In Lazarus v. American Motors Corp. (1963), 21 Wis.2d 76, 84, 123 N.W.2d 548, this court said: "A court is not obliged to adopt even uncontradicted testimony if such testimony is inherently improbable."Summary of this case from Estate of Staniszewski
September 6, 1963 —
October 1, 1963.
APPEAL from a judgment of the circuit court for Milwaukee county: JOHN A. DECKER, Circuit Judge. Affirmed.
For the appellant there were briefs by Henry C. Friend of Milwaukee, and Frankenstein, Lewis Feierberg of Chicago, Illinois, and oral argument by Mr. Friend and Mr. A. S. Frankenstein.
For the respondent there was a brief by Quarles, Herriott Clemons, attorneys, and Laurence E. Gooding, Jr., and Ross Shumaker of counsel, all of Milwaukee, and oral argument by Mr. Shumaker.
This appeal is from a judgment in favor of the defendant dismissing the complaint of the plaintiff, Louis Lazarus, doing business as Sea Coast Steel Supply Company.
This litigation began as a suit for damages for the loss of profit by Mr. Lazarus in connection with an alleged contract in which Mr. Lazarus was the seller and the defendant American Motors was the buyer. Mr. Lazarus complains that American Motors broke its contract by refusing to accept delivery of steel in spite of the existence of a valid sales contract between the parties.
On January 4, 1960, American Motors issued a purchase order addressed to Jackson Steel Corporation for steel in various quantities and sizes to be delivered by January 15, 1960. Ralston Steel Corporation, Skokie, Illinois, was designated as the place of delivery, since American Motors was not equipped to handle certain processing and storage which was done on their behalf by Ralston Steel Corporation. The purchase order contained the following provisions, among others:
"In accepting this order you agree to all of the terms and conditions set forth both on face and reverse side hereof. You further agree that either the delivery of any item covered by this order or the written approval of this order shall constitute an acceptance thereof.
". . .
"This material is for immediate shipment only to sizes, gauges, and quality specified. Any variance subjects any or all of this order to cancellation. All deliveries to be completed on or before 1-15-60."
The pertinent background facts are that there had been a nationwide steel strike in 1959, and at the time of the disputed sales contract, the supply of steel was short. Jackson Steel had previously done business with Sea Coast Steel Supply Company, which is a sole proprietorship operated by Mr. Lazarus. Sea Coast had supplied Jackson Steel with steel in the past but had had difficulty obtaining payment. Jackson Steel asked Sea Coast to supply the steel described in the purchase order issued by American Motors. Sea Coast was willing to supply the steel to American Motors but not to Jackson Steel because of the unfavorable past credit experience. Sea Coast wanted payment directly from American Motors and was willing to pay a commission to Jackson Steel. At the trial, Mr. Lazarus testified that he actually paid a commission to Mr. Harris, an officer of Jackson Steel.
On January 12, 1960, after a conversation between the plaintiff and a representative of American Motors, a changed purchase order was issued, naming Sea Coast Steel Supply in place of Jackson Steel.
On January 15, 1960, the name of the vendor in the purchase order was somehow changed back from Sea Coast to Jackson Steel, but there was no testimony at the trial to explain the purpose of such change.
On January 22, 1960, the purchase order was again changed so as to extend the delivery date to January 25, 1960. Although this change order was received by Sea Coast, it still bore the name of Jackson Steel; Mr. Lazarus testified that the thought that the order had been changed back to Jackson Steel never occurred to him. On January 25, 1960, American Motors addressed a letter to Jackson Steel, with a copy directed to Sea Coast Steel, which extended the delivery date through Saturday, January 30th.
Numerous deliveries of steel were made by Sea Coast to Ralston Steel pursuant to the purchase order, and payment was made by American Motors directly to Sea Coast. However, 565 tons of steel included in the purchase order were not delivered by Sea Coast, and such steel is the subject of this dispute.
On January 26, 1960, Sea Coast issued purchase orders for the 565 tons of steel to Union Steel Corporation of Chicago. The purchase orders to Union Steel also specified Ralston Steel at Skokie, Illinois, as the place of delivery. The orders were acknowledged by Union Steel on the same day. Sea Coast's purchase orders provided, "This order is being given with the understanding that all of the above material must be loaded on trucks, ready to roll by Friday, January 29, 1960 (early Friday morning)." The acknowledgments bore Union Steel's notation directed to Sea Coast, "You will release by 12 noon January 28, 1960, or cancel at no charge."
On Wednesday, January 27th, Mr. Lazarus telephoned Henry Lerman, an employee of Ralston Steel, to advise him of the impending delivery to Ralston Steel on Saturday, January 30th. Mr. Lerman told Mr. Lazarus that Ralston Steel would not be open January 30th. Mr. Lazarus requested that Mr. Lerman arrange to have the plant open to accept delivery of the steel and asked Mr. Lerman to telephone him with respect to whether such arrangements could be made. Mr. Lerman said that he would talk to Mr. Rubin, an officer of Ralston, and to Mr. Foulks, the purchasing agent for American Motors; he would then call Mr. Lazarus back.
On Thursday, January 28th, Mr. Lazarus placed telephone calls to Mr. Lerman and to Mr. Rubin, but neither called back. Mr. Lazarus also called and talked to Mr. Foulks, who Lazarus described as "quite explosive." Mr. Foulks informed Mr. Lazarus that there was plenty of steel available at a price cheaper than prescribed by the American Motors purchase order and that he would not facilitate the delivery. Mr. Foulks said, "If you can't get the steel in there by Friday, why just forget it, you've shipped enough."
After the conversation with Mr. Foulks, Mr. Lazarus canceled his orders with Union Steel for the 565 tons of steel. Mr. Lazarus explained the cancellation by saying that he realized after the conversation with Mr. Foulks that the delivery could not be consummated. He said that if he had disregarded the conversation with Mr. Foulks, Union Steel would have started loading the steel on trucks for delivery Friday night and all day Saturday. Mr. Lazarus explained that once loaded on the trucks, he would have owned the steel and would have been "stuck with it" because the market had dropped. He claimed that his cancellation action was taken to minimize damages.
On Friday, at 5 o'clock p.m., Mr. Lerman called Mr. Lazarus. Mr. Lerman said that he had talked to Mr. Foulks, and Mr. Foulks had directed him to remain open on Saturday to receive any further shipments. Although Mr. Foulks denied directing Ralston Steel concerning its working hours, Mr. Foulks admitted that there may have been other instances in which he had requested Ralston Steel to stay open to receive a late shipment. The trial judge in his memorandum decision stated that Ralston Steel could have received the 565 tons of steel in one working day. Mr. Lazarus acknowledged that Ralston Steel was in fact open on that Saturday.
When Mr. Lerman telephoned at 5 o'clock p.m. Friday, Mr. Lazarus pointed out to him that because trucks for shipping the steel were scarce, it was too late for Sea Coast to be able to deliver the steel.
Mr. Lazarus testified that he had agreed to pay Mr. Harris of Jackson Steel a commission on the sale of the steel to American Motors. Mr. Lazarus claimed that he paid Mr. Harris $8,200 as a commission for steel that he had actually delivered and $8,600 as a commission for steel which was not delivered. Mr. Lazarus claimed that the commission of $8,600 was paid out of what he expected to realize from his profit on the sale of the 565 tons to American Motors.
Mr. Lazarus testified that the commission agreement required him to pay Jackson Steel 50 percent of his profit. Although Mr. Lazarus claimed that his profit was to be $41,200, he paid only $8,600 instead of one half of $41,200 because the latter figure was not net profit. He said he had other commission payments to make to people who were "going along" with him on payment, abiding the outcome of this action.
The plaintiff requested that the trial court determine the amount of his damages assuming that there was a valid sales contract existing between the parties. The trial court made this finding and accepted the measure of damages computed by Sea Coast. The defendant did not file a notice of review. Sec. 274.12(1) and (2), Stats.
In order for the plaintiff to prevail, it was incumbent upon him to establish the existence of a contract with the defendant. The plaintiff contends that an enforceable contract was created under either of the following theories: (a) A contract arose when the plaintiff accepted the defendant's purchase order and agreed to deliver steel within the terms of the contract; or (b) a contract arose when, under the inducement of the defendant's offer, the plaintiff took substantial steps to perform.
The issue before this court is to be determined by the law of Illinois. The order called for the delivery of steel in Illinois. If there was a contract, it was accepted in Illinois. See Estate of Knippel (1959), 7 Wis.2d 335, 342, 96 N.W.2d 514; State ex rel. Webster Mfg. Co. v. Reid (1922), 177 Wis. 612, 616, 188 N.W. 67.
The trial court concluded that the purchase order was a unilateral offer which was revoked before there had been acceptance and without having induced substantial action on the part of the plaintiff. We agree with such conclusions.
Was There a Bilateral Contract?
The purchase order contained the following provision:
"You further agree that either the delivery of any item covered by this order or the written approval of this order shall constitute an acceptance thereof."
Thus, without making delivery, Mr. Lazarus could have created an enforceable bilateral contract by submitting a written approval of the purchase order. The trial judge's determination that written approval was not given by Mr. Lazarus is fully supported by the record.
The companies involved in this litigation are all engaged in the business of buying or selling large quantities of steel. In view of the steel shortage which then existed, it is completely understandable that Mr. Lazarus chose not to utilize that portion of the purchase order which would have permitted him to create an enforceable contract. The trial judge was warranted upon this record in concluding that Mr. Lazarus did not bind himself to deliver the steel or to be liable for the consequences.
Judge DECKER noted that the issuance of the purchase order gave the offeree "a license to hunt steel for which payment would be made on delivery." When the trial judge added that it "does not require clairvoyance to understand why" Mr. Lazarus did not avail himself of the opportunity to create a bilateral contract, he undoubtedly had reference to the market condition which existed at the time of the steel shortage. This is the practical construction of a "rational business instrument" which we referred to in Bitker Gerner Co. v. Green Investment Co. (1956), 273 Wis. 116, 120, 77 N.W.2d 549.
Was There Substantial Performance?
The true thrust of the plaintiff's appeal is embodied in his contention that it would be unjust to deny him recovery, since the defendant's offer reasonably induced substantial action on the part of the plaintiff and caused him to change his position to his financial detriment. A unilateral contract will be legally enforceable when it has induced substantial performance or when it has brought about a change of position on the part of the offeree. Restatement, 1 Contracts, p. 110, sec. 90.
Further, if an offer for a unilateral contract is made, the offeror may be bound if the offeree gives or tenders part of the consideration. Restatement, 1 Contracts, p. 53, sec. 45. The reason for the rule is stated by Corbin in his treatise on contracts:
"The reason for the rule . . . is, not that part performance or tender is the `equivalent' of full performance, but that honorable men do not repudiate their promises after part performance has been given or tendered." 1 Corbin, Contracts, p. 264, sec. 63.
However, from the record it is clear that there was no actual tender of the steel by Mr. Lazarus.
The trial court concluded that Mr. Lazarus did not incur any detriment or undertake any substantial action prior to the revocation of the offer. Judge DECKER found incredulous the plaintiff's contention that the payment of $8,600 was meant to be a commission on the expected profit from this transaction. The plaintiff contends that the trial court erred in disbelieving this testimony, since it was uncontroverted in the record.
While it is true that the record unequivocally establishes that Mr. Lazarus paid $8,600 to Mr. Harris, it does not follow that the court was obliged to adopt the import of that testimony. Mr. Lazarus and Jackson Steel had a long history of business dealings. Mr. Lazarus even had some difficulty in procuring timely payments from Jackson Steel. The mere fact that the money was paid to an officer of Jackson Steel did not prevent the trier of fact from disbelieving that the payment was an outgrowth of the transaction now before the court. It was within the discretion of the trial judge to find that the testimony of Mr. Lazarus as to the purpose of this payment was incredible in view of the intertwined business dealings between Mr. Lazarus and Mr. Harris.
"Positive uncontradicted testimony as to the existence of some fact, or the happening of some event, cannot be disregarded by a court or jury in the absence of something in the case which discredits the same or renders it against the reasonable probabilities."
It is also contended by the plaintiff that his commitment to purchase the steel from Union Steel Corporation constituted a substantial action so as to make his contract with the defendant enforceable. At the oral argument, plaintiff's counsel expressed the opinion that the agreement of Mr. Lazarus to buy steel from Union Steel Corporation was legally enforceable by the latter corporation.
This contention is not affirmatively supported by the record. Mr. Lazarus testified that he would have been "stuck" with the steel if he had not canceled, but there is no proof that he was able to cancel only because of Union Steel's desire to maintain his good will. The fact is that Union Steel accepted the cancellation without challenge. It is noted that Union Steel, in acknowledging the purchase order from Mr. Lazarus, wrote the following: "You will release by 12 noon January 28, 1960, or cancel at no charge." The meaning of this clause was not explored at the trial, but it would seem to suggest that Mr. Lazarus had withdrawal rights.
Mr. Lazarus also contends that the defendant prevented him from completing his contract by announcing in advance a refusal to accept delivery on Saturday. In view of the fact that the contract had not been accepted or substantially acted upon by the plaintiff at the time of such "prevention," we find that this did not constitute a legal wrong of which the plaintiff may complain. Similarly, the revocation of the offer was made at a time when there had been neither formal acceptance by the plaintiff nor a substantial change of position. Since Mr. Lazarus did not see fit to make a formal acceptance of the offer, he was in effect "gambling" that American Motors would not revoke its offer by canceling the purchase order before he made delivery.
We recognize that upon different facts it would be possible for a seller of steel to have altered his position so as to effectuate the equitable considerations inherent in sec. 90 of the Restatement. Under all the circumstances of this case, however, this court is satisfied that the offer was withdrawn in time so as to avoid any obligation under the offer to the plaintiff. The preparations which Mr. Lazarus made in order to enable him to perform did not give rise to a legal obligation even under the liberal application of the rule of substantial performance.
In view of the fact that we find that there was no enforceable contract, it is unnecessary to consider the issue of damages.
By the Court. — Judgment affirmed.