Audi Vision Inc. v. RCA Mfg. Co.

• Decision Date: 10 June 1943
• Docket Number: No. 278.,278.
• Parties: AUDI VISION INC., et al. v. RCA MFG. CO., Inc.
• Court: U.S. Court of Appeals — Second Circuit

136 F.2d 621 (1943)

AUDI VISION INC., et al. v. RCA MFG. CO., Inc.

No. 278.

Circuit Court of Appeals, Second Circuit.

June 10, 1943.

Harry A. Gordon, of New York City (Harry A. & Eric C. Gordon and Abraham Lillienthal, all of New York City, on the brief), for plaintiffs-appellants.

Fred J. Knauer, of New York City (Wright, Gordon, Zachry, Parlin & Cahill and Lawrence J. McKay, all of New York City, on the brief), for defendant-appellee.

Before SWAN, CLARK, and FRANK, Circuit Judges.

CLARK, Circuit Judge.

Plaintiff Audi Vision Incorporated and defendant entered into a written contract on November 19, 1941, whereby plaintiff agreed to produce certain slide films, recordings, and supplementary material — all constituting a proposed educational program for defendant's distributors and dealers in promoting the sale of defendant's phonograph records — for which defendant agreed to pay $16,200 in three installments. The first installment of $3,240 was paid upon the making of the contract. A clause of the contract entitled "Cancellations," in addition to a provision for cancellation by Audi Vision, not here material, stipulated as follows as to defendant, called "the Sponsor": "Orders for productions may be cancelled by the Sponsor on written notice at any time prior to approval of the frame-by-frame script but not thereafter; provided, however, that the Sponsor in such event shall pay at fair and customary rates for time and expense already devoted to the production, not to exceed 25% of the minimum price." In this action for breach of the contract it is alleged that defendant on or about February 2, 1942, notified plaintiff Audi Vision that it would not perform the contract, and then, to meet the expected defense of cancellation, it is set forth that until February 1, 1942, plaintiff Audi Vision had in its employ one Singer as its general manager, who had worked out the preparation of plans for the agreed educational program, and who was familiar with all details and its expected manner of completion; that defendant and Singer entered into an agreement to deprive Audi Vision of the benefits of this contract pursuant to which Singer resigned from plaintiff's employ and entered that of defendant in order to make use of all the plans and benefits of the contract; and that in consequence defendant had received all the benefits of the contract, notwithstanding its claimed cancellation. The plaintiffs other than Audi Vision were a copartnership to whom the second installment, payable January 2, 1942, had been assigned. Plaintiffs asked judgment for the contract price remaining unpaid, less the reasonable cost and value of completion of the work, estimated to be about $4,700.

In its answer defendant stressed its reliance upon its cancellation of the contract, under the clause quoted above, of which it claims first to have given Audi Vision notice on or about December 23, 1941, with final written notice on February 2, 1942, both before preparation or presentation of a frame-by-frame script. It also pleaded a first counterclaim, in which it relied on this same clause to say that the expenses incurred by Audi Vision before cancellation did not exceed $1,500 and that, therefore, it was entitled to a refund out of the sum initially paid by it of $1,740 with interest; and for a second counterclaim it set up an account of goods and merchandise delivered, showing $1,454.61 still due. Plaintiffs' reply, in addition to reiterating their claims upon the contract, challenged only the first counterclaim. Depositions were taken by both sides, and thereafter defendant moved for summary judgment dismissing the complaint and for judgment on the pleadings as to the second counterclaim. The court granted the motion and this appeal followed.

On this appeal plaintiffs do not attack the judgment given defendant on the second counterclaim, but do contest the district court's conclusions that defendant's privilege of cancellation was unrestricted and that their allegations of defendant's taking Audi Vision's general manager into its employ, in order to get the benefits of the contract notwithstanding the cancellation, did not present any issue of fact. They also object to the failure to allow judgment at least for the second, or assigned, installment due January 2, 1942, or, in the alternative, for a balance of $810 due for time and expense already devoted to the production.

At the outset we are presented with the question of the finality of the judgment entered below. Since the judgment appearing of record does not mention the first counterclaim, that portion of the action remains standing. This is made quite clear by the statement in the court's opinion that defendant's liability to pay for time and expense incurred before cancellation "is put at issue by the first counterclaim and the reply and will be determined by a trial of that issue." Indeed, the original motion papers stated that the action was on the jury calendar for immediate trial, and that the issues would be much simplified if restricted only to the claim involved in defendant's first counterclaim. And defendant's brief here shows that it never sought summary disposition of that counterclaim. The question, therefore, arises whether the judgment, which leaves this issue undetermined, is final as to the matters it purports to adjudicate. Our only concern, of course, is as to the dismissal of the original claim on the contract; the judgment on the uncontested second counterclaim is final under the principles hereafter discussed, although the district court may still wish to stay execution upon it, pending disposition of the other matters, as provided in the last sentence of Rule 54(b), Federal Rules of Civil Procedure, 28 U.S. C.A. following section 723c.

Even when the parties have not raised the issue, it is the duty of the court to determine whether a "decision" is "final" under Judicial Code, § 128, 28 U. S.C.A. § 225. Collins v. Miller, 252 U.S. 364, 40 S.Ct. 347, 64 L.Ed. 616; Cory Bros. & Co. v. United States, 2 Cir., 47 F.2d 607; National Nut Co. of California v. Kelling Nut Co., 7 Cir., 134 F.2d 532. This is a matter for the appellate court to decide, whatever may have been the view of the trial court. Potter v. Beal, 1 Cir., 50 F. 860; The Attualita, 4 Cir., 238 F. 909. In the present case, however, it is interesting to note that, while plaintiffs did not make a formal motion to dismiss the appeal and contested most strenuously the district court's view that the facts they alleged did not nullify the effect of the written cancellation, nevertheless they do attack the piecemeal determination of the case by the court. Notably in their third point, dealing with the counterclaim, they argue that determination is not possible in this way, stressing that they are entitled under their allegations of performance, even if the attempted cancellation is valid, to a refund up to 25 per cent of the total purchase price or $810 more than they have been paid, for the value of Audi Vision's time and expenses.

Plaintiffs seem, therefore, to be on unassailable ground that on the trial yet to be had herein they are entitled to show in any event a basis of recovery for at least $810. That they had originally claimed a substantially greater amount has no bearing on the actual recovery to be had after answer filed and at trial. See Rule 54(c). Defendant essentially concedes the justice of this contention by saying in its brief that defendant's first counterclaim is now on the trial calendar awaiting trial, and that "defendant is perfectly willing to stipulate that plaintiff's claim to the $810 shall be tried together with the counterclaim, so the jury can decide whether defendant has overpaid or underpaid." That is a concession most significant in the light of the governing principle, set forth in Rule 54(b), that for a separate final judgment there must be "a determination of the issues material to a particular claim and all counterclaims arising out of the transaction or occurrence which is the subject matter of the claim."

Before the adoption of the federal rules it was clear that the dismissal of a counterclaim where the action was left pending would not be a final judgment. General Electric Co. v. Marvel Rare Metals Co., 287 U.S. 430, 432, 53 S.Ct. 202, 77 L. Ed. 408; Radio Corporation of America v. J. H. Bunnell & Co., 2 Cir., 298 F. 62. In Jefferson Electric Co. v. Sola Electric Co., 7 Cir., 122 F.2d 124, 126 (in which the final judgment in 125 F.2d 322, resting on a different ground, was reversed by the Supreme Court in 317 U.S. 173, 63 S.Ct. 172, 87 L.Ed. ___), it was held that this rule had been changed by Rule 41(b) and (c), 28 U.S.C.A. following section 723c, allowing dismissal of a counterclaim, though "we think this is an unfortunate result of the rule for the reason that it requires separate appeals from very closely related cases which would much better be combined for hearing on one appeal." But the decision fails to note that this rule dealt with the district court's control over the dismissal of actions, not with the time of entry of final judgment, which is governed by Rule 54(b) quoted above; and hence it did not consider the background of this latter rule. See 3 Moore's Federal Practice, Cum.Supp.1942, 48, 122. Rule 54 (b) purports only to modify the previously existing law that a final judgment must finally dispose of all matters at issue in the case, see Collins v. Miller, supra, to one requiring complete disposition of a single transaction and all matters connected with it; in other respects it leaves the former law untouched. Unless, therefore, the circumstances stated in the rule exist, the judgment is not final.

The reason for the modification made by Rule 54(b), as Professor Moore well states, 3 Federal Practice 3155-3158, is, of course, one naturally following from the wide extent of joinder of actions, parties, and counterclaims permitted under...