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McMahon Food Corp. v. Burger Dairy Co.

December 30, 1996

MCMAHON FOOD CORP.,

PLAINTIFF AND COUNTERDEFENDANT-APPELLANT,

v.

BURGER DAIRY CO.,

DEFENDANT AND COUNTERPLAINTIFF-APPELLEE.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division.

No. 93 C 256

Before CUDAHY, COFFEY, and FLAUM, Circuit Judges.

COFFEY, Circuit Judge.

Joan H. Lefkow, Magistrate Judge.

ARGUED MAY 13, 1996

DECIDED DECEMBER 30, 1996

Burger Dairy Company ("Burger") and McMahon Food Corporation ("MFC") were involved in a contract dispute over milk products that Burger sold to MFC, as well as credits for empty milk cases that MFC returned. MFC brought a declaratory judgment action against Burger, asserting that it effected an accord and satisfaction of its debt by tendering two checks with attached vouchers, one marked "payment in full through 6/6/92," the other marked, "paid in full thru 8/8/92," to Burger. Burger countersued, seeking $58,518.41 from MFC. The trial court denied MFC relief, ruling that the accord which the first check purported to satisfy was obtained by deceit, while the second check was a unilateral action by MFC, on which the parties reached no accord. The court awarded Burger the full amount claimed. On appeal, MFC argues that (1) because the language "payment in full thru 6/6/92 . . . Clear statement of account thru 6/6/92 to follow," inscribed on the first voucher, was clear and unambiguous, the district court wrongly admitted parole evidence to elucidate the negotiations leading up to its tender; and (2) under U.C.C. sec. 3-311, a second accord was reached when Burger objectively agreed to MFC's offer by cashing the second check. We are of the opinion that the trial court's findings of fact are not clearly erroneous. Therefore, we affirm.

I. Background

Burger Dairy Company, an Indiana vendor of dairy products, regularly sold milk products to McMahon Food Corporation, a Chicago distributor of dairy products, from October, 1991, until August 15, 1992. *fn1 MFC generally placed several orders each week. Burger's product manager entered the orders onto a "load ticket," which the loading crew relied upon when shipping a truckload of plastic milk cases *fn2 for the respective order. If there was a discrepancy between the amount MFC ordered and the amount Burger was able to ship, the load ticket reflected that discrepancy, including the exact number of milk cases. Burger used the load tickets to itemize the charges in its invoices for MFC. In addition, to make sure that MFC returned Burger's plastic milk cases, Burger charged MFC a $1.00 deposit for each milk case delivered to MFC, and gave an equal credit for each case returned. Burger prepared and mailed a weekly invoice for MFC.

In addition to buying dairy products, MFC had a side-business selling used plastic milk cases to Burger. MFC had acquired a large stockpile of these cases from various suppliers, including Burger. Burger agreed that when MFC returned a truckload of cases to its plant, it could add some of its "stockpiled" cases to the shipment, and Burger would credit MFC $1.00/case. Frank McMahon, MFC's vice-president, claimed that Burger did not give MFC sufficient credit for extra cases MFC returned. For this reason, when he paid Burger's invoices, McMahon deducted from his check the amount of credit he thought MFC was entitled to.

In contrast, Burger's general manager, Richard L. Bylsma, asserted that not only was MFC always late in its payments, but more frequently than not Burger had difficulty collecting. Bylsma also stated his belief that when Frank McMahon remitted payment, he made unauthorized deductions for dairy products shipped and delivered which he claimed not to have received. In addition, Bylsma maintained that MFC was short-changing Burger, by consistently claiming credits for returning full truckloads of empty cases, while the count which Burger's loading-dock personnel made reflected only partial truckloads of returned cases: Burger did not give MFC the credit McMahon demanded, Bylsma asserted, because Burger never received the number of cases MFC claimed to have returned. These disputes over the unauthorized deductions for milk cases became a major source of friction between the two companies throughout the period of their business relationship. Burger's records indicated that by mid-February of 1992, MFC was in arrears $58,518.41 ("the February debt"). About half of this total was for unauthorized credits for returned milk-cases.

Bylsma, on behalf of Burger, met with Frank McMahon on February 27, 1992, to discuss MFC's account with Burger, including the February debt. The parties dispute the results of that meeting. Both parties agree that they examined the invoices in question, and ultimately agreed that Burger would no longer charge MFC a deposit for milk cases--according to Bylsma, in exchange for MFC's agreement to pay the invoices as they became due. Bylsma testified that he and McMahon did not otherwise resolve the amounts past due, nor did they agree upon the amount of credit due for the empty milk cases allegedly returned.

Bylsma further claimed that he never agreed to excuse MFC from making payment in full for the past due accounts. Instead, he claims he made clear during their conversation, when he and McMahon were unable to reach an agreement, that they would simply table further discussion of the February debt at that time. Upon returning to Burger's plant and checking the records, Bylsma satisfied himself that the company had been giving MFC proper credit for the cases returned. Bylsma left Burger's employment shortly thereafter, without further communication with McMahon and MFC about the February debt. Burger's records reflect that after the February 27th meeting, it continued to bill MFC for the full $58,518.41 it claimed was in arrears at the time Bylsma and McMahon met. McMahon, in contrast, testified that he believed he had probably paid for some of the amount in arrears with a lump-sum check; that he had never received one of the shipments for which Burger billed him; and that MFC had returned a sufficient number of additional empty milk cases to make up for the amount which Burger claimed was due in February. Nonetheless, McMahon conceded that Bylsma told him he would have to return to Burger's headquarters and check the record there before he could straighten out the old charges and credits.

After the February meeting, MFC made full payments for three weeks of current purchases (nothing was done to pay off the February debt), but then made no further payments until May 13, 1992, when it remitted a $100,000 check to Burger with an accompanying voucher stating "on account detail to follow." Burger's records, however, reflected that the $100,000 covered less than half the debt that MFC had amassed by that time, including the $58,518.41 February debt which was the subject of McMahon's meeting with Bylsma.

II. The June 17th ...


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