Amfac Foods, Inc. v. International Systems & Controls Corp.

630 P.2d 868, 52 Or. App. 907, 1981 Ore. App. LEXIS 2865
CourtCourt of Appeals of Oregon
DecidedJune 29, 1981
DocketA7705-06471, CA 16706
StatusPublished
Cited by3 cases

This text of 630 P.2d 868 (Amfac Foods, Inc. v. International Systems & Controls Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals of Oregon primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Amfac Foods, Inc. v. International Systems & Controls Corp., 630 P.2d 868, 52 Or. App. 907, 1981 Ore. App. LEXIS 2865 (Or. Ct. App. 1981).

Opinion

*909 THORNTON, J.

This is an action for damages for alleged breach of a contract to supply and install certain equipment in connection with the construction of a large potato processing plant. The jury returned a verdict for plaintiff. Defendants appeal. We affirm.

Plaintiff is a food processing firm. On the strength of a contract with the McDonald’s restaurant chain, a longtime customer, plaintiff decided to build a large plant at Hermiston to process a new potato product. Defendant Flodin, Inc. (Flodin) is an engineering and manufacturing firm specializing in building food processing machinery, which had built machinery for plaintiffs other plants in the past. In 1973 Flodin was acquired by defendant International Systems and Controls, Inc. (ISC), a Texas-based holding company.

On April 29, 1976, plaintiff entered into a contract with an engineering firm named Austin (which is not a party to this action) to build the plant. At the urging of plaintiff, Austin contracted with Flodin, which was to furnish the major portion of the line machinery. A purchase order was accordingly prepared by Austin bearing a date of June 26, 1976. This order was never signed by Flodin, but Flodin commenced work under its terms and received advanced partial payment. On December 7,1976, a further written agreement was drawn by Austin and Flodin. No new work was required under this order. Flodin had notified Austin that it was short of cash and would be forced to stop production on the machinery if it did not solve its cash flow problems. Owing to its expedited production schedule, plaintiff agreed, and Austin signed the December 7 purchase order. It granted Flodin a $100,000 increase in total price and limited certain aspects of Flo-din’s liability, which became the basis for several affirmative defenses at trial.

The project experienced numerous delays. Delivery by Flodin was not completed until the second week of January, 1977. The equipment was found to be in unfinished condition upon arrival, and plaintiff claimed substantial damages for repair of defects and consequent delays in *910 installation of equipment from other vendors. In January, 1977, plaintiff was informed that Flodin was to be liquidated (which was done in December, 1977). There was testimony that Flodin’s plant remained in operation until May, 1977, for the purpose of completing two other orders upon which advance payment had been made by the purchaser and which, therefore, could not be cancelled.

The gravamen of plaintiffs complaint was that defendant ISC had interfered substantially with Flodin’s performance of the contract and had been a substantial cause of the delay and the alleged defects in the machinery installed at the new plant. Defendant ISC denied the interference and consequent damages and asserted that there was no contractual relationship between plaintiff and ISC and, therefore, ISC was not liable.

Defendants make a total of 13 assignments of error:

1) Denying defendants’ motion for directed verdict on the grounds (a) that plaintiff itself had no contract with defendants and (b) that ISC was not liable on the contract of its subsidiary, Flodin.

2) Instructing the jury that ISC could be held liable as a parent corporation if an injustice to plaintiff might otherwise result from ISC’s control of its subsidiary;

3) Failing to give an instruction predicating ISC’s possible liability upon a specific finding of fraud or dishonesty;

4) Failing to instruct the jury on the significance of the purchase order issued after the original agreement;

5) Failing to instruct the jury on the application of the parol evidence rule (ORS 72.2020);

6) Striking nine of defendants’ eleven affirmative defenses;

7) Denying defendants’ motion for mistrial based on prejudice resulting from plaintiff’s cross examination of the witness Hofker regarding defendant ISC’s ties with Iranian oil;

8) Sustaining objections to certain exhibits;

*911 9) Refusing to admit a letter stating that a piece of equipment from another vendor had failed to arrive;

10) Sustaining plaintiffs objection to, and striking witness Hofker’s testimony concerning the corporate relationship between Flodin and ISC;

11) Sustaining plaintiffs objection to testimony explaining the meaning of the term "pick it green”;

12) Rejecting defendants’ offer in evidence of prior complaints filed by plaintiff; and

13) Denying defendants’ motion for change of judge.

PLAINTIFF - AUSTIN AGENCY

Defendants argue that the trial court erred in denying their motion for directed verdict on the basis that plaintiff was not a party to the contract between Flodin and Austin and therefore did not have standing to bring an action on the contract. Plaintiff argued that it had an agency relationship with Austin and, since Austin was acting as its agent in making the contract, plaintiff could properly sue for breach of that contract. Evidence was presented that plaintiff had directed Austin to contract with Flodin; that Flodin was paid by it through Austin; that plaintiff had the right to control execution of the contract; and that plaintiff did not require Austin to pay the costs of Flodin’s breach.

The standards for finding an agency relationship include the right of the principal to control the agent’s dealings and the principal’s responsibility to pay for services provided. In John I. Haas, Inc. v. Tax Com., 227 Or 170, 361 P2d 820 (1961), the Supreme Court held that there was an agency relationship between Haas and a corporation buying hops for it, even though the hop buyer was obliged to obtain cover for defects in quality and shortages. The Court found that the buyer paid the growers and was reimbursed by Haas and that Haas had the right to approve all contracts. Similarly in Sparhawk v. Stevens, 162 Or 375, 91 P2d 1116 (1939), the Supreme Court found an agency relationship where a carpenter contracted with a homeowner to hire workers and pay them a specific wage, *912 which was then paid to the carpenter for disbursement to the workers.

Here the fact that Austin was described in the contract as a general contractor is not controlling. The nature of a relationship may be shown by the actions of the parties. Courts may look beyond the language of the contract to determine what the actual relationship was. Wallowa Valley Stages v. Oregonian 235 Or 594, 596-97, 386 P2d 430 (1963), overruled in part on other ground, Woody v. Waibel, 276 Or 189, 192, n 3, 554 P2d 492 (1976). In the case at bar there was evidence to support either theory - that Austin was a general contractor or agent. Since the trial court was not able as a matter of law to say that there was no agency relationship between Austin and plaintiff, it was proper to submit the question to the jury with instructions on the law.

PARENT - SUBSIDIARY LIABILITY

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Bluebook (online)
630 P.2d 868, 52 Or. App. 907, 1981 Ore. App. LEXIS 2865, Counsel Stack Legal Research, https://law.counselstack.com/opinion/amfac-foods-inc-v-international-systems-controls-corp-orctapp-1981.