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Anheuser-Busch Inc. v. Grovierstarr Produce Co.

April 24, 1942


Appeal from the District Court of the United States for the District of Kansas, Second Division; Richard J. Hopkins, Judge.


Before PHILLIPS, BRATTON, and MURRAH, Circuit Judges.

MURRAH, Circuit Judge.

Based upon the breach of an alleged oral contract, whereby the appellee (herein called Grovier-Starr), became the wholesale distributor for the products of the appellant (herein called Anheuser-Busch), as long as Anheuser-Busch manufactured beer and Grovier-Starr faithfully performed its services in business, Grovier-Starr recovered a judgment for $50,019.43 in the District Court of Kansas, Anheuser-Busch has appealed.

Anheuser-Busch denied the existence of a contract as alleged or the authority of its agent to make the same on its behalf, but admitted that on the date mentioned in the complaint it entered into an arrangement with Grovier-Starr, by which it agreed to and did sell to Grovier-Starr its products for purposes of resale in the designated territory on an order-to-order and day-to-day basis, and only so long as the arrangement was mutually satisfactory between the parties, terminable at will by either party. By motion for summary judgment, Anheuser-Busch contended that if a contract was entered into on the date and as alleged by Grovier-Starr, the same was modified during the latter part of 1935 by another oral agreement whereby Grovier-Starr was allotted additional territory known as the Dodge City Territory on the same terms and conditions as the original contract, and again modified in May 1937 by letter written to and accepted by Grovier-Starr, whereby certain counties originally allotted and designated as the Hutchinson-Great Bend Territory were eliminated from the arrangement and additional counties tributary to the Dodge City Territory were added, which arrangement or agreement specifically provided for an order-to-order and day-to-day relationship, terminable at will by either party. No order or judgment was entered on the motion for summary judgment.

The detailed facts are essential to the proper consideration of the legal questions involved. For many years prior to the dates herein complained of Grovier-Starr was engaged in the wholesale produce business with its headquarters at Hutchinson, Kansas. It serviced a trade territory which included parts of Western Kansas, Oklahoma and Texas. Soon after the sale of beer was legalized in Kansas, it became the distributor for Blatz beer for several months in the Summer of 1933. In July or August of the same year, E. J. Grovier, as president of the company, addressed a letter to Anheuser-Busch in St. Louis, Missouri, soliciting the distributorship for Budweiser beer in the territory served by Grovier-Starr. The letter was referred to W. L. Suycott, district manager for Anheuser-Busch in the territory serviced by Grovier-Starr, whose duty it was to supervise sales and recommend dealers. Suycott called at the office of Grovier-Starr on or about September 1, 1933. At the ensuing conference with E. J. Grovier, Suycott explained that it would be necessary for Grovier-Starr to stock and sell only Anheuser-Busch products, to maintain year-round service which would require the purchase of additional equipment, the employment of additional salesmen; and the utilization of its cold storage facilities which it then owned and operated in connection with its produce business; to promote the sale of the products in the designated territory by opening new retail outlets, and to install and maintain advertising, all agreeably to the policies and under the supervision of Anheuser-Busch.

Grovier-Starr was favorably located for the nees and purposes of Anheuser-Busch and the prospects were mutually satisfactory. E. J. Grovier testified that after Suycott had explained the requirements and demands of his company, he inquired of Suycott that if Grovier-Starr would stock and handle only Anheuser-Busch products and would purchase additional equipment, hire additional salesmen and adequately provide for the servicing of the territory, what assurance did Grovier-Starr have that the agreement would not be cancelled and the distributorship discontinued, whereupon, according to Grovier, Suycott stated: "You will be here * * * will have the contract for this territory to sell beer as long as we make it and as long as you faithfully perform your services in the business." According to Suycott, he stated that "Anheuser-Busch would furnish them with beer f.o.b. our dock in St. Louis on a car-to-car basis, that the account would be theirs as long as mutually satisfactory and we discussed this. Mr. Grovier asked me if we gave a contract and I said that the account was for as long as it was mutually satisfactory."

Thus is presented clearly the only substantial conflict in the facts which give rise to the controversy. It is established without substantial dispute that Suycott agreed to recommend Grovier-Starr as the exclusive distributor for Anheuser-Busch products for a territory which embraced certain named counties. At the same time Grovier-Starr ordered two car loads of beer, giving its check for the purchase price therefor, to be shipped through a Missouri permit. In a letter dated September 3, 1933, Suycott reported to the officer at St. Louis stating that he had called upon Grovier-Starr and had taken "their application for the attached territory, subject to your approval." Nothing was said in this letter concerning the duration of the proposed arrangements. Thereafter Suycott was authorized by the St. Louis office to confirm the appointment and the beer was shipped as ordered. Grovier-Starr "just quit" handling Blatz beer and Anheuser-Busch cancelled out a distributor at Great Bend, Kansas and allotted this territory to Grovier-Starr.

The parties operated under this oral agreement until May 1, 1937, during which time Grovier-Starr devoted its best efforts towards the promotion and sale of Anheuser-Busch products. More than five hundred retail outlets were established and the business was mutually profitable and satisfactory. In 1934, by an oral arrangement, certain counties tributary to Dodge City, heretofore serviced by another distributor, were added to the territory and thereafter serviced by Grovier-Starr. All arrangements or agreements between the parties were oral and it is established without dispute that all other agreements or arrangements which Anheuser-Busch maintained with wholesale distributors throughout the United States, including the seventy-five distributors under the supervision of Suycott, were on an order-to-order and day-to-day basis, terminable at will by either party. It is also established without dispute that such was the general policy of the company and that no representative of Anheuser-Busch had any authority to enter into any arrangement other than on an order-to-order and day-to-day basis.

In March 1937 Grovier-Starr heard "rumors" that Mr. Burdick, representative of Anheuser-Busch and successor to Suycott in this territory, contemplated discontinuing further relations with Grovier-Starr. By telephone it was advised by Burdick that if and when such action was contemplated, it would be informed, and that "Anheuser-Busch did not do business in that way"; nothing was said concerning a permanent or continuous contract. The rumors persisted and in April Grovier and Starr conferred with Mr. Busch, vice-president of the company, in St. Louis. Mr. Busch observed that the business relation had been quite satisfactory and promised to investigate the matter thoroughly. Again, nothing was said between the parties concerning the duration of the relationship. Soon thereafter Burdick informed Grovier-Starr at its office in Hutchinson that he was cancelling the distributorship as of May 1, 1937 and that Mr. Hettinger, a former employee of Grovier-Starr in charge of beer sales, was to be designated as the distributor for the counties embraced within the Hutchinson-Great Bend Territory. Grovier and Starr remonstrated with Burdick and when pressed for his reasons, Burdick answered "well, the only reason I have got is that Hettinger is going to leave you and he is going into business and I don't want him for a competitor." At that time, nothing was said concerning the duration of the original arrangement, neither did Grovier-Starr contend that it had a contract for a distributorship as long as Anheuser-Busch made beer and it faithfully performed its services in business.

At the same conference, it was agreed that Grovier-Starr would continue as the distributor for the Dodge City Territory with certain named counties added thereto. This territory was far less profitable than the Hutchinson-Great Bend Territory, in fact the Hutchinson-Great Bend Territory was the heart and geographical center of the trade territory serviced by Grovier-Starr, and undoubtedly represented the profitable part of the busienss. The St. Louis office approved the arrangements for the Dodge City Territory by a letter dated May 5, 1937 in which the arrangements were stated in detail, including a recital, "we shall continue the policy of working with our distributors without entering into any contracts, franchises or continuous relationships, but it will be agreed that our distributors are wholesale dealers in our beers, the relationship to be on the order-to-order basis, and may be abrogated at will either by yourselves or by ourselves. We found this basis of relationship with our distributors happy and most profitable throughout our business history, and have resolved to continue it. * * * " This arrangement was confirmed by Grovier-Starr and they continued to operate under it until the arrangement was discontinued by mutual consent. Again Grovier-Starr was silent concerning any agreement for permanent or continuous relationship. Without further protest, Grovier-Starr continued to operate in the same trade territory as a wholesale produce dealer and as distributor for different brands of beer until it discontinued business in October of 1938, but the beer business in the Hutchinson-Great Bend Territory was not profitable to it because it was unable to convert the retail outlets it had created for Anheuser-Busch to a competitive brand of beer.

It was not until after it had discontinued business in 1938 and had employed counsel that Grovier-Starr informed Anheuser-Busch that it was contending for a contract on any basis other than the agreement outlined in the letter addressed to it by Anheuser-Busch on May 5, 1937.

The trial court found that Suycott was the only agent or representative of Anheuser-Busch who talked with or conveyed any information to Grovier-Starr's officers concerning the agreement; that whatever arrangements were made with Grovier-Starr were made by Suycott who, with the approval of Anheuser-Busch, appointed Grovier-Starr distributor in the designated territory and agreed that Grovier-Starr would be the exclusive distributor for Budweiser beer in the designated territory so long as Anheuser-Busch made beer and the plaintiff faithfully performed its services in business. The trial court concluded as a matter of law that W. L. Suycott had authority from Anheuser-Busch to enter into the contract; that after the termination of the contract on or about May 1, 1937 Grovier-Starr made a new agreement with defendant for the wholesale distribution and sale of Anheuser-Busch products in what is known as the Dodge City Territory; that this agreement was on an entirely different basis and was terminated by mutual consent on or about August 1, 1937. The trial court specifically found that the agreement of May 1, 1937 did not operate to waive any claim which Grovier-Starr had for damages against the defendant by reason of its breach of the alleged original contract of September 1, 1933, and that the said original contract was wrongfully breached by its unauthorized cancellation on May 1, 1937. On the basis of its sales experience and net profits as shown by the record, the court calculated the measure of the damages and rendered judgment therefor.

On appeal, the appellant contends (1) that the findings of the court as to the contract and its duration is clearly erroneous; (2) Suycott had no authority to bind Anheuser-Busch by an agreement giving Grovier-Starr exclusive sale of its beer as long as Anheuser-Busch made beer and Grovier-Starr faithfully performed its services; (3) the contract as contended by Grovier-Starr and as found by the court was terminable at will by either party as a matter of law and unenforceable because of lack of mutuality; and (4) the alleged ...

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