Bruce Lincoln-Mercury, Inc. v. Universal CIT Credit Corp., 14039.

• Decision Date: 31 October 1963
• Docket Number: No. 14039.,14039.
• Citation: 325 F.2d 2
• Parties: BRUCE LINCOLN-MERCURY, INC., a Pennsylvania corporation v. UNIVERSAL C.I.T. CREDIT CORPORATION, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

325 F.2d 2 (1963)

BRUCE LINCOLN-MERCURY, INC., a Pennsylvania corporation v. UNIVERSAL C.I.T. CREDIT CORPORATION, Appellant.

No. 14039.

United States Court of Appeals Third Circuit.

Argued March 8, 1963.

Decided October 31, 1963.

As Amended November 18, 1963.

Rehearing Denied December 30, 1963.

COPYRIGHT MATERIAL OMITTED

Bernard G. Segal and Samuel D. Slade, Philadelphia, Pa., Robert A. Doyle, Pittsburgh, Pa. (Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., on the brief), for appellant.

T. Robert Brennan, Pittsburgh, Pa. (Brennan & Brennan, Pittsburgh, Pa., on the brief), for appellee.

Before BIGGS, Chief Judge, and KALODNER and FORMAN, Circuit Judges.

FORMAN, Circuit Judge.

Bruce Lincoln-Mercury, Inc. (referred to hereinafter as Bruce Lincoln or appellee), a Pennsylvania corporation, having its principal place of business in Altoona, Pennsylvania, filed a complaint May 28, 1959, in the United States District Court for the Western District of Pennsylvania against Universal C.I.T. Credit Corporation (referred to hereinafter as U.C.I.T. or appellant). It alleged, among other things: "By reason of the wilful and malicious acts of the defendant, plaintiff has been forced out of business, has incurred operating losses and has failed to receive accounting from the defendant of moneys due and owed. * * *" U.C.I.T. filed an answer on December 31, 1959, wherein, among other things, it not only denied the commission of acts causing Bruce Lincoln to go out of business, but declared that it went out of business as the result of its own mismanagement. The trial came on before the court and a jury, which awarded $50,000 compensatory and $5,000 punitive damages to Bruce Lincoln.

U.C.I.T. has appealed. Appellant contends that the Trial Court erred in refusing to grant either its motions for directed verdict or for judgment after the verdict.¹ The Court should have granted these motions by virtue of Bruce Lincoln's failure, appellant urges, to show that U.C.I.T.'s acts were tortious and that there was a basis in the record to support the damages awarded by the jury. At a minimum appellant requests that a new trial should be ordered on the ground that the trial judge acted under a mistake of law and the verdict is against the clear weight of the evidence.

The material facts of the instant case are in dispute. Since the verdict of the jury favored Bruce Lincoln, the testimony must be construed in the light most favorable to the appellee.

At the trial it was disclosed that on or about March 17, 1956, Bruce M. Lingenfelter purchased the assets of the Lincoln-Mercury automobile agency in Altoona, Pennsylvania from John Stallard for $15,000. Included in this purchase were parts, equipment, used and new cars. Ford Motor Company approved the sale and issued a franchise to Mr. Lingenfelter to sell Lincoln and Mercury automobiles.

Mr. Lingenfelter was without the capital to pay cash to the manufacturer in order to purchase new cars. Hence, he applied to the appellant for the customary financing. As a result, on March 17, 1956, Mr. Lingenfelter and U.C.I.T. entered into an "Agreement for Wholesale Financing". Among other things, the conditions of this contract called for appellant to pay to the Lincoln-Mercury division of Ford Motor Company invoice prices for newly manufactured automobiles ordered by Mr. Lingenfelter from Ford and delivered by it to his showroom floor. Such an arrangement was commonly known as "Floor Plan Accommodation". In exchange Mr. Lingenfelter agreed to pay to appellant immediately upon the sale of the new automobiles the sum advanced by appellant to Ford, plus certain interest and carrying charges. In addition, the parties entered into a plan whereby appellant would finance the purchase or lease of new and used cars by retail customers.

On March 20, 1956, a corporation was formed under the name of Bruce Lincoln-Mercury, Inc. The incorporators and stockholders were: Mr. Lingenfelter, an experienced dealer in used cars; Louis Kline, a meat packer; and Harry Benton, a local attorney. The outstanding stock of the company consisted of 30 shares. A certificate for ten shares was issued to each of the three incorporators. Mr. Lingenfelter became president of the corporation, Mr. Kline, vice president, and Mr. Benton, secretary-treasurer.

Mr. Lingenfelter and appellant entered into their contractual relationship on March 17, 1956, although the corporation was not chartered until three days later — March 20, 1956. Appellant, however, was aware that the corporation was in substance the real purchaser of the Lincoln Mercury franchise.

On April 2, 1956, appellee borrowed $10,000 from appellant as a capital loan, for which appellee gave a demand judgment note in that amount endorsed by Messrs. Lingenfelter, Kline and Benton. In the absence of a demand the note called for a payment of $280.00 per month for eleven consecutive months followed by one payment of $6,920 with interest at 5½ percent per annum. Additionally, Messrs. Lingenfelter, Kline and Benton pledged their 30 shares of stock in the appellee to appellant as security for the capital loan; and Mr. Lingenfelter assigned a life insurance policy to appellant as further security.

Mr. Lingenfelter and David C. Miller, then district manager of appellant at Altoona, negotiated the financing of the appellee. Mr. Miller recommended the account on the basis of a "pro forma" financial statement designed to reflect a picture of the business on its starting day, and the representations that Messrs. Lingenfelter and Benton were substantial citizens. The financial statement was signed and delivered on March 14, 1956 by Mr. Lingenfelter in the name of "Bruce Lincoln-Mercury", evidently anticipating the formation of the corporation.

After being assured of the requisite financing from appellant, appellee began to operate its automobile agency, selling new Mercurys and Lincolns and used cars. According to Mr. Lingenfelter, business relations with appellant proceeded smoothly until August of 1956 when Adrian W. Mather replaced Mr. David C. Miller as district manager. Testimony revealed that Mr. Mather developed an immediate hostility to Mr. Lingenfelter and their relationship rapidly developed from bad to worse.

Appellee charges that appellant committed two separate acts which constituted the tortious conduct for which it seeks damages. The first act, it is alleged, occurred on the night of September 19, 1956, when appellant's agents demanded the balance due on the $10,000 judgment note under threat of execution on the following morning if it were not paid that night. The other act, is alleged to have occurred on the evening of November 14, 1956. Appellee asserts that appellant's district manager Mather and other of its employees entered the showroom of appellee that evening without prior notice or demand, ordered prospective customers away from the five 1957 Mercury cars being shown therein and then "auctioned off the five cars to the used car dealers. * * *"

The Incident of September 19, 1956

On September 19, 1956, about 11:00 p. m., Mr. Lingenfelter received a telephone call from Mr. Mather, who ordered him to go to Stover's Restaurant immediately. Mr. Mather also called Mr. Benton. He commanded him to communicate with Mr. Kline and go with him to the restaurant forthwith.² All three arrived at Stover's Restaurant between 11 o'clock and midnight. After looking inside, they saw no one familiar to them. A short time later Mr. Mather, and Fred Bennett, the director of sales for the Pittsburgh Division of the appellant, emerged from a nearby beer garden.

According to testimony given by Mr. Lingenfelter and Mr. Benton, both Messrs. Mather and Bennett thereupon insisted, in a bullying, loud, and drunken manner, which was to continue throughout this meeting, that everyone go inside Stover's. All five sat at a table in the restaurant which Mr. Lingenfelter claimed at trial "was crowded at that time of night" and contained "familiar faces".

Messrs. Mather and Bennett declared that they were calling the capital loan and threatened to close appellee's business. Mr. Lingenfelter asked them, he testified, to discuss the matter in his office so that they could preclude the people present from hearing this embarrassing conversation. The appellant's representatives, however, declined the request. Finally, Mr. Lingenfelter said that he would pay off the loan the next morning. According to Mr. Benton the meeting at Stover's lasted "five to ten minutes".

Besides its belief that appellee's financial structure was deteriorating, appellant suggested the following two reasons for the calling of the note on September 19: (1) that appellant believed appellee had issued a check which was not covered with sufficient funds, and (2) that appellant believed appellee had breached the Agreement for Wholesale Financing, which provided that appellee would pay appellant for each car financed by U.C.I.T. forthwith after it had been sold.

On or about September 14, appellee's bookkeeper, Frank Oessinich, informed John Mitchell, an employee of the Altoona office and Howard Allison, an adjustor of appellant, that a check for $7,898.16 made by appellee on September 13, was not covered by sufficient funds at time of issuance. Mr. Mather immediately reported this to the Pittsburgh office. Mr. Bennett then proceeded to Altoona to collect on the check and call the capital loan. The check, unbeknown to Mr. Bennett, had cleared prior to Mr. Bennett's departure for Altoona. Appellant submitted that it was not a question of the check's clearance but whether sufficient funds were in the bank at time of its issuance.

It was adduced at the trial that the bank balances of appellee at the end of each day, for the period surrounding the check were: September 11 — $9,597.08; 12th — $12,529.49; 13th — $8,476.00; and the 14th — $7,916.46. Appellant's witness, Mr. Oessinich, conceded that according to the...