Appeal from the District Court of the United States for the Eastern Division of the Northern District of Illinois; Walter C. Lindley, Judge.
Before ALSCHULER, EVANS, and SPARKS, Circuit Judges.
This appeal is from a decree dismissing appellees' complaint and denying the relief sought in the counterclaim, and also directing the discharge of the receiver appointed earlier in the litigation to take charge of the property of appellee, the International Ticket Scale Corporation of Chicago, which corporation will hereinafter be called the Chicago company. The disputes, out of which the litigation arose, grew out of a contract, which opposing litigants made, whereby appellee Elenbogen "purchased or contracted to purchase * * * 4000 International Ticket Scales * * * of the following models and at the following prices: Model 'A' at $200 each and Model 'S' at $250 each, F.O.B. Jamaica, New York. Deliveries to be made as follows: 1300 scales the first year and not less than 675 scales per year hereafter until the entire amount is taken. Payment for these scales to be made either for cash or on the basis of twenty dollars down payment on each scale when shipped, the balance to be paid in equal quarter yearly payments in five years." Elenbogen assigned this contract to his coappellee. The controversy arose over appellant's alleged failure to deliver machines ordered and over the Chicago company's failure to pay for machines delivered.
The litigation began in the state court, but was transferred to the federal court. Appellees were complainants below. They sought damages because of appellant's failure to deliver the so-called S machines when ordered and because the model A machines, which appellant delivered, were not as represented. Appellant, through its counterclaim, sought to recover the purchase price of machines delivered and damages for breach of the contract and equitable relief to protect its claims. The court found that both parties had breached their contract and denied relief to both.
The written agreement subsequently executed, and called an exclusive franchise agreement, while specifying the number of scales sold and the price of each model, failed to state the number of either model sold. It likewise failed to specifically define the delivery dates. While the legal questions are numerous, they all arise from the parties' inability to agree on (a) the number of scales of each model sold and (b) the delivery date of model S scales.
There were other issues of fact and law which we view as afterthoughts of the parties or their counsel. They wer epresented to the District Court and are raised in this court. We will not, however, discuss them save to announce our adoption of the District Court's findings thereon. The District Court found that appellees had failed to establish their claim that appellant made fraudulent representations prior to the execution of the contracts and the delivery of the scales; that the scales delivered were, from a mechanical point of view, satisfactory and in compliance with the representations made by appellant concerning the same; and that the parties executed the contract in New York, and the Illinois law concerning the contracts of foreign corporations was not applicable to it.
The disposition of these questions leaves for determination only the terms of the agreement respecting the number and date of delivery of the model S scales. This question turns in part upon the admissibility of certain evidence bearing thereon, in view of the provision of the agreement to the effect that it "embodies the whole agreement of the parties."
We are well satisfied from a reading of the evidence that it was not contemplated by the parties that model S scales could be, or were to be, presently delivered. At the time of the execution of the agreement, appellant was making no model S scales, but was engaged in the manufacture of model A scales. At the time the agreement was made, the model S scale was only in the wooden form in which it had been conceived by the artist, and the tools and the dies for its manufacture were being ordered; and some months would necessarily elapse before appellant could put upon the market any model S sacales.
The action of the parties confirms this impression. It appears that, shortly after the sales agreement was made, the parties negotiated the exclusive territory franchise agreement in New York, which referred to the purchase and sale of 4,000 International Ticket Scales. This agreement granted exclusive territory rights to Elenbogen and made specific provision for keeping the scales in good repair and free from liens, and defined appellant's rights in case of Elenbogen's defaults in payments. Shortly before this agreement was executed, the Chicago company was organized, and thereafter the contract was assigned by Elenbogen to it. The Chicago company then sent its first order for 35 model A scales, together with notes and conditional sales agreements covering the same.
A question of Elenbogen's personal responsibility for the payment of the notes arose, and negotiations were then had which resulted in an agreement, whereby the assignment to the Chicago company was recognized, but Elenbogen was not relieved from personal liability.
The first installment of scales was then shipped. A few weeks later a second installment of 200 scales was shipped, followed immediately by notice from appellant that it was ready to make another shipment of 200 scales. The Chicago company complained of shipments in less than carload lots. However, it forwarded its notes and conditional sales agreements to cover 170 of the 200 scales of the third shipment. Shortly thereafter the Chicago company sought the return of the notes covering these 170 scales. Again Elenbogen sought to get released from the contract. Negotiations were then had with the result that the third shipment was accepted by the Chicago company, and the notes and conditional sales agreements covering this installment were dated August 1, 1929. At this time, $8,100 had been paid by the Chicago company as a first payment on the 405 scales delivered. A further sum of $7,590 had been paid on the installments due on these scales. An unpaid balance of $65,310 remained. All scales ordered and all scales shipped were model A scales.
On July 27th appellees gave a written order for 895 model S scales for immediate delivery. Appellant, on August 2d, replied:
"In answer to your letter of July 27th, in which you direct us to ship immediately 895 of our Model 'S' scales, we write to remind you that you are well acquainted with the fact that our obligation to make deliveries under the ...