Berryfast, Inc. v. Zeinfeld, 82-2259

• Decision Date: 17 August 1983
• Docket Number: No. 82-2259,82-2259
• Citation: Berryfast, Inc. v. Zeinfeld, 714 F.2d 826 (8th Cir. 1983)
• Parties: 36 UCC Rep.Serv. 1267 BERRYFAST, INC., a California corporation, Appellant, v. Seymour ZEINFELD and Shirley Zeinfeld, Appellees. Steel Fastener Company, Inc., Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 826

714 F.2d 826

36 UCC Rep.Serv. 1267

BERRYFAST, INC., a California corporation, Appellant, v. Seymour ZEINFELD and Shirley Zeinfeld, Appellees Steel Fastener Company, Inc., Appellee.

No. 82-2259.

United States Court of Appeals Eighth Circuit.

Submitted June 14, 1983.

Decided Aug. 17, 1983.

William H. Pickett, Robert J. Perkins, William H. Pickett, P.C., Kansas City, Mo., for appellant.

Michael R. Roser, Alan B. Gallas, Berman, DeLeve, Kuchan & Chapman, Kansas City, Mo., for appellees.

Before HEANEY, Circuit Judge, and FLOYD R. GIBSON and HENLEY, Senior Circuit Judges.

HENLEY, Senior Circuit Judge.

Appellant Berryfast, Inc. contests certain aspects of the judgment entered by the district court ¹ in this diversity action. Specifically, it contends the court erred (1) in finding that two officers of defendant Steel Fastener Company, Inc. were not personally liable on two promissory notes; and (2) in entering judgment for Steel Fastener on its counterclaim for wrongful termination of an exclusive distributorship agreement between the parties. We affirm.

I. Background.

This litigation is the result of a business arrangement gone sour. During the 1970's Steel Fastener, a Missouri corporation engaged in the distribution and sale of nailers, staplers and related items, purchased pneumatic tools and fasteners from Berryfast, a California manufacturer. Beginning in early 1973 Steel Fastener allegedly became the exclusive distributor for Berryfast's products in and around Kansas City, and proceeded to develop a market for the products in that area.

Nearly all Steel Fastener's purchases of Berryfast's products were made on open account. On two occasions in late 1975 and early 1976, however, when Berryfast agreed to finance the distributor's purchases of certain tools to be used for loans to customers, it required the execution of promissory notes by Steel Fastener. Each of the notes obligated both the distributor and Seymour Zeinfeld, its owner and president. Consequently, Zeinfeld signed each instrument twice, both as "president" of Steel Fastener and as "an individual." Each of the notes was subsequently paid.

In March of 1978 Berryfast requested that Steel Fastener execute a promissory note for the amount then unpaid on its account; this note was apparently necessary to satisfy the manufacturer's creditors. Berryfast prepared a note dated March 29, in the amount of $15,675.00. The instrument included an annual interest rate of 9%, and specified that payment was to be completed in six monthly installments. During this period, Berryfast also asked that a note be executed to secure payment for purchases shipped to Steel Fastener on April 1, 1978. This instrument, in the amount of $17,169.99, was to be paid in sixty days. No interest was charged. Thereafter, the notes were mailed to Seymour Zeinfeld, to be executed by him and his wife, who served as secretary-treasurer of Steel Fastener. Both notes were executed in the following manner:

STEEL FASTENER CO.,

/s/________________________________

Seymour Zeinfeld

/s/______________________________________

Shirley R. Zeinfeld

While Berryfast intended that these notes personally bind the Zeinfelds, they apparently believed the signatures were made only in their capacities as representatives of Steel Fastener, and not as co-makers.

At the beginning of May, 1978, Steel Fastener's leading salesman of Berryfast products resigned to establish a competing business in Kansas City, Midwest Staple & Nail, Inc. Without notifying Steel Fastener, Berryfast began selling its products to the new company in mid-May.

In the meantime, Steel Fastener, which had made a total of three payments on the promissory notes, continued to make other purchases from Berryfast on open account. Within a short time, however, the manufacturer imposed three-for-one cash-on-delivery terms for all new Steel Fastener purchases. ² Unable to afford these terms, Steel Fastener's purchases began to diminish, and ultimately ceased in June of 1980. No further payments were made on either of the promissory notes.

Berryfast initiated the present action in October of 1978, seeking judgment against Steel Fastener, Seymour Zeinfeld and Shirley Zeinfeld on the two promissory notes. The defendants denied liability, and Steel Fastener filed a counterclaim, seeking damages for Berryfast's alleged wrongful termination of Steel Fastener's exclusive distributorship.

Following trial without a jury, the district court concluded that Steel Fastener was liable for the unpaid balance and accrued interest on the promissory notes in the amount of $26,880.79. It found, however, that the Zeinfelds had executed the notes in their capacities as representatives of the company, and that they therefore could not be held personally liable. In addition, the court found that an exclusive distributorship existed between the parties, and that Steel Fastener was entitled to compensation as a result of Berryfast's failure to afford it a reasonable period in which to recoup its ongoing expenses. Accordingly, the court entered judgment for Steel Fastener on its counterclaim in the amount of $26,979.00. This appeal followed.

II. Personal liability of the Zeinfelds.

In its initial assignment of error, Berryfast challenges the district court's finding that the Zeinfelds were not personally obligated under either of the promissory notes. Essentially, the company argues that insufficient evidence was presented to demonstrate that the Zeinfelds signed the instruments only as representatives of Steel Fastener, and not as individual comakers. ³

Factual findings of the district court may not be set aside on appeal unless clearly erroneous. Fed.R.Civ.P. 52(a); see, e.g., Blair International, Ltd. v. LaBarge, Inc., 675 F.2d 954, 957-58 (8th Cir.1982). "A finding is 'clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948). In addition, we give great deference to the district court's determination of state law, which is applicable in this diversity action. See, e.g., Ancom, Inc. v. E.R. Squibb & Sons, Inc., 658 F.2d 650, 654 (8th Cir.1981).

Because the signatures on the promissory notes in question failed to indicate the capacity in which the Zeinfelds had signed, an ambiguity existed, and parol evidence was properly admitted "to prove signature by the agent[s] in [their] representative capacit[ies]." Mo.Ann.Stat. § 400.3-403 comment 3 (Vernon 1965); First Security Bank v. Fastwich, Inc., 612 S.W.2d 799, 805 (Mo.App.1981); see Fricke v. Belz, 237 Mo.App. 861, 177 S.W.2d 702, 706-07 (1944). In the present case, the evidence submitted at trial supports the district court's finding that the Zeinfelds signed the notes only as representatives of Steel Fastener, and that they therefore were not personally bound. Although a Berryfast official testified that the promissory notes were intended to obligate the Zeinfelds as well as Steel Fastener, Seymour Zeinfeld stated there was no request that he and his wife assume personal liability on the instruments. As the district court observed, the additional evidence presented supports the Zeinfelds' position. For example, the 1978 promissory notes were drafted for signature differently than those executed in 1975 and 1976, which the parties agree were personally binding upon Seymour Zeinfeld. The earlier notes required Zeinfeld's signature twice, once as president of Steel Fastener and again as an individual. In contrast, the notes now in dispute made no such provision. Additionally, payments...