Dow Corning Corporation v. Capitol Aviation, Inc., 17127.

• Decision Date: 20 May 1969
• Docket Number: No. 17127.,17127.
• Parties: DOW CORNING CORPORATION, Plaintiff, v. CAPITOL AVIATION, INC., Defendant and Third-Party Plaintiff-Appellee, v. NORTH AMERICAN ROCKWELL CORPORATION and its Aero Commander Division, formerly known as Rockwell Standard Corporation and Aero-Commander, Inc., Third-Party Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

411 F.2d 622 (1969)

DOW CORNING CORPORATION, Plaintiff, v. CAPITOL AVIATION, INC., Defendant and Third-Party Plaintiff-Appellee, v. NORTH AMERICAN ROCKWELL CORPORATION and its Aero Commander Division, formerly known as Rockwell Standard Corporation and Aero-Commander, Inc., Third-Party Defendants-Appellants.

No. 17127.

United States Court of Appeals Seventh Circuit.

May 20, 1969.

John J. Crown, Albert E. Jenner, Jr., William B. Davenport, Chicago, Ill., for appellants, Raymond Mayer, Jenner & Block, Chicago, Ill., of counsel.

James B. O'Shaughnessy, Chicago, Ill., Aaron J. Kramer, for defendant and third-party plaintiff-appellee, Schiff, Hardin, Waite, Dorschel & Britton, Chicago, Ill., of counsel.

Before DUFFY and HASTINGS, Senior Circuit Judges, and SWYGERT, Circuit Judge.

DUFFY, Senior Circuit Judge.

This is an appeal from an interlocutory order dated April 4, 1967, striking one of appellant's affirmative defenses, and from a final judgment dated June 21, 1967 entered after a trial on the merits.

Initially, plaintiff (Dow) claimed breach of a written contract for the purchase by plaintiff and the sale by defendant (Capitol) as distributor for Rockwell Standard and Aero-Commander, Inc. (Aero) of a certain Aero-Commander aircraft, with shipping date in August 1965.

Aero was dismissed as a party defendant as there was no privity of contract shown between Dow and Aero. However, Capitol filed a cross claim against Aero claiming 1) If Capitol were found liable to Dow, Aero was legally obligated to indemnify Capitol; and 2) Aero's conduct resulted in loss of profits to Capitol for which loss Aero was legally obligated to reimburse Capitol. Dow is not a party to this appeal.

The District Court entered judgment for Dow against Capitol for $64,000. After a hearing on the cross claim, the District Court ruled Aero should reimburse Capitol for the $64,000, and further found Capitol should recover an additional sum of $43,865 for lost profits, making a total judgment for Capitol against Aero of $107,865.

Aero is a producer of executive type aircraft many of which it sells to private industry. Aero actually manufactures only the air frame. It purchases from others the engines, brakes, landing gear, avionics (electronic radio and radar equipment), and other items. Officers and representatives of Capitol and Dow were aware of this practice.

In the fall of 1964, at an aircraft industry convention in Miami which was attended by personnel from Dow and Capitol, Aero announced it would offer for sale a twin engine turbine powered executive type passenger aircraft which it hoped to have available in about a year. Aero announced it would employ its proven pressured Grand Commander air frame and convert it from a piston powered to a turbine powered aircraft. The plane was to be called "Turbo-Commander, 680T."

On November 17, 1964, Capitol placed its written order with Aero for one of these new type aircraft at wholesale price of $260,000 with standard equipment. In an appropriate blank on the order with reference to a delivery date, was a typewritten insertion TBD (to be determined). Also typed on the order was the recital "Specifications to be supplied at a later date." On February 19, 1965, Aero accepted Capitol's order.

On February 10, 1965, Capitol ordered from Aero two more Turbo-Commanders and a conventional piston type aircraft. As to delivery dates, these three orders also contained the letters TBD (to be determined). These three orders were accepted on February 18 and 19, 1965.

On February 25, 1965, Capitol's sales manager, at Dow's request and without prior consultation with Aero, wrote to Dow's Administrative Service Manager, Coultrip, advising that Aero's "target delivery date" for Turbo-Commander 1552-12¹ was "the end of August, 1965," and enclosed several alternative purchase orders. No delivery date was set. Dow took the information from one of the orders and placed it upon its own order form and submitted it to Capitol. However, Dow, without consultation with Aero, and although a delivery date had not been fixed between Aero and Capitol, inserted August 1965 as the date of shipment. Capitol executed the order committing itself to the August 1965 date. Later, Aero was informed by Capitol that it had sold a plane to Dow but no details were given.

Aero had arranged to purchase the engines for the new aircraft from Garrett AiResearch. When Garrett began supplying production line engines as opposed to the hand-built prototype power plants, Aero experienced difficulties of which Capitol and Dow were each informed. Meetings were held at Aero's plant in June, August, September and October 1965. In the first week of November, after Aero's manager had experienced a "hair-raising" trip in the new plane, Aero announced on November 18, 1965, that delivery of these aircraft would be delayed indefinitely. It was not until June 1966 that Aero began delivery of the new aircraft for consumer use. Aero delivered two in June, six in July and a total of thirty by the end of 1966.

In connection with plaintiff Dow's purchase of the aircraft, it deposited with defendant Capitol the sum of Five Thousand ($5,000) Dollars in January 1965, and Twenty Thousand ($20,000) Dollars on March 12, 1965. These payments were to be applied against the purchase price of the aircraft.

On January 5, 1966, plaintiff Dow terminated the agreement with Capitol due to defendant's failure to deliver the aircraft. Defendant thereupon returned plaintiff's deposits totaling Twenty-five Thousand ($25,000) Dollars.

On January 6, 1966, plaintiff Dow entered into an agreement with Aerodynamics, Inc. for the purchase of a Beechcraft King Air Model A-90 with turbine engines, agreeing to pay therefor $439,910 not including sales tax.

During the period between August 1965 and January 6, 1966, plaintiff Dow leased an airplane from defendant Capitol at a rental expense of Fourteen Thousand ($14,000) Dollars. Other expenses were incurred by plaintiff in anticipation of the delivery of aircraft 680T.

Apparently it was the theory of the trial court that although Aero, in all its written agreements and communications with Capitol, had insisted that the delivery date of the new aircraft be open, nevertheless Aero agreed to a modification by reason of conversations had with officials or employees of Aero. In our view, these casual statements were not sufficient to establish a modification of the written contract or to show an agreement between the parties for delivery of the aircraft on a definite date.

Consistent with industry custom and practice, there were valid reasons for the contract to provide for an open delivery date. All parties concerned knew that the aircraft which Aero proposed to construct was in an experimental stage of development; that on November 17, 1964, the date of Capitol's order, a prototype of that aircraft had not been flown; and further, that the plane had not been type certified, and no air-worthiness certification had been issued for a turbo-commander type aircraft. Both certificates were necessary prerequisites to the delivery of aircraft to a distributor for re-delivery to a customer.

Furthermore, it was well known by all concerned in the...