of the defendant.

In March 1946, and prior thereto, the defendant Stansen Corporation was selling and distributing a lawn sprinkler bearing the trade name "Travelawn," upon which an application for patent was pending. The sprinkler was already being manufactured for the defendant by Moulton Machine Shop, of South Bend, Indiana. Stansen was seeking an additional manufacturing source.

Through a broker it was brought into contact with the plaintiff, Arnolt Corporation. Conferences were held between the parties, each being represented by its president.

Prices of materials and castings used in the manufacture or assembly of the sprinkler were disclosed by Stansen and were used by Arnolt, together with its estimate of overhead and labor costs, in order to determine a price at which it would be willing to manufacture the sprinkler. As a result of the conference Arnolt submitted a price of $10.10 per sprinkler.

The record then discloses that on April 29, 1946, the defendant Stansen mailed to plaintiff its purchase order for 15,000 lawn sprinklers at $10.10 per unit. The order recited that the sprinklers were to be "delivered as follows": 5,000 in June, 1946; 5,000 in July, 1946; 3,000 in August, 1946; 2,000 in September, 1946, more or less, plus or minus as engineering changes are made.

The provision for shipment was: "Ship as directed." This order was signed "Milton Sturm & Co., by Milton Sturm." It stated that Stansen should be invoiced and that the account was guaranteed by Milton Sturm & Co.

After receipt of the order of April 29, 1946, the president of plaintiff corporation phoned the defendant company whose president, Milton Sturm, testified that he told Arnolt the sources from which body and wheel castings requirements were supplied and the prices which were paid for them by Moulton. He also testified that on behalf of Stansen he agreed to procure additional pattern equipment from which wheel and body castings were made. The record discloses that City Pattern & Foundry Company billed Stansen on May 24, 1946, for patterns for body and wheel castings in the total amount of $1,986. The new patterns were apparently required because the castings being made by Moulton had produced some leaky sprinklers. It is later made clear in the record that these patterns when completed, about May 24, 1946, were paid for and forwarded by Stansen to the Duramold Castings, Inc.

After this telephone conversation, the plaintiff corporation proceeded to tool up so that it might assemble or manufacture the sprinklers ordered by the defendant. The record contains exhibits offered by the defendant which demonstrate that beginning with June 15, 1946, Duramold Castings, Inc. billed plaintiff, or its affiliate, with sprinkler body castings. Such Duramold invoices continued up to July 27, 1946. They were paid by plaintiff or its affiliate. The record does not disclose when or where wheel castings were procured by plaintiff.

It is from the purchase order of Stansen, dated April 29, 1946, and the oral or implied acceptance thereof by Arnolt that the contract, for the breach of which damages are claimed in the cross-complaint, arose. Therefore, it may be profitable to examine what was done under this contract by the respective parties.

During the month of June 1946, two and only two shipping directions were issued by Stansen to the plaintiff corporation. One, numbered 1A, was dated June 26, 1946, and directed Arnolt to ship to Electronic Sales Company of New Haven, Conn., 100 Travelawn sprinklers. Electronic's order for sprinklers, as shown by Stansen's Exhibit 13, was procured on June 25, 1946.

The second directive, numbered 2A, was based on an order for 350 sprinklers procured by Stansen on June 26, 1946. It directed shipment of 150 sprinklers to Ballou, Johnson & Nichols Co., Providence, R. I. Both of these directives were executed and the sprinklers shipped and paid for by Stansen's check #819, which also paid for directive 3A, issued in July.

During the month of July 1946, Arnolt received and carried out shipping directions for some 1500 sprinklers. There is in evidence a telegram, dated July 23, 1946, addressed to Stansen by plaintiff's affiliate requesting shipping directions for 400 Travelawn sprinklers within the next three days. It went unanswered.

As a matter of fact other exhibits in this record show that after July 26, 1946, such shipping directions as were issued to Arnolt during July 1946, called for only two or three sprinklers, save for one directive calling for eleven on July 30, 1946.

During the month of August 1946, the record shows that only eleven sprinklers were ordered to be shipped, all the directives being dated August first and second. It was in this month, during the latter part thereof according to his own testimony, that Stansen's president ordered Arnolt to cease production because he had "no further orders at the time."

When Stansen ordered production stopped, the plaintiff corporation had on hand some 1611 completely assembled sprinklers.

Three hundred and fifty (350) of the sprinklers on hand when production was stopped, were sold through Arnolt's efforts and with the consent of Stansen to a Mexican concern with which plaintiff had some connection. The remainder of the completed sprinklers, 1261 in...

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