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PEPPER'S STEEL & ALLOYS, INC. v. LISSNER MINERALS

November 26, 1979

PEPPER'S STEEL & ALLOYS, INC., Plaintiff, against LISSNER MINERALS & METALS, INC., Defendant.


The opinion of the court was delivered by: LEVAL

This is an action for breach of contracts for the sale of copper scrap brought by the seller Pepper's Steel & Alloys, Inc. ("Pepper's" or "plaintiff") against the buyer Lissner Minerals and Metals, Inc. ("Lissner" or "defendant"). The contracts in question were unique inventions of Lissner designed in late 1975 to permit Lissner to obtain copper scrap from dealers who at the time were reluctant to sell because of depressed prices. Subsequent experience has taught Lissner that the contracts it designed carried disadvantages to itself which it had incorrectly assessed. Accordingly, Lissner now seeks to escape the predicament it created for itself by seeking a judicial interpretation of the contracts which differs from their apparent meaning and from the understandings on both sides at the time the contracts were made. I find that the contracts are correctly construed as plaintiff asserts and that the defendant Lissner's contention as to the meaning of the contracts is without basis.

The Parties

 At all relevant times, Pepper's was a Florida corporation with its principal office in Miami, Florida, engaged in the business of a copper scrap dealer. The common activities of the business included buying copper scrap, processing or cleaning the copper scrap, packaging the scrap after processing, and selling it. Norton Bloom was a founder, a primary shareholder, the president and a director of Pepper's and has been a copper scrap dealer for approximately 20 years.

 At all relevant times, Lissner was a New York corporation with its principal office in New York, New York. Lissner was a copper "merchant" and broker. A part of its business involved dealings in copper scrap, including purchasing copper scrap from scrap dealers such as Pepper's, in some cases causing it to be refined, and reselling the scrap or refined copper. During the following times the following persons held the following positions at Lissner:

 
(a) Robert Joblove:
 
President From approximately 1972-October 14, 1977
 
Director Prior to 1975-October 14, 1977
 
(b) Michael Lissner:
 
President October 14, 1977-present
 
Director Prior to June 1, 1976-present
 
Vice-President 1973-October, 1977
 
Shareholder Prior to 1976-77
 
(c) Glenn Lytton:
 
Assistant Buyer and Metal (copper scrap) Trader April, 1975-July, 1977
 
(d) Robert Steinfeld:
 
Vice President Prior to 1975-November, 1976
 
(e) Fletcher Morgan:
 
Scrap trader December, 1976-August, 1977
 
(f) Jeffrey Farber:
 
Treasurer June, 1976-November, 1977
 
(g) Mary Ann Valen:
 
Secretary to Robert Joblove Prior to June 1, 1976-March, 1978
 
(h) Mort Lissner:
 
Director Prior to June 1, 1976-present
 
Vice President, Shareholder

 Robert Joblove had the primary responsibility for supervising the daily operations of Lissner in New York. Michael Lissner was responsible for overseeing Lissner in New York, including Robert Joblove. Robert Steinfeld was in charge of copper scrap purchasing by Lissner, and, together with Glenn Lytton and Fletcher Morgan, purchased copper scrap for Lissner. Mort Lissner had general supervisory responsibilities with respect to Lissner. Lytton had purchased and sold copper scrap for approximately 8 to 10 years. He reported to Steinfeld and Joblove while he was at Lissner.

 The Contracts

 During the period from approximately the end of 1975 to the end of 1976, Lissner had contracted with third parties for the sale by Lissner of copper scrap. In order to perform these outstanding contractual obligations, Lissner needed to obtain copper scrap. At the same time, scrap dealers were reluctant to sell. Copper prices were low based on prior experience. It was widely anticipated that they would rise in time. Accordingly dealers (like Pepper's) preferred to hold their inventories with the expectation of selling at better prices in the future.

 In order to induce scrap dealers to part with their inventories during this period of low prices, Lissner devised a new form of contract under which delivery of the scrap would be made promptly but final pricing of the sale would not occur until an unspecified future date to be selected at the option of the seller.

 This form of contract was the invention of Robert Steinfeld, Lissner's vice-president in charge of scrap purchasing. After discussion and receipt of approval from superiors, Steinfeld instructed his traders to utilize this new contract form to induce scrap dealers to sell to Lissner. In accordance with these instructions, Glenn Lytton, a Lissner trader, called Bloom at Pepper's in early 1976. Pepper's and Lissner had an established trading relationship. Lytton was the buyer at Lissner who customarily dealt with Pepper's.

 Lytton told Bloom that in order to induce dealers to sell it scrap Lissner was buying under a new kind of contract which postponed pricing until "whenever" the seller would elect to price. Lytton read Bloom the terms from the contract form. Bloom, at first a bit skeptical, commented that it seemed radical and asked if there would be surprises down the road. Lytton explained that the contract had been designed because Lissner needed to acquire material and assured him that there would be nothing down the road, nothing hidden, that the contract would be exactly as Lytton explained. Bloom said to send him the contract and he would sign it. The written contract proposed by Lissner was exactly as Lytton had described. Upon examination Bloom signed Lissner's Contract No. 3897 agreeing to sell 20 tons of Unburnt No. 1 Scrap.

 The contract was a brief one page document comparable to a contract on an order form. The terms relating to price were typed in as follows:

 
(a) "TERMS: 75% provisionally advanced upon receipt of material. Balance within 30 days after pricing."
 
(b) "PRICE: The price to be mutually agreed upon between buyer and seller, whenever seller ...

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