Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-89-05198/USCOURTS-ca10-89-05198-0/pdf.json

Parties Involved:
C & L Marketing, Inc.
Appellant
Emcat, Inc.
Appellee
Claud W. Walker
Appellee

Document Text:

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FI LED 

United States Court of Appeals 

Tenth Circuit 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

fvi t ~ 1991 

ROBERT L. HOECKER 

Clerk 

C & L MARKETING, INC., 

an Oklahoma corporation, 

Plaintiff-Appellant, 

v. 

EMCAT, INC., a New Mexico 

corporation; and CLAUD w. 

WALKER, 

Defendants-Appellees. 

No. 89-5198 

(D.C. No. 89-C-587-B) 

(N.D. Okla.) 

ORDER AND JUDGMENT* 

Before HOLLOWAY, Chief Judge, and BARRETT and TACHA, Circuit 

Judges. 

Plaintiff-appellant C & L Marketing, Inc. (C & L) sued 

defendants-appellees Emcat, Inc. and its president, Claud Walker, 

(collectively, Emcat) to enjoin them from further breaching their 

exclusive distribution contracts. C & L also sought a declaratory 

judgment that the contracts continued in effect despite Emcat's 

termination for C & L's failure to make payments. The district 

court denied C & L's claims and awarded Emcat $7,000 damages to 

compensate for goods shipped and received but not paid for. The 

district court found C & L waived Emcat's known breaches in a 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 89-5198 Document: 010110031062 Date Filed: 03/04/1991 Page: 1 
superseding contract and that Emcat's subsequent breach was 

immaterial. The court also found that C & L's failure to pay was 

a material breach not waived by Emcat. The court found Emcat's 

termination of the contracts proper. For the reasons stated by 

the district court, we AFFIRM in all respects. 

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ENTERED FOR THE COURT 

Deanell Reece Tacha 

Circuit Judge 

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IN THE UNITED STATES DISTRICT COURT F I L E D 

FOR THE NORTHERN DISTRICT OF OKLAHOMA 

C & L MARKETING, INC., ) 

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OCT 30 ~9BS ~ an Oklahoma corporation, 

Plaintiff, 

Jack C. Silv~r, Clerk 

U.S. DIS-~0 ~CT COURT. 

vs. No. 89-C-587-B / 

EMCAT, INC., a New Mexico 

corporation; and CLAUD W. 

WALKER, 

Defendants. 

FINDINGS OF FACT 

AND 

CONCLUSIONS OF LAW 

This action to enforce the written terms - of an exclusive 

license to distribute a product patented by Defendants, and enjoin 

Defendants from terminating said agreement, came on for trial to 

the Court, sitting without a jury, on October 24 and 25, 1989. By 

way of a counterclaim the Defendants seek money damages for failure 

to pay for product and also seek declaratory relief from the Court 

to the effect that the exclusive distributorship agreement has been 

terminated by reason of Plaintiff's breach thereof. 

Following a review of the evidence, arguments of counsel, and 

the applicable legal authorities, the Court enters the following 

Findings of Fact and Conclusions of Law: 

FINDINGS OF FACT 

1. At the commencement of the trial the parties entered into 

a stipulation of facts relative to the following: 

A. The parties agreed the Court has jurisdiction 

pursuant to 28 U.S.C. § 1332 and venue pursuant to 28 u.s.c. 

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§1391. 

B . Plaintiff C & Land Defendants, EMCAT and Walker, 

entered into a series of contracts beginning May 1, 1986 and 

ending November 5, 1988. 

c. The current contract involving the emission catalyst 

device under Patent No. 4,715,325 between the parties is 

August 31, 1988 . 

D. The current contract involving the oil field 

catalyst devices under Patent 4,789,031 is the November 1, 

1988, contract . 

E. Plaintiff C & L has not pa4i the minimum monthly 

purchase amount of $6,000.00 per month as per Section 3.06 of 

the August 31, 1988 emission catalyst contract since November 

of 1988, except for an order of $7,972.00 on May 25, 1989, and 

an unpaid order of $7,000.00 on June 30, 1989. 

F. on May 2, 1989, Defendants EMCAT and Walker I s 

attorney, Kenneth B. Wilson, gave written notice pursuant to 

Article IV, Section 4.02(c) that Defendants EMCAT and Walker 

intended to cancel their contract with Plaintiff c & L for 

failure to purchase and pay the minimum purchase amount of 

$6,000.00 within 60 days of the above date. Notice was also 

given that Plaintiff C & L could cure said breach by 

purchasing and paying the minimum amount due under the 

contract. 

G. On May 12, 1989, Plaintiff C & L's attorney, Jerry 

Reed, wrote a letter to Defendants EMCAT and Walker's counsel, 

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Kenneth B. Wilson, which stated that Plaintiff C & L has 

refused to pay the minimum purchase amount because of the 

alleged breach of the exclusivity provision contained irl 

Section 2.01, caused by David Rowland. 

H. On June 16, 1989, the United States District Court 

for the Western District of Texas, Midland-Odessa Division, 

the Honorable Judge Lucius D. Burnton presiding, found against 

David A. Rowland and David A. Rowland Engineering Company, 

Inc., by finding them guilty of patent infringement; that Mr . 

Rowland's contract to sell had been terminated and that he be 

permanently enjoined. .... 

I. On May 25, 1989, Plaintiff C & L ordered $7,972.00 

of emission catalyst devices with credit for $2,752;00 for 

emission catalyst devices which were being returned to 

Defendants EM CAT and Walker and credit for $2,171.47 for 

fittings, leaving a balance due of $3,048.53. 

J. on June 29, 1989, the Defendant EMCAT and Walker's 

attorney, Kenneth B. Wilson, wrote a letter to Plaintiff c & 

L's attorney, Jerry Reed, informing Plaintiff C & L of the 

Rowland decision and again advising Plaintiff c & L that they 

must comply with the . demand letter dated May 2, 1989 • . 

K. The August 31, 1988 contract provides at Section 

3.04(c) the following, regarding the payment for goods shipped 

to Plaintiff C & L: 

The Distributor shall pay the Company 

for emission catalyst devices on the 

following terms: 

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(i) for any order of Six Thousand 

Dollars ($6,000) or less, payment 

shall be in cash or certified funds 

on delivery; 

(ii) for any order in excess of Six 

Thousand Dollars ($6,000), one-half 

(1/2) of the total amount due shall 

be paid in cash or certified funds 

at the time such order is placed, and 

the balance shall be paid in cash or 

certified funds on delivery. 

On July 6, 1989, Plaintiff C & L's attorney, 

Jerry Reed, wrote a letter to the Defendants EMCAT and 

Walker's counsel, Kenneth B. Wilson, which stated that 

if David Rowland has not appealed they would be willing 

to go forward under the contract with its minimum 

purchase requirement. 

M. On July 6, 1989, Defendants EMCAT and Walker's 

counsel, Kenneth B. Wilson, wrote a letter to the Plaintiff 

C & L·

1 s counsel, Jerry Reed, which stated that the emission 

catalyst contract with Plaintiff C & L was being terminated. 

N. On July 17, 1989, Defendants EMCAT and Walker's 

counsel, Kenneth B. Wilson, wrote a letter to Plaintiff c & 

L's counsel, Jerry Reed, which stated that David Rowland had 

filed an appeal; however, the restraining order would remain 

in effect during the pendency of the appeal. Defendants EMCAT 

and Walker restated that their contract with Plaintiff C & L 

had been terminated but offered to sell the emission catalyst 

device on a nonexclusive basis. 

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o. Plaintiff C , L's only subdistributor now under 

contract is one Siegfredo Chavez. 

P. Defendants EMCAT and Walker, in their second 

counterclaim, filed as a part of their first answer on August 

25, 1989, have given notice of their intent to cancel, at 

will, the November 1, 1988 contract concerning the oil field 

catalyst device. 

2. That Plaintiff C & L Marketing, Inc. ( "C & L") is a 

corporation incorporated under the laws of the State of Oklahoma 

-- -- with its prin~ipal place of business in TUlsa, Oklahoma. The 

Defendant, EMCAT, Inc. ( "EMCAT"), is a CO:Q)oration incorporated 

under the laws of the State of New Mexico, having its principal 

place of business therein. The Defendant, Claud W. Walker 

("Walker"), is an individual residing in the State of New Mexico. 

The amount in controversy exceeds the statutory jurisdictional 

amount. 

3. C & L, EMCAT and Walker entered into a settlement 

agreement (Defendants' Exhibit 8) on November 5, 1988, whereby the 

parties mutually determined what amounts were due to each other 

from their previous dealings under the various emission catalyst . r, 

device contracts which began on February 2, 1988. The closing 

statement (Defendants' Exhibit 8) is an addendum to the August 31, . . . . . . . 

1988, emission catalyst contract and specifically states, "the 

agreement of November 5, 1988, shall control the future conduct of 

the parties." 

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4 • At the time of the settlement agreement (Defendants' 

Exhibit 8), in early November 1988, it was known to the parties 

that one Lee Groff and one David A. Rowland were making claims of 

rights to sell the emission catalyst device in conflict with C & 

L's exclusive distributor license. Defendants settled with Groff 

and his distributors so they were no longer in the market. In 

November 1988, there remained the conflicting claims of Rowland, 

which the parties knew would probably require litigation to solve. 

(See Finding of Fact #lH}. Additionally, evidence established that 

Defendants had made sales of a small number of emission control 

devices to a company named JWA, Inc. of Abil~ne, Texas, for use on 

their own vehicles, in violation of Plaintiff's exclusive 

distributor license.' The Court concludes that while a technical 

violation of Plaintiff's exclusive distributor license, the sales 

to JWA,Inc. involved only a small number of devices so as not to 

be considered a material breach. 

5. C & L offered evidence that in December 1988, Daywalt, 

on behalf of C & L, and Walker, on behalf of EMCAT, orally agreed 

that the $6,000.00 minimum monthly payment and purchase required 

by the exclusive license agreement (Plaintiff's Exhibit 1) need not 

be paid until six (6) months following settlement or conclusion of 

the Rowland dispute which was in litigation. Walker testified no 

such oral agreement was entered into. In any event, such purported 

'JWA, Inc., prior to November 1988, was a distributor of the 

Defendants relative to the oil field catalyst device . 

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agreement was not reduced to writing. Plaintiff's evidence 

reflected that the sole reason for not paying said $6,000.00 per 

month since November 1988, was the alleged executed oral agreement: 

6. on January 9, 1989, C & L's attorney wrote a letter 

(Plaintiff's Exhibit 2) to Defendants' attorney whereby he proposed 

that the minimum $6,000.00 monthly payment and purchase requirement 

be suspended until six (6) months after successful resolution of 

pending lawsuits between EMCAT and Walker . and David A • ..Rowland, 

Case Nos. MO-88-CA-304 and MO-88-CA-308 in the United States 

District Court for the Western District of Texas, Midland-Odessa 

Division. The Defendants did not execute Shis proposed ~ritten 

amendment to the exclusive distributor license agreement . 

(Plaintiff's Exhibit l} . 

7. On February 1, 1989, Defendants' attorney by letter. 

(Defendants' Exhibit 10) made a written demand on Plaintiff to pay 

the $6,000.00 minimum monthly purchase amounts due and owing and 

delinquent since November 1988 . 

8. The emission catalyst exclusive distributorship license 

agreement (Plaintiff's Exhibit 1) provides as follows in Section 

5.05 on page 8: 

"The failure of either party at any time to 

require performance by the other party of any 

provision hereof shall not affect in any way 

the full right to require such performance at 

any time thereafter. Nor shall the waiver by 

either party of a breach of any provision 

hereof be taken or held to be a waiver of the 

provision itself." 

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9. The provisions ot the contracts (Plaintiff's Exhibit l 

and Defendants' Exhibit 2) relative to an indefinite term and 

termination for cause only, respectively, state: 

"Section 2.03. Unless terminated as provided 

in Article IV, this Agreement and the appointment of the Distributor hereunder shall 

continue in force indefinitely and govern all 

transactions between the parties hereto. 

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"Section 4. 01. Either party may terminate this 

Agreement for cause upon giving sixty (60) 

days' written notice. Such notice shall 

specifically set forth reasonable grounds upon 

which to terminate this Agreement, and such 

notice shall set forth a proposed plan by which 

to remedy the reasonable - grounds for 

termination. It is the intent of the parties 

that any and all possible remedies to avoid 

termination be explored prior to actual 

termination." 

10. The evidence has not established a binding oral agreement 

entered into between the parties suspending the $6,000.00 monthly 

payment-purchase requirement of the emission catalyst exclusive 

distributorship licensing agreement . {Plaintiff's Exhibit 1). 

11. The evidence has established that C & L breached the 

emission catalyst exclusive distributor license agreement 

(Plaintiff's Exhibit 1) in failing to pay the $6,000.00 paymentpurchase arrearage within sixty {60) days following the Defendants' 

demand letter of May 2, 1989 (Defendants' Exhibit 11). The 

Defendants were therefore legally justified in terminating such 

agreement for cause. {Defendants' Exhibit 15). 

12. C & L has not purchased any oil field catalyst devices 

from Defendants since the oil field catalyst contract inception on 

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November 1, 1988. 

13. In June 1989, C & L ordered 100 1/2" Remission catalyst 

devices at $30. 00 per device and 100 3/ 4" R emission catalyst 

devices at $40.00 per device for a total sum due of $7,000.00 . 

These goods were shipped on June 30, 1989, and received by 

Plaintiff C & Lon July 5, 1989. C & L has continued to retain 

said goods and has not made payment therefor pursuant to the 

agreement between the parties. (Plaintiff's Exhibit 1). C & L has 

belatedly contended that some of said devices are defective but has 

not returned them. 

CONCLUSIONS OF IJ\W 

1. The Court has jurisdiction of the parties and the subject 

matter herein pursuant to 28 U.S.C. § 132 and 28 U.S.C. § 1391. 

2. Any Finding of Fact above which might be properly 

characterized a Conclusion of Law is incorporated herein. 

3. On November 5, 1988, the parties entered into a 

settlement agreement which was supported by mutual consideration 

and waived any right to assert any breaches prior to November 5; 

1988. 15 o.s. § 237; Creekmore v. Redman Industries, Inc., 671 

P.2d 73, 79 (Okla. App. 1983); Watt Plumbing, Air Conditioning and 

Electric v. - Tulsa, Rig, Reel & Mfg. Co., 533 P.2d 980, 983 (Okla. 

1975). 

4. A party relying upon an executed oral agreement pursuant 

to 15 o.s. (1981) §237, to alter or amend a contract in writing, 

must establish the executed oral agreement by positive, clear and 

convincing evidence. Bredouw v. Wilson, 256 P.2d 421, 208 Okl. 393 

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(1953), and Creekmore v, Redman Industries, Inc., 671 P.2d 73 

(Okla. App. 1983). No such oral executed agreement was established 

by the evidence herein. 

5. The Defendants did not agree to waive or suspend the 

minimum purchase amount of $6,000.00 per month contained in the 

emission catalyst contract, Section 3.06, and C & L breached the 

contract by failing to pay said amount for most of the months from 

November 1988 until this date. 

6. The emission control exclusive distributor license 

agreement (Plaintiff's Exhibit 1) was terminated for cause on July 

1, 1989, when C & L failed to comply with the Defendants' demand 

letter of May 2, 1989, to make the $6,000.00 monthly paymentpurchase required pursuant to Section 4. 02 (b) and (c) of the 

agreement (Plaintiff's Exhibit 1). 

7. An indefinite term exclusive dealership contract is 

terminable at will upon proper notice by either party without 

consent of the other. Bartlett v. Sterling Construction Co., 499 

P.2d 425, 428 (Okla. 1972); Dunn v. Birmingham Stove & Range co., 

44 P.2d 88, 170 Okla. 452 (1935). 

8. The emission catalyst device contract dated August 31, 

1988 (Plaintiff's Exhibit 1) and the oil field catalyst contract 

dated November 1, 1988 (Defendants' Exhibit 2) are indefinite term 

exclusive dealership contracts. 

9. The oil field catalyst contract was terminated at will 

by Defendants on August 25, 1989 by its Second Counterclaim herein, 

filed as part of the Defendants' original answer. 

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10. C & Lowes Defendants $7,000.00 for emission catalyst 

devices, pursuant to purchase order, delivered to C & L by 

Defendants on July 5, 1989. 

11. A Judgment in keeping with these Findings of Fact and 

Conclusions of Law shall be filed contemporaneous herewith. 

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DATED this .___?C, -- day of (!1/!~ , 1989. 

// : . . ,/? ? 7 'x/ 

c==--~=---~ r; ✓ Cc,ef~J ~?<~ 

THOMAS R. BRETT ' 

UNITED STATES DISTRICT JUDGE 

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