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Stewart-Warner Corp. v. Remco Inc.

: July 3, 1953.

STEWART-WARNER CORP.
v.
REMCO, INC. (TWO CASES).



Author: Duffy

Before DUFFY and LINDLEY, Circuit Judges, and BRIGGLE, District Judge.

DUFFY, Circuit Judge.

In Appeal No. 10689, Stewart-Warner Corporation is designed counter-defendant-appellant, and in Appeal No. 10690 as counter-defendant-appellee. In these appeals Remco, Inc. is designated counter-plaintiff-appellee and counter-plaintiff-appellant, respectively. In this opinion these companies will be called Stewart-Warner and Remco.

Invoking diversity jurisdiction, Stewart-Warner brought this action to recover $83,118.41 upon open account for merchandise sold and delivered. Remco admitted liability and the court instructed the jury to bring in a verdict accordingly. By special interrogatory the jury found Remco had not unreasonably and vexatiously refused payment of the account, which finding was approved by the court; hence interest was not allowed, and the judgment as entered allowed this claim of Stewart-Warner against Remco in the sum of $83,118.41, from which there has been no appeal.

The trial involved a determination on Remco's counterclaims,*fn1 labeled Counts I, II, III and IV inclusive. The court directed the jury to find in favor of Stewart-Warner on Counts I, III and IV, and the judgment dismissed said counts of the counterclaim, reversal of which is sought by Remco in Appeal No. 10690. The jury returned a verdict favorable to Remco on Count II, assessing damages at $173,000. Judgment was entered for that sum, but later a remittitur of $15,000 was made.From this judgment for Remco for $158,000 Stewart-Warner appeals in No. 10689.

Count I of the counterclaim alleges a claim for fraud and deceit. Remco alleges that Stewart-Warner at various times between October 1, 1948, and September 30, 1949, falsely represented to Remco, who was exclusive distributor of Stewart-Warner radio and television products in the Chicago area, that it would supply Remco certain quantities of merchantable television sets competitively priced but there was no possibility that Stewart-Warner would have such sets available; that Remco, believing and relying on such representations, expanded and enlarged its sales organization at a great increase in its overhead expenses and that Stewart-Warner, in addition, caused Remco to refrain from rescinding its current distributor contract with Stewart-Warner and to forego entering into agreements with competitors of Stewart-Warner, to its damage in the sum of $200,000. Stewart-Warner's answer put in issue all material allegations of this count, including the one which asserted that Remco was an exclusive distributor of Stewart-Warner, and that the distributor contract between them was an exclusive contract.

Count II alleges that from October 1, 1948, to September 30, 1949, Remco was the exclusive distributor of Stewart-Warner's radio and television products in the Chicago metropolitan area in accordance with the distributor contract between them; that under such contract Remco was exclusive distributor in the Chicage area, "except under special circumstances," or with reference to sets carrying a "special identifying trade or brand name"; that Stewart-Warner failed to carry out the distributor contract, in that it supplied radio sets to other distributors at a price averaging 50% of the price of identical sets sold to Remco, and that a portion of such sets were sold by other distributors to Remco's dealers at a price below that which Remco could sell; and that such sales to the other distributors by Stewart-Warner were not made "under special circumstances" as that term is defined in the trade, and that such sets did not carry a "special identifying trade or brand name." On this count Remco asked for $200,000 damages. Answering this count, Stewart-Warner put in issue all of its material allegations, including that Remco was an exclusive distributor and that the distributor contract was an exclusive contract; that Stewart-Warner violated any of the terms of the contract; and as a separate defense alleged that Remco had failed to give Stewart-Warner notice of claim within the time required by the distributor contract.

Remco charged in Count III of its counterclaim that Stewart-Warner promised Remco it would be given first opportunity to dispose of the radio inventory held by Stewart-Warner upon prices being reduced; that Remco agreed to dispose of such inventory upon same being offered to it; and that Stewart-Warner failed to offer the radio inventory to Remco but instead offered it to another corporation. Under this count $200,000 damages was also asked. Stewart-Warner's answer put in issue all of its material allegations, and also pleaded the affirmative defense that the alleged oral promise to sell the radio inventory is unenforceable under the Illinois Statute of Frauds, Sec. 4, Ch. 121 1/2, Ill.Rev.Stats.

Material allegations of Count IV assert Stewart-Warner's breach of an agreement to make available to Remco during October, November, and December, 1948, a total of 1,700 merchantable and competitively priced television sets, and during 1949 to make available to Remco additional television sets at the rate of 500 per month, same also to be merchantable and competitively priced, to Remco's damage of $200,000. Stewart-Warner's answer to this count put in issue all of its material allegations and also, by way of affirmative defense, claimed that the alleged agreement respecting delivery of competitively priced, merchantable television sets is unenforceable under the Illinois Statute of Frauds, supra.

Stewart-Warner is a manufacturer of radio and television sets and parts. Remco at the times in question was a distributor of some 20 lines of household and other appliances, including records, outboard motors, power bikes, radios, television sets, refrigerators, deep freezers, etc. Remco's place of business was located in a five-story and basement building at Ohio and LaSalle Streets in Chicago.

Remco first became a Stewart-Warner distributor of radio products under a written contract, for a period from July 12, 1948, to September 30, 1948, with a territory consisting of 20 counties in northern Illinois and Indiana, including the city of Chicago. This agreement was replaced by another of identical provisions for the period from October 1, 1948, to September 30, 1949. Among others, the contracts contained the following provisions, Remco being referred to therein as "the Distributor":

"1b. Stewart-Warner will sell and the Distributor will buy radio products at Stewart-Warner's prevailing list prices and discounts or at Stewart-Warner's net prices to Distributors in effect at the time of shipment, in accordance with the terms of sale established from time to time by Stewart-Warner.

"1c. The Distributor will resell the goods thus purchased from Stewart-Warner only in the territory described and set forth in Exhibit A attached hereto.

"1d. It is not the intention of Stewart-Warner to sell Stewart-Warner Radio Products as defined above to others in said territory, but it is recognized that special circumstances may make such a sale or sales desirable, and Stewart-Warner is not precluded from so doing. Stewart-Warner reserves the right to make sales of ...


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