Bendix Home Appliances v. Radio Accessories Co.

• Decision Date: 09 July 1942
• Docket Number: No. 12172.,12172.
• Citation: 129 F.2d 177
• Parties: BENDIX HOME APPLIANCES, Inc., v. RADIO ACCESSORIES CO.
• Court: U.S. Court of Appeals — Eighth Circuit

129 F.2d 177 (1942)

BENDIX HOME APPLIANCES, Inc., v. RADIO ACCESSORIES CO.

No. 12172.

Circuit Court of Appeals, Eighth Circuit.

June 15, 1942.

Rehearing Denied July 9, 1942.

W. C. Fraser, of Omaha, Neb. (C. F. Connolly and Crofoot, Fraser, Connolly & Stryker, all of Omaha, Neb., on the brief), for appellant.

L. R. Newkirk, of Omaha, Neb. (C. L. Waldron and Waldron & Newkirk, all of Omaha, Neb., on the brief), for appellee.

Before GARDNER, THOMAS and RIDDICK, Circuit Judges.

RIDDICK, Circuit Judge.

The plaintiff and the defendant in the court below, the parties to an executory contract terminable at the will of either party, agreed that the contract should remain in force for a stated term in order that the plaintiff, which had sustained a loss through performance to the date of the amendment, might recoup its losses. The defendant wrongfully terminated the contract, and the plaintiff brought this suit to recover expenses incurred by it in performance of the contract both before and after the amendment and for the profits which the plaintiff claimed it would have earned but for defendant's default. At the conclusion of the testimony plaintiff was permitted to amend its pleadings to ask a recovery against defendant for the breach of a supplementary agreement which the parties executed after the breach of the original contract. There was a judgment for the plaintiff for the breach of both the original and the supplementary contracts.

The questions presented on this appeal are: (1) whether the court has jurisdiction of the defendant in the suit, (2) the validity of the contract as originally drawn and as amended, and (3) whether the plaintiff may recover the particular items of damage for which judgment was rendered if there was a valid contract between the parties.

A jury was waived and the case was tried to the court. The testimony taken at the trial on the merits of the case is not brought into the record. On the question concerning the court's jurisdiction of the defendant, the record contains certain affidavits and exhibits, but it does not appear that these constituted all of the evidence upon which the court made its decision upon this question.

The trial judge made extended findings of fact which, in the circumstances just stated, are conclusive upon this court. From these findings we take the following statement of the case:

Radio Accessories Company, a Nebraska corporation with its principal place of business in the city of Omaha, and Bendix Home Appliances Incorporated, a Delaware corporation with its principal place of business in South Bend, Indiana, on the 6th day of May, 1938, entered into a written contract under which Bendix Incorporated granted to Radio Accessories the exclusive franchise for the wholesale distribution of Bendix Home Laundries in a number of counties in the states of Nebraska and Iowa, Bendix Incorporated reserving the right to change at will the extent of the territory described. Radio Accessories agreed to maintain a staff of trained personnel for the service of Bendix products in the territory allotted it; to repair and service free of charge for one year from the date of sale the Bendix machines sold by it or by its predecessor distributor; to maintain a service reserve fund in an amount satisfactory to Bendix Incorporated to defray the expense of rendering free service upon machines sold; upon the termination of the contract by either party to pay to Bendix Incorporated the proportion of unexpended service reserve fund allocable to each Bendix Home Laundry; and aggressively to advance the sale of the Bendix Home Laundries. Bendix Incorporated agreed to warrant to purchasers of home laundries that the machines were free from defects in material and workmanship under normal use and service, its obligation under the warranty being limited to repairing or replacing at its factory any machine or part which proved defective within one year from the date of installation.

It was expressly stipulated in the contract that Radio Accessories was not appointed an agent of Bendix Incorporated for any purpose whatsoever and that the contract was terminable at the will of either party, with or without cause. Radio Accessories did not agree to buy and Bendix Incorporated did not agree to sell any stipulated number of Bendix products. Radio Accessories agreed to pay promptly for all home laundries and parts delivered by Bendix Incorporated, but the latter was absolved from all claims whatsoever for failure to make delivery of the machines ordered. It was agreed that the contract should be interpreted and construed in accordance with the laws of Indiana.

At the time of the execution of the contract, M. E. Daily was the acting distributor of Bendix products at Omaha. Radio Accessories purchased from M. E. Daily his stock of Bendix laundries and parts and other material necessary to the sale of Bendix products. Radio Accessories took over the service on six laundries which had been sold by Daily. Daily released Radio Accessories and Bendix Incorporated from all claims against either of them. A written memorandum of this transaction was executed and signed by the representatives of the three parties involved.

The Bendix Home Laundry was relatively new and untried. It developed in the hands of purchasers a number of defects which Radio Accessories was required by the terms of the contract to correct at its own expense, subject only to the credit allowed it by Bendix Incorporated for defective parts under the warranty given the purchaser of each machine. From the outset the contract proved to be an expensive one for Radio Accessories. In response to its complaints, Bendix Incorporated sent employees into Nebraska, who inspected and repaired defective machines in the hands of users in the state, gave demonstrations to the owners of machines purchased and to the employees of Radio Accessories in the proper operation and maintenance of the machines, advised Radio Accessories in the purchase of parts from Bendix Incorporated for the repairs necessary and did what they could toward promoting the sale of Bendix Home Laundries. The net result of all operations, nevertheless, continued to be a loss for Radio Accessories.

In this state of affairs the president of Radio Accessories met the sales manager of Bendix Incorporated in Chicago during the latter part of July 1938, where, after a canvass of the situation, it was agreed that the contract between the parties should be amended to eliminate the provision permitting its termination at will by Bendix Incorporated, and to provide that Bendix Incorporated would continue the contract in full force and effect for one year from the date of its execution in order that Radio Accessories might have an opportunity to recoup the losses which it had sustained up to that time under the contract in giving free maintenance to machines sold.

On October 21, 1938, Bendix Incorporated wrongfully canceled the contract as amended and appointed a new distributor. Immediately thereafter the parties entered into another agreement, the substance of which was that Radio Accessories was to be paid for all Bendix sales and promotional material on hand; that its successor distributor would take over from Radio Accessories all parts in stock and pay for them; that any surplus money remaining in a cooperative advertising fund, after charging it with outstanding items, would be paid over to Radio Accessories; and that Bendix Incorporated would assume and pay all the expenses of a certain dealers' meeting, the arrangements for which had been made prior to the cancellation of the original contract.

In its petition for damages for breach of contract, Radio Accessories alleged the execution of the original contract between the parties, its amendment for a definite term, and that certain oral agreements between the parties prior to the signing of the written contract were made in supplement of the original contract and as a material part of the consideration for it. These oral agreements on the part of Radio Accessories were to discontinue the distribution of competitive products of other manufacturers in the territory allotted to it, and to purchase the laundries and parts in the hands of its predecessor distributor. On the part of Bendix Incorporated the oral agreements were to send a factory representative to assist Radio Accessories in promoting the sale of the Bendix Home Laundries and its assurance that the laundries purchased from the former distributor were free from defects. The alleged breach of the contract as originally executed was the failure of Bendix Incorporated to furnish the factory representative to assist plaintiff, and the fact that the machines purchased from plaintiff's predecessor proved to be so defective in the hands of purchasers as to oblige the plaintiff to expend large sums of money under the service clause of the original contract.

The plaintiff also averred that after the amendment of the original contract and in reliance upon defendant's agreement not to cancel, it incurred further expense under the service and maintenance clause of the contract in its efforts to promote the sale of Bendix Home Laundries. It declared that the amendment by which Bendix Incorporated agreed not to terminate the contract was made by Bendix Incorporated in recognition of the losses sustained by Radio Accessories in attempting to sell the home laundries and in order to "thereby afford plaintiff a means to recoup his losses and damages"; and that the cancellation by Bendix Incorporated on October 20, 1938 of the contract which had been amended on July 29, 1938, was made without just cause. The recovery of the expenses of plaintiff under the contract and the profits which the plaintiff would have made but for the cancellation of the contract was asked.

Bendix Incorporated, by a special appearance, moved to dismiss the petition on the ground that it had never...