Electrical Research Products v. Gross, 9613.

• Citation: 120 F.2d 301
• Decision Date: 03 June 1941
• Docket Number: No. 9613.,9613.
• Parties: ELECTRICAL RESEARCH PRODUCTS, Inc., v. GROSS.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

120 F.2d 301 (1941)

ELECTRICAL RESEARCH PRODUCTS, Inc., v. GROSS.

No. 9613.

Circuit Court of Appeals, Ninth Circuit.

June 3, 1941.

COPYRIGHT MATERIAL OMITTED

R. E. Robertson, of Juneau, Alaska, and H. H. Breland and T. Brooke Price, both of New York City, for appellant.

J. A. Hellenthal and Frank H. Foster, both of Juneau, Alaska, for appellee.

Before GARRECHT and HEALY, Circuit Judges, and ST. SURE, District Judge.

HEALY, Circuit Judge.

Appellant sued to recover possession of motion picture sound equipment, which it had licensed to appellee, and to obtain damages for its detention. Appellee denied the asserted claim, set up various affirmative defenses, and counterclaimed for damages caused by appellant's removal of the property.¹ The jury returned a verdict in favor of appellee for $55,194.05, and from a judgment thereon this appeal was taken. On a former appeal a similar judgment was reversed. 9 Cir., 86 F.2d 925.

By two contracts dated March 28, 1929, appellant licensed appellee to use certain of its equipment in two of his theaters located in Juneau and Ketchikan, Alaska. The term of each license was ten years, and the aggregate rental was $21,000. The contracts contained the following important provisions:

"4. * * * Products appellant also agrees to make periodical inspection and minor adjustments in the Equipment after it shall have been installed. Products may from time to time install such spare and renewal parts as may, in its opinion, be necessary to the satisfactory operation and maintenance of the Equipment.

* * *

"6. In addition to any other payments required to be made by the Exhibitor appellee hereunder, the Exhibitor agrees to pay Products throughout the term of the license hereby granted a service and inspection payment, payable weekly, which for the first two weeks of said term, shall be payable on the Saturday next succeeding the `Service Day'² and thereafter throughout the balance of said term on each and every Saturday in advance. The amount of such payment shall be in accordance with Products' regular schedule of such charges as from time to time established. Under Products' present schedule, the service and inspection payment shall be $_______ per week, which charge shall not be exceeded during the first two years of the period of said license and thereafter for the balance of the term of said license shall not exceed the sum of $_______ per week.

* * *

"8. The Exhibitor agrees to pay to Products its list installation charges as from time to time established for any additional equipment, or spare or renewal parts, furnished or supplied by Products, upon delivery thereof. * * *" (Emphasis supplied).

The contract further provided that upon the failure of the licensee to pay any sum owed by him within five days after it should become due, appellant should have the right to terminate the contract and take possession of the equipment.

Subsequent to the execution of the above contracts the parties signed supplemental agreements, in the form of letters, dated September 4, 1929. Each letter refers to the original contract and states that: "This agreement was executed with the provision left blank relating to weekly service payments, in order that the amount thereof might be later determined. It is proposed that this provision of the agreement be now made definite, and that in order to give effect thereto, the above mentioned agreement be modified by striking out paragraph 6 thereof (which, as above stated, was left blank as to the amount of the charge) and inserting in lieu thereof the following: * * *"

Then follows the proposed new section 6, which is identical with the old, except for the last two sentences: "6. * * * The amount of such payment shall be in accordance with Products' regular schedule of such charges for theaters in Alaska as from time to time established. Under Products' present schedule, the service and inspection payment shall be $29.75 per week, which charge shall not be exceeded, provided, however, that the Exhibitor agrees to reimburse Products for any extra expense incurred by Products because of the use of airplane or other extraordinary means of transportation incurred in connection with emergency service visits."

The gist of the complaint is that appellant is entitled to possession of the property because of two distinct defaults on the part of appellee: (1) Failure to pay for the inspection and minor adjustment service from May 24, 1930 to March 7, 1931, amounting to $1,219.75; and (2) failure to pay for additional equipment furnished from May 20, 1930, to February 17, 1931, in the sum of $91.01.

The answer denies that appellee agreed to pay for the inspection service and denies that such service was ever rendered. It also denies that any additional equipment was ever furnished except such as was duly paid for upon delivery. It then sets up four affirmative defenses: (1) Duress in the execution of the supplemental agreements of September 4, 1929, relating to service charges, and in the payment of certain sums of money; (2) failure of appellant to render the service customarily performed under similar contracts in force in the United States; (3) payment for all additional equipment received; and (4) illegality of the contracts under the antitrust laws. A demurrer to the last-mentioned defense was sustained. The counterclaims allege, in effect, that the removal of the equipment was wrongful, and that appellee has suffered damages not only from the loss of the licenses, but from the loss of patronage as well.

Appellant contends that the evidence conclusively shows that appellee was in default as to both of the matters set forth in the complaint, and that the court erred in refusing to direct a verdict in its favor. Obviously, if appellee was in default, either in the payment for service or for additional equipment, appellant was entitled to possession of the property.

With respect to the service charges, it is conceded that no payments were made by appellee for the period mentioned in the complaint. But appellee maintains that he was not obligated under either the original contracts or the supplemental agreements to pay such charges, and that, in any event, payment was excused by the failure of appellant to render the proper service.

The first of these propositions requires scant attention. The liability of appellee, under the original contracts, to pay $29.75 a week for inspections and minor adjustments was settled on the former appeal. 86 F.2d 925, 929. Hence, it is not necessary, so far as this issue is concerned, to consider the question of duress in the execution of the supplemental agreements.

The second proposition — that payment was excused by the failure of appellant to render the proper service — must be resolved in favor of appellee. As to the frequency of service, the contracts simply say that it shall be "periodical". In order to explain the meaning of this ambiguous term it was necessary to resort to parol evidence. Accordingly, appellee was permitted to show that appellant had numerous contracts in effect in the United States, and that its uniform practice in the States was to service the equipment about once a week for the first six months and bi-weekly thereafter. In addition, it was shown that appellant's engineers were available at all times for emergency service. The evidence further reveals that appellee was aware of this established practice on the part of appellant in rendering "periodical" service.

On the other hand, the record shows that appellant's engineers, leaving Seattle, called at appellee's theaters approximately once a month, and that appellant maintained no agent in Alaska for emergency service. Although in our view of the case the jury was not bound to find that this so-called usage furnished the standard of performance required by the contracts, it is plain that it might properly do so. In other words, the question whether appellee was in default, or whether his failure to pay the weekly service charge was excused by appellant's failure to perform, was a matter for the jury to decide.

At this point we digress for a moment to consider a ruling on evidence and an instruction given the jury on this phase of the case.

After appellee had, over the objection of appellant, introduced evidence of its practice of servicing theaters in the United States, appellant, in rebuttal, sought to prove by depositions of its agents, Gage and Levinson, that in the negotiations leading up to the execution of the contracts appellee was told that because of the distance to Alaska its service engineers would not be able to visit his theaters as often as they did those in the United States, and that they would make inspections and adjustments in his theaters approximately once a month. This evidence was excluded. And, consistently enough, the court instructed the jury as follows: "* * * If the plaintiff had in use a uniform contract, identical in terms so far as the printed portion was concerned, and had a usual and customary method in force at that time, in accordance with which service was rendered to its exhibitors and licensees generally throughout the country and for which the scheduled payments were made, then I instruct you that is the type and character of service that the plaintiff was required to render to the defendant under the contracts of March 28, 1929, and that the defendant was not required to pay plaintiff for such service charges unless such service was duly and faithfully rendered by the plaintiff." Inasmuch as the existence of the uniform contract and the prevalence of the usage were not in dispute, and since appellant made no pretense of furnishing service on a par with that in the States, the instruction was, in effect, a peremptory direction to find for appellee.

We think the court erred in giving this instruction and excluding the proffered evidence. And these errors alone are such as to require a...