Publicker Industries, Inc. v. Roman Ceramics Corp.

• Decision Date: 26 June 1981
• Docket Number: No. 80-2378,80-2378
• Citation: 652 F.2d 340
• Parties: 32 UCC Rep.Serv. 449 PUBLICKER INDUSTRIES, INC. and Continental Distilling Corporation v. ROMAN CERAMICS CORPORATION, Publicker Industries, Inc., Appellant.
• Court: U.S. Court of Appeals — Third Circuit

Page 340

652 F.2d 340

32 UCC Rep.Serv. 449

PUBLICKER INDUSTRIES, INC. and Continental Distilling Corporation v. ROMAN CERAMICS CORPORATION, Publicker Industries, Inc., Appellant.

No. 80-2378.

United States Court of Appeals Third Circuit.

Argued Feb. 24, 1981.

Decided June 26, 1981.

Harold Cramer, Anthony E. Creato (argued), Jeffrey Cooper, Mesirov, Gelman, Jaffe, Cramer & Jamieson, Philadelphia, Pa., for appellant.

Thomas P. Preston (argued), Duane Morris & Hecksher, Philadelphia, Pa., Meyer J. Myer, Myer, New, Berlin & Braude, Chicago, Ill., for appellee.

Before ADAMS, ROSENN and HUNTER, Circuit Judges.

OPINION OF THE COURT

ROSENN, Circuit Judge.

This contract action presents the question whether the seller, Roman Ceramics Corporation, must seek breach-of-contract relief from Continental Distilling Corporation, with whom Roman shares a common state of incorporation, or whether, on the contrary, Roman is entitled to full relief from Publicker Industries, Inc., a party whose citizenship is diverse from Roman's. If the former route is necessary, the case must be dismissed for lack of subject matter jurisdiction. If, on the other hand, the latter course is permissible, then the case is properly before the federal courts under 28 U.S.C. § 1332 (1976), and we must address the further question whether the district court awarded Roman the proper measure of damages. Except for a slight modification in the amount of damages awarded, we affirm the judgment of the district court.

Our inquiry must proceed within the confines of our decision in a prior appeal of this same case. See Publicker Industries, Inc. v. Roman Ceramics Corp., 603 F.2d 1065 (3d Cir. 1979). Because the factual background of this case is set out there in some detail, we recount the facts in abbreviated form. In January 1976 Roman, negotiating with individuals who were officials of both Continental and its parent, Publicker, agreed to sell them 40,000 ceramic "liberty bells." ¹ In return Roman was to receive $2.50 per bell. By September, Roman had become unhappy with the buyers' failure to move ahead with the transaction, and failure to provide shipping instructions to deliver the bells. ² Publicker thereupon entered into settlement negotiations with Roman and paid Roman $40,000 to be applied on account of settlement of the January deal. Some time afterward, however, Publicker called the settlement off and, together with Continental, brought this diversity suit against Roman in federal district court for restitution of the $40,000. Roman counterclaimed for the unpaid balance of the January purchase price. Continental was ultimately dismissed from the suit due to its and Roman's common Delaware citizenship. The district court then entered judgment against Publicker.

I.

We begin with the liability question. The seeds of furor over this issue were sown by the district court's brief recitation of the theory upon which it originally held Publicker liable on the contract:

I will note for the record that thus far I have spoken of the plaintiffs (Publicker and Continental) interchangeably, and I did that deliberately. I rule that on the present record there is no basis for distinguishing between the two. There is nothing in the record to show that they are indeed separate entities, that they are not alter egos for each other. Because of the way they worked interchangeably throughout this transaction, I treat them as one in the same; and the finding on the counterclaim is against both plaintiffs. ³

On appeal to this court we noted that there was no evidence to support application of the traditional alter ego theory to pierce the corporate veil. 603 F.2d at 1069-70. However, we went on to acknowledge that a legal framework for imposition of liability upon Publicker

might be provided by the principles of agency, in that it might be concluded that Publicker and Continental created mutual agencies in one another with respect to their dealings with Roman....

Under the agency theory, ... it could be argued that Continental, acting both on its own behalf and under apparent authority from Publicker, bound Publicker as well as itself to the January contract with Roman.

Id. at 1070. However, because the district court made no findings under an agency theory and because we could not discern any other ground upon which an alter ego theory could be made applicable to this suit, we remanded "to allow the trial judge to make the necessary findings and to explain the legal underpinnings of his determination." Id. at 1071.

Upon remand the parties presented additional evidence to support their theories on the proper scope of Publicker's liability under principles of agency. In light of the additional evidence, the district court resolved the liability question in Roman's favor. It found that the principal actors for the buyer in the transaction were acting as officers, employees, and agents of Publicker rather than Continental. In support of this conclusion, the district court noted that the letters from the various buyer representatives comprising exhibit D-8 were designed to give the reader "the clear impression that Publicker Industries was the main force in this situation." Secondly, the court noted that when Roman demanded some sort of action in response to buyer's nonperformance of the January agreement, it was Publicker that initially shouldered the burden of setting things straight. "(I)f Publicker didn't have an interest in this transaction it doesn't make any sense at all in this abortive attempt to settle the transaction."

The court then suggested that Publicker's interest in the transaction encompassed the entire scope of the relief sought by Roman the expectation that Roman was seeking to protect in this suit was identical, in economic impact, to the expectation that Publicker had admittedly created in the aborted settlement attempt. Finally, Judge Fullam noted that the original complaint filed by Publicker and Continental for recovery of the $40,000 had expressly alleged that it was Publicker that had agreed to buy the defective bottles, and that had paid the $40,000 on account of the settlement. The complaint also, he noted, had alleged that "Publicker and/or Continental were and are selling Liberty Bells." The judge further observed that plaintiff's pre-trial memorandum of July 13, 1977 set forth that on two occasions, both plaintiffs agreed to buy the defective bottles.

Based on these facts, the court concluded that "it was Publicker which was the moving force throughout." It therefore held that Publicker was directly liable under the contract, rendering it unnecessary "to go into the question of agency." ⁴ Alternatively, however, the court noted that "at the very least" Publicker was acting as agent for its subsidiary, Continental, "that it had an interest in the transaction and that therefore (it) is liable as principal." Publicker appealed, chiefly on the ground, it seems, that if Continental could have been held liable under the contract (and we tend to believe that it could have), this would perforce exclude liability by Publicker.

The question to be decided now is not whether Continental could have been sued on a contract for the purchase of 40,000 liberty bells from Roman. Rather, the question is whether Publicker is liable under such an agreement, either solely or jointly. Although the direct method of inquiry would be to ask whether Publicker was a party to "the contract" (notwithstanding the absence of its name on some of the documents that passed between the parties), we recognized on the earlier appeal that Publicker's contract liability could be deduced as a matter of law from the existence of a putative principal-agent relation between Publicker and Continental. Under such a theory, the sort of findings ordinarily bearing directly on the contract question might have been rendered unnecessary in part. In their stead, the district court could have made findings upon which to predicate a holding that Continental executed the contract for the bells as agent for Publicker. From such a holding, Publicker's liability would have followed as a matter of law. ⁵ In addition, a further finding that Continental was not liable would not have been inconsistent with such a finding of Publicker's liability. "Unless otherwise agreed, a person making or purporting to make a contract with another as agent for a disclosed principal does not become a party to the contract." Restatement (Second) of Agency (Restatement) § 320. See generally Viso v. Werner, 471 Pa. 42, 369 A.2d 1185 (1977); Vernon D. Cox & Co. v. Giles, 267 Pa.Super. 411, 406 A.2d 1107 (1979). ⁶ However, the additional findings of the district court revealed that Publicker's liability was not to be neatly confined to such a theory. ⁷ Thus, through the findings developed upon remand, the district court resumed ab initio the liability inquiry, bypassing the agency theory as an automatic basis for holding Publicker liable.

Before us now is solely the question whether the district court's findings support its conclusion that Publicker bore direct liability on the January contract. ⁸ Even assuming that for some purposes Publicker is to be characterized as Continental's agent, the opening proviso to Restatement § 320 leads us to reject application of Publicker's "either-or" theory of contract liability. ⁹ Therefore, we cannot agree with Publicker when it argues that its exclusion from any direct contractual undertaking is the "law of the case." Obviously, an explicit written statement signed expressly on behalf of Publicker would have made the case simple. However, evidence of a more circumstantial nature is also legally sufficient to establish liability. ¹⁰

Stripped of the contention that Continental's admitted liability negates Publicker's liability, we believe that Publicker's argument reduces to a mere disagreement with the district court's factual determinations. Although it is...