Firestone Tire and Rubber Co. v. Pearson
Decision Date | 05 August 1985 |
Docket Number | 82-2494,Nos. 82-2449,s. 82-2449 |
Citation | 769 F.2d 1471 |
Parties | FIRESTONE TIRE AND RUBBER COMPANY, Plaintiff-Appellant/Cross-Appellee, v. Raynal PEARSON, Marden D. Pearson, and Dwaine Pearson, a general partnership d/b/a Pearson Tire Company; Raynal Pearson, Marden D. Pearson, and Dwaine Pearson, a general partnership d/b/a Pearson Tire Center; Sevier Valley Oil Company, Inc.; and Pearson Tire and Distributing Company, Defendants-Appellees/Cross-Appellants. |
Court | U.S. Court of Appeals — Tenth Circuit |
Bradley D. Holm, Salt Lake City, Utah (Robert B. Lochhead's of Rooker, Larsen, Kimball, Parr & Crockett, Salt Lake City Utah, and Ray G. Martineau, Salt Lake City, Utah, on briefs), for plaintiff-appellant/cross-appellee.
Robert A. Peterson of Van Cott, Bagley, Cornwall & McCarthy, Salt Lake City, Utah (Ken Chamberlain of Olsen & Chamberlain, Salt Lake City, Utah, with him on briefs), for defendants-appellees/cross-appellants.
Before HOLLOWAY and LOGAN, Circuit Judges, and BURCIAGA, District Judge. *
This is an appeal from a jury verdict in a contract action and a cross-appeal from the trial court's determination of the applicable statute of limitations and denial of prejudgment interest. Plaintiff-Appellant Firestone Tire and Rubber Company [Firestone] appeals entry of final judgment after a jury verdict awarding damages against Firestone on Defendants-Cross Appellants' counterclaim. Defendants-Cross Appellants Raynal Pearson, Marden Pearson, Dwaine Pearson, Pearson Tire Company, Pearson Tire Center, Sevier Valley Oil Company, Inc., and Pearson Tire and Distributing Company [referred to collectively as the Pearsons] appeal from the trial court's application of the Utah six-year statute of limitations to their damages claims and from the trial court's order denying prejudgment interest on their claims. We affirm in most respects, but reverse as to the applicable statute of limitations, and reverse and remand for a new trial as to the amount of damages.
This case arose from a business relationship between Firestone 1 and the Pearsons that began in 1959. At that time, Raynal Pearson, Marden Pearson and Dwaine Pearson owned a controlling interest in Pearson & Crofts, a Utah corporation. Pearson & Crofts owned a warehouse in Salt Lake City, Utah. In May of 1959, Pearson & Crofts entered into an agreement with Seiberling Rubber Company [Seiberling], establishing a warehousing operation in Salt Lake City, Utah, for Seiberling products. Under the agreement it acted as a warehouser for a sales territory covering Utah, southern Idaho and small parts of Wyoming and Nevada. Pearson & Crofts received a commission of 5% on shipments out of their warehouse. It also acted as a Seiberling retail distributor. This agreement preceded the two warehouse agreements at issue in this case. Another Utah corporation owned by the Pearson family, Sevier Valley Oil Company, Inc. [Sevier valley], acted as a Seiberling retail distributor in Richfield, Utah, approximately 150 miles southeast of Salt Lake City.
Firestone acquired Seiberling in early 1965, at which time Seiberling became an operating division of Firestone. In the summer and fall of 1965, the Pearsons and Firestone entered into discussions concerning the possibility of expanding the Pearsons' existing tire warehousing and retail operations. This expansion required the Pearsons to acquire a new warehouse.
During the course of the discussions, but prior to the execution of a formal warehouse agreement between the Pearsons and Firestone, Seiberling's General Sales Manager, Mr. C.W. Dunn, wrote Raynal Pearson a letter [the Dunn letter] confirming some items the parties had negotiated relating to the new warehouse. The Dunn letter, dated October 21, 1965, stated in part that
(2) As a servicing dealer warehouse for The Seiberling Tire and Rubber Company, all Seiberling brand tires shipped into ... [the Utah sales] territory ... will be shipped through the [Pearsons'] dealer warehouse in Salt Lake City whenever possible. I am sure you can appreciate the fact that from time to time any given shipping point is out of merchandise and that emergencies arise necessitating shipments from alternate warehouses. We will, however, ship all merchandise possible from the dealer warehouse in Salt Lake City operating under the name "Pearson's Auto-Car Center."
Defendants' Exhibit B.
On December 6, 1965, Firestone and Pearson Tire & Distributing Company entered into a new warehouse agreement. The provisions of the agreement relevant to this dispute are as follows:
1. COMPANY [Firestone] shall ship, consigned to itself in care of FACTOR [Pearson Tire & Distributing Company] such quantities of tires ... as will, in its judgment, constitute an adequate auxiliary stock to the stock of merchandise maintained in COMPANY's regular District Warehouses. Said auxiliary stock shall be used (i) as required from time to time to supply COMPANY's distributors located ... in FACTOR's trade area ..., and (ii) to supply FACTOR for his own account.
* * *
3. ...
FACTOR is privileged to withdraw merchandise from time to time for his own account, subject to credit limitations imposed by COMPANY.
4. ... FACTOR shall (i) report to COMPANY no later than the tenth and twentieth and the end of each month all withdrawals for FACTOR's own account....
5. FACTOR shall promptly pay to COMPANY, in accordance with COMPANY's then-current prices and terms, all amounts due for merchandise purchased for his own account.
* * *
7. FACTOR shall receive, via monthly credit memoranda, as full compensation for his services and expenses (other than cartage and transportation expenses) in warehousing and shipping merchandise hereunder 5% of FACTOR's ... price with respect to all merchandise shipped by FACTOR at COMPANY's request, in accordance with this Agreement, except merchandise withdrawn by FACTOR for his own account....
* * *
13. This Agreement ... supersedes and cancels all rights and obligations arising under prior agreements referring to the subject matter hereof.... The provisions of this Agreement cannot be waived, altered, or modified except by a writing duly signed by both FACTOR and COMPANY....
* * *
15. This Agreement shall be governed by and construed under the laws of the State of Ohio.
Defendants' Exhibits BB, CC. Firestone and Pearson Tire and Distributing Company executed a second warehouse agreement, containing the same provisions, on July 26, 1967. The second warehouse agreement related both to the warehouse already operating in Salt Lake City and to an additional warehouse the Pearsons established in Provo, Utah.
At the time the warehouse agreements were executed, Pearson Tire and Distributing Company was a partnership. Subsequently, a corporation by the same name was organized, which the Pearson brothers owned. Pearson Tire and Distributing Company also owned and operated the Salt Lake City retail store. In addition to the warehousing and retail operations in Salt Lake City and the warehouse in Provo, the Pearson family owned retail tire businesses in Richfield, Provo and Murray, a suburb of Salt Lake City. The four retail outlets all carried the Seiberling line of tires. Firestone billed the retail stores separately. The retail business in Salt Lake City operated in the same building as the warehousing business.
The Pearsons and Firestone conducted business with each other under the two warehouse agreements for almost fifteen years. In accordance with its interpretation of the phrase "for his own account" in the warehouse agreements, Firestone did not pay warehouse commissions on merchandise the Pearsons withdrew from the warehouse for sale by the Pearsons' Salt Lake City and Murray retail outlets. Firestone did pay warehouse commissions on merchandise the Pearsons withdrew for sale by their Provo and Richfield retail outlets. Firestone paid all warehouse commissions via regular monthly credit memoranda.
During the course of the business relationship between Firestone and the Pearsons, Firestone did not ship all Seiberling tires sold in the Utah sales territory through the Pearsons' Salt Lake City warehouse. Instead, Firestone shipped certain orders directly from the factory into the territory. The orders Firestone shipped directly into the territory included discounted large volume orders, discontinued or blemished tires, and other specially discounted orders. Firestone did not feel that it was economically feasible to ship these orders through the Salt Lake City warehouse.
During the parties' business relationship, Firestone paid the Pearsons warehouse commissions on approximately half of the Seiberling merchandise sold in the Utah sales territory. The rest of the Seiberling tires sold in the territory either were shipped directly to various retail outlets or were sold through the warehouse to the Pearsons' Salt Lake City or Murray retail outlets.
Raynal Pearson became aware that not all of the Seiberling tires going into the Utah sales territory were being shipped through the Pearsons' Salt Lake City warehouse. Mr. Pearson considered this to be a violation of the agreement expressed in the Dunn letter. Mr. Pearson wrote Firestone to protest the bypassed shipments several times. See, e.g., Defendants' Exhibits B, F, G, I, J, K, L, M, R.
On April 24, 1967, Mr. Pearson wrote to Mr. W.E. Slutz, a vice president of Firestone's Seiberling operating division, protesting the direct factory shipments into the territory. Mr. Slutz responded to Mr. Pearson's complaint in a letter dated June 12, 1967 [the Slutz letter]. That letter stated, in part, that "[s]o far as warehousing is concerned, the letter agreement, signed by C.W. Dunn, dated October 21, 1965, concerning paragraphs (2) and (3), has been in effect since that time, to the best of my knowledge, and we have no plans to change it." Defendants' Exhibit H. Firestone, however, did not change their procedures...
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