C.F. Sales, Inc. v. Amfert, Inc., 68601

• Citation: 344 N.W.2d 543
• Decision Date: 21 December 1983
• Docket Number: No. 68601,68601
• Parties: 38 UCC Rep.Serv. 844 C.F. SALES, INC., A Delaware Corporation, Appellee, v. AMFERT, INC., A Foreign Corporation, Royster Company, A Foreign Corporation, and Olin Corporation, A Foreign Corporation, Appellees, and Pan American Commodities, Division of Pan American Trade Development, A Foreign Corporation, Appellant. OLIN CORPORATION, A Foreign Corporation, Appellee, v. T.H.E. INVESTMENT CORPORATION, A Corporation, Appellant.
• Court: United States State Supreme Court of Iowa

Page 543

344 N.W.2d 543

38 UCC Rep.Serv. 844

C.F. SALES, INC., A Delaware Corporation, Appellee, v. AMFERT, INC., A Foreign Corporation, Royster Company, A Foreign Corporation, and Olin Corporation, A Foreign Corporation, Appellees, and Pan American Commodities, Division of Pan American Trade Development, A Foreign Corporation, Appellant.

OLIN CORPORATION, A Foreign Corporation, Appellee, v. T.H.E. INVESTMENT CORPORATION, A Corporation, Appellant.

No. 68601.

Supreme Court of Iowa.

Dec. 21, 1983.

Michael Noyes of Rehling, Lindburg & Gosma, Davenport, for appellant pan am.

A. John Frey, Jr., of Jurgemeyer, Frey & Haufe, Clinton, for appellant T.H.E.

William C. Davidson of Lane & Waterman, Davenport, for appellee C.F. Sales.

James D. Bruhn of Shaff, Farwell & Senneff, Clinton, for appellee Amfert.

Peter C. Fieweger and Dale G. Haake of Katz, McAndrews, Durkee, Balch & Lefstein, P.C., Rock Island, Ill., for appellee Olin.

Considered by UHLENHOPP, P.J., and HARRIS, McGIVERIN, LARSON, and CARTER, JJ.

UHLENHOPP, Justice.

This appeal involves three main legal questions: (1) whether substantial evidence was introduced of a principal-agent relationship between a securities holding company and an agricultural commodities broker; (2) whether the trial court erred in holding that a manufacturer did not tortiously interfere with contracts among subsequent purchasers of its product; and (3) whether the product was "received" by subsequent purchasers.

I. Facts. The first chapter of the case deals with International Materials Corporation (IMC) and T.H.E. Investment Corporation (T.H.E.).

A. IMC bought and sold agricultural commodities for a number of years. It lacked sufficient capital to do business on a large scale. Beginning in 1974 it established a credit accommodation arrangement with T.H.E., a securities holding company. T.H.E. had a Dun & Bradstreet credit rating sufficient to support large transactions on credit. When a supplier of agricultural commodities refused to accept IMC's own credit, IMC would offer T.H.E.'s credit, which T.H.E. permitted subject to certain restrictions: (1) IMC could not surpass a certain dollar limit of outstanding credit ($3.5 million at times pertinent to this lawsuit); (2) the transaction had to be a "closed loop" (when IMC purchased a product, it already had a buyer); and (3) IMC was to obtain permission to use T.H.E.'s credit on a transaction-by-transaction basis. IMC paid T.H.E. a fee for use of its credit (in 1976, 1977, and 1978 IMC paid $9336.00, $44,267.00, and $70,135.00, respectively). For reasons which do not appear of record, T.H.E. itself desired to be the owner of the commodity during the transactions.

In December 1977, T.H.E. formalized the arrangement in the following letter to IMC:

We have been operating for some time in purchasing chemicals, raw materials and other types of products for resale to other parties.

This letter will confirm our agreement that in any such case, that you are acting as our agent and bailee and that the chemicals, raw materials and other types of products are purchased and will be purchased in our name and on our behalf by you as our agent, and that we shall be the sole owners thereof.

We hereby authorize and direct you to invoice the ultimate purchaser for the selling price of the chemicals, raw materials and other types of products that are sold by you on our behalf and to collect the proceeds arising from such invoices as our agent. Once collected you will make payment of the funds to our suppliers in our name and on our behalf.

The letter was signed by Ernest Friedlander, a vice-president and director of T.H.E., and Marc S. Newkirk, president of IMC.

In practice, IMC generally requested and received credit approval from Friedlander, who doubled as treasurer and a director of IMC. Carroll Baum, treasurer of T.H.E., also sometimes authorized the use of T.H.E.'s credit. When approval was given, T.H.E. contacted the supplier and stated that it would accept billing. At the request of IMC, T.H.E. also sent its financial statements to suppliers so they could better assess its financial capability. At trial, Friedlander and Baum testified that the initial restrictions upon IMC and the course of doing business were never modified.

T.H.E., however, did not have an accounting system of its own to monitor IMC's activities. Instead, it relied upon IMC to determine the dollar amount of the fees owed and to provide monthly reports that included the amount of outstanding credit. These reports were typically months in arrears. As a result, T.H.E. had no simple way of determining how many transactions IMC was entering on T.H.E.'s credit and had difficulty knowing at any given time whether IMC was complying with established credit limits.

By the beginning of 1979, IMC was using T.H.E.'s credit without the required transaction-by-transaction request on more than one half of its T.H.E.-backed purchases. Newkirk believed he and Friedlander had an "understanding" permitting this procedure, though Friedlander claims he first knew of such conduct when this lawsuit was commenced. Newkirk testified Friedlander had to be aware of this practice because of the volume of business being conducted and the fees generated and paid (though the evidence showed IMC paid no fees in 1979).

Also early in 1979, IMC exceeded its credit limit. At one point in April the amount reached $5.4 million. Newkirk attributed this to seasonal aberrations and continued to use T.H.E. credit. When Friedlander became aware of the excess he warned Newkirk to reduce the outstanding credit to within $3.5 million. Early in August, Baum became aware that IMC still was not within the credit limit and sent Newkirk a letter informing him that the IMC-T.H.E. relationship could not continue if the outstanding credit was not reduced and if fee payments and credit reports, then months overdue, were not brought up to date. Friedlander and Baum testified that at this point they decided to stop approving IMC's credit requests, and Baum closed a "lock box" bank account that was used in the arrangement. Neither, however, informed IMC that the relationship had ceased, nor did they attempt to inform those who dealt with IMC, which continued to operate.

B. Olin Corporation (Olin) makes products for agriculture. Late in July 1979, Olin manufactured a quantity of urea fertilizer near Lake Charles, Louisiana. Early in August, it loaded 1533.76 tons of the fertilizer into a Midwest Towing Company barge for shipment up the Mississippi River to Savage, Minnesota, to be stored for the winter. While the barge was en route, Olin salesmen Sam Stiles and Joe Carl Montgomery took steps to sell the fertilizer by contacting potential buyers. On the morning of Friday, August 24, 1979, Montgomery received a telephone call from Skip Coppolla, who at that time was an employee of IMC. Montgomery testified:

Q. [W]ould you state, please ... what Mr. Coppolla stated to you when he called you that morning? A. He called me and ... said, "I understand that Olin has a barge of urea on the Mississippi that you want to sell," and I said, "Yes. We are considering selling it." He said, "Well, I'd like to buy it." He asked me what I wanted for it; and I computed him a price; and he said, "I believe I can handle it for that price; but let me check, and I will call you back."

Q. Did you know Mr. Coppolla prior to that phone call? A. I don't believe I had met him. I can't say that for certain. I attended a trade meeting in July of that year in New Orleans; and I may or may not have met him; but I had talked to him on the phone on numerous occasions.

Q. Did he identify the business firm that he was with or did you know? A. I knew that he was with International Materials.

Q. All right. Was that the extent of that conversation, then, by telephone? A. Yes.

Q. What was the next thing that occurred on that date with reference to your activity and this barge of urea? A. Skip Coppolla called me back probably about thirty minutes to an hour later and said that they would like to buy the barge of urea.

Q. Who is they? A. Well, International Materials.

Q. And, then, what was said? A. Okay. I said, "Skip, we agreed on price; however, I cannot sell to you on a credit basis. I do not have any credit set up on International Materials. The only way that I can do business with you is on transfer of funds, cash." And he said, well, he wasn't prepared to do that.

Q. What do you mean by transfer of funds, cash? A. Transfer of funds from one bank to the other, and I told him who our bank was and started to give him the account number; and he said, "Hold it. We are not prepared to do that." And I said, "Well, that's the only way that I can do business." And he said, "Well, let me do this, then. Let me bill it to my parent corporation, T.H.E. Investment, and let them purchase it." And I said, "Well, Skip, I don't have the authority to do that. You will have to call Mr. Huff, our credit manager; and he can rule on that."

Q. Who is Mr. Huff? What's his first name? A. John Huff. He was--at that time, he was credit manager of the agriculture credits department.

Q. Up to that point, had the agriculture division or department in Little Rock made any sales on credit to International Materials Corporation? A. No.

Q. Had it had any business dealings with International Materials Corporation? A. No.

Q. Was [sic] was the extent, then, of the conversation? A. I connected him with Mr. Huff's office.

Q. Did you know at that time whether there was any relationship between International Materials Corporation and T.H.E. Investment Corporation? A. Mr. Coppolla or somebody from that firm told me that International Materials was a subsidiary of T.H.E. Investment.

Q. What was your next connection, then, with this sale, transaction, regarding the urea from barge MWT7236? A. I went to lunch and came back and asked Mr. Huff if he had talked to Skip Coppolla...