Opinion ID: 2199783
Heading Depth: 1
Heading Rank: 1

Heading: The amount paid by Fisheries for construction in excess of $70,000.

Text: The Vice-Chancellor held that the responsibility of Solubles for the erection and equipment of the plant was limited to the sum of $70,000, and that all sums expended over and above that amount were the sole responsibility of Fisheries. It was also held that the plant for the condensation of weak fish stickwater contemplated by the parties meant a plant having all buildings, machinery, equipment, piping, etc., necessary for the conduct of a complete condensing process. That portion of the ruling which prohibits recoupment by Fisheries of sums spent for this purpose over and above the sum of $70,000 is attacked as error. Solubles argues that the finding of the Vice-Chancellor should be sustained because, either the written agreements between the parties firmly bound Fisheries to erect a complete plant at a cost not to exceed $70,000, or Fisheries induced Solubles and Levin to enter into the contracts by making representations and warranting that it could and would build the plant at a maximum cost of $70,000. We will first take up the argument based upon the written agreements. The initial agreement of April 6, 1951, contrary to the argument made by Solubles, did not require Fisheries to erect a plant at all. Quite the opposite is the fact. The recitals in the agreement make it clear that Solubles was to be organized to, inter alia, erect a fish `stickwater' plant. Fisheries, for its part, undertook to check the development and construction of the `stickwater' plant and to assist with its best judgment and advice in connection therewith. With respect to liability to finance the construction of the plant, however, the agreement is clear beyond any doubt that Solubles and Levin could not be called upon to finance the construction beyond the total sum of $50,000. We can find nothing in the first agreement of April 6, 1951 to support Solubles' argument that Fisheries was bound by contract to erect a plant at a specified maximum cost. In our opinion the only rational construction of this first agreement is that, at most, Fisheries was obligated to use its special know-how to oversee and supervise the construction of a plant to be built by Solubles. After actual construction started, it became apparent that the sum of $50,000 would prove to be insufficient to complete the project and, accordingly, the agreement of May 31, 1951 was entered into. However, the only modification of the April 6, 1951 agreement, so far as is important in this connection, was to increase the maximum liability of Solubles and Levin from $50,000 to $70,000. The other provisions of the April 6th agreement were left unchanged and were expressly ratified and confirmed. We think, therefore, that the written contracts between the parties fall far short of the interpretation Solubles places upon them. It is true that they place an outside limit on the contribution of Solubles and Levin, but we can find in them no undertaking on the part of Fisheries to build a plant for not more than $70,000. In our view the written agreements go no further than to establish some of the terms of a joint adventure the parties were about to enter into. No particular formality is required for the establishment of such a relationship. It is sufficient, for the purpose, if the parties agree to combine their property, money, efforts, skill, or knowledge to carry out a single business enterprise for profit. 48 C.J.S., Joint Adventures, § 1; 30 Am.Jur., Joint Adventures, § 10. The agreements clearly show an intent on the part of the parties to combine to a limited extent their property, money, skill and knowledge to establish a business enterprise for their mutual profit. The relationship of the parties under the agreements being that of joint adventurers, the ordinary rules governing such relationship would apply, and it seems well settled that where one joint adventurer advances his money in excess of his proportionate share of the enterprise, he is entitled to be reimbursed therefor before the profits of the enterprise are divided. 30 Am.Jur., Joint Adventures, § 51; 48 C.J.S., Joint Adventures, § 10. See also Crenshaw v. Crenshaw, 61 S.W. 366, 22 Ky.Law Rep. 1782; Cain's Adm'r v. Hubble, 184 Ky. 38, 211 S.W. 413, 6 A.L.R. 146; In re Taub, 2 Cir., 4 F.2d 993. As a general rule, also, even a volunteer who pays the obligation of another is entitled to reimbursement from the obligor when he takes advantage of the act of the volunteer. 40 Am.Jur., Payment, § 23. It is quite clear from the record before us, and was so found by the Vice-Chancellor to be the fact, that the complete plant cost in excess of $70,000 and that Fisheries paid the excess. Without this expenditure by Fisheries, there would have been no plant capable of earning the profit, of which Solubles now demands an accounting. We think, therefore, that the Vice-Chancellor's ruling cannot be supported upon the theory that Fisheries was obligated by the written agreements to erect the plant for the sum of $70,000. We turn now to the argument of Solubles that it was induced to enter into the agreements, or the enterprise, by reason of oral warranties and representations made by Fisheries through its agent, Hayes. Implicit in the decision of the Vice-Chancellor is the conclusion that Hayes, on behalf of Fisheries, promised or warranted to Levin that he would see to the construction of the plant, that many materials were on hand which he could supply at cost, and that the total cost of construction would not exceed the sum of $70,000. He further concludes that, solely in reliance upon these representations, Levin entered into the project. The Vice-Chancellor, therefore, held that it was Fisheries' responsibility to erect the plant in a proper manner at a cost not in excess of $70,000. These findings are based entirely upon the testimony of Levin and his wife. Ordinarily, when sitting in an appeal from Chancery, this Court will not make an examination of the evidence to reach independent conclusions of fact, but will content itself with examining the evidence to determine whether the factual findings of the court below are supported by the record. If they find support in the record we adhere to them. When the evidence does not support the findings of the court below, however, this court sitting in review of an equity cause may make its own factual findings and direct the court below to give effect to them by the entry of a judgment. We have this authority and are restrained in its exercise only by our sense of judicial propriety. See Peyton v. William C. Peyton Corporation, 23 Del.Ch. 321, 7 A.2d 737, 123 A.L.R. 1482, and New York Trust Co. v. Riley, 24 Del.Ch. 354, 16 A.2d 772. We turn then to the evidence, and particularly the testimony of Levin to determine how much reliance in fact Levin placed upon the statements of Hayes made during the negotiations which culminated in the written agreements. We observe that the statements of Hayes in question were couched in the form of estimates and do not of themselves import a warranty. It is true that Levin specifically testified that he definitely relied upon the statements and figures submitted by Hayes and that as a result of that reliance he entered into the enterprise. While he so testified, however, his testimony in this respect is contradicted by his admitted actions. After some preliminary conversations on the telephone of a very general nature Levin and Hayes met in Lewes, Delaware, in the latter part of March of 1951. At that meeting Hayes showed Levin certain figures which Levin testified constituted the representations inducing him to execute the first agreement. These figures appear on Plaintiff's Exhibit No. 5. This exhibit contains on the left-hand side a column of three figures totaled to a sum of 43,000. There is no descriptive notation to indicate what they represent, but according to Levin's testimony the figures represented Hayes' estimate of the total cost of the plant. Levin explains the figures as follows: $26,000 for the erection of the plant and the installations; $8,500 for a boiler, and $8,500 for buying the rig and setting it up, to make a total of $43,000. It is difficult to accept the proposition that two men of the caliber of Hayes and Levin, both experienced in business and financial matters, could have intended and understood a column of four figures standing alone as a sufficiently firm representation of cost of construction to constitute a warranty with the result that Fisheries would be bound to the payment of all excess cost of construction. Furthermore, even if the Hayes figures be given such preponderant importance, it is apparent from Levin's own testimony that he was taking nothing for granted, and in fact did not rely on Hayes' estimate of costs. This is more than amply demonstrated by a second column of figures in Levin's handwriting which appears on the right-hand side of Plaintiff's Exhibit No. 5. This column of figures totals the sum 444. Levin testified that they were added by him after I came back from Buffalo in order to make a comparison with the figures that Mr. Hayes had given me, and were a revised estimate of total cost in the amount of $44,400. Not only, therefore, did Levin obviously not accept and rely upon the Hayes' estimate of cost, but he, himself, undertook to make his own analysis of the cost by going to Buffalo to inspect a secondhand evaporator they contemplated purchasing, and to confer with the seller on the cost of installation. After his visit to Buffalo, Levin prepared a handwritten paper which appears in the record as Defendant's Exhibit No. 28. This consists of ink notations corrected in pencil on a piece of yellow pad paper. The handwriting is that of Levin. The document itself is more suggestive of notes hurriedly made during a discussion of possible costs than of a detailed and firm cost analysis. But the important thing in connection with it is that it was prepared by Levin and shown by him to Hayes. Defendant's Exhibit No. 28, which apparently is the most detailed estimate of cost of construction of the plant made by any one, was nevertheless lacking in several important particulars. There was no allowance for labor in installing the equipment, and there was no estimate of cost of installation of piping. It now appears that the cost of the latter item in round numbers was, according to Fisheries, approximately $34,000. The result is that the first contract of April 6, 1951 was executed by the parties without any detailed cost estimates which could reasonably be expected to be an approximation of the total eventual cost of construction. Indeed, the experience gained from the preliminary construction work indicated that the original guess of $50,000 would be far under the actual cost and, therefore, the Levin contribution to the project was on May 31, 1951 raised to $70,000. In view of this evidence, we think the Vice-Chancellor should not have accepted at its face value the statement of Levin, denied by his actions, that he entered into the contracts solely as a result of representations of costs made to him by Hayes. We think the record is clear that Hayes made no actual representation intending it to be relied upon, and we further think that Levin realized this for he made his own investigation and compiled his own figures for his reliance. It is the general rule that mere expressions of opinion as to probable future events, when clearly made as such, cannot be deemed fraud or misrepresentations. Eastern State Petroleum Co. v. Universal Oil Products Co., 22 Del.Ch. 333, 2 A.2d 138. In any event, even though a representation made be false, that fact is immaterial if the person to whom it is made does not rely upon it but instead acts on his own knowledge. Eastern State Petroleum Co. v. Universal Oil Products Co., 24 Del.Ch. 11, 3 A.2d 768; Mackenzie Oil Co. v. Omar Oil & Gas Co., 4 W.W.Harr. 435, 154 A. 883; Phoenix Oil Co. v. Mackenzie Oil Co., 4 W.W.Harr. 460, 154 A. 894; Montgomery v. Jacob Bros. Co., 5 W.W. Harr. 112, 159 A. 374; Nye Odorless Incinerator Corp. v. Felton, 5 W.W.Harr. 236, 162 A. 504. Solubles makes no suggestion that Fisheries is guilty of fraud in the negotiation of these agreements. It argues that Hayes' estimate constitutes a warranty that the cost of the plant would be kept within the estimate. This argument presumably means that the oral representations became a term of the contract, were not inconsistent with its provisions, and in effect were a guarantee by Fisheries that the total cost would not exceed $70,000. Ordinarily, testimony offered to prove that a party to a written contract made oral extrinsic promises, warranties or undertakings which increase his written duties or obligations, is excluded from evidence as a violation of the parol evidence rule. There are, however, exceptional cases in which the written contract may in fact not completely express the understanding of the parties and, in such cases, testimony to establish the extrinsic promise or warranty will be received. The burden cast upon the party seeking to establish the extrinsic undertaking in such cases is great. It must ordinarily be shown by the circumstances or by the testimony of disinterested witnesses. See 3 Corbin on Contracts, § 585. The case before us does not fall within this exceptional class. The extrinsic warranty, if it has been proved at all, which seems to us most doubtful, rests solely upon the testimony of interested witnesses. For the foregoing reasons, we are therefore compelled to disagree with the Vice-Chancellor that Fisheries had undertaken the obligation of building the complete Solubles plant at a maximum cost of $70,000. This decision requires a reversal in part of paragraph numbered 1 in that part of the judgment dealing with the accounting phase of the cause which directed that all sums expended by Fisheries over and above the sum of $70,000 were the sole responsibility of Fisheries On this phase of the appeal, therefore, the cause will be remanded with instructions that Fisheries be given allowance in the accounting for all sums spent in constructing the plant. Allowance for rental of equipment. The Vice-Chancellor held that the parties agreed orally that Fisheries was at liberty to bill Solubles for the actual cost to it of furnishing equipment used in the construction of the plant. This ruling to the effect that Fisheries was entitled to charge only the actual cost to it of the use of such equipment is not attacked by Fisheries as error. Fisheries does, however, attack as error the further ruling of the Vice-Chancellor disallowing any amount for the rental of equipment on the ground that the evidence offered to support it was too remote. The evidence offered by Fisheries upon this point consisted of the testimony of its office manager, and the testimony of an expert witness who estimated the cost of equipment which would be required to erect the plant. Fisheries' office manager based his estimate of cost upon job tickets which show the individuals who worked on the construction of the Solubles plant. This witness testified that he knew the individuals, what their jobs were, and was thus able to determine what equipment was used on the Solubles job and for what period of time. He then computed the charge upon the prevailing rates charged Fisheries by outside contractors for the rental of similar pieces of equipment. The expert witness estimated the total cost of rental of equipment from an inspection of the actual plant and his knowledge of the type of equipment required in the erection and the amount of time it should be needed on the job. With this as a basis, he computed the total cost by applying a rental rate based upon what it would have cost to hire the equipment from outside sources. We think the Vice-Chancellor was correct in holding that Fisheries had failed to support by evidence this particular item. The agreed basis for the charge is the actual cost to Fisheries; yet the evidence offered by Fisheries is that of estimates based not upon the actual cost to it of supplying the equipment, but of what it would have cost Fisheries to hire the equipment from outside sources, which would necessarily include an item of profit. Since there is nothing in the record establishing to any extent Fisheries actual cost in supplying equipment it already had on hand, we think Fisheries has failed to prove any basis for the requested allowance of this item. The ruling of the Vice-Chancellor on this point will be affirmed. The amount of fresh water used. The Vice-Chancellor fixed the maximum amount of fresh water used in the Solubles plant during the period in question at 700,000 gallons. This conclusion was reached after weighing and considering expert testimony produced by Solubles as to the maximum amount of water which should have been used, and a mathematical estimate made by Fisheries based on a comparison of its use of fresh water before the Solubles plant operation and after it was in operation. Admittedly, there was no meter record of fresh water consumption during the period in question. The question turns on the evaluation of testimony and we see no reason to disturb the Vice-Chancellor's ruling.