Court Opinion

ID: 6894636
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:48:17.136204+00
Date Added: 2024-06-11T16:05:56.460034
License: Public Domain

PARKER, Circuit Judge
(dissenting in part.).
I dissent from so much of the judgment of the court as finds liability on the part of the defendants for shipments made prior to March 1, 1944. Subsequent to that date, as the court below found, defendants were on notice that the mills whose product they were selling were not properly grading the lumber shipped in accordance with the invoices which were being furnished; and, in view of this notice, it was correct to hold that defendants were parties to the violation of the OPA regulations involved in the improper grading. In my opinion, however, there was shown no basis upon which defendants could be held liable with respect to the shipments made prior to March 1, as to which they had no reason to suspect improper grading and reasonably relied on the inspection certificates furnished them.
The defendants are not manufacturers but wholesale direct-mill distributors of lumber, with profits limited to 6% of the regular f.o.b. price established by the price regulations. They placed orders with the mills with which they did business, received invoices from the mills showing quantities and grades of lumber shipped, and billed their customers in accordance with these invoices, adding in the price the 6% which they were allowed. The invoices from the mills after November 15, 1943, were accompanied by inspection cer*500tificates as provided by OPA regulations and defendants relied upon these as being correct. At no time prior to March 1, 1944, did they have reason to suspect that the quantities and grades did not correspond to the billing thereof. The District Judge found as to this: “That with respect to the items enumerated in the preceding findings of fact, the court finds that the violations of the regulation by the shippers on or before March 1, 1944, occurred without the defendant in this case willfully participating therein or failure on the part of defendant to take practical precautions against the violation. * * * There is some uncertainty in the evidence as to when the defendants received actual knowledge of the results of all these inspections, and for this reason and in order to give the defendant the benefit of every reasonable inference, the court fixes March 1, 1944, as the date when this knowledge came to the defendant, and the court likewise finds that from that time on it was the duty of the defendant to take practical precautions against future violations of these regulations by these particular shippers.”
In the contracts which defendants made with purchasers, there was no charging of an excessive price. The excessive price resulted from violation of the regulations with respect to the grading of the lumber; but this was the shipper’s fault, to which defendants were not parties and which prior to March 1, they had no reason to suspect. It is clear that a violation of the act can arise from delivery of goods of an inferior quality as well as from the express charging of an excessive price, East v. Bowles, 5 Cir. 158 F.2d 227; but to subject one to a penalty for such delivery, he should in some way participate in or have knowledge of the breach of regulation which it involves. It will not do to say that the wholesaler is liable merely because he has made the sale, and is liable upon his implied warranty, or that he can be held liable for correction of the mistake. This liability exists in any event and can be asserted by the purchaser at any time within the period of the state three year statute of limitations. The question is whether the statutory liability is incurred in addition. I do not think it is incurred where the wholesaler bills out the lumber in good faith and at a proper price on the invoices furnished him, and violation of the regulation occurs entirely without his fault or knowledge as a result of conduct on the part of others, over whom he has no control.
I agree that the act ought not be interpreted in such way as to permit evasions; and a seller in position of the defendants here might well be required to bear the burden of showing lack of knowledge; but the defendants have carried this burden and have an affirmative finding of the court below upon which to rely. There is a manifest difference between a seller who makes delivery through his own organization and who should be charged with knowledge of what is done by his agents and servants, and one, like the defendants here, who is little more than a sales agent and who depends upon an independent organization for making delivery under his contracts. To penalize one in the latter position for violation of regulations by those over whom he has no control, when he does not participate in or have knowledge of such violations is not required by anything contained in the statute or in any of the regulations adopted thereunder. No case has been cited to us where a broker or wholesaler, relying on invoices or certificates, has been held liable for excessive prices, arising without his knowledge from violation of the act by the party from whom he has purchased; and I know of none, and am opposed to establishing a precedent to that effect. The law ought not- be interpreted in such way as to penalize the innocent who have conducted business in good faith according to accepted standards.
To hold that the broker or wholesaler is not liable under such circumstances does not, of course, exonerate the shipper upon whom responsibility for violation of the regulations rests; and it is worthy of note that suits have been instituted against the shippers who filled the orders of defendants here to recover damages on account of the very transactions that are involved in this suit. There is no objection to granting *501recovery against the wholesaler as well as the shipper, where the former has participated in the violation of regulations of which the latter has been guilty; but this should not be done where the shipper has violated the regulations without participation or knowledge on the part of the wholesaler. This case well illustrates the hardship that may otherwise result to the innocent. Defendants are being held in damages in the sum of more than $13,000 in connection with transactions had before March 1, 1944, which were carried on in entire good faith, and upon which their total profits amounted to less than $3,000. I do not think it could have been intended that this sort of penalty should be visited on a dealer wdio in good faith made a legitimate contract expecting it to be carried out as made, merely because, without his knowledge, a third person over whom he had no control violated OPA regulations.
There is yet another ground upon which recovery on account of the shipments to Ginsberg should be denied. Not only was there no intent on the part of defendants to charge an excessive price, but, as pointed out by the court below, there was no delivery and consequently no sale. In other words, in the Ginsberg transaction delivery of an inferior grade under a contract calling for a higher grade cannot be relied upon as a violation of the regulation, for the reason that the delivery was not made.
I do not think, that, because the shipper attempted such delivery, defendants can be said to have made an offer in violation of the regulations. Defendants contracted to sell lumber of a certain grade and expected lumber of that grade to be shipped by the mill. They knew nothing about the mill’s shipping an inferior grade and cannot reasonably be said to have offered the inferior lumber at the price of the higher grade. The fact of the shipment of inferior lumber by the mill, of which the defendants knew nothing, cannot fairly be' tacked on to the price provision of the legal contract which defendants had made so as to put them in the position of offering to sell inferior lumber at the contract price. Furthermore, the lumber was not shipped to Ginsberg at all but to defendants, and its inferior quality was discovered before it was tendered to Ginsberg; and, when it was subsequently tendered to him, this was upon a rebilling at a proper price. I am unable to see any principle upon which an offer of the lumber to Ginsberg at an illegal price can possibly be spelled out of the legal contract made by defendants and the shipment of inferior lumber by the mill to defendants to be tendered on the contract, where, in fact, it was never tendered on the original contract, but only on a new billing and at the proper price.
I concede that, if defendants had offered to deliver to Ginsberg inferior lumber on a contract calling for a higher grade, it might be said that they were offering to sell low grade lumber at high grade prices. But defendants did not do this. The shipment of low grade lumber was made without defendants’ knowledge or consent and it was made, not to Ginsberg, but to defendants. 11 would be straining the law of contracts beyond the breaking point, to hold that such shipment by the mill of inferior lumber may be held a new offer by defendants to sell that lumber at the contract price.
No one, I think, would contend that the penalty was incurred, where a different grade of lumber was shipped to a purchaser through bona fide mistake of fact, when the mistake was discovered and corrected before payment was received; and I see no difference between that case and this, where a wholesaler bills out lumber in good faith on the invoices furnished him, where the furnishing of inferior lumber was entirely the fault of others without his knowledge or participation, and where the facts were discovered by the wholesaler and correction made by him before payment was made by the purchaser.