Court Opinion

ID: 8815489
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:17:19.480406+00
Date Added: 2024-06-11T17:04:27.198325
License: Public Domain

WOODS, Circuit Judge
(dissenting). The question to be decided is the measure of damages for the breach by Arminius Chemical Company of its contract for the sale of pyrites to tire plaintiff, Acme Manufacturing Company. Omitting immaterial provisions, the contract was as follows:
“New York, October 21, 1915.
“Arminius Chemical Company, Incorporated, sells to Acme Manufacturing Company, which buys four thousand to seven thousand (4,000 to 7,000) tons (2,240) pounds fines sulphur pyrites averaging 42% and upwards of sulphur from its mines near Mineral, Yirginia, to be shipped at the rate of say five hundred (500) tons per month in substantially equal monthly quantities, beginning at buyer’s option, on or before January 1, 1916. Prices to be nine and one-half cents per unit of sulphur.
“This contract is made subject to delays and stoppages caused by strikes, accidents, delays by railway companies, and causes beyond the selling company’s control.'
“The purchaser’s right to demand pyrites under this contract will expire January 1, 1917.”
There is no dispute as to the essential facts. The defendant made similar contracts to sell pyrites to other customers in 1916; its entire obligations for deliveries in that year amounting to 64,793 tons. In January, 1916, after these contracts were made a cave occurred in the mine which so impeded its operation that defendant could deliver in all only 8,977 tons. On January 25, 1916, defendant by letter notified plaintiff of the disaster and promised to use its utmost efforts to put the mine in workable condition. There was an extended correspondence during the year 1916 with respect to the delay in shipments, defendant’s obligations to other purchasers, and the needs of the plaintiff. The importance of the correspondence is that it shows: (1) The recognition by the plaintiff- that in view of the condition of the mine it was entitled only to prorate with other customers on equal footing in the total product that defendant could make; (2) the agreement by plaintiff on July 29, 1916, that on account of the disaster the plaintiff might suspend all further shipments for 1916, and begin again on January 1, 1917, thus extending the original contract with its limitations through the year 1917. The total shipments to plaintiff in 1916 were 1,000 tons and 300 pounds. Assuming that plaintiff’s contract gave it the option to take 7,000 tons, this was 31 tons more than its pro rata share. Some of the contracts of defendant with its customers, made before the disaster to the mine, were contracts continuing from year to year, so that its obligations to these customers, standing on the same plane as its obligation to the plaintiff, embraced not only the deficiencies for the year 1916, but also the pyrites it had agreed to deliver to these other customers in 1917. The *37aggregate of all these obligations for 1917 was 88,616 tons, of which it was able to deliver only 13,850 tons. Its total shipments in 1917 to the plaintiff were 796 tons, 1,360 pounds — 140 tons less than plaintiff’s pro rata share.
During the year 1917 the difficulties at the mine continued. There was further correspondence between plaintiff and defendant relating to the mine trouble, the delay in shipments and shortage of cars. The culmination came in the following letter from defendant to plaintiff, dated April 4, 1917:
“Wo regret to announce that, after 15 months’ hard work, and the expenditure of a largo sum of money, the plan adopted by us for the re-opening- of out-mine after the cave-in on January 1G, UHO, has been condemned by expert mining engineers. We are now about to begin all over again, and it will take from G months to a year, if the new plan is a success, to put the mine in operation.
■‘Since Sopi ember 10th, when we resumed shipments, we have done everything in our power to supply our customers with ore, notwithstanding the fact that every ton shipped them has been at a great loss to ourselves. Wo cannot afford to do this any longer, and as, by the terms of our contract with you of October 21, 1015, your right to demand pyrites expired on January .1, 1917, we very reluctantly advise you that no further shipments will be made under it.”
Similar letters were sent to defendant’s other customers. Defendant made no shipments to plaintiff after the date of this letter. In September, 1917, defendant made new contracts with some of its customers at an increased price — these customers consenting to the increase on the representation of defendant that by reason of the accident to the mine it was impossible for it to furnish pyrites called for at the original price, except at tremendous loss. After making the new contracts, the defendant applied all its product thereon, having renounced all its old contracts.
The plaintiff accepted the renunciation of its contract and brought this action October 31, -1917, for $40,776.12 damages, alleged to be the difference between the market price and the contract price of the difference between 7,000 tons and the amount shipped to plaintiff. The renunciation by defendant, upon its acceptance by plaintiff, became an irrevocable breach by the defendant, conferring upon plaintiff an immediate right of action, the measure of damages being the difference between the contract price of the pyrites, which ought to have been delivered to plaintiff and was not, and the market price at the time of delivery contemplated by the contract. Roehm v. Horst, 178 U. S. 1, 20 Sup. Ct. 780, 44 1,. Ed. 953. The issue is: What was the true deficiency in the quantity that ought to have been delivered to plaintiff? The court instructed the jury in effect that, notwithstanding the renunciation of the contract, if the cave in the mine was a cause beyond the defendant’s control, preventing the production and shipment in entire fulfillment of all its contracts dated before the disaster for the years 1916-1917, and defendant mined and shipped all the pyrites it could after all reasonable efforts, then, in view of defendant’s contracts with other purchasers, the extent of defendant’s liability was to ship ratably on al! contracts in existence at the time of the accident and standing on the same foobng, and that the plaintiff could *38only recover damages to the extent of defendant’s failure to ship the plaintiff its ratable share of the entire output.
The majority holds that this instruction was erroneous, and that the instruction should have been that by renunciation of the contract the defendant forfeited the right to the pro rata rule, and that the verdict of the jury should b,e for the difference between the market price and the contract price of the total difference between 7,000 tons and the quantity shipped to plaintiff in 1916-1917. This I agree would be a correct statement of the law, if the renunciation had been of an unconditional contract to deliver to plaintiff 7,000 tons during the years 1916 and 1917. But the contract breached and repudiated by defendant was to deliver 7,000 tons from its mine subject to causes beyond defendants control. It may be, if the cave in the mine had occurred after the breach and repudiation of the contract, it would be held no defense, on the ground that the voluntary renunciation of the seller released the purchaser from the risk of future contingencies. Roehm v. Horst, 178 U. S. 1, 20 Sup. Ct. 780, 44 R. Ed. 953.
But the cave occurred before the renunciation, and the right under the contract which the plaintiff had at the time of the renunciation had become limited to prorate with other purchasers on the same footing in the total output of the mine. This being plaintiff’s entire right, it could not be damaged by the breach beyond the value of that right, and the extent to which it was deprived of that right by the defendant is the measure of its damage. It could never have any right to the ratable share of other purchasers, who had made contracts before the accident, unless those purchasers had in due time unconditionally released the defendant from obligation to ship to them, and there is no evidence of such releases.
It is true that, after the repudiation by the defendant and the acceptance of it by the plaintiff, the contract was at an end, and thereafter was available to either p'arty only to ascertain the measure of damages; but in using it for that purpose the purchaser could not strike out its conditions. It was bound to take the whole contract, including exemption of defendant from liability for failure to deliver for “causes beyond the selling company’s control.”
Application of the measure of liability fixed by the majority opinion illustrates its disastrous hardship. The contracts for 1916 and 1917 amounted to 153,409 tons: Owing to the mine accident defendant was able to produce only 22,829 tons, leaving a deficiency of 130,580 tons. The difference between the contract price and the market price was about $6.50 a ton. As all other purchasers holding contracts at the time of the accident had the same rights as the plaintiff, tire result would be a liability of the defendant to its customers of nearly $850,-000, although its contracts were limited to deliveries from its own mine, subject to cause of nondelivery beyond its control, and the condition of the mine in spite of defendant’s utmost efforts made full deliveries impossible.
It is true that, after the repudiation of the contracts, the defendant, in violation of the rights of the plaintiff and other purchasers, made new contracts and delivered under them. But the only result of this *39was to charge the defendant, as it was charged by the verdict, with all of these deliveries as deliveries which it should have made pro rata on its existing contracts. It could not justly have the effect of charging it for failure to deliver to plaintiff more than its pro rata of what it could produce from its mines.
It seems to me that to hold defendant bound to ship the entire 7,000 tons, without respect to the failure of the mine or its obligations to other customers, is not only inequitable, hut denotes the substitution of an absolute contract to ship 7,000 tons for the conditional one, which was made and recognized throughout the entire correspondence. It is really the inflicting of punitive damages for breach of a contract.
The authorities are unanimous that the only right of a purchaser under the conditions here appearing is to share pro rata with other purchasers whose contracts were on the same footing, and that his measure of damages is the loss resulting from defendant’s failure to deliver his pro rata share. McKeefrey v. Connellsville C. & I. Co., 56 Fed. 212, 5 C. C. A. 182; Jessup & Moore Paper Co. v. Piper et al. (C. C.) 133 Red. 108; Luhrig Coal Co. v. Jones & Adams Co., 141 Fed. 617, 72 C. C. A. 311; Oakman v. Boyce, 100 Mass. 477; Metropolitan Coal Co. v. Billings, 202 Mass. 457, 89 N. E. 115. The rule is restated in Garfield & Proctor Coal Co. v. Pennsylvania Coal & Coke Co., 199 Mass. 22, 84 N. E. 1020, relied on by plaintiff; but there it was held that defendant could not avail itself of the pro rata rule, because it had enough coal to fill plaintiff’s contract and all others on an equal footing with it.
The District Judge held, and charged the jury, that under the contract the buyer had the right to fix the quantity at 7,000 tons, subject to the other provisions of the contract. As the defendant did not except to this instruction, it is not discussed in this dissenting opinion, though I do not assent to it.
I think the District Judge correctly instructed the jury as to the measure of damages.