Appeal from the Circuit Court of Cook County; the Hon. DANIEL
A. ROBERTS, Judge, presiding. Reversed and remanded.
MR. JUSTICE ENGLISH DELIVERED THE OPINION OF THE COURT.
Rehearing denied March 27, 1963.
Plaintiff's complaint in equity sought damages for breach of contract and for the declaration and satisfaction of a lien on machinery and other property belonging to defendant. Defendant and Hexarmour Company filed a counterclaim for damages arising from the same contract, and for conversion of their property. A decree was entered in favor of plaintiff on both complaint and counterclaim, and defendant has appealed.
As we see this case, almost all the differences between the parties stem from their opposing views as to what constituted the basic contract. The master and the chancellor found in favor of plaintiff's contention that the terms of the contract were contained in an exchange of four letters two from each party written between July 2 and July 14, 1954. Defendant, on the other hand, argues that the source of contract rights is limited to the last three of these letters, and that plaintiff's letter of July 2 should play no part in the case, the proposals contained therein having been rejected by defendant.
At the time, defendant was in Florida, and Mr. V.A. Weiland, president and treasurer of plaintiff (whose name will be used interchangeably with that of plaintiff), was in Chicago. They had met only once, and then in Chicago on June 29, 1954, after a letter from plaintiff to defendant soliciting business. To that meeting, held at plaintiff's factory, defendant had brought a sample of Hexteel, a hexagonal patterned steel mat with squared ends, used in reinforced concrete. They discussed the manufacture of a somewhat similar product called Hexarmour. Certain machinery and steel belonging to defendant, which the parties contemplated would be used in the manufacture of Hexarmour, were then located at the plant of Carlson Steel Products Company in Batavia, Illinois.
The pertinent parts of the four letters follow:
Letter of July 2, 1954 from Weiland to Whitney
Last Wednesday Mr. Bedner, *fn1 our Mr. Haydock and the writer visited the Carlson Steel Products Plant at Batavia to inspect your machinery and steel. Mr. Carlson was quite cooperative and appeared willing to help in any reasonable way to expedite this matter and get things rolling. He requested that the steel be removed by July 15th but after some persuasion by the three of us was willing to have us start by that time and complete the removal by July 30th. He claims that a carload of other steel is coming in about that time.
We likewise discussed with Mr. Bedner the possibility of securing his services as a Working Supervisor to oversee the skidding of the steel, shipping of machinery, setting up same in our plant and then to have under him a crew of approximately five men or whatever workers are needed, plus such additional skilled help as may be required to then turn out the mats in required quantities. From discussions with him we are led to believe that production in quantity should start in about six weeks. Mr. Bedner appears to be a capable individual who we believe will supervise and run the job to both your satisfaction and ours.
Our proposal will then appear as follows. Weiland will fabricate mats as required by you, using your special hydraulic clinching unit and your Rockford Press, Also your dies. Should additional punch presses be required we will also furnish same, one equipped with automatic roll feed. If necessary additional presses will also be furnished but the roll feed would have to be furnished and installed by you or by us at a price that we can agree upon if such volume materializes. You are also to furnish and install a roll feed on your present Rockford Press. We are informed that roll feeds at present require about ninety days delivery, so to get started we would use our press or transfer one of our present roll feeds to your press. Once installed and producing parts to your satisfaction, we will then maintain, repair and keep up all equipment due to normal wear and tear, but not repair or replace broken parts nor replace the entire unit or units when worn out. You, at your own expense, will move the machinery and steel from Batavia to our plant and set up same for production, including electrical wiring. We are locating your heavy motors very close to our master electrical panel board so that this should be a nominal expense. If you wish to hire your own labor for this purpose it is acceptable to us. However, if you care to have us furnish this labor we shall be glad to do so at actual costs plus 19% which is our out-of-pocket cash expense for payroll taxes, insurance, hospitalization and other fringe benefits. This could be done under Mr. Bedner's supervision who could approve daily time tickets, work done, etc. Reimbursement to us for this portion of the work would be on a weekly basis, due each week as the work progresses. Apparently some work has to be done on your die, to which we would assign our skilled toolmakers again under Mr. Bedner's instructions. In short, we would turn the job over to Mr. Bedner furnishing him such help as he may require.
We have approached the cost of our operations from four different angles, and always wind up somewheres between twenty-one cents and twenty-four cents per square foot. In doing so, we are taking Mr. Bedner's statements as to assembly speed etc. but which seems to us to be fair and accurate also. Likewise using your opinion that ten or eleven cents per square foot was direct labor cost and comparing it with increases since your time of manufacture again brings us to these figures. Therefore we could come to terms by quoting a cost plus basis using twenty cents as a floor and twenty-four cents as a ceiling. Or if acceptable to you we could go along on a flat twenty-two cent price until more experience can be gained, at which time we could then renegotiate the price to the satisfaction of all concerned. Mr. Carlson did not say so in so many words but we believe his expressions indicated that his twenty cent contract was on the low side and that he could operate his plant much more favorably in other orders.
If necessary the writer will be glad to fly to Florida to further discuss this program with you, should there be anything herein which could not be settled by telephone Tuesday afternoon when he will be back from Michigan. Our negotiations with Mr. Bedner have covered everything noted in this letter except price and we seem to be in quite harmonious accord. He did not, however, nor did we, mention anything about price. If acceptable to you, Mr. Bedner is willing to start immediately and we can likewise assign to him one or several men that he may require.
We have not had the opportunity to check credit angle on this matter which good business practice might require, but from our impressions and your statements we assume that sufficient financial reliability is present by both you and us, which can be proved by proper investigation and background. We understand from your statement that you would accept billing for fabricated stock at time of shipment, but no date of payment was stated. We believe, however, this can satisfactorily be worked out.
It is also understood that you are to furnish all steel for this product and that we are to store same. We again assume that this can be done in quantities to suit your proper purchasing and our storage facilities, which would probably run to sixty or ninety days supply.
Letter of July 9, 1954 from Whitney to Weiland
Thank you for your letter of July 2nd, which as you know I received only yesterday. Thank you also for your very welcome telephone call.
I am quite willing to pay 22¢ sq. ft. for making the hexarmor which represents a price of 2¢ higher than that which three other companies have offered to charge. However, there were a number of items mentioned in your letter, which properly should and will have to be done by your good company in order to install and start production of hexarmor.
First of all it will be necessary for your company to load machinery and steel at Carlson's place and to unload it, and put the machinery together and install it in your plant. I shall pay the actual freight or cartage charges on both the steel, machinery and the dies and the fixtures, and any other items that were sent by me to Carlson Steel Products Company.
I value these items and inventory at over $50,000 and this is my capital investment in this matter plus any additional money I have to pay for the freight.
Secondly, each of my would-be subcontractors has offered to furnish an automatic feed of some sort to go with the Rockford Press, and I would have to ask you to furnish such a feed.
I shall take the burden of furnishing the additional presses and of purchasing the additional dies if the volume of business warrants, or if it is more convenient to you and more economical, I should be happy to make arrangements to pay a higher price for such hexarmor as we may find it necessary to make.
With the additional dies and presses furnished by yourselves, these higher prices could be invoiced as rent for your presses and as an installment purchase on the dies. You of course will be asked to maintain repair and keep up all tools, dies and other equipment, and to sharpen and replace punches as required, and to return all the tools, dies, machinery and equipment to me upon demand when our work is completed, in the same condition as when turned over to you, less normal wear.
I understand that the hexarmor die is now properly broken in and makes a good sample piece of hexarmor, with the possible exception of repositioning of the gauges. However, I am not a tool and die man, and I cannot guarantee that this is so, I can only tell you that the last sample pieces run off by Carlson looked fine to me. You will have to examine the die and if any adjustments are necessary on it, I will expect you to make them as you will have to continue making them through out the time that the die is used. Any die that is run continuously with automatic feed, is subject to adjustments from time to time. I believe that an additional set of inserts and punches has already been made for us, but Mr. Bedner will have to verify it from the receipted bills of lading in his possession.
I note in your letter, that if any work has to be done on the die, you will turn it over to one of your die makers under Mr. Bedner's instructions. Mr. Bedner is an excellent worker and a good foreman, but he is not a tool and die maker. I gave a completed sample of the hexarmor as well as the blue prints of the finished produce and of the completed hexarmor clinching table to Carlson, and you should regain it then from him.
The most important thing is that the die and the clinching table will be able to make the hexarmor in accordance with the sample.
You are correct in the understanding that we ought to furnish all steel for this product, and you ought to store it in such manner that it does not become unsaleable as hexarmor by reason of excessive rust.
We of course undertake the burden of making and paying for the catalogues, advertising and the sales force, and we undertake all expenses in connection with the sale of this article. We also will agree to turn over to you for fabrication 100% of all orders received for hexarmor for the period of eighteen months from the date of the making an agreement, between ourselves, which agreement will be renewable for year to year thereafter, if neither party notifies the other of desire to continue such a contract within 60 days of the termination of the original contract at any renewable date.
I think it should also be understood that you will be willing to run two or even three shifts in hexarmor department, before putting me to the additional expenses of purchasing additional presses and dies. At the previous plant where I made similar material, we ran four presses and two hexarmor clinching tables three shifts a day, six days a week and we still did not keep up with our orders.
You must band hexarmor with steel strapping and load it for shipment to my customers F.O.B. your plant.
We bill for hexarmor at 1% ten days net 30; I understand that your billings are 1/2% ten days net 30, and shall be willing to have you bill us when you ship the hexarmor to the orders at 1/2% ten days net 30.
You will note that there are a few dies and fixtures at Carlson Steel Product Company, which dies and fixtures are related in noway to hexarmor, but instead are for the making of open steel bridge docking. It is understood that you will also load and accept and store these bridge docking dies and ...