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SENECA FALLS MACH. CO. v. MCBETH

August 26, 1965

SENECA FALLS MACHINE COMPANY, Plaintiff,
v.
P. C. McBETH and P. C. McBeth, Jr., individually, and trading as McBeth Machinery Company, Defendants



The opinion of the court was delivered by: MARSH

 This action, tried non-jury, involves a claim and counterclaims.

 It appears in the Complaint and is admitted in the Answer that the plaintiff, Seneca Falls Machine Company (Seneca), agreed orally with the defendant partnership, McBeth Machinery Company (McBeth), whereby the latter was to act as the former's sales representative for its electronics division. It was also alleged and admitted that on or about October 20, 1961, Seneca sold to McBeth an electronic tractor (tracer) for $14,846.00, for delivery to the actual customer, Westinghouse Electric Corporation, at Derry, Pennsylvania. For this sale and other subsequent minor sales to Dana Corporation, McBeth admittedly owes Seneca the sum of $13,536.07, *fn1" after deducting credits of 10% as sales commissions to which McBeth is admittedly entitled.

 Accordingly, judgment will be entered in favor of plaintiff for $16,126.00 (being the principal sum of $13,536.07 with interest in the sum of $2,589.93 calculated to December 29, 1964), *fn2" plus interest at 6% on the principal sum of $13,536.07 from December 30, 1964. *fn3"

 McBeth's Counterclaim No. 1 asserted a claim for commissions on sales of equipment made by Seneca to Mack Trucks, Inc., in 1961, delivered to Hagerstown, Maryland, which commissions McBeth believed to be in excess of $20,000. For the reasons hereinafter set forth, we have concluded that the defendants are not entitled to recover on this counterclaim.

 Counterclaim No. 2 alleged a tortious conspiracy among R. A. Young, Seneca's general sales manager, William D. Pomeroy, agent for the Snyder Machine Company, and Ernest C. Hawkins, a full-time salesman employed by McBeth, which conspiracy was alleged to be successful in its objects and damaged McBeth in excess of $20,000. In our opinion, the evidence was insufficient to establish the alleged conspiracy by a fair preponderance of the evidence. The circumstantial evidence adduced did not prove any of the particulars alleged in the counterclaim beyond mere suspicion. However, we think McBeth is entitled to a $1,500 commission on the sale of a second Seneca electronic machine to Westinghouse Electric Corporation which it proved as an item of damage, but not to the punitive damages claimed for Seneca's alleged wrongful interference in connection with that sale.

 Jurisdiction.

 Seneca is a corporate citizen of New York with its principal place of business in Seneca Falls, New York. P. C. McBeth and P. C. McBeth, Jr., McBeth's partners, are citizens of Pennsylvania. Diversity existing, and the plaintiff's claim being in excess of $10,000, the court has jurisdiction of the parties and the subject matter.

 The defendants' counterclaims are permissive. In our opinion, each of the counterclaims alleged to be in excess of $20,000 was asserted in good faith. 1 Moore, Federal Practice, P0.91[1]. Moreover, it is permissible to aggregate separate counterclaims for the purpose of meeting the requisite jurisdictional amount. McKnight v. Halliburton Oil Well Cementing Co., 20 F.R.D. 563 (N.D.W.Va.1957); Moore, supra, vol. 1, P0.98[2], and vol. 3, P13.20. The court has jurisdiction of the counterclaims.

 Pennsylvania Law Applies.

 The parties in their briefs agree that the law of Pennsylvania is applicable, and we concur. Although the litigated oral agreements were made in New York and the performance thereof was to take place in Pennsylvania, Maryland, and other states, McBeth's headquarters were in Pennsylvania and most of its activities under the Seneca franchises would likely have been centered in that state within the contemplation of the parties at the time of the execution of the agreements in issue. *fn4" We think Pennsylvania is the "center of gravity" and "has the most significant contacts with the matter in dispute". *fn5" The new Restatement counsels reference to the law of the state with the most significant relationship to the contract when performance is to occur wholly or in substantial part in a state other than that of contracting. Restatement, Conflict of Laws 2d, § 332b. (Tent. Draft No. 6, 1960). As to contracts specifically for the rendition of services, it refers to the "local law of the state where the contract requires that the services, or a major portion of the services, be rendered." Id., § 3461. This is clearly the modern approach. *fn6"

 With respect to the alleged tortious conduct on the part of Seneca and others, its principal operative effect was in Pennsylvania, which state, as the forum state, clearly has more interest in the outcome of this litigation than any other state. Griffith v. United Air Lines, Inc., 416 Pa. 1, 203 A.2d 796 (1964).

 Counterclaim No. 1.

 At Seneca Falls, New York, in February, 1960, R. A. Young, representing Seneca's machine tool division, and P. C. McBeth, Sr., representing McBeth, orally agreed *fn7" that McBeth was to be the exclusive sales representative for Seneca's machine tools in western Pennsylvania, excepting four counties. Seneca agreed to pay a 10% commission on the price of all machine tools sold by McBeth in that territory; no commission was to be paid on the price of electrical equipment added to the machine tools and purchased by Seneca from some other manufacturer. All sales made by McBeth were to be treated as sales to it by Seneca, and from the sales price of any machine tool, it was entitled to deduct a 10% commission. *fn8"

 Seneca promised to reduce the agreement to writing but failed to do so even after being prodded by McBeth (plaintiff's Ex. C). There was no definite agreement regarding the duration of the exclusive agency or its termination.

 McBeth was a machine tool sales company of considerable experience, maintaining offices in Pittsburgh and Philadelphia. Three or four salesmen were employed by each office, in addition to secretarial help. *fn9" One of the Pittsburgh salesmen was Ernest C. Hawkins, who had previously sold Seneca's machinery; his employment was a principal reason for Seneca entrusting its economic well-being in that area to McBeth. The fact that McBeth was in contemplation of both parties to continue to sell the machinery of other manufacturers, not shown to have been competitors of Seneca, does not mitigate against a clearly implied covenant that McBeth was to use the best efforts of its sales organization to develop a market for and promote the sale of Seneca's products. The Seneca line by itself would not have supported McBeth's sales organization.

 It was the settled custom in the machine tool industry that when a sale was made by one agent for delivery in the exclusive territory of another agent, the commission payable was to be divided 50-50 between the agent making the sale and the agent into whose territory the machine was delivered and the latter was bound to provide any servicing required when the machinery was installed and while being used by the customer. *fn10" Servicing of machinery generally involved acting as a liaison between the manufacturer and the customer, rendering aid, giving advice, handling the complaints of the customer, and establishing goodwill. This split-commission custom by implication was part of the oral franchise agreement between the parties. Restatement, Contracts, §§ 245, 246(b), 247(c).

 Subsequently, in June, 1960, at a meeting in Seneca Falls of R. A. Young, representing Seneca, and P. C. McBeth, Sr. and Robert McBeth, *fn11" representing McBeth, the exclusive sales territory was ...


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