Harry Alter Company v. Chrysler Corporation

• Decision Date: 03 February 1961
• Docket Number: No. 12997.,12997.
• Citation: 285 F.2d 903
• Parties: HARRY ALTER COMPANY, an Illinois corporation, Plaintiff-Appellee, v. CHRYSLER CORPORATION, a Delaware corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

285 F.2d 903 (1961)

HARRY ALTER COMPANY, an Illinois corporation, Plaintiff-Appellee, v. CHRYSLER CORPORATION, a Delaware corporation, Defendant-Appellant.

No. 12997.

United States Court of Appeals Seventh Circuit.

November 18, 1960.

As Amended on Denial of Rehearing February 3, 1961.

COPYRIGHT MATERIAL OMITTED

Douglas C. Moir, Edward J. Wendrow, Chicago, Ill. (Winston, Strawn, Smith & Patterson, Chicago, Ill., of counsel), for appellant.

Richard L. Kahn, Chicago, Ill., Eugene R. Johnson, Peoria, Ill., Fischel, Kahn, Heart & Weinberg, Chicago, Ill., Miller, Westervelt & Johnson, Peoria, Ill., for appellee.

Before HASTINGS, Chief Judge, KNOCH, Circuit Judge, and MERCER, District Judge.

MERCER, District Judge.

The above cause was tried by the court, without a jury, upon plaintiff's complaint sounding in fraud and deceit for damages, and upon defendant's counterclaim against plaintiff for a balance due upon an open account. Plaintiff is an Illinois corporation engaged in the business of selling parts, tools and equipment to contractors in the refrigeration and air conditioning industry. Defendant, a Delaware corporation, acting through its Air-Temp Division, is engaged in the sale of central air conditioning and heating equipment.

At the close of all the evidence, the trial court found that defendant had, beginning in August, 1956, solicited plaintiff to become a franchised distributor of defendant's Air-Temp products in the Chicago area; that defendant, to induce plaintiff to become its distributor, had represented to plaintiff that the volume of sales of two predecessor distributors in the area for the period of the immediately preceding twelve months had totaled $1,321,518.94; that the sales volume of those distributors was overstated by that representation by a monthly average of 94.86% of actual volume to induce plaintiff to enter into a distributorship franchise agreement; that plaintiff, in reliance upon that misrepresentation, had entered into the distributorship venture; and that, as a direct and proximate result of its reliance upon the false representation as to volume of sales, plaintiff sustained damages through losses in the amount of $196,179.32.

No evidence was introduced upon the counterclaim. After both parties had rested in the trial upon the complaint, the parties stipulated that the amount due to defendant from plaintiff upon the account stated was $24,331.68. The court entered judgment for defendant for that amount upon the counterclaim, and entered a net judgment in plaintiff's favor for the amount of $171,847.64 and costs of suit. Defendant appeals from that judgment.

Defendant contends that plaintiff failed to prove by clear and convincing evidence that it relied upon the false sales figure in entering into the distributorship agreement with defendant. It relies upon Weininger v. Metropolitan Fire Ins. Co., 359 Ill. 584, 598, 195 N.E. 420, 98 A.L.R. 169; Bundesen v. Lewis, 368 Ill. 623, 633, 15 N.E.2d 520, and Regner v. Hoover, 318 Ill. 169, 173, 149 N.E. 16, as principal support for its argument. We do not construe those cases, as defendant would have us do, as establishing a burden of proof in fraud cases which requires more than a mere preponderance of the evidence. The language of each of those opinions upon which defendant principally relies represents only the state court's reaction to the particular factual situation presented, not a statement of principle establishing an exaggerated burden of proof.

Weininger involved a plea of fraud as a defense to a claim for indemnity for fire loss, the insurer contending that the claim as to the value of lost property had been fraudulently overstated. Bundesen was an action for rescission of a contract for the purchase of lands which was predicated upon the claim that the sellers had fraudulently represented that a state highway would be built along one side of the lands involved. The decision rests upon the court's holding that the purchaser was chargeable with notice of the true state of facts which a reasonable inspection of the lands and reasonable diligence in inquiry would have disclosed. Regner involved a collateral attack upon a default equity decree by bill of review, the complainant contending that her failure to defend had been induced by fraudulent misrepresentations of the complaint in the original suit.

The quantum of proof required of plaintiff in this case was proof by a preponderance of the evidence of each element necessary to support a judgment in its favor. Barrett v. Shanks, 382 Ill. 434, 47 N.E.2d 481; See generally, I.L.P. Fraud §§ 47, et seq. Thus, it was incumbent upon plaintiff to prove by a preponderance of the evidence that a false representation was made as to some material fact, that the defendant know of the falsity and intended that plaintiff should rely upon the representation, that plaintiff, in ignorance of the falsity thereof, did rely upon the false representation, and that damage to the plaintiff resulted from its reliance thereon. Roda v. Berko, 401 Ill. 335, 339-340, 81 N.E.2d 912.

The evidence adduced at this trial supports the trial court's findings of the existence of each of those material elements. Briefly summarized, the transcript adequately supports the following version of events leading up to this law suit. Smith, defendant's assistant regional manager, approached plaintiff's president, Harry Alter, suggesting that plaintiff undertake the exclusive distributorship of defendant's Air-Temp products in the Chicago area. Smith was told that plaintiff would not be interested in the proposition unless at least one million dollars per year of sales volume could be anticipated. Mr. Alter asked Smith to provide plaintiff with figures showing the volume of sales in that area for the immediately preceding twelve months' period by distributors whom it was anticipated that plaintiff should succeed. On or about September 26, 1956, Smith gave Mr. Alter a written document showing sales for such period of $1,321,518.94. That figure overstated the volume of sales by plaintiff's predecessor distributors by...