The opinion of the court was delivered by: John E. Miller, District Judge.
This case was tried to the Court, without a jury, on October 2,
1956, and at the conclusion of the trial the Court took the case
under advisement in order to study the exhibits introduced by the
parties. And now the Court, having considered the pleadings, ore
tenus testimony of the witnesses, exhibits, and briefs of the
parties, makes and files herein its findings of fact and
conclusions of law, separately stated.
The plaintiff is a Nevada corporation. The defendants, B.T.
Fooks, Gulnare Fooks, and Frances Sue Fooks are citizens of
Arkansas and residents of the Western District of Arkansas, El
Dorado Division, and are doing business as a partnership under
the name Grapette Products Company. (Hereafter the Grapette
Products Company will be referred to as the defendant.) The
Grapette Company, Inc., is an Arkansas corporation doing business
in the El Dorado Division of the Western District of Arkansas.
The amount in controversy, exclusive of interest and costs,
exceeds the sum of $3,000.
After some preliminary negotiations, on December 31, 1952, the
plaintiff entered into an agreement with defendant, said
agreement being guaranteed by The Grapette Company, Inc., under
which plaintiff agreed to sell to defendant thirty thousand gross
of glass bottles manufactured especially for defendant, said
bottles to be packed in labeled paper cartons. Among other things
the contract provides:
"The `Seller' hereby agrees to sell to the `Buyer'
and the `Buyer' hereby agrees to purchase from the
`Seller' thirty thousand (30,000) gross `Clown'
design bottles fourteen and seven-eights (14 7/8)
ounces in weight plus or minus one-half (½) ounce at
the price of Seven Dollars and Nineteen Cents ($7.19)
per gross packed in one dozen `C' style cases;
provided, however, if the `Buyer' desires a bottom
pad added, making this an `L' style case, then in
such event the price shall be Seven Dollars and
Thirty-three cents ($7.33) per gross, packed in one
dozen `L' style cases.
"The prices quoted above are f.o.b. Camden,
"Delivery shall be made at Camden, Arkansas as
"Ten thousand (10,000) gross on a `make and ship'
basis, payable net cash thirty (30) days or one
percent (1%) cash discount in ten (10) days from date
of each invoice, with Los Angeles exchange.
"The balance of this order or twenty thousand gross
shall be warehoused
by `Seller' at its Sand Springs Oklahoma Warehouse up
to July 15, 1953 at which time `Buyer' agrees that it
will have requested and taken delivery of said entire
twenty thousand (20,000) gross. `Seller' agrees to
deliver entire amount (20,000) gross by July 15,
1953. If, however, the entire amount has not been
produced by that date `Buyer' may cancel such
unmanufactured part, by notice in writing to
`Seller'. Billing times for said twenty thousand
(20,000) gross shall be as follows: one-third (1/3)
to be billed on May 20th, 1953, one-third (1/3) to be
billed on June 20th, 1953, and the final one-third
(1/3) to be billed on July 20th, 1953."
Initial production did not begin until the molds for the
bottles were received, and apparently the first bottles were
produced on March 21, 1953 (plaintiff's Exhibit No. 2).
Thereafter plaintiff continued to produce the bottles under the
On May 6, 1953, defendant placed an additional order with
plaintiff for 20,000 gross of clown-design bottles. On June 23,
1953, defendant ordered 5,000 empty cartons from plaintiff to be
used in replacing cartons that had been damaged in shipment,
storage, etc. On June 26, 1953, plaintiff acknowledged the order
for 5,000 cartons, stating that "We have placed an order with our
box supplier for cartons to be delivered Monday, June 29." These
cartons were ordered by plaintiff from Southwest Box Company on
June 25, 1953 (plaintiff's Exhibit 2-A), and apparently were
delivered to plaintiff on July 1, 1953, along with another order
of 23,000 cartons from Southwest Box Company (plaintiff's Exhibit
2 indicates receipt of 28,123 cartons on July 1, and plaintiff's
Exhibit 2 indicates that plaintiff had requested shipment from
Southwest Box Company of the 5,000 cartons on June 29 and also
23,000 cartons on July 1). It appears from plaintiff's Exhibit 2
that these two orders were both filled on July 1.
However, for some unexplained reason only 2,500 of these
cartons were shipped by plaintiff to defendant. In this
connection, plaintiff's Exhibit 2 shows the shipment of these
cartons (see lower right-hand corner of page 2 of the Exhibit),
but the exhibit does not show the date on which the shipment was
On July 13, 1953, at 9:32 a.m., defendant sent plaintiff the
following telegram: "Stop manufacture Grapette Products clown
bottles until further notice. Advise Western Union inventory
glass on hand. Our warehouses are full."
On July 14 defendant sent plaintiff the following telegram: "Do
not ship bottles until further notice. Our warehouses and plant
completely filled. No place to unload. Situation should be
alleviated in week or ten days. You will be advised." On the same
day, Dolphus McCord, plaintiff's Sales Representative, contacted
Mr. B.T. Fooks, partner and General Manager of defendant, and
informed him of the balance of cartons and bottles which
plaintiff had on hand. Fooks informed McCord that the situation
would be alleviated in a short time.
On August 7, 1953, M.R. Kerr, Vice President of plaintiff
corporation, wrote Mr. Fooks as follows:
"We wish to review our initial order status with
your good company. On July 13, our Oklahoma plant
received the following wire and we quote:
"`Stop manufacture Grapette Clown bottle until
further notice. Advise warehouse inventory glass on
"Our Mr. R.F. Kalbus 'phoned you and gave you a
preliminary analysis of our stock on hand and
material inventory position; then our Mr. D.W. McCord
made a trip into Camden to discuss your situation and
await further instructions.
"We were advised by Mr. McCord, after his personal
visit to Camden, that this total quantity of 6,000
gross should be sufficient stock to meet the glass
requirements of your company through the month of
September along with the glass that you now have on
"We were advised that you were going to analyze
your production, sales and stock on hand and would
then advise us of your findings so that we may
intelligently schedule production and have ample
stock on hand to meet your requirements as a result
of this analysis. Therefore, we would appreciate your
advising us of the results of this analysis if it has
already been made. If there is any additional
information that we can supply you that will assist
you in making this analysis please do not hesitate to
contact the writer.
"May we express our appreciation for the
opportunity of doing business with you and looking
forward to being of further assistance, we are"
On August 15, 1953, McCord talked to Fooks regarding a
complaint on some over-sized bottles, and also discussed the
possibility of filling the empty cartons.
On August 28, 1953, Mr. Fooks wrote to plaintiff explaining the
difficulties defendant had experienced in estimating the amount
of raw material inventory to be carried and in estimating the
volume of business to be expected. After explaining some of the
problems incurred by defendant, Fooks stated:
"The foregoing information has been given you so
that you might be familiar with our operation due to
the request which we are making of you as follows:
"Our present account with you amounts to
$14,007.46, also the amount of 1,381 gross of glass
which you have on hand at your factory at $7.33
amounting to $10,122.73 which, when shipped, will
reflect a balance due you of $24,130.19.
"We will be glad to make payment of $9,130.19
immediately provided you are willing to carry the
amount of $15,000.00 on trade acceptance without
interest or on open account until May 1st, in which
event we will begin the removal of the 1,381 gross of
glass which you have on hand immediately.
"We do not have room to store this glass, but will
go to the expense of leasing another building to
store glass from your factory if proposition
submitted is satisfactory.
"We dislike making such a request, but the
condition as set out above was beyond our control. We
believe that the volume business given your company
in the past and the future business you will receive,