Glenwood Range Co. v. Universal Major Elec. Appliances

• Decision Date: 16 September 1954
• Docket Number: Civ. A. No. 6313.
• Citation: 124 F. Supp. 103
• Parties: GLENWOOD RANGE COMPANY, a body corporate, v. UNIVERSAL MAJOR ELEC. APPLIANCES, Inc., a body corporate.
• Court: U.S. District Court — District of Maryland

124 F. Supp. 103

GLENWOOD RANGE COMPANY, a body corporate, v. UNIVERSAL MAJOR ELEC. APPLIANCES, Inc., a body corporate.

Civ. A. No. 6313.

United States District Court D. Maryland, Civil Division.

September 16, 1954.

William D. Macmillan, William A. Fisher, Jr., and Semmes, Bowen & Semmes, Baltimore, Md., and Neil Leonard, Francis S. Moulton, Jr., and Bingham, Dana & Gould, Boston, Mass., for plaintiff.

Philander B. Briscoe, Baltimore, Md., and John P. Hampton, Louis Linton Dent and Norville & Dent, Chicago, Ill., for defendant.

THOMSEN, District Judge.

Defendant's motion for judgment n. o. v. or, in the alternative, for a new trial requires a consideration of all the evidence in the case.

Glenwood Range Company, of Taunton, Mass. (Glenwood), has been engaged in the business of manufacturing and selling various types of stoves for approximately 75 years. In 1950 its officials were considering the desirability of adding to its line refrigerators and other household appliances, to be purchased by Glenwood from their respective manufacturers. The officers of Glenwood conferred and corresponded with the officers of Artkraft Manufacturing Company, of Lima, Ohio (Artkraft), which has since merged into defendant, Universal Major Elec. Appliances, Inc. Malcolm Leach, Glenwood's vice president in charge of sales, and Newman, its sales manager, visited Lima, where they toured Artkraft's plant and display rooms and discussed contract terms. They were shown at least two refrigerators of the type Artkraft manufactured for its various customers. One was a 10 cubic foot refrigerator, which was described as having a frozen food storage capacity of approximately 70 pounds. The other was a 9 cubic foot model, which was described as having a frozen food storage capacity of approximately 52 pounds. All of the refrigerators of each model which Artkraft manufactured for its customers were manufactured from the same dies and jigs and were the same for each customer, except for trim and minor features. Edelmuth, Artkraft's sales manager, showed Malcolm Leach advertising matter describing the refrigerators put out by various customers of Artkraft, and also showed him a number of models of refrigerators manufactured by competitors, such as Crosley, Philco and Frigidaire.

A special feature of the Artkraft refrigerator was that the refrigerating coils were embedded in three horizontal plates extending the width of the refrigerator. An enclosed freezer or frozen food storage compartment ran all the way across the top of the refrigerator, and a large "chill tray" was placed across the top of the general food storage area, directly under one of the plates. An Artkraft engineer, Money, had pioneered this development, which was later adopted, to some extent at least, by other manufacturers. In 1950, however, most of the household refrigerators which contained a frozen food storage compartment had an insulated strip or baffle between that compartment and the main storage area of the refrigerator. Since the Artkraft refrigerator had no insulating baffle between the freezing plates and the chill tray, the chill tray in the Artkraft refrigerator was designed to keep foods at a lower temperature than similar trays in other refrigerators. As a result, refrigerators manufactured by Artkraft were advertised and described as having a larger frozen food storage capacity than refrigerators of similar size put out by other manufacturers.

Malcolm Leach talked to Artkraft's president, Clark, again early in January, 1951, and Edelmuth came to Taunton on January 19, 1951. In the meantime Artkraft had sent Glenwood a draft of a proposed contract, and Edelmuth brought the proposed contract with him to Taunton, already executed on behalf of Artkraft. It was in the form of a letter, dated January 19, 1951, from Artkraft to Glenwood, which read as follows:

"We are pleased to submit herewith our proposal for the manufacture of private brand refrigerators, per our several discussions with your good organization. I am submitting it in triplicate and when signed by both parties, it will become an agreement.

"This will constitute an order for 2400 refrigerators to be delivered at approximately 1/12 per month for twelve (12) months, and unless cancelled thirty (30) days before expiration of any one year period, shall continue on from year to year on a like basis.

* * * * * * "You are to advance to us $5.00 per refrigerator for the total amount covered under this contract, and we will amortize back to you at the rate of $4.00 per refrigerator, so that you will have all your money back in fifteen months, or less.

"Terms are Net Cash, 10th and 25th prox.

"The method of costing this refrigerator to you will be as follows:

* * * * * *

"Each refrigerator will bear a standard warranty by our factory for one year against defects in material or workmanship. If you desire to reinsure your five year warranty, you can do so through Marsh and McLennan, brokers in Chicago, who have submitted a proposal based on insurance in the St. Paul Mercury Company, or the Zurich Company of Switzerland, I believe you have one of their proposal books. * * *"

The refrigerators were not more specifically described in the letter. After some discussion, the letter contract was accepted and signed on behalf of Glenwood.

Immediately thereafter, the parties discussed a page to be inserted in Glenwood's catalog. A draft of that page, which had either been dictated by Edelmuth, or prepared by Glenwood from information furnished by Edelmuth, was shown to Edelmuth at that time and was corrected by him in his own handwriting. Its essential wording, as corrected by Edelmuth, was as follows:

"Model GMD-10-70 — Equipped with freezer 70 pounds frozen food storage. Two large porcelain crisper pans * * * 14¾ qt. each moist storage capacity. * * * Exclusive three plate horizontal leak-proof evaporator. Mammoth meat keeper and chill tray. * * *

"Model GHD-9-52 — Equipped with freezer 52 pounds frozen food capacity. One porcelain crisper pan. Mammoth meat keeper and chill tray. * * *"

Deliveries began in February, 1951. One of the first refrigerators delivered was placed in Glenwood's testing laboratory, which was in charge of an engineer, a graduate of M.I.T., who specialized in gas engineering and was said by Glenwood's witnesses to know nothing about electric refrigerators. There is no evidence that any tests were made on this refrigerator, but there is some evidence that water kept in the storage area tended to freeze. In all, Artkraft delivered 1024 refrigerators and one sample freezer before the end of July, 1951.

At the time the contract was made in January, 1951, the market for refrigerators was very good and materials for manufacturing them were in short supply. At or about the time the first refrigerators were delivered the market broke badly, and Glenwood's salesmen, inexperienced in the sale of refrigerators, had great difficulty in disposing of any refrigerators. By the end of July, 1951, less than half of the 1024 refrigerators had been sold to dealers, and very few had been sold by dealers to their customers. There were a few complaints about performance.

In July, 1951, Glenwood called a meeting of its salesmen, which was addressed by Edelmuth. At that meeting, the question arose whether the chill tray was included in the freezing and frozen food storage capacity of the Artkraft refrigerators. Glenwood had hired one salesman who knew something about refrigerators, and he commented on the fact that, according to N.E.M.A. (National Electrical Manufacturers Association) standards, the chill tray should not be included in the frozen food storage computation. Edelmuth, however, stated that it was so included in the Artkraft refrigerator, and that it was proper for Glenwood's salesmen to sell on that basis.

Glenwood continued to have difficulty in disposing of the refrigerators. In late May, 1951, Glenwood had made a reduction in price. In the summer of 1951, it made another reduction, which brought the price down to Glenwood's cost. It made a third reduction in price sometime in 1952. Various promotional efforts were also made to dispose of the refrigerators.

Meanwhile, Glenwood asked Artkraft to release it from the obligation to take 200 refrigerators per month during the balance of the year 1951 and to permit it to take the additional units in later months. There was also some correspondence about the possibility of taking other models or freezers. Artkraft granted Glenwood's requests for such delays, but the contract was not otherwise modified before November, 1951.

During this time, Artkraft was holding a considerable inventory of materials which it had accumulated for the manufacture of refrigerators for Glenwood and other customers, some of it having been purchased at high prices during the period of scarcity. Walker Leach, Glenwood's president, testified that in November, 1951, Clark, Artkraft's president, called him on the telephone at his home, where he had been ill, told him that Artkraft wanted some money to finance this inventory, and requested him to advance $40,000 on account of the refrigerators not yet delivered. Walker Leach testified that Clark told him that if it developed later that Glenwood could not use or sell all of the refrigerators that were called for under the contract, he (Clark) would cancel the contract. Clark testified that he asked for the money originally on the basis of a purchase of an undivided interest in the inventory, but denied that he made any offer to cancel. After some correspondence and another telephonse conversation, which will be discussed under Point IV below, Walker Leach sent Clark Glenwood's check for $40,000. There was some later correspondence about whether the $40,000 should be considered a purchase of a part of the inventory, but at the trial the parties agreed that it should be considered a payment on account of undelivered...