Monarch Beverage Co., Inc. v. Tyfield Importers, Inc., 86-2542
| Citation | 823 F.2d 1187 |
| Decision Date | 05 August 1987 |
| Docket Number | No. 86-2542,86-2542 |
| Parties | 4 UCC Rep.Serv.2d 388 MONARCH BEVERAGE CO., INC., Plaintiff-Appellant, v. TYFIELD IMPORTERS, INC., Defendant-Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (7th Circuit) |
Phillip A. Terry, McHall Cook & Welch, P.C., Indianapolis, Ind., for plaintiff-appellant.
Thomas C. Scherer, Bamberger & Feibleman, Indianapolis, Ind., for defendant-appellee.
Before BAUER, Chief Judge, and FLAUM and RIPPLE, Circuit Judges.
This diversity action arises from a contractual dispute between Monarch Beverage Co., Inc. (Monarch) and Tyfield Importers, Inc. (Tyfield). In the district court, Monarch filed a seven-count complaint for: 1) breach of contract, 2) premature termination of contract, 3) unreasonable notice of termination, 4) fraud and misrepresentation, 5) breach of duty of good faith and fair dealing, 6) price discrimination, and 7) promissory estoppel. Amended Complaint, R.5. The district court determined that Tyfield had breached its contract with Monarch and awarded Monarch $13,908 for Tyfield's failure to ship an order of goods. The district court entered judgment for the defendant on the remaining counts. In this appeal, Monarch raises three issues: 1) whether Tyfield gave unreasonable notice of its termination of the contract, 2) whether Tyfield committed fraud, and 3) whether Monarch can recover under the doctrine of promissory estoppel. For the reasons set forth below, we affirm in part, vacate in part and remand the case.
Monarch, an Indiana corporation, is a wholesaler of wine products. Tyfield, a Michigan corporation, is the exclusive importer in the United States of a brand of sparkling wine called Tosti Asti Spumante (Tosti). In October 1981, Monarch and Tyfield entered into an oral agreement providing that Monarch would become an Indiana distributor of Tosti. This agreement was terminable at will by either party, with or without cause. As a distributor, Monarch purchased Tosti from Tyfield and sold it to retail customers.
On July 5, 1983, William V. Graves, the regional sales manager of Tyfield, met with two employees of Monarch, Donald Hammond and Christopher Arn. Mr. Arn was Monarch's wine sales manager and Mr. Hammond was Monarch's sales manager. At this meeting, Mr. Graves informed Monarch that National Wine & Spirits, Inc. (National), the largest direct competitor of Monarch, was being appointed a distributor for Tosti in Monarch's market of central Indiana. At this meeting, Mr. Hammond opined to Mr. Arn, in Mr. Graves' presence, that he believed Monarch was being "dualed," meaning that Monarch and National would both be Tosti distributors in central Indiana. Mr. Graves failed to respond to Mr. Hammond's comment about the future status of Monarch and National as distributors. Mr. Graves neither stated that Monarch was being terminated nor specifically agreed that Monarch's future status would be that of a dual distributor.
On September 14, 1983, Mr. Hammond, on behalf of Monarch, ordered 1,200 cases of Tosti from Tyfield. The order was confirmed both by a telephone conversation and by a letter. Tyfield neither shipped the order to Monarch nor advised Monarch that it had no intention of doing so. Because the wine was imported from Italy, the shipment normally would have taken six to eight weeks to arrive.
Tyfield had told National that its distributorship would be exclusive. During September 1983, National experienced difficulties securing the business of prospective customers who were still purchasing Tosti from Monarch. National, therefore, requested a letter from Tyfield confirming its exclusive distributorship. In response to National's demand, Tyfield then sent it a letter dated September 21, 1983. This letter designated National a "master distributor" for Indiana, but failed to state that this distributorship was exclusive. Tyfield sent another letter, dated October 4, that added the word "exclusive." As a result of National's distributorship, Monarch's customers became confused as to its status as a distributor. Tyfield was aware of the confusion among Monarch's customers and Tyfield also knew that Monarch continued advertising the wine. Tyfield, however, never questioned Monarch about its representation that it was a Tosti distributor.
On November 3, 1983, Tyfield sent Monarch a letter stating that it was terminated "effective immediately" as a distributor. On the termination date, Monarch had no unfilled orders for wine products from Tyfield other than the September 14 order for 1,200 cases of Tosti. The sale of Tosti amounted to only one percent or less of Monarch's total business.
The district court held that Tyfield breached its contractual duty to sell and deliver the September 14 order of 1,200 cases of Tosti to Monarch. In addition, the district court held that Tyfield breached its duty to give Monarch reasonable notice of its termination of the distributorship agreement. The district court found that a reasonable notice would have been 30 days notice. The district court calculated Monarch's damages resulting from Tyfield's breach to equal its gross profit for the sale of the 1,200 cases of Tosti. The profit would have been $11.59 per case, totalling $13,908. The district court further held that Monarch failed to prove its other claims of breach of good faith and fair dealing, fraud, and price discrimination. The district court accordingly entered its judgment that Monarch recover $13,908 from Tyfield along with the costs of the action.
Monarch first contends that the district court erred in deciding that Tyfield could terminate its distributorship agreement upon only 30 days notice, rather than 90 days notice. Tyfield responds that the district court's finding that 30 days notice of termination was reasonable is not clearly erroneous. It further contends that 30 days constituted reasonable notice because 30 days notice was the industry practice and 30 days afforded Monarch ample time to contract for a substitute brand of sparkling wine. We believe that the district court's finding that, in this situation, 30 days constituted reasonable notice of termination of the distributorship agreement should not be overturned.
The parties' distributorship agreement for the sale and purchase of wine products is governed by the Indiana Uniform Commercial Code (UCC). See Moridge Mfg. Co. v. Butler, 451 N.E.2d 677, 680 (Ind.Ct.App.1983); Warrick Beverage Corp. v. Miller Brewing Co., 170 Ind.App. 114, 352 N.E.2d 496, 500 (1976). Indiana's version of the UCC provides that where a contract is terminable at will, reasonable notification must be given by the party terminating the contract. Ind.Code Sec. 26-1-2-309(3); see also B & T Distrib., Inc. v. Meister Brau, Inc., 459 F.2d 29, 31 (7th Cir.1972). "What is a reasonable time for taking any action depends on the nature, purpose, and circumstances of such action." Ind.Code Sec. 26-1-1-204(2). "[T]he application of principles of good faith and sound commercial practice normally call for such notification of the termination of a going contract relationship as will give the other party reasonable time to seek a substitute arrangement." Ind.Code Sec. 26-1-2-309, comment 8 (emphasis supplied); see also Zidell Explorations, Inc. v. Conval Int'l, Ltd., 719 F.2d 1465, 1473 (9th Cir.1983).
The parties agree that the district court's conclusion that the 30 days notice of termination was reasonable is a finding of fact. As a finding of fact, it must be reviewed under the clearly erroneous standard. A finding is clearly erroneous when "although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed." Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948)); see also Yowell v. United States Postal Serv., 810 F.2d 644, 648 (7th Cir.1987); Hayden v. Oak Terrace Apartments, 808 F.2d 1269, 1271 (7th Cir.1987). There is sufficient evidence in the record to support the district judge's conclusion that 30 days provided a reasonable period for notice.
Thirty days provided Monarch with sufficient time to find a substitute product for the Tosti Asti Spumante. On cross-examination, Mr. Hammond testified that Monarch could have contracted for another brand of sparkling wine to substitute for Tosti. Tr. I at 148. As a distributor of Martini & Rossi Asti Spumante, the best-selling brand in the Indianapolis market, Monarch could have substituted that brand for Tosti. Moreover, Tosti's sales constituted only one percent or less of Monarch's total sales. Monarch contends that thirty days notice was unreasonable because the termination occurred at the beginning of November, right before its period of peak sales during the holiday season. However, considering that Monarch had not placed another order for Tosti since September 14 and that the shipments normally take six to eight weeks to arrive, it appears that the September order was intended to cover the holiday season. Under the district court's judgment, Monarch has recovered its lost profits for that shipment. After considering the facts and circumstances underlying the distributorship agreement between Monarch and Tyfield, we conclude that the district court's finding that 30 days notice of termination was reasonable is not clearly erroneous. 1 See generally Rockwell Eng'g Co. v. Automatic Timing & Controls Co., 559 F.2d 460, 463 (7th Cir.1977) (). 2
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