Ceraseal Chemical Corp. v. Design Engineering Co

The above-entitled matter was tried to the court, at the City of St. Paul, Minnesota, on the 8th, 9th and 12th of March, 1951, further trial being then continued to the 24th of April, 1951, upon which date the trial was completed.

Plaintiff brings this action for money had and received, and for conversion of property claimed to be owned by it. Defendant, by answer, alleges payment in full of all accounts due plaintiff, and denies the conversion. It also counterclaims for alleged breach of contract.

At the trial, and before testimony was taken, defendant admitted a credit balance in favor of plaintiff in the sum of $ 4,080.60, but contends plaintiff is indebted to defendant in excess of said balance by reason of the claimed breach of contract. Defendant assumed the burden of proving its counter-claim, as it admitted that it had received $ 4,080.60 as an advance by plaintiff, but this has been credited by defendant to expense incurred in connection with the contract they claim plaintiff breached. Throughout the trial counsel referred to plaintiff as 'Ceraseal' and to defendant as 'Design.' Consistent therewith, the parties will hereinafter be designated in like manner.

Design is a Minnesota corporation which engaged in manufacturing products, including a portable glycolator or vaporizer, at its plant in St. Paul, Minnesota.

Ceraseal is an Indiana corporation. Its agents, impressed with the possibilities of marketing Design's vaporizers, conferred with agents of Design from time to time, representing that Ceraseal would engage in an extensive advertising campaign with a view to selling the vaporizers to the public, and particularly to poultry raisers. Ceraseal and Design agreed on a price for the vaporizers and an order for 1,000 units initiated the agreements and disagreements that followed. Visits in person and by telephone disclosed that while Design was possessed of engineering skill and commendable industry, it lacked the capital necessary to keep step with Ceraseal's highpowered salesmanship. As a result, Ceraseal advanced money to Design, which furnished some needed working capital, and which was to be applied to orders supplied by Ceraseal as distributors of the product. Ceraseal complained that production by Design was falling too far behind purchase orders forwarded for shipment to the trade, and additional telephone conversations resulted in a conference between the parties at Ceraseal's offices on or about June 6, 1949. Not a scratch of a pen was made by either party to express the understanding and intent of the parties, until the summer of 1949.

Ceraseal's anxiety over money advanced Design and not accounted for led to some discussion between the parties relative to the need for an understanding with reference to 'Sight Draft Bill of Lading shipments.' Ceraseal evidenced a studied attempt to avoid any positive commitment towards liability for orders except as obtained by it from the trade, but finally did represent to Design that Ceraseal could handle 500 vaporizers per week. By the end of June, 1949, it became obvious that what each party had originally visualized with so much enthusiasm was headed for the shoals. Ceraseal had advanced money and obtained orders, and Design had purchased parts and made preparation for production of 2,500 or 3,000 units per month.

Ceraseal sent its top officers of Design, on July 6, 1949. At the trial said officers were witnesses, and they were thoroughly disagreed as to what was said, done and agreed upon. However, the day following this meeting Ceraseal dispatched a letter to Design, purporting to summarize the conversations of the officers present.

unanswered by Design, there is nothing in the record to support the claim of conversion by Ceraseal.

In support of Design's counterclaim there is nothing of importance except the testimony of its officers to the effect that they advised Ceraseal verbally that Design had to have orders for 3,000 units per month, and that without formal orders therefor the silence of Ceraseal amounted to acquiescence. Design emphasizes that it went into production at Ceraseal's request and discontinued manufacturing for all other customers, and to that end had invested about $ 25,000. Design admits that at the time of the July 7th meeting it had a credit balance in excess of $ 7,000 and would need about $ 4,100 of that to keep production going. Design also admits they had no authority to collect from Ceraseal's customers by sight draft, but did so because Ceraseal did not oppose this method of financing the deal. Ceraseal contends that the continuation of this practice prompted its officers to arrange for the meeting of July 7th. At this time Ceraseal claims Design was behind 800 orders and that the only mention of '3,000' was the remark of Design's president that in order to manufacture 500 units per week they would be required to stock parts for 3,000 units, and that, according to Ceraseal, was Design's affair, as Ceraseal was only 'interested in schedules.'

The foregoing discussion of the evidence and contentions of the parties will suffice to point out the sharp conflict between the testimony of the parties.

Taking up first Ceraseal's claim of conversion, the record impresses me that there was no conversion. There were no earmarks on the vaporizers connecting them with Design, and Design did not authorize their return for cleaning. It does not appear that there was exercise of complete ownership and dominion over the 64 units by Design. True, it stripped some of them, looking for claimed defects, and finding they were returned for cleaning only, they were left for Ceraseal or the owners to pick up. Certainly a failure to function, attributed to dirt from the customers' premises, does not constitute a defect covered by a warranty of the manufacturer, and failure of Design to reassemble and return the units under the circumstances here existing does not constitute conversion. The action for conversion is dismissed.

It is so ordered.

The $ 4,080.60 had and received by Design must be accounted for to Ceraseal, unless the evidence sustains Design's counterclaim. Both parties are at fault for not reducing there contract to a formal writing. They did not do this. That is why they are now so far apart in their claims and contentions. That Design may have veen misled by the sales talk of Ceraseal is easy to understand. But there is no justification for Design's inexcusable neglect to answer the one-sided correspondence initiated by Ceraseal and quoted above. Where the evidence is so controversial as the record of the instant case discloses, the trier of the facts must assume that the statements made by Ceraseal in the correspondence referred to, and which remained unanswered up to the time of trial, tips the scales weighing the evidence so that it inclines towards Ceraseal. The burden on the defendant in support of its counterclaim is not carried, and the counterclaim must be, and the same hereby is, dismissed.

Costs are not allowed to either party.

It is so ordered.

Plaintiff may submit findings of fact, conclusions of law, order for judgment in the sum of $ 4,080.60 in favor of plaintiff, and from of judgment, consistent with the foregoing.

An exception is allowed.