VM CORPORATION v. Bernard Distributing Company

• Decision Date: 23 August 1971
• Docket Number: No. 18218.,18218.
• Citation: 447 F.2d 864
• Parties: V-M CORPORATION, Plaintiff-Appellee, v. BERNARD DISTRIBUTING COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

447 F.2d 864 (1971)

V-M CORPORATION, Plaintiff-Appellee, v. BERNARD DISTRIBUTING COMPANY, Defendant-Appellant.

No. 18218.

United States Court of Appeals, Seventh Circuit.

July 22, 1971.

Rehearing Denied August 23, 1971.

Joseph Z. Sudow, Larry M. Leiken, Kavanagh, Scully, Sudow, White & Frederick, Peoria, Ill., for defendant-appellant; James B. Lewis, Peoria, Ill., of counsel.

Duane L. Traynor, Traynor & Hendricks, Springfield, Ill., Gordon T. Roberts, Boston, Mass., for plaintiff-appellee.

Before KILEY and CUMMINGS, Circuit Judges, and CAMPBELL, Senior District Judge.¹

CUMMINGS, Circuit Judge.

Plaintiff V-M Corporation is a Benton Harbor, Michigan, manufacturer of tape recorders, record players, and other electronic equipment. Defendant Bernard Distributing Company is a Peoria, Illinois, distributor of electronic equipment and floor coverings. In this diversity action, V-M sued Bernard for $26,333.47 for goods allegedly sold and delivered to Bernard between August 1965 and May 1966.² After filing its answer denying the allegations of the complaint, Bernard filed seven counterclaims based upon V-M's failure to supply goods of adequate and saleable quality.

The trial court dismissed the last four counterclaims on the ground that they were barred by the wholesale distributor agreement between the parties. Subsequently, the court also granted V-M's motion for summary judgment on Bernard's first two counterclaims, on the ground that the wholesale distributor agreement precluded any claims for actual and anticipated loss of profits due to defective merchandise supplied by V-M. Thereafter Bernard amended its answer by incorporating therein a claim to set-offs in the amount of $13,714.13. This claim had been the substance of Bernard's third counterclaim, which was dismissed on Bernard's own motion. After a jury trial, V-M's damages were assessed in the amount prayed, without any set-offs for Bernard. Bernard appeals from the judgment on the jury verdict and from the dismissal of the six remaining counterclaims. We affirm.

The record shows that Bernard and V-M began extensive dealings in October 1952. At that time, Bernard and V-M executed a written service agency agreement, making Bernard an authorized agent to service V-M's products in the State of Illinois. That same month, Bernard commenced distributing V-M products through an oral agreement. A written wholesale distributor agreement was first formally executed in August 1955. That agreement expired on December 31, 1955. On February 16, 1956, the parties executed a second wholesale distributor agreement identical in form. This agreement was to be effective through December 31, 1956, and was subsequently renewed yearly by letter.

According to Bernard, dealings between the parties continued smoothly until the latter part of 1964 and 1965. At that time, V-M introduced transistorized components in the manufacture of its products, with substantial changes in the electronic design of many of its models. These innovations assertedly coincided with a sharp decline in the quality of V-M's products. As a result, the number of units returned to Bernard and dealers for credit or warranty repair soared, and the demand for V-M products declined. Bernard complained to V-M about the excessive costs and diminished demand throughout 1965.

Finally, in February 1966, after unsuccessful attempts by Bernard to change the terms of the distributorship agreement, V-M wrote Bernard saying that it accepted Bernard's decision to relinquish the V-M line of products. V-M then stopped shipping merchandise to Bernard for wholesale distribution. V-M also sought termination of the service agency agreement as of March 31, 1966, and it ceased shipping parts to Bernard after May 5 of that year.

At the time the distributorship agreement expired on December 31, 1965, Bernard was indebted to V-M in the amount of $51,795.81 for merchandise sold under that agreement. On November 30, 1966, after fruitless settlement negotiations, V-M wrote Bernard to return all V-M products and parts on hand for credit. When this was accomplished, V-M's claim was reduced to $26,333.47.³ After further acrimonious correspondence between the parties, V-M filed its complaint on September 13, 1967.

I

Bernard first argues that at the trial, the court improperly held that to establish its right to set-offs, Bernard must "prove V-M specifically agreed to the reimbursements sought and that the written agreements were controlling." Our examination of the record does not bear out this assertion. The district court recognized that Bernard would be entitled to set-offs where V-M had waived the contractual terms. See Ill. Rev.Stats., 1969, Ch. 26, § 2-208(3). Bernard has cited no authorities to show that V-M's offered waiver of certain contractual requirements during pre-litigation negotiations would absolutely bar V-M from relying on the contracts to defend against claimed set-offs at the trial. Cf. Buono Sales, Inc. v. Chrysler Motors Corporation, 363 F.2d 43, 49 (3d Cir. 1966), certiorari denied, 385 U.S. 971, 87 S.Ct. 510, 17 L.Ed.2d 435. Insofar as V-M was compelled to defend against the set-offs alleged by Bernard, V-M was entitled to rely on unwaived requirements of the written agreements. The jury was rightly permitted to credit Bernard's account with set-offs where V-M was found to have waived the written agreements or portions thereof, so that the court below did not err in this regard.

II

Bernard next complains of the wrongful exclusion of several exhibits dealing with its claimed set-offs under the wholesale distributor's agreement.

The first of these exhibits consisted of a table showing that as a distributor Bernard was allegedly entitled to a credit of $361.85 for advertising and display material returned to V-M in 1967. Paragraph 14 of the wholesale distributor's agreement, however, only covered V-M repurchases of "products and repair and replacement parts therefor which are now new and unused." Bernard did not show why it would be entitled to a credit for advertising and display materials under that or any other agreement. No instances of waiver had been shown with respect to this matter, and the district court correctly refused to permit the jury to consider this evidence.

Bernard's second such exhibit consisted of a table supporting its claim as a distributor to $469.11 credit for freight and handling charges it incurred as to 210 units returned to Bernard by its dealers. The record does not show that V-M was responsible for such charges. As in the case of the first of these exhibits, nothing in either agreement provided for V-M's assumption of such liability. Moreover, the exhibit does not indicate actual costs, but shows estimates based upon random samples. The trial judge properly excluded this exhibit.

Bernard also urges that a third exhibit should have been received in evidence. This was a November 18, 1966, letter from Bernard's president to V-M's president demanding $38,595.84 for its "extra costs" occasioned by service problems with V-M units. Bernard insists that this exhibit was admissible because at trial V-M's counsel sought to show that Bernard had not made a demand upon V-M for credits and reimbursements. We have found no such argument by V-M counsel in the trial record. Other received exhibits showed that Bernard had made demands upon V-M. In addition, this particular exhibit was not confined to the recovery sought by Bernard in its claim for $13,714.13 in set-offs and was therefore irrelevant. Furthermore, it lacked documentation supporting the demanded credits. Accordingly, the exclusion of this letter was within the trial court's discretion.

III

Bernard also objects to various instructions on the ground that the jurors would consider that they could not award Bernard any set-offs unless based on the written agreements between the parties. Bernard's counsel did not, however, object to these three instructions below, so that error may not now be assigned in giving them. Rule 51 of the Federal Rules of Civil Procedure. Furthermore, the objections are without merit, for Instruction 4 informed the jury that the parties would not be bound by the written agreements if the jury decided that there had been a waiver. In addition, the court instructed the jury it should deduct from any V-M recovery the amount of set-offs to which the jury should find defendant was entitled. In our view, the relatively simple instructions given were not misleading...