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Gnp Commodities v. Walsh Heffernan Co.

OPINION FILED APRIL 24, 1981.

GNP COMMODITIES, INC., PLAINTIFF-APPELLEE,

v.

WALSH HEFFERNAN COMPANY ET AL., DEFENDANTS-APPELLANTS.



APPEAL from the Circuit Court of Cook County; the Hon. LOUIS WEXLER, Judge, presiding.

MR. PRESIDING JUSTICE SULLIVAN DELIVERED THE OPINION OF THE COURT:

Defendants appeal from a judgment for plaintiff, after a jury trial, in an action to recover damages in the sale of nonconforming frozen pork bellies. They contend that (1) the trial court should not have permitted their jury demand prior to the retrial of the case; (2) plaintiff's rejection or revocation of acceptance of the goods did not occur within a reasonable time; (3) plaintiff had no right to revoke acceptance since the value of the goods to plaintiff was not substantially impaired; and (4) the trial court improperly instructed the jury that the sole measure of damages was the return of the purchase price.

The record discloses that plaintiff is a commodity trader, a member of the Chicago Mercantile Exchange (Exchange) and, at the time of the transaction with defendants, a hedger and speculator in frozen pork bellies. Its activities included the purchase and sale of pork bellies (referred to as "actual" or "cash" product) and Exchange traded futures contracts for the purpose of speculating on the difference between the actual product and the futures market. It accomplished this by a technique called "hedging," which involved the purchase of the actual product and the sale of futures against it.

Myron Rosenthal, president of plaintiff, was responsible for buying the actual product through a public meat broker and selling the corresponding futures contract on the Exchange. He testified that he never bought nondeliverable frozen bellies during the hedging season, which was from November through August, and that bellies frozen after November 1 were important to a hedger such as plaintiff because they afforded the option of delivering the actual product against the futures position.

On March 27, 1974, Rosenthal received a telephone call from Eugene Figurelli, the agent for defendant Walsh Heffernan Company (Walsh), a public meat broker, which in turn was the agent that conducted the transaction for the seller of the bellies, defendant Florence Beef Company (Florence). The meat broker assists potential customers by obtaining offerings of fresh or frozen products from sellers who pay for the broker's services, and he is responsible for obtaining necessary information (including freeze dates) from the seller for the buyer.

In the March 27 telephone call, Figurelli asked Rosenthal if he was interested in purchasing five loads of frozen pork bellies, and Rosenthal replied that he was, depending on the freeze date, price, manufacture and location. Figurelli called back within 20 minutes and reported that the bellies were frozen on February 1, 1974, or later, were priced at 43 1/2 cents per pound, and that the weight met Exchange specifications for delivery. Rosenthal told Figurelli that he would purchase those five loads and asked if Figurelli could obtain five more loads which were more "desirable"; that is, either fresh or frozen within the last 15 days. Figurelli later called Rosenthal and told him that he had five more loads priced at 44 cents per pound which would meet Rosenthal's specifications, and he assured Rosenthal that all 10 loads complied with Exchange requirements for delivery.

It appears from the testimony that a party planning to deliver the actual product as protection against a futures contract deliverable between February and August of a given year must comply with Exchange regulations, the most important of which concerns the freeze date and requires that bellies must have been frozen no earlier than the preceding November 1, or must have been accumulating in the freezer not earlier than October 16 with other product and frozen not earlier than November 1. Freeze dates are significant because after bellies have been in the freezer for several months there is a progressively greater chance of deterioration. Bellies frozen before November 1 are not deliverable against futures short sales starting the following February. To a hedger, therefore, bellies frozen before November 1 have no value, especially between February and August, and thus there is always a price differential between old and new bellies.

Three or four days after the transaction between Rosenthal and Figurelli, Walsh sent plaintiff written confirmations for each of the 10 loads. These revealed that the seller was defendant Florence and included the weight of each load, the storage locations, and the storage companies' lot numbers, but they did not disclose the dates that the product first went into the freezers. Plaintiff paid a total of $164,368.39 for the 10 loads.

Rosenthal and Figurelli communicated every 5 to 10 days for about six weeks in April and May. When freeze dates were mentioned, Figurelli continually assured Rosenthal, "It's okay, it's just a matter of confirming which dates got on which loads." He did not, however, give Rosenthal the exact freeze dates but said they were February 1, 1974, or later. Rosenthal testified that he had no reason to doubt Figurelli's word since there had been no problems dealing with him in the past.

In late May, Rosenthal requested an inspection by the Exchange so that the bellies could be delivered against a futures contract, if necessary. About June 8 or 9, Rosenthal received the first inspection report from the Exchange for loads one and two. They did not pass inspection, since the bellies had been frozen prior to November 1, 1973, and thus were not deliverable. Plaintiff then tried to return the bellies to defendants, but they refused to cancel the transaction. Eventually it was determined that nine of the 10 loads were frozen before November 1973, and were not deliverable. Plaintiff then sold those nine loads on the open market for 21 cents per pound. The tenth load, which was frozen prior to March 1, 1974, was deliverable and was sold for 45 1/2 cents per pound. Plaintiff's proceeds for the 10 loads came to $87,984.16; storage costs were $5,000.

The record further discloses that loads one and two, which defendants sold to plaintiff, were originally owned by Pacific Trading Company (Pacific), which had inadvertently failed to sell them in 1973 and then sold them on January 4, 1974, through Figurelli to Florence. Two months later, on March 19, defendants sold the first five loads (including the Pacific loads) to Murlas Brothers Commodities (Murlas), also through Figurelli. The confirmations on that sale recited that the bellies were frozen in November 1973 or later, but did not provide all the usual information which Figurelli promised to supply later. Murlas had purchased the five loads for November 1 and later freeze so that the bellies could be deliverable on the Exchange and, when the information was not provided, Murlas returned the five loads to Florence on March 26. They were then sold to plaintiff on March 27 through Figurelli.

Plaintiff sued both defendants, alleging breach of contract, fraud and misrepresentation, wilful and wanton fraud and misrepresentation against each, and also breach of fiduciary duty against Walsh. A count alleging breach of warranty was dismissed. The jury found both defendants liable and assessed plaintiff's damages in the full amount claimed of $81,384.15. The jury also answered two special interrogatories in the affirmative, finding that defendants either singly or together knowingly misrepresented the age of the meat to plaintiff at the time of the sale and that the agreement between the parties specified that the 10 loads were to have been February 1, 1974, freeze or later.

OPINION

Defendants initially contend the trial court abused its discretion by permitting plaintiff to file a jury demand following withdrawal by defendants of their jury demand prior to retrial. The case originally commenced as a trial by jury but ended in a mistrial, and, as a retrial began, defendants requested a bench trial. Then, for the first time approximately five years after the action was filed, plaintiff demanded and was granted a jury trial.

Under the Civil Practice Act, a plaintiff is generally required to file a jury demand at the time the action is commenced (Ill. Rev. Stat. 1979, ch. 110, par. 64), but additional time may be granted on good cause shown, in the discretion of the court and on just terms (Ill. Rev. Stat. 1979, ch. 110, par. 59).

The situation here is substantially similar to that in the leading case of Hernandez v. Power Construction Co. (1978), 73 Ill.2d 90, 382 N.E.2d 1201, aff'g (1976), 43 Ill. App.3d 860, 357 N.E.2d 606. There, plaintiff did not initially make a jury demand but, when defendant withdrew its demand four years later immediately before trial, plaintiffs' motion for leave to file a late jury demand was denied. On appeal, this court found, among other things, that the trial court abused its discretion in denying the motion. The supreme court affirmed with reasoning that may be distilled as follows: statutes regulating jury demands are to be liberally construed; good cause must be shown to obtain an extension of time to file a later jury demand; in passing upon such a request, the convenience to the parties and the court and any possible prejudice to the rights of the opposing parties must be considered; and the standard of review on appeal is not whether the appellate court would have allowed the motion but whether the action of the trial court was a reasonable exercise of sound discretion. Also see Greene v. City of Chicago (1978), 73 Ill.2d 100, 382 N.E.2d 1205; Kren v. Payne (1980), 81 Ill. App.3d 283, 401 N.E.2d 19.

• 1 We believe here that plaintiff has satisfied the requirement of good cause, as he had lost the opportunity for a speedy adjudication because of defendants' original jury demand, and it would be unfair to deprive plaintiff of the benefits of a jury trial. In Hernandez v. Power Construction Co., the court stated "[t]he [appellate] court pointed out that plaintiff, because of the defendant's jury demand, had already lost the benefit of an early adjudication, and that a denial of the demand would deprive plaintiff of the advantage of a jury trial as well. [Citations.] We agree that this element of unfairness constitutes good cause for granting plaintiff's late jury demand * * *." (73 Ill.2d 90, 97, 382 N.E.2d 1201, 1204.) Furthermore, it seems clear that the parties and the court were not inconvenienced since the case had already been assigned for a jury trial when defendants withdrew their jury demand and plaintiff made its request. There is also no indication of prejudice, as both parties had anticipated a jury trial from the outset. We are thus of the opinion that the grant of leave to file a late jury demand was a reasonable exercise of the trial court's discretion.

Defendants next contend that plaintiff did not reject the pork bellies or revoke acceptance of them within a reasonable time. They argue that plaintiff's conduct was unreasonable because plaintiff indicated no intention to inspect the goods and because information about their condition was readily available.

The record discloses that plaintiff purchased the bellies at the end of March 1974, but did not inspect them until May of that year. Thereafter, plaintiff notified defendants that the goods were nonconforming and unsuccessfully sought to return them. The jury was instructed as to plaintiff's theories that the goods were rejected within a reasonable time and that acceptance was revoked within a reasonable time after discovery of the nonconformity. The issue that is raised, therefore, is whether plaintiff's conduct was reasonable within the framework of those theories.

The Uniform Commercial Code (the Code) provides generally that an action is to be judged as reasonable depending on the nature, purpose and circumstances of such action (Ill. Rev. Stat. 1979, ch. 26, par. 1-204(2)), and in each case that determination rests with the trier of fact (see Heller v. Sullivan (1978), 57 Ill. App.3d 190, 372 N.E.2d 1036; Sauers v. Tibbs (1977), 48 Ill. App.3d 805, 363 N.E.2d 444; Boysen v. Antioch Sheet Metal, Inc. (1974), 16 Ill. App.3d 331, 306 N.E.2d 69). Consistent with that standard, section 2-602(1) provides in relevant part that "[r]ejection of goods must be within a reasonable time after their delivery or tender." (Ill. Rev. Stat. 1979, ch. 26, par. 2-602(1).) Similarly, section 2-608(2) provides in relevant part:

"Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer ...


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