Plas-Chem Corp. v. Solmica, Inc., PLAS-CHEM

• Decision Date: 09 December 1968
• Docket Number: PLAS-CHEM,No. 1,No. 53254,53254,1
• Citation: 434 S.W.2d 522
• Parties: CORPORATION, a Corporation, Appellant, v. SOLMICA, INC., a Corporation, Respondent
• Court: Missouri Supreme Court

Page 522

434 S.W.2d 522

PLAS-CHEM CORPORATION, a Corporation, Appellant, v. SOLMICA, INC., a Corporation, Respondent.

No. 53254.

Supreme Court of Missouri, Division No. 1.

Dec. 9, 1968.

John P. Montrey, St. Louis, for appellant.

Ackerman, Schiller & Schwartz, by Theodore F. Schwartz, Clayton, for respondent.

HIGGINS, Commissioner.

Petition by Plas-Chem Corporation for $512,913.74 damages for breach of contract, denied by Solmica, Inc., and to which Solmica counterclaimed for $750,000 damages on account of allegedly inferior and unfit materials purchased by Solmica pursuant to the contract between it and Plas-Chem. Plas-Chem had a verdict for $60,400 damages on its petition and a verdict on Solmica's counterclaim. The court awarded Solmica a new trial on Plas-Chem's petition and entered judgment against Solmica on its counterclaim. Upon this appeal Plas-Chem seeks reinstatement of its $60,400 verdict; Solmica supports the award of a new trial on that issue and seeks a new trial on its counterclaim.

Plas-Chem is engaged in manufacture and sale of industrial coatings. Solmica is engaged in the manufacture and sale of aluminum siding for application to houses. In 1958, E. Dean Jarboe, president of Plas-Chem, accepted the invitation of Solmica's plant superintendent to visit Solmica's plant and observe its manufacture and coating of aluminum siding. Solmica was trying to coat aluminum siding with a 'grained' effect and had been working with a roller which produced a grained effect when used with a vinyl-based coating. The result was not satisfactory, however, and Solmica was seeking a different paint or coating. Mr. Jarboe formulated a polyvinyl chloride coating which produced the desired grained effect, and his company began production of this coating in the summer or fall of 1959. Saul Schmidt, president of Solmica, liked the product, Solmica Plasticlad, to the extent of desiring exclusive right to use it.

The contract, which is the subject of this suit, was executed by Plas-Chem and Solmica November 19, 1959. It recited Plas-Chem's ownership of the formula for Solmica Plasticlad, Solmica's desire to have exclusive use of that product for application to siding, and Plas-Chem's desire to sell Solmica Plasticlad to Solmica for use in the manufacture of siding. The parties then agreed: (1) that Plas-Chem shall sell to Solmica in all quantities requested by Solmica, the product known as Solmica Plasticlad at a price not in excess of 'thirty percent (30%) above gross cost and it is mutually agreed that gross cost shall include only the cost of material used in the manufacture of this product, provided however, that nothing herein contained shall obligate or require Plas-Chem Corporation to disclose the formulation of the product'; (2) that Plas-Chem shall not sell Solmica Plasticlad to any other company for siding application and Solmica shall not purchase any directly competing product from any other company; (3) that Solmica shall have the right to purchase the product for resale and distribution to other companies; (4) that Plas-Chem shall not sell similar products for siding application in conflict with Solmica Plasticlad; (5) that Dean Jarboe and Carl Geary of Plas-Chem, founders of the formula, shall not form any other organization for distribution of Solmica Plasticlad; (6) that Plas-Chem shall take steps to prevent any of its customers from using Solmica Plasticlad for application to siding; (7) that Plas-Chem guarantees color uniformity and consistency to delivery and receipt by Solmica and shall have no liability for any variations after application of the product to siding; (8) that Solmica Plasticlad is defined as 'a plastic composition consisting of polyvinyl chloride resins dispersed in suitable plasticizers, pigments, stabilizers and control agents which upon heating converts into a thermo-plastic solid film exhibiting unique physical and chemical properties'; (9) that Plas-Chem shall have the right to terminate the agreement upon failure of Solmica to make payment within 90 days of invoice dates; (10) that Plas-Chem shall have the right to continue research for improvement of the product and if 'any such new formulation of the product constitutes a definite improvement of the product, then the formulation of the material delivered hereunder shall be changed accordingly'; (11) that Solmica, Inc., shall cause "Solmica Plasticlad a Product of Plas-Chem Corporation' or words of equivalent meaning' to appear 'in all printed advertising of its siding'; (12) that the agreement shall continue for five years, but may be terminated with show of cause by either party upon 120-days' written notice.

Solmica used Solmica Plasticlad primer and finish coat furnished by Plas-Chem to coat their aluminum siding. In the process coiled aluminum sheets were conveyed over a long roller and in the first stage would be cleaned by an alodine process which rendered the aluminum less slick. Primer would be applied at the next stage and it would be heat cured on the conveyor. The finish coat would be applied in the next step, giving the grained effect to the siding. The finish coat was also heat cured. The finished aluminum coil would then be transferred to machines which shaped it into aluminum siding.

The first marketed siding had a problem of dirt from the atmosphere adhering to the siding and it would not wash away in an ordinary rain. Solmica so advised Plas-Chem and Plas-Chem adjusted the formula to make it harder.

A redwood finish was the first color of Plasticlad developed. Then came mahogany, white, beige, blue, pink, yellow, and green. Mr. Jarboe wished more time to test colors, but Solmica was anxious to get a full color line into production and on the market. There were some problems with fading of colors following application of siding to houses.

In 1960, Mr. Jarboe noted a full-page advertisement in the St. Louis Globe-Democrat advertising Solmica Plasticlad aluminum siding without mention of Plas-Chem Corporation. He noted also television programs where commercials were read for Solmica's siding without mention of Plas-Chem Corporation.

In 1960, Mr. Jarboe, while in Solmica's plant, observed coatings manufactured by other companies being used on aluminum siding.

Mr. Jarboe wrote Solmica July 12, 1961, to terminate the agreement between Plas-Chem and Solmica, Inc. At this time sales to Solmica represented about 40 percent of Plas-Chem's total sales. During August and September, 1961, Solmica was furnished primer and coating by Plas-Chem and at time of trial there was an unpaid balance of $12,913.60. Plas-Chem's overhead, after termination of the contract, remained about the same, except it no longer was necessary to buy ingredients for coatings.

On May 1, 1961, Solmica delivered a sample of Plasticlad to Dennis Chemical Company and between July 28, 1961, and November 11, 1961, Dennis sold Solmica 5,198 gallons of vinyl roller finish coating for aluminum siding.

In July or August, 1961, finish coatings for aluminum were purchased from DuPont and Sherwin-Williams in sufficient quantity to run 'a couple of million feet' of siding at the rate of one gallon to cover 250 feet of aluminum coil calculated by Plas-Chem to amount to 10,000 gallons of coating.

Between December 31, 1959, and November, 1960, Sam Kalman, an advertising agent, billed a total of $29,925.50 for advertising aluminum siding. $1,700 of this amount was paid by Solmica, Inc., and the remainder by 'Solmica of St. Louis, Incorporated,' a corporation separate from defendant, Solmica, Inc., controlled by Saul Schmidt and located at the same address as Solmica, Inc. Solmica of St. Louis, Incorporated, was treated by Solmica, Inc., as a retail dealer in aluminum siding. Most of this advertising was over television. Mr. Kalman prepared the copy and submitted it to Mr. Schmidt. On some of the programs a large card containing writing about siding was shown by the cameras.

Plaintiff represents his theory of damages as falling into four categories.

The first item of damages in this theory is the unpaid balance of $12,913.60. In this connection, it should be noted that plaintiff's suit is for damages and not in any part on account.

The second item refers to the purchase of 5,198 gallons of coating from Dennis during pendency of the exclusive contract. This theory is that the contract provided that the price for coatings was not to exceed 30 percent above gross cost and after price adjustment to cover the dirt pickup problem plaintiff was charged $5.25 per gallon. 'Assuming that $5.25 is the cost of material plus about 30% profit * * * the profit per gallon amounts to approximately $1.57 per gallon. 5,198 gallons at $1.57 per gallon equals $8,160.68. * * * Admittedly, this does not produce an exact figure.'

For its third category, plaintiff applies the $1.57 'profit' figure to the 10,000 gallons of coating purchased from DuPont and Sherwin-Williams to arrive at the figure $15,700.

It should be noted in connection with items two and three that 'gross cost' in the contract included only cost of ingredients and did not account for any other overhead or cost of doing business of Plas-Chem.

The fourth category of damages was the...