Kanmak Mills v. Society Brand Hat Company

• Decision Date: 03 August 1956
• Docket Number: 15438.,No. 15437,15437
• Parties: KANMAK MILLS, Inc., Appellant, v. SOCIETY BRAND HAT COMPANY, Appellee. SOCIETY BRAND HAT COMPANY, Appellant, v. KANMAK MILLS, Inc., Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

236 F.2d 240 (1956)

KANMAK MILLS, Inc., Appellant, v. SOCIETY BRAND HAT COMPANY, Appellee.

SOCIETY BRAND HAT COMPANY, Appellant, v. KANMAK MILLS, Inc., Appellee.

Nos. 15437, 15438.

United States Court of Appeals Eighth Circuit.

August 3, 1956.

Marion S. Francis, St. Louis, Mo. (George W. Simpkins, Bryan, Cave, McPheeters & McRoberts, St. Louis, Mo., and Jerome G. Rosenhaus, New York City, were with him on the brief), for Kanmak Mills, Inc.

Murray Steinberg, St. Louis, Mo. (Richard Marx, St. Louis, Mo., was with him on the brief), for Society Brand Hat Co.

Before SANBORN, WOODROUGH and VOGEL, Circuit Judges.

WOODROUGH, Circuit Judge.

These two appeals are taken from a final order of the District Court which affirmed a part and vacated and remanded to the arbitrators for rehearing a part of an arbitration award growing out of seven contracts for delivery of cloth in interstate commerce between Kanmak Mills, Inc. (Kanmak), a corporation engaged in New York in making and selling textile piece goods, as seller and Society Brand Hat Company (Society), a manufacturer of men's trousers in St. Louis, as buyer. The contracts were accepted orders for cloth of which six, numbered 139, 140, 141, 143, 144 and 156, for an aggregate of about 66,500 yards, were dated November 17, 1947, and one numbered 193 was dated April 28, 1948, and called for 100,000 yards. None of the contracts was carried out and bitter disputes ensued.

Each of the orders contained the following agreement to arbitrate printed on the back:

"8. Controversies or claims arising with respect to this contract shall be referred to arbitration in the following manner:

"a. When the controversy or claim related to the condition or quality of any merchandise delivered or to be delivered under the terms hereof, such controversy shall be referred to the Mutual Adjustment Bureau of the Cloth and Garment Trades by the buyer, or upon his failure to refer such controversy or claim to said Mutual Adjustment Bureau of the Cloth and Garment Trades the seller may make such reference.

"If delivery of the merchandise which is the subject of such controversy or claim has been made, then the buyer shall within ten (10) days after demand by the seller forward such merchandise to the Mutual Adjustment Bureau of the Cloth and Garment Trades. The failure of the buyer to forward the merchandise in question to the Mutual Adjustment Bureau of the Cloth and Garment Trades within ten (10) days after demand in writing by the seller shall constitute a waiver of the controversy or claim previously asserted.

"The decision of the Mutual Adjustment Bureau of the Cloth and Garment Trades on all controversies and claims submitted to it as provided herein shall be binding upon the parties hereto.

"b. All other controversies arising out of or relating to this contract, or breach thereof, shall be settled by arbitration in accordance with the Rules, then obtaining, of the American Arbitration Association and judgment upon the award rendered may be entered in the highest court of the forum, state or federal, having jurisdiction."

On delivery of 18,572 yards of cloth in the first shipment under the 1947 orders, Society examined the cloth and claimed it was in bad condition. Upon receipt of the claim, the seller (Kanmak) made demand on Society, as provided in the arbitration agreement, that Society forward such merchandise to the Mutual Adjustment Bureau of the Cloth and Garment Trades named in the contract, and Society complied. Mutual duly examined the goods and made report of its findings to Kanmak which forwarded the report to Society. Mutual found that only 3,9024/8 yards were normal goods and that 10,1252/8 yards were seconds.

On May 1, 1948, after the contract numbered 193 for 100,000 yards had been entered into on April 28, 1948, Society wrote Kanmak:

"Society Brand Hat Company * * * "May 1st "Our 42nd Year "1948" * * *

"Pleas refer to the various contracts which we have with you on which delivery was to be completed by January through April 15th, January through April, etc. We ask that you kindly cancel out these orders as we could not possibly make these goods up and get them delivered to our customers in line with our commitments to them due to your late delivery.

"We have received a substantial number of cancellations because of your failure to deliver the goods on these contracts in time. We are today advising our customers that the mill has failed to deliver the goods in time and that we will be unable to make deliveries to them of trousers of these fabrics. Please acknowledge these cancellations by return mail.

"In other words, all orders that we have placed with you to date which were not shipped before the 1st day of April are hereby cancelled with exception, of course, of the new order No. 193 which is dated April 28, 1948."

Kanmak replied by letter of May 3, 1948, that it was accepting and effecting cancellation of the remaining unshipped portions of all orders on file with them with the exception of contract 193.

Contract No. 193 for 100,000 yards of cloth provided for delivery of 20,000 yards monthly, May through September 1948, and Society was required and did pay $10,000 in advance, which was to be applied on the very last shipment, under the contract. The contract contained provision that shipments were to be R.O.M. (run of mill). It contained no specific reference to "free from foreign ends" but it specified percentages as to content of cloth, 50% cotton, 25% acetate, 25% wool.

On June 28, 1948, Society telegraphed Kanmak to ship 20,000 yards under contract No. 193 "free from foreign ends," to which Kanmak replied:

"Have goods ready for shipment but cannot accept your terms as to their being free from foreign ends. We sold you these goods R.O.M. and will ship same to you as per contract on those terms only. If this is agreeable wire immediately."

On July 6, 1948, Society telegraphed Kanmak that the materials sold to it on Contract 193 were warranted to be free from foreign ends; that tests were to have been made to eliminate pieces with foreign ends; that it would accept only goods free from foreign ends, and it insisted that 20,000 yards be shipped to its dyers "today" or it would purchase similar goods on open market and hold Kanmak for loss which was not speculative but probable. Notice was included that Society wished to refer entire matter to arbitration immediately. Kanmak wired on the same day maintaining its position that it would ship R.O.M., but not free from foreign ends. It stated it would submit to arbitration forthwith.

On the next day (July 7, 1948), Society wired Kanmak:

"Retel inasmuch as you leave us no alternative, will buy on open market goods ordered under contract 193 and hold you for difference. If unable to obtain, will hold you for loss of profit on sale of completed trousers. Inasmuch as you refused to honor contract return our check for $10,000 forthwith. Will submit to arbitration all disputes pending with you. If this is your final decision, our attorney will make arrangements for arbitration."

Kanmak, by its attorney, apparently answering the foregoing telegram, wrote Society on September 24, 1948:

"Our client, Kanmak Textiles, Inc., has advised us that you are presently indebted to it in the sum of $13,493.66, representing the unpaid balance of purchase price covering certain piece goods sold and delivered to you.

"You, on the other hand, have made certain claims against our client with respect to an alleged defect in some of the goods, and that, with respect to the sale of certain blended fabric, there is a dispute as to the interpretation of the contract order in regard to the quality of the goods to be delivered thereunder.

"In view of these disputes, we suggest that all matters in dispute be submitted to arbitration before the American Arbitration Association in New York City. In this way, a speedy determination and just adjudication of all claims and counterclaims may be obtained.

"In the event that you are willing to submit all disputes to arbitration, a proper written submission agreement can be entered into so that the matters in dispute can be properly presented." (Emphasis added.)

Thereafter, on November 22, 1949, Society filed its Demand for Arbitration of all matters in dispute between it and Kanmak with the American Arbitration Association named in the contracts and referred to in the foregoing letter, and notice was given to Kanmak.

The Demand described each of the seven written contracts entered into between the parties with particularity, giving the kind and amount of cloth called for, when it was to be delivered and the terms of the sale. Also, the number of yards of goods that had been delivered on those of the contracts upon which some delivery was made, and the failure of Kanmak on demand to deliver according to the contracts. Society also alleged in the Demand that samples of the goods it ordered were delivered to it by Kanmak for the fabrication of sample trousers, and Society obtained firm orders and promised delivery based on the delivery dates of the contracts. On Kanmak's failure to deliver, Society attempted to obtain other piece goods to substitute, but was unable to do so, and as the result of Kanmak's failure to deliver the 165,000 yards of cloth as provided in the contracts, Society lost the profit on its sale. That 18,573¼ yards received from Kanmak was not according to contract and was unusable for the purpose sold. That as Society had deposited $10,000 in advance upon contract 193, on which Kanmak refused to deliver any goods, recovery of that amount was also sought. Society claimed damages from Kanmak in such sums as the arbitrators of the American Arbitration Association shall determine due it for the failure of Kanmak to make delivery of the piece goods ordered, and for further damages for delivery of piece goods not in accordance with samples, and for the $10,000 received and...