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Kosuga v. Kelly

June 23, 1958

VINCENT W. KOSUGA
v.
JACK H. KELLY



Author: Major

Before MAJOR, SCHNACKENBERG and PARKINSON, Circuit Judges.

MAJOR, Circuit Judge: This is an appeal from a summary judgment in favor of appellee (plaintiff) against appellant (defendant), entered October 11, 1957, in the amount of $37,342.80, with interest and costs. The action was commenced September 11, 1956, and the judgment represents the balance due on a sale made December 17, 1955, by plaintiff to defendant, of fifty cars of onions.

If plaintiff was entitled to recover, there is no dispute as to the amount due as embodied in the judgment. The issues raised on this appeal require a statement of the salient facts which give rise thereto, as well as the essential proceedings in the District Court. The case was tried and decided upon the pleadings, which included plaintiff's complaint, defendant's answer thereto, certain affirmative defenses asserted by defendant, as well as a counterclaim by which defendant sought to recover damages against plaintiff in the amount of $75,000. There was submitted in connection with the counterclaim an affidavit by each of the parties.

On December 17, 1955, when the contract in dispute was made, plaintiff and his associate, Sam Siegel (the latter not a party to this action), were owners of actual onions in Chicago and elsewhere. Defendant was a grower of onions. Both parties were engaged in the marketing of onions in Illinois and in commerce generally throughout the country. By the terms of the contract plaintiff agreed to sell and defendant agreed to purchase fifty cars of onions at $960.00 per car, plus storage charges, or a total of $48,000, plus storage charges. The terms of sale were: initial cash payment, $300.00 per car, or $15,000; second payment to be made by January 10, 1956, of $200.00 per car, or $10,000; the balance of $460.00 per car, plus storage to be computed at the time defendant ordered the cars withdrawn from storage, or a total of $28,082.00. From time to time, defendant withdrew from storage thirteen cars of onions. The payments made by defendant consisted of $7,500 on December 22, 1955, and $5,000 on January 18, 1956, or a total payment of $12,500. No further payments were made as provided for in the agreement or for the thirteen cars of onions withdrawn by defendant from storage.

Onions, due to their perishable nature, can be kept in storage only for a reasonable period. On February 16, 1956, plaintiff sent a telegram to defendant, as follows:

"Storage onions you purchased from me on 12-17-55 now showing deterioration. You agreed to order out of Chicago storage and pay for these onions during January and early February 1956. Present condition of onions require immediate action. Demand payment by 2-20-56 and will surrender negotiables upon receipt of payment."

On the same date, plaintiff wrote defendant, which in general was confirmatory of the telegram. On February 20, 1956, defendant responded by telegram, as follows:

"Our agreement does not provide that onions be withdrawn from storage in substantial quantity by early February. We intend to abide by the original agreement and we expect you to do likewise."

Defendant, on March 9, 1956, notified plaintiff that he would withdraw no further onions from storage and that he would make no further payments. The reasons for such refusal will be subsequently noted under defendant's affirmative defenses.

The facts so far stated are conceded by defendant. In connection therewith it is pertinent to note that defendant makes no contention, either by allegation or otherwise, but that the price which he agreed to pay for the onions was the fair and reasonable cash market price. For reasons asserted in the affirmative defenses, defendant contends that payment of the balance due on the contract cannot be judicially enforced. Such defenses are predicated upon an alleged factual situation from which it is argued that there was incorporated in and made a part of the sale agreement certain conditions in violation of anti-trust laws, both Federal and State (Illinois), as well as the Commodity Exchange Act. These affirmative defenses were, on motion of plaintiff, stricken by the court. We need cite no authority for the well established rule that all facts well pleaded must be taken as true. This is so even though plaintiff by answer has in large part denied defendant's allegations.

We find it difficult, as is often the case under similar circumstances, to separate facts well pleaded from those of a conclusory and argumentative nature. It appears, however, that the essential allegation of fact is that referred to as the non-delivery provision asserted to have been made at the same time and in connection with the sale of the onions. It appears from the briefs that each of the parties recognizes this provision as furnishing the principal bone of contention. Relative thereto, it is stated in defendant's brief that it was agreed by the parties that "the plaintiff and Sam Siegel would not deliver any onions on the futures market for the balance of the 1955-1956 trading season" (referring to onions owned and controlled by plaintiff and Siegel other than those involved in the sale to defendant), and that the defendant and other onion growers "agreed to purchase the 287 carloads of onions and to desist from selling them upon the futures market for the balance of the trading season in consideration of the promise of the plaintiff and Sam Siegel not to deliver any of the onions owned, held or controlled by them on the futures market for the balance of the 1955-1956 trading season."

It is alleged as a legal conclusion,

"The avowed and express object of said agreement was to fix the price of onions and limit the amount of onions sold in the State of Illinois, to fix and manipulate the market price of onions and to stabilize said price and, if possible, to increase their price, said onions being a part of interstate commerce, and to create a false and fictitious market condition."

In connection with this non-delivery provision, it is pertinent to note that each of the parties remained free to merchandise onions ...


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