Court Opinion

ID: 8595369
Source: CourtListenerOpinion
Date Created: 2022-11-23 16:02:30.180248+00
Date Added: 2024-06-11T16:54:53.233068
License: Public Domain

Nichols, Judge,
concurring in part, dissenting in part:
I agree with much of the court’s opinion, but dissent as to the vital matter of how we should treat the estimated projection of cost of performance of $43,067,413, as stipulated. The trial judge would not deduct this from the estimated contract revenues, nor would I. The court disagrees.
By UCC § 2-709, if the buyer wrongfully refuses to pay the purchase price, and the seller cannot sell the goods elsewhere, the buyer remains liable for the price. By UCC §2-708 (1) and (2), the buyer is entitled to a credit for expenses saved the seller by the breach if, but only if, this measure is adequate to put the seller in as good a position as performance would have done. UCC does not directly govern here, but the above rules do not differ materially from those acknowledged by the court to apply at common law. So far as I can tell, we differ as to issues of fact, more than law.
. If I contracted with Swift & Co. to buy all the squeal produced by its pigs, and if I reneged, I would not expect Swift & Co. to stop slaughtering pigs. I would, therefore, under the UCC, expect that Swift & Co. would go on slaughtering pigs, and any mitigating cost savings I could show would have to take that into account and probably would be slight indeed. Yet the court here, in an analagous situation, demands that the group with which plaintiff is affiliated, and with which it has integrated its operations, should stop producing natural gas. Because it does not do this, the court refuses to put plaintiff in as good a position as it would have been in upon full performance.
The record herein shows without contradiction that the Government always foresaw, and in a sense required, that plaintiff would integrate into a commercial natural gas production. Only thus could the cost be brought below the cost of a non-integrated operation. Absent such integration, and the cost savings to be expected therefrom, the Government would have preferred to produce helium in its own plants. To pretend that, under the contract, nothing but purchase of helium was involved, is to substitute a sterile legalism for the broad remedial relief the law prescribes against an unexcused contract breach.
*899The court puts on its blinders so as to be able to say it is putting the plaintiff in as good a position as it would have been in upon full performance, the standard it gives lip service to and should follow in reality. The court knows from the record that the three-stage refrigeration process at plaintiff’s plant produces, at the third stage, about 295° F. and colder, a gas mixture, 72% helium and 27% nitrogen, which the Government bought, and a liquid residue, 26% methane, 73% nitrogen, and 0.01% helium, which is good only for fuel in special low-BTU boilers which exhaust this helium and nitrogen into the air. Plaintiff could not produce salable helium without producing these, too, and they, with the methane and the purified natural gas, are the usable products of plaintiff’s plant now that the Government no longer will buy the helium. Stoppage of this plant would disrupt the other elements of the integrated system and apparently, cause a larger loss than the stipulated cost, $43,067,413, incurred by keeping open.
The Chief Judge’s able concurrence became available only after I had written the above, and requires further specificity by me. I rely primarily on the trial judge’s findings 26 and 79. Defendant did not except to these findings except in particulars not here relevant. It desired additions rather than deletions. They show that defendant elected to contract with plaintiff to obtain a reasonable cost to the Government, because the investment in the plant and operating costs “could be spread over several other end-products rather than helium alone”, and would “avoid the necessity for the Government to undertake nitrogen removal and possibly petrochemical operations as a necessary, but basically unrelated, adjunct to helium conservation.” Presumably this necessity of embarking in petrochemical operations in the suppositious Government plant was to spread the costs as a private, integrated plant would do. In the March 30-31, 1961, negotiations, plaintiff advised that the helium plant to be built would be “fully integrated” with the Bushton liquids recovery plant, and that “petrochemical facilities might be constructed and added in the future.” Mr. Wheeler, government negotiator, “recognized that the helium extraction facilities would in *900most cases, be fully integrated with other facilities of the contractor.”
Finding 125, following a description of the integration achieved after the contract date, reads in part: “All of these integrated operations are in implementation of Northern’s original plans as executed through wholly owned subsidiaries.” Defendant does not deny that this is true, in its exceptions, but says only it is irrelevant because the Government contract was not with Northern, i.e., it is irrelevant because of the legal theory urged in Judge Skelton’s opinion.
In view of this, I do not see how it can be said that the defendant could not have foreseen in general the measures adopted by plaintiff in 1970, as the Chief Judge describes them. Defendant’s officials did not know exactly what plaintiff was going to do, but they expected plaintiff to exploit to the full all the capabilities of its helium plant. They could hardly have believed plaintiff would continue its pre-1970 procedure of feeding back into the pipeline downstream from the plant the useless and detrimental nitrogen it had gone to so much trouble and expense to extract.'When plaintiff stopped doing this, had it done otherwise something else than what it actually did, that something else likely would have knit the helium plant into the other plants in a way that would have been costly to unravel. If it is true that before 1970, plaintiff could have stopped producing helium without damage to the other operations, this is because the integration in that period was incomplete.
The question is one of the inferences to be drawn from the record. Our trier of fact drew his inferences, and we are rejecting them, I believe, without respect for the presumption of correctness demanded by Eule 147(b). It seems to me that the implication of this rule is that we do not disregard numbered findings, but if we think the record does not support them, we take them up individually and show why; The Government did not in 1981 actually address itself to what the damage consequences of a breach would be. Finding 125 shows that a plan for integrated operation- existed, substantially the plan actually implemented before the breach. Defendant knew the helium plant would be made part of an integrated operation which might include new *901petrochemical facilities. (Findings 26 and 79.) If the Government did not obtain the details, the fault was its own. However, it did not do this because it did not anticipate it was going to breach the contract. Therefore, it is chargeable with what it could have learned. The Chief Judge’s 'argument seems to imply that a party to a contract who fails to inquire or consider what the consequences of a future breach by it will be, thereby limits its liability for damages in the event it actually commits such a breach. I do not think this is the law.
I do not get any help from Article XXXI, para. 31.3, quoted by the court. It is ambiguous whether the “risk” referred to is the risk of unexcused breach by the Government. The “legislative history” of the clause shows that the parties had entirely different kinds of risks in mind. American courts do not favor contract clauses to exculpate a party from the legal consequences of his own wrong. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), deals with this policy. See especially the fn. in Mr. Justice Douglas’s dissent at p. 24. Thus the clause here involved should be construed not to apply to the risk that a party might wilfully breach the contract.
I would be willing to give credit for the excess in the value of the plant over cost less depreciation at the time of the breach, if the court means just after it. However, in that event any deficiency in the fair market value, should 'also be charged to the Government. Presumably such deficiency, if it exists, is eaused by the breach.