Kiley, Pell and Sprecher, Circuit Judges.
This is an appeal from a judgment entered following the direction of a verdict for the defendant (Stainless)*fn1 in a diversity action in which the plaintiff (Goldstein) sought to recover damages arising out of an alleged breach of contract for the delivery of nickel cathodes.
The parties were dealers in metals. Neither had dealt with the other prior to the transaction in question. The facts support the premise that neither reposed any confidence in the other.
As a result of telephonic conversations, Goldstein agreed to buy and Stainless agreed to sell 20,000 pounds of nickel cathodes at a price of $4.60 per pound, f.o.b., Chicago. During the conversations, Stainless had asked that some money be sent on account, which request Goldstein had declined. Variations on the request were proposed with equally negative responses. Finally, Stainless suggested that Goldstein send a $20,000 check which Stainless would hold in escrow.
Goldstein's version of the conversation, which we accept for the purposes of considering the propriety of directing a verdict, is that "he would do that provided that they would hold the check until the time he would come to Chicago to verify the material, then they would return the check to Goldstein at the time of delivery, and he would pay the entire amount due in full by a single certified check."
Stainless sent its confirmation of sale, dated August 27, 1969, which specified as "Terms" the following: "$20,000.00 deposit. Balance by certified check at time of pickup." No reference was made to any escrow arrangement.
On August 28, 1969, Goldstein, not yet having received the confirmation, sent a letter to Stainless confirming the telephone conversation of the previous day by outlining the terms and provisions of the oral agreement. The letter concluded as follows:
"We are enclosing our check in the amount of $20,000.00 as a good faith deposit. This check is to be held in escrow. When we get to Chicago and the entire shipment is weighed and verified, we will issue one check to cover the full amount.
"Please sign and return the enclosed copy of this letter for our files."
Stainless signed and returned to Goldstein a copy of this letter about September 5, 1969. However, prior to the 5th the following significant incidents occurred. On the same day that Goldstein mailed the "good faith deposit" check he went to his bank and stopped payment on it. This apparently had no connection with an insufficiency of funds as his bank balance showed substantially more than the amount of the check. Further, Stainless unaware of the stop payment order, upon receipt of the check went to its bank and deposited the "in escrow" check in its account.
On September 2, 1969, Goldstein wrote Stainless in part as follows:
"We acknowledge receipt of your sales Contract No. 2633 and note that it varies slightly from our understanding as stated in our contract letter of August 28, 1969; namely, you mentioned on the telephone that you would like to have a $20,000.00 check to be held in escrow. We have sent you this check." (Underlining emphasis in original.)
The check travelled in banking channels without incident until its confrontation with the stop payment order. Upon its arrival back at its point of embarkation, or shortly thereafter, a telegram ...