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S.A. v. Appelbaum

October 30, 1957


Author: Duffy

Before DUFFY, Chief Judge, and MAJOR and LINDLEY, Circuit Judges.

DUFFY, Chief Judge.

Plaintiff will hereinafter sometimes be referred to by its trade name "Reno." Plaintiff brought this suit against defendant for sums alleged to be due under a contract for the sale of shrimp. Defendant answered and interposed several counterclaims. A jury was unable to agree upon a verdict. The trial court then granted plaintiff's previously made motion for a directed verdict; denied the motions made by defendant and entered judgment against defendant for approximately $210,000 plus interest.

Reno is a Mexican corporation engaged in the business of purchasing, freezing, packaging and distributing shrimp. Reno produced about one-eighth of the total production of West Coast of Mexico shrimp. Defendant is a resident of Illinois engaged in the frozen food business. He distributes shrimp throughout the United States and Canada.

On October 19, 1950, plaintiff and defendant executed a written contract under which plaintiff was obligated to deliver to defendant for sale, all of plaintiff's production of shrimp through August 15, 1951 with the exception of shrimp sold for consumption in Mexico.*fn1 Defendant agreed that he would not distribute Mexican shrimp other than that received from plaintiff and agreed to and did lend $68,000 to plaintiff. Defendant also agreed to establish a letter of credit simultaneously with notification by plaintiff that it was prepared and ready to ship a carload of shrimp. Each letter of credit was to cover 75% of the market value of the carload of shrimp delivered.

Under the contract defendant was to remit to plaintiff 93% of the price for which defendant had sold the shrimp after deducting all expenses paid or incurred by defendant in connection with the transportation of the shrimp. The contract also provided that on or before the 15th of each month, defendant was to deliver to Reno a report with specified information as to shrimp sold. Defendant agreed that simultaneously with the delivery of such report it would pay to plaintiff the balance due on all sales made by defendant "as disclosed by such report."

Under Clause 18 the contract would expire on August 15, 1951, and on August 15 of each succeeding year thereafter if the contract were renewed. Under this same clause the contract was to be automatically renewed for another year unless either party notified the other to the contrary by March 1st of each year.

On July 22, 1952, the parties executed an extension agreement which modified the terms of the original agreement. By this modification the term of the contract was extended for two years and the plaintiff was given the option whether or not defendant was to furnish letters of credit. If defendant did furnish letters of credit defendant would continue to remit 93% of the sale price of the shrimp, otherwise defendant was to remit 95%.

On February 25, 1953, Reno sent defendant a telegram stating it was Reno's will to terminate the contract and stating the contract by its terms would thus end on August 15, 1953. Defendant promptly wired Reno that the contract was not subject to cancellation until 1954. Then followed an exchange of letters and telegrams in which Reno insisted the contract was canceled and defendant insisted that the contract remained in full force and effect until August 15, 1954.

Upon giving the cancellation notice, Reno, through its General Manager, Pedro Pinson, began negotiations for the formation of a new plan of distribution of its shrimp. Reno was instrumental in forming a Mexican organization called Exportadores Associados (hereinafter called E.A.) which consisted of five West Coast of Mexico shrimp producers whose combined production amounted to approximately one-fourth of the total production of West Coast of Mexico shrimp. These producers, including Reno, were stockholders in E.A. In June, 1953, an American corporation called Crest Importing Company, with headquarters at San Diego, California, was formed. This corporation was owned entirely by E.A.

A contract was executed on October 3, 1953 between E.A. and Crest whereby E.A. was to sell and Crest was to purchase all of E.A.'s production of shrimp. All of the stockholders of E.A. except Reno had previously agreed to sell their entire production to E.A.

On September 24, 1953, upon demand of the defendant, conferences were held in Chicago in an endeavor to reach an amicable settlement. Among those attending were defendant, his son and attorney; John Willis, President of Crest, and Oscar Fraustro, chairman of Reno's board of directors, and general comptroller of Nacional Financiers which is an agency of the Mexican government and owned 75% of Reno's stock. Reno offered defendant a subbrokerage under Crest, and in the alternative offered to make settlement payments of $40,000. Defendant refused these offers and made counter offers which were rejected by Reno.

On October 3, 1953, Reno sent a telegram to defendant admitting the contract was in full force and effect. Reno demanded payment on or before October 7, 1953 of all sums due as a result of previous shipments of shrimp. The payment requested related to the shipment of cars 31 through 38 during the period from October, 1952 to June, 1953. The telegram also stated that plaintiff anticipated shipping the first car of shrimp about October 9th and instructed defendant to open a letter of credit to cover same. In a covering letter Reno stated any further delay in making payment might result in Reno's financial failure.

Defendant replied by telegram dated October 6, 1953, wherein defendant stated that in the light of his recent experience with plaintiff he was entitled to adequate security for plaintiff's performance. Defendant also stated he was puzzled at plaintiff's direction to open only one letter of credit when ...

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