Henry G. Meigs, Inc. v. Empire Petroleum Company

• Decision Date: 11 January 1960
• Docket Number: No. 12698,12709.,12698
• Citation: 273 F.2d 424
• Parties: HENRY G. MEIGS, INC., Plaintiff-Appellant, v. EMPIRE PETROLEUM COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

273 F.2d 424 (1960)

HENRY G. MEIGS, INC., Plaintiff-Appellant, v. EMPIRE PETROLEUM COMPANY, Defendant-Appellee.

Nos. 12698, 12709.

United States Court of Appeals Seventh Circuit.

January 11, 1960.

Ray T. McCann and Richard A. McDermott, Milwaukee, Wis., for appellant.

John S. Walter, Sheboygan, Wis., William R. Loeffler, Denver, Colo., for appellee.

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

PLATT, District Judge.

Henry G. Meigs, Inc., plaintiff-appellant (plaintiff), brought this action to recover damages for breach of contract of April 27, 1956, with Empire Petroleum Company, defendant-appellee (defendant). The contract provided in part that in the event the parties were unable to negotiate a new contract for 1957 plaintiff's claim for $39,098.05 would become due and payable, less any payment made by defendant. No contract was consummated for 1957 and plaintiff sued to recover $34,098.05, the net amount alleged to be due. After the trial to the court judgment was entered for the defendant. Plaintiff has filed this appeal.

Plaintiff was a broker located in Madison, Wisconsin, and sold paving asphalt cement used in the construction of county, state and federal highways. It sold approximately 60% of the paving asphalt used by the highway contractors in Wisconsin.

Plaintiff and Wisconsin Oil Refining Company entered into an agreement under date of February 17, 1955, whereby plaintiff was the sole distributor of all asphalt cement produced by Wisconsin, with the exception of purchases in ten listed counties. Wisconsin Oil Refining Company was merged with defendant in January, 1956 which resulted in defendant acquiring a substantial portion of the available market for asphalt cement in Wisconsin. Defendant also sold asphalt cement in Michigan. Following the merger defendant negotiated the contract with plaintiff dated April 27, 1956, upon which this suit is brought. During the negotiations plaintiff claimed that it has suffered damages in the sum of $39,098.05 as a result of the breach of the 1955 contract betwen plaintiff and Wisconsin.

The 1956 contract between plaintiff and defendant read in part as follows:

"Whereas, second party plaintiff alleges the execution and existence of a contract between it and Wisconsin Oil Refining Company, Inc., dated February 17, 1955, appointing second party sole distributor of all asphalt cement produced by the said Wisconsin Oil Refining Company, Inc., and,

"Whereas, second party maintains that it has sustained damages in the amount of Thirty Nine Thousand Ninety Eight and 5/100 Dollars ($39,098.05) under the terms of the contract aforesaid during the year 1955 by reason of the failure of Wisconsin Oil Refining Company, Inc. to perform the terms of said contract; and,

* * * * * *

"Whereas, the first party defendant maintains that the aforesaid contract was void from its inception as a contract against public policy, and that, if the contract was in full force and effect during 1955, the same ceased to have any existence after December 31, 1955, and,

"Whereas, first party maintains that any claim for damages made by second party should be offset by an accounting to first party by second party of all profits from the sale of asphalt under which said purported claim arises; and,

"Whereas, the parties are desirous of terminating and settling all differences whatsoever between them now existing or hereafter to arise, and are, further, desirous of doing business together to their mutual benefit."

Then followed the provision whereby plaintiff would have an exclusive territory within a 50 miles radius of the city of Sheboygan, to sell the asphalt cement manufactured by defendant during the paving season of 1956 at an agreed price. The paragraph upon which this controversy arises read:

"VI. First party agrees to pay second party the sum of Twenty-Five Thousand Dollars ($25,000.00) in full settlement of the claim of second party under the contract dated February 17, 1955, payable as follows: First party shall pay to the second party Fifty Cents ($.50) per ton for all paving asphalt delivered and sold by first party to second party such payments to be made on the last day of each month during the term of this contract. If the sum of such payments so made do not amount to Five Thousand Dollars ($5,000.00) during the term of this contract, then in that event first party will pay to second party enough money to make up the difference between Five Thousand Dollars ($5,000.00) and the total of the payments so made. When all of said payments shall equal the sum of Twenty-Five Thousand Dollars ($25,000.00) said obligation shall be fully paid and satisfied. In the event the parties hereto are unable to negotiate a new contract for the year 1957 and subsequent years and before said Twenty-Five Thousand Dollars ($25,000) shall be fully paid, then the full amount of its claim of Thirty-Nine Thousand Ninety Eight and 5/100 ($39,098.05) shall be due and payable to second party and the first party agrees to pay the second party immediately the sum of Thirty-Nine Thousand Ninety-Eight and 5/100 Dollars ($39,098.05) less any payment made to second party by reason of the payment provided by this paragraph. The parties further agree that in the event first party fails to carry out the terms of this contract, that the sum of Thirty-Nine Thousand Ninety-Eight and 5/100 Dollars ($39,098.05) less the amounts paid as provided by this paragraph shall become due and payable to second party, in addition to the damages, if any, sustained by the party of the second part by reason of the failure of the party of the first part to carry out the terms of this contract."

The parties fulfilled the requirements of this contract and defendant paid plaintiff $5,000.00 from its purchases of asphalt cement.

Negotiations for a 1957 contract were initiated by plaintiff in August, 1956. Thereafter the parties corresponded and discussions were had during the week of January 7, 1957. After the negotiation conferences, the attorney for plaintiff reduced to writing what he believed to be the agreement. This proposed contract dated January 21, 1957 was sent to defendant on January 31, 1957. It contained the following paragraph:

"It is further agreed by and between the parties that the party of the first part shall not sell paving asphalt cement with the penetration ranges as herein specified to any broker or highway contractor or to any customer of the party of the first part directly or indirectly at prices less than herein stated and party of the first part agrees that its price to any broker or highway contractor or customer of the party of the first part shall be the prices herein stated plus the latest tariff established by the Schwerman Trucking Company."

After objections by defendant, changes were made by plaintiff to provide for the proper grade of asphalt. On February 26, 1957, defendant drafted its version of the contract with some further changes and presented it to the plaintiff. Defendant also sent a letter to Mr. Meigs, the President of the defendant, on February 26, 1957, which stated:

"The price formula which sets forth that you will be entitled to the lowest price which we offer to any highway contractor or any person, firm or corporation re-selling our asphalt cement to any such highway contractor, and in addition, in case we should offer a lower delivered destination price to any highway contractor you would be offered the same price, and in such case you would still be entitled to your regular sales discount of $1.50 per ton. I believe this gives you ample protection in case competitive conditions force us to sell below the price formula as set forth. * * * We object to the paragraph proposed by you for the reason that it might be construed to be a price fixing agreement which might be illegal, and we therefore cannot enter into any such arrangement."

Plaintiff in its letter of March 14, 1957 objected to the provisions inserted by defendant for load indicators on the transport trucks, that defendant might sell to other contractors and to the word reasonably unable to negotiate a contract for 1957. The letter closed by stating:

"It is apparent from your re-draft that we cannot negotiate a new agreement and we, therefore, make this demand upon you, that you pay us the sum of $34,098.05, the balance due us on the indebtedness as set forth in Paragraph VI of our Agreement of April 27, 1956."

Defendant replied by letter of April 1, 1957.

"Your proposed contract, however, attempted to bind us so that we would maintain a price to all of our customers (not just highway contractors), and whereby we would be required to maintain this price irrespective of market conditions. We consider this attempt to be highly unreasonable and could not under any condition accept such. There are several reasons why this provision is not acceptable, and among these is the fact that it appears to be an attempt to fix prices, which might be in violation of the Robinson-Patman Act and, therefore, might be a violation of Federal laws and subject us to a possibility of treble damages. We cannot, under any condition, enter into any such price fixing arrangement.

* * * * * * "We do not concede that a condition exists whereby we are unable to negotiate a new contract for the year of 1957 and subsequent years."

On April 10, 1957 plaintiff, by letter, objected to the provision that trucks be equipped with indicators and insisted upon the paragraph for a fixed price, claiming that it was not in violation of any law. Plaintiff demanded that its proposed contract be signed within five days or all negotiations would cease and again demanded the $34,098.05. Negotiations ended and plaintiff filed this suit on April 20, 1957.

Plaintiff first contends that the contract of April 27, 1956 did not require the parties to conclude a contract for 1957. This issue is not pertinent. The terms of the new...