SAB Harmon Industries, Inc. v. All State Bldg. Systems, Inc., WD

• Decision Date: 30 June 1987
• Docket Number: No. WD,WD
• Citation: 733 S.W.2d 476
• Parties: SAB HARMON INDUSTRIES, INC., Respondent-Appellant, v. ALL STATE BUILDING SYSTEMS, INC., Appellant-Respondent. 38003.
• Court: Missouri Court of Appeals

Page 476

733 S.W.2d 476

SAB HARMON INDUSTRIES, INC., Respondent-Appellant, v. ALL STATE BUILDING SYSTEMS, INC., Appellant-Respondent.

No. WD 38003.

Missouri Court of Appeals Western District.

June 30, 1987.

William C. Paxton, Paxton, Kerber, Halas, Jeffries & Mencl, (Originally John R. Mencl), Independence, for appellant-respondent.

Robert J. Bjerg, Linde Thomson Fairchild, Langworthy Kohn & Van Dyke, Kansas City, for respondent-appellant.

Before SHANGLER, P.J., and MANFORD and BERREY, JJ.

SHANGLER, Presiding Judge.

The plaintiff SAB Harmon Industries, Inc. sued the defendants Phenix Ventures, Limited and All State Building Systems, Inc. for breach of contract. Harmon dismissed the cause of action against Phenix Ventures at the conclusion of the evidence, submitted against All State Systems, and had the verdict of the jury for $291,785.16. All State Systems appealed SAB Harmon Industries, Inc. manufactures electronic control devices. Harmon maintained several plants, among them the site at Grain Valley. Phenix Ventures, Limited was the manufacturer of the Phenix I Dish Manager, an electronic satellite control unit. The plant of that corporation was in Kimberling City. Phenix manufactured only for wholesale. All State Building Systems, Inc. was the distributor of products, through a network of dealers, the Phenix I Dish Manager among them.

from the judgment entered on the verdict and Harmon cross-appealed. ¹

In August of 1983, one Gary Robinson, a contract engineer, made overture to Harmon regarding the production of an electronic control device. This device was a component of a complete system already in production. Robinson met with Schmitz, a Harmon representative, and with Aldrich, Harmon production manager. That initial meeting was in the nature of a site survey to determine the production capability of Harmon to manufacture the device. Aldrich inquired as to the identity of the company Robinson represented, but he was not at liberty to make that disclosure, and the company remained anonymous.

The next discussion as to the feasibility of production by Harmon of the electronic control device was conducted on September 20, 1983 at Grain Valley plant site. Harmon production manager Aldrich was again present as were commission man Schmitz and contract engineer Robinson. Two others were also in attendance: James McGuire and Charles Noel. Aldrich recounted that they told him they were in several types of businesses, but neither would identify the company either represented on the venture presented to Harmon, nor the nature of that business, nor the position either held with that--or any other company. James McGuire displayed a business card, but only his name appeared on it. The purpose of the September 20, 1983 meeting, as Aldrich explained, was that "[t]hey were looking for some company to produce this Phenix device for them, this dish rotating management device." The device itself was designed to fit atop a home television set serviced by an outdoor satellite dish, and functioned to change the position of the dish from one satellite to another by a press of the electronic button. They had heard of the electronic products made by Harmon and wanted a "quote on 10,000 units" on the basis of a predesigned prototype. They informed Aldrich that a "lot of material" had already been purchased so they asked for two quotations, one for labor only and the other for both labor and materials. They were eager for the production of units and wanted a quote within a few days. After consultation with Randy John, his superior, and others at the Harmon plant, Aldrich made a tender of price, based on the production of 10,000 units, of $24 per unit for labor only and $105.29 per unit for labor and materials. It was the Aldrich testimony that up to that time, he had never heard of either All State Building Systems, Inc. or Phenix Industries, Limited. Some time later he was furnished a brochure, but as of September 20, 1983 he still did not know "who we'd be doing business with."

McGuire confirmed that the purpose of the September 20, 1983 meeting with the Harmon representatives was to find a manufacturer for the satellite dish manager. It was his testimony that he presented himself to Aldrich as a representative of Phenix and not of All State. In the course of discussion he informed Aldrich that he was the sole owner of the Phenix shares--that it was his corporation. McGuire was then also manager of the All State Building Systems, but [he said] made no representation on behalf of All State to Aldrich at that meeting. ² It happened that Noel, who accompanied McGuire to the meeting, was McGuire and Noel did project to Aldrich the sale of 10,000 units per year of the electronic management device. They derived that projection, they informed him, on the basis of the current sales by All State of other satellite equipment through its distributors and their expectations from national satellite shows. It was also explained that about 200 of the units had already been manufactured at the Kimberling City plant and that the Phenix corporation had some excess inventory of materials. McGuire testified as to an agreement between Phenix and All State whereby All State could purchase the Phenix I only through the Phenix corporation: "Phenix was to manufacture the device. All State was to be the distributor and to sell the produce [sic] through its dealer system." Aldrich testified that he had no knowledge of such an agreement, and there was no evidence that the agreement--if subsistent--was ever disclosed to Harmon at that negotiation or thereafter. ³

then a dual employee of both the Phenix and the All State Systems corporations. Noel, however [according to McGuire], never undertook to speak on behalf of All State in any capacity at the meeting.

These principals met again on October 18, 1983 at the Harmon site in Grain Valley, except that commission man Schmitz was not there, and Randy John was. The tender by Harmon to produce the units at a cost of $24 for labor only and $105.29 for labor and material was accepted by McGuire and Noel. The quotations were based on the manufacture of 10,000 units and--according to Aldrich--McGuire and Noel understood that the agreement was to quantity as well as to price. The satellite dish industry was then volatile because--as McGuire explained--the legality of the private use of that device was uncertain, and so they urged delivery as soon as possible. Thus, contemporaneously with the agreement to purchase 10,000 units at the quoted prices, McGuire and Noel gave a verbal purchase order for 500 units and ascribed number 1585 to that transaction. The next day Harmon commenced to hire and train personnel to meet those production needs. The first order was for labor only, and Robinson and Noel delivered to Harmon materials sufficient to produce about 950 units. [In the words of McGuire: "So we brought all the stuff up."] Harmon was also provided sufficient cartons to package those units. Harmon commenced delivery on November 23, 1983 on purchase order 1585 and was always paid by Phenix check. The production of the 500 units under the verbal order was completed at the end of December 1983 and Harmon Industries--through Aldrich immediately requested a written purchase order for the balance of the 10,000 units. Noel repeatedly promised that a new, written purchase order would be forthcoming, and Harmon agreed to continue to produce the units during that interim at his urging. Finally, during the last of January, 1984 Harmon received written purchase order number 2589 from Noel, but for 1,000 units only. Harmon promptly rejected the purchase order because it was not for the balance of the 10,000 units. Harmon was also concerned because about 1,000 units had already been produced and delivered so that the materials supplied by Robinson and Noel were depleted and Harmon commenced to stock material for the purchase orders anticipated under the agreement. In fact, as requested by McGuire and Noel, Harmon had assumed contracts their principals had made with suppliers for the balance of the 10,000 units.

Noel again promised Aldrich to send a new, written purchase order for the balance of the 10,000 units, but it never came. Finally, Aldrich arranged to visit Noel in Kimberling City on March 28, 1984 for that purpose. That was his first glimpse of that facility. McGuire was then in the hospital, and Noel conducted him through the plant. It was then that Aldrich discovered Aldrich discussed with Henning the subject of a purchase order. Henning left for some minutes and returned with the response: "Instead of a purchase order my lawyers are informing me that I should give you a letter of intent." Aldrich rejected the notion of a letter of intent [which he understood was an offer to do business] since Harmon was already in the production of the units, and responded: "What I want from you is a purchase order to cover the balance of the units." Harmon had by then already produced, delivered, and received payment for 1,190 units, so the demand was for a purchase order for 8,810 units from a designated purchaser--whether "Allstate or Phenix or anybody." Henning then went over to the desk occupied by LeAnn Krause and stood over her while she typed a purchase order for 8,810 units on a sheet of blank paper devoid of letterhead. Aldrich rejected the form since, as he explained, "[w]e had so many names at this point I wanted to know who I was doing business with." Aldrich returned the sheet to Henning, who in turn gave it to LeAnn Krause, and the sheet reappeared with the heading: "Allstate Building Systems." The purchase order was assigned the number 840328-01 and was signed by LeAnn Krause "per Charlie Noel." The "per" designation, Krause explained, indicated that Noel was the source of the information shown on the purchase order.

                that the Phenix and All State operations were conducted in the same building,

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