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Nortown Steel Supply Co. v. Northern Indiana Steel Supply Co.

April 4, 1963


Before Hastings, Chief Judge, and Knoch and Castle, Circuit Judges.

Author: Knoch

KNOCH, Circuit Judge.

Northern Indiana Steel Supply Co., Inc., third party defendant-appellant (hereinafter called "Northern"), took this appeal from a judgment entered in favor of the Nortown Steel Supply Company, third party plaintiff-appellee (hereinafter called "Nortown").

Briefly, the action arose out of the following situation. Tennessee Steel and Supply Compny (hereinafter called "Tennessee"), a Tennessee corporation, made inquiries of Nortown respecting purchase of a quantity of steel. Nortown, in turn, made inquiries of Northern and was assured that Northern could supply the steel by acquiring it from another source.

Tennessee's president, Noah Liff, came to Chicago on March 18, 1959, to confer with Ben Gore, president of Nortown, and to enter into a contract respecting sale of this steel by Nortown to Tennessee. During the course of the conference, while Mr. Liff was present, Mr. Gore telephoned Mort Winski, secretary of Northern, informed him that Nortown was about to accept Tennessee's order for the steel, and placed a verbal order for that steel with Northern.

Tennessee and Nortown entered into a written contract for delivery of about 900 tons of steel, in Chicago, Illinois, with shipments completed by June 30, 1959. Tennessee was to furnish a letter of credit in the amount of $150,000 to assure payment. Nortown's written order for the identical steel to be delivered to Chicago, Illinois, with time of shipment specified as "April/May/June-Complete," was accepted for Northern by Mr. Winski, in writing. After the printed words "Shipment will be made" Mr. Winski inserted the words "Complete by 6/30/59."

An irrevocable letter of credit was furnished by Tennessee and assigned to Northern. By its terms it could not be reassigned by Northern, and it expired if shipment were not made by June 30, 1959.

On March 24, 1959, Northern ordered the steel from Donovan Iron & Wire Company. When deliveries did not begin in April, Mr. Liff, of Tennessee, called Northern directly. Mr. Winski testified that he informed Mr. Liff that there would be no deliveries in April, and perhaps no deliveries in May, but that shipments would be completed in June, quoting the information he received from Donovan Iron & Wire Company. Mr. Liff also called Donovan Iron & Wire Company directly, trying to expedite delivery. No steel was delivered by June 30, 1959. The letter of credit expired.

August 12, 1959, Tennessee filed suit against Nortown in the United States District Court. The District Court granted Nortown's motion for leave to file a third party complaint, make Northern a third party defendant, and have summons issue against Northern. The District Court ordered that summons be sent to the U.S. Marshal at South Bend, Indiana, for service.

After service of summons on it, pursuant to the aforesaid order of Court, Northern moved to quash that service:

"* * * for the reason that said summons was served beyond the territorial limits of the State of Illinois and there is no specific statutory provision for such service. And said third party defendant has not waived due service of process herein by voluntary appearance or otherwise."

The motion was unsupported by affidavit or other document. The third party complaint alleged that the contract between Nortown and Northern was entered into "in Chicago, Illinois," for delivery of steel [according to the purchase order (Exhibit A attached to and made a part of the third party complaint)] "F.O.B. Loaded Trucks - Chicago, Ill." These allegations were not denied by Northern. The motion to quash was denied.

In its subsequent answer, amended answer, and answer to the subsequently amended third party complaint, Northern admitted that the contract between itself and Nortown was entered into in Chicago, Illinois. No further reference was made in any of these answers to lack of proper service, or to the issue of jurisdiction.

After the trial, without a jury, the District Court found that Northern, having been advised of the intent to resell to a specific customer, had entered into a contract with Nortown for steel to be shipped by June 30, 1959; that as a result of Northern's failure to perform, Nortown lost its profit of $8,100 and suffered a further liability of $16,500 to ...

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