Champion Spark Plug Co. v. Automobile Sundries Co.

273 F. 74, 1921 U.S. App. LEXIS 1421

• Court: Court of Appeals for the Second Circuit
• Decided: April 6, 1921
• Docket: No. 142
• Status: Published

Opinion

MANTON, Circuit Judge

(after stating the facts as above). [1] The evidence in the record indicates, as indeed it was conceded by counsel for the plaintiff, that the plaintiff defaulted in the contract in having entered the domestic market and sold the products of the defendant in competition with it, and were it not for the alleged waiver thereof, as contended for by the plaintiff, this default would end the case, and the trial judge would have been obliged to dismiss or direct a verdict.

[2] It appears that after August 4, 1916, the plaintiff sold in the domestic market approximately 44,000 spark plugs. These were for export. The amended complaint pleads such sale, and further pleads a waiver of this breach of the contract. The defendant contends that at no time previous to the service of the second complaint did the plaintiff frankly admit this breach of the contract; that in view of its persistent stand that it did not breach the contract, and the denials of the charges of the defendant that the plaintiff did, whatever occurred by way of statements made by the defendant’s officers, or its conduct in subsequently filling orders given to it by the plaintiff, this did not amount to a waiver, and that therefore there was no waiver of the plaintiff’s breach. The defendant’s letters of September 25, 1916, written to the plaintiff, were cancellations of the contract, and' the second letter of that date was a direct threat not to fill any other orders unless the plaintiff could show that they were destined to foreign ports. These letters led to the Toledo conference, where a direct accusation vías made against the plaintiff that it was selling in the domestic market. There was a flat denial thereof. After this conference, according to the president and vice president of the plaintiff, matters were straightened out and business relations were resumed. But there was further complaint and incrimination, which led to the conference at a hotel in New York City on November 24, 1916. It is testified that, after this conference, the sales manager of the defendant waived whatever took place up to that time, by suggesting to let bygones be bygones and continue the business relations. It does appear that orders were received after that date and deliveries were made. We think this testimony required the submission to the jury of the question of whether or not the breach on the part of the plaintiff was waived by the defendant.

[3-5] Waiver depends upon the intention of the party who is charged with the waiver. It is an intentional abandonment or relinquishment of a known right or advantage. But for such waiver, the party who enjoys it could not be released from the obligations of the contract. It is a voluntary act, and does not require or depend upon a new contract or a new consideration. Nor does it depend upon estoppel, and, once made, it cannot be recalled or expunged. Hotchkiss v. City of Binghamton, 211 N. Y. 279, 105 N. E. 410.

[6,7] Oversight, carelessness, or thoughtlessness will not create a waiver. There must appear to be an intention to relinquish the right or advantage, and it must be proved. It may be proven by an express declaration of the party charged with the waiver. It may also be proven by the existence of acts or language so inconsistent with the purpose of the person charged to stand upon his rights as to leave no opportunity for a reasonable inference to .the contrary. If such be the facts, thé question of waiver is one of law, and not of fact. It may also be proven by declarations or acts which, although denied, indicate unmistakably or unequivocally an intent to abandon or relinquish the breach. Under such circumstances, it is for the jury to say whether the facts, as proved, indicate that such an intention exists. It must indicate a voluntary choice not to claim the advantage of the breach. So-much depends upon the intention of the parties that, where such intent is disputed, it necessarily becomes a question for the determination of a jury. Therefore, if the established facts permit reasonable minds to differ as to the inferences or effects from them, a question of fact, arises. It is only where facts proven permit of one inference, and that a waiver, that the question becomes one of law.

[8] In the'case at bar, we think that, in view of the testimony referred to, the question of waiver was a proper one for submission to the jury. The conversations which took place at the Toledo conference, as well as the New York conference, and tire defendant’s thereafter filling the plaintiff’s orders under the terms of the contract, recognized the. contract as still existing, and was some evidence of the waiver of the breach made by the plaintiff of the contract in selling in the domestic market. Shappirio v. Goldberg, 193 U. S. 232, 24 Sup. Ct. 259, 48 L. Ed. 419; Grymes v. Sanders, 93 U. S. 55, 23 L. Ed. 798. The trial court left the question of breach of contract on the part of the defendant, as well as on the part of the plaintiff, to the jury as questions of fact. These questions have been resolved in favor of the plaintiff, and, since they have some evidence to support them, they are controlling upon us, and would require an affirmance of this judgment, except for the errors which have been assigned, and which we think were committed during the course of the trial.

[ 9 ]. The trial court refused to charge that the contract created between the parties the relationship of principal and agent for the purposes therein specified, and charged that the only relationship which existed between the parties was that of buyer and seller. The defendant requested the court to charge that “the contract on which this action is based created between the parties the relation of principal and agent for the purposes therein specified.” This was refused. We think this was error. The court did charge; 1 )

“The contract on which the plaintiffl is suing is a contract for purchase and sale, and not a contract of agency, and the relationship which existed between the parties was that of buyer and seller.”

Under the terms of the contract, the relations of principal and agent were coexistent with that of buyer and seller. The contract had a double aspect. In one respect it created a relation of principal and agent, and in another it contemplated, as between thei parties, purchases and sales. It provides that the “second party is hereby made and constituted sales agent and distributor by the first party.” The term “agent” is employed. The contract called for fidelity in carrying out the terms of the contract, and it was therefore important to have the jury understand the requirement of complete fidelity, which was owing by the agent to its principal, and which the defendant had the right to expect, the violations of which might justify terminating the relationship at once. In Willcox & G. Sewing Mach. Co. v. Ewing, 141 U. S. 627, 12 Sup. Ct. 94, 35 L. Ed. 882, the first party was described as an exclusive vendor for the sewing machines, parts, and attachments of the party of the second part within a given territory. A breach of the contract was.alleged and proven on the trial of the action. The Supreme Court held that in the use of that term, and in the clause of the contract which prohibited him from soliciting trade directly or indirectly in the territory “of other agents,” the relationship of principal and agent existed, requiring the fidelity which is imposed by reason of such relationship. It was said:

“So far as the company’s power of revocation is concerned, the case is not materially different from what it would be if the plaintiff had agreed to sell such machines as were delivered to him at the established retail prices, receiving, as compensation for his services, the difference between those prices and the amount he agreed to pay for them under the contract of 1874. In either case, his relation to the company would be one of agency, that could be terminated at its will or by renunciation upon his part, at least after 1875. Of course, the revocation by the principal of the agent’s authority could not injuriously affect existing contracts made by the latter under the power originally conferred upon him.” 141 U. S. 637, 12 Sup. Ct. 97, 35 L. Ed. 882.

We think that the court erred in charging as it did and refusing to charge as requested by defendant.

[10] The court charged the jury that the contract gave the plaintiff exclusive foreign selling rights of the J-D and Ajax special brand and Lodge plugs. These were not a part of the Champion line, 'me court also admitted evidence that the defendant had sold these plugs for export, on the theory that such sale was a violation of the contract. We think these rulings constituted error. At the time the contract was entered into, the only spark plugs which the defendant was manufacturing and selling was the Champion line. It was subsequent to the making of the contract that the defendant became the owner of the other lines of spark plugs. It was upon the theory that, by the contract, the plaintiff obtained “exclusive and sole right to sell and distribute the products of the first party known as spark plugs,” the plaintiff became the sales agent and distributor of subsequently acquired lines of spark plugs. But it will he observed that in a later paragraph of the contract the types and sizes of the plugs are specifically mentioned. No reference is made in the contract to subsequently acquired makes of spark plugs which the defendant might manufacture or control or offer for sale in the market.

Particularly is it to be noted that no reference is made to lines of the different types or trade-names than the Champion. The Champion was a registered trade-mark owned by the defendant, and its mechanical features were protected by patents. It was only through the purchase of competitors in September, 1914, that the defendant became the owner of the J-D. spark plug. After such purchase, and in placing this product upon the market, the plugs were prominently marked with the letters “J-D.” Its construction was along different lines than that of the defendant’s own plugs. It does appear that in order to take advantage of some feature which possessed special value by two of the J-D plugs, they were renamed “Champion sparks in water” and “Champion magneto.” These were permanently incorporated in Champión lines, and were considered by the defendant to come within the plaintiff’s agency, and duly recognized as such. However, the others were sold as a separate line and could hardly be said to be in competition with the Champion plugs. They were listed séparately, with a mark well displayed in the circulars and upon the articles. Full opportunity was given to the plaintiff to handle these goods on the same basis as every other exporter, and the record does not disclose that any better price was offered to any other exporter. Nor is it disclosed that the plaintiff suffered a loss in its sale of the Champion plugs, due to any alleged competition of the J-D’s.

Later the defendant purchased the Star Specialty Manufacturing Company, with its line of Ajax plugs. We think the same rule applied as to these plugs. They were separately marked and sold under this trade-name. The J-D Company manufactured and sold special brand plugs, which constituted a make of plugs made to order stamped with the customer’s name or brand. This business was continued by the Champion Company, and evidence was permitted to show damages sustained by the plaintiff by reason of the failure to give exclusive agency for such sale to the plaintiff. We think it was error to admit this evidence, and to enhance the-profits of the plaintiff by such admission. Such sales were not part of the Champion line, and were not covered by the contract between the parties.

[11] The claim of the plaintiff! that sales were made by foreign shipments to the Lodge Spark & Plug Company, of England, the Fiat Company, and the Berrardo Company, and that this was a breach of the contract, was waived by the plaintiff’s correspondence and its acceptance of commissions for these shipments. The proof quite conclusively establishes that commissions were paid to the plaintiff upon their demand, and were received by the plaintiff with full knowledge of all the facts. By receipt of such commissions, the plaintiff relinquished all right of action which it is claimed to have had by reason of this alleged breach of the contract. Further we believe that the shipments which were made to the Lodge Company were spark plugs which were not included in the contract between the parties, and the plaintiff was not entitled to commissions therefor.

[12] Error was also committed by the judge below in charging the jury on the question of damages for breach of contract. The jury was instructed that the plaintiff might recover, if at all, for loss of prospective retail profits of the spark plugs, because of nondelivery of the plugs ordered before the final breach. These were summarized in 13 separate claims, amounting to $270,475.15. The plaintiff was obligated to minimize the damages by buying plugs in the market and claiming the difference between the price paid and the price agreed upon. There are exceptions to this general rule, as where the injured buyer is allowed to recover special damages as resale profits, which loss he has suffered by reason of the breach on the seller’s part. If there be no market value for the goods which were purchased under the terms of the icontract, or which substantially answer the purpose of such goods, and the buyer suffers damages because of the failure of the seller to deliver, such damage can be recovered.

[13] If the buyer has made a contract in advance and for the resale of the goods, and that fact has been disclosed and is known to the vendor, and the latter undertakes to furnish the goods and deliver at the time specified in the contract according to the terms of the contract, so that the buyer may fulfill his contract of resale, then, if the vendor fails to deliver the property, he will be liable for damages on the basis of profits the vendee would have realized on his contract for such resale. This record, however, discloses the existence of no resale contracts having been brought to the attention of the defendant at the time of its orders.

There is some proof contained in correspondence wbh reference to the 100,000 plugs sold to Morris Russell, but the record discloses that 50 per cent, of these plugs so ordered were intended for stock, and as to those which were sold to Morris Russell’s order it appears that there was no difference between the contract and the market price. To be entitled to resale profits, it must appear that the buyer had an existing contract for resale at the time of the purchase, and the purchase must be made for the purpose of enabling the buyer to perform the obligations of his contract of resale, and such facts must be made known, clearly, to the seller. And the theory then is that the contract by the seller has been entered into to enable the buyer to perform his obligations under the contract of resale. Setton v. Eberle-Albrecht Flour Co., 258 Fed. 905, 169 C. C. A. 625; Holloway & Bro. v. White Shoe Co., 151 Fed. 216, 80 C. C. A. 568, 10 L. R. A. (N. S.) 704. Spark plugs of other makes were obtainable in the market, which could have been purchased by the defendant, and the loss minimized, examples of which were the Mosler plug. In many instances in which orders were filled by the plaintiff, it did so by substitution of other makes. We find nothing in this record which would require us to depart from the usual rule of damages. Vulcan Iron Works Co. v. Roquemore, 175 Fed. 11, 99 C. C. A. 77; Parsons v. Sutton, 66 N. Y. 92.

[14] An item of damage claimed and proven was for alleged sales made by the defendant to the Ford Company in foreign territory, both before and after the date of the alleged breach of contract, and it was claimed that it would have resulted in profit to the plaintiff of $151,-669.18. It was contended by the plaintiff that it might be inferred that all sales made by the defendant and the Ford Company would have been made by the plaintiff, except for the breach of contract. There was no proof, however, to show that the plaintiff had lost any orders by reason of such sale. We think this evidence was inadmissible, and was not an element of damages which the jury might consider. The selling and distribution of the spark plugs was the obligation of the plaintiff under the terms of the contract, and, in the absence of some proof showing that the defendant interfered with or sold to the customers of the plaintiff, proof of this character was inadmissible and was prejudicial to the defendant.

It would be against the most elementary rules in respect of damages for breach of contract to allow the plaintiff the profits of a sale which he did not make, and which there is no reason to believe he would have made. The plaintiff, if it made out its right to recover, was entitled to any actual damages sustained by reason of its being obliged to purchase spark plugs in the market at the market value and at a price above the contract price, thus resulting in loss to the plaintiff. Cincinnati, etc., Gas Co. v. Western, etc., Co., 152 U. S. 200, 14 Sup. Ct. 523, 38 L. Ed. 411.

[15] The trial court, as an element of damages, permitted the plaintiff to offer proof as to estimates of profits it would have made if the contract had continued to be performed down to the date of its termination, July 15, 1918. In estimating what this loss sustained would be, due regard must be had for cost of carrying on the business of the plaintiff, its cost of selling. This is a subject which should be a matter of proof, and not an estimated loss of profits. Damages for the interruption or destruction of established business may be recovered; but the plaintiff must do so by establishing, with reasonable certainty and by competent proof, what the amount of his loss actually was. This character of proof was not offered.

For the errors assigned, the judgment below is reversed.