Schaeffer Piano Mfg. Co. v. National Fire Extinguisher Co.

148 F. 159, 78 C.C.A. 293, 1906 U.S. App. LEXIS 4309

• Court: Court of Appeals for the Seventh Circuit
• Decided: August 11, 1906
• Docket: Nos. 1,257, 1,258
• Status: Published

Opinion

SEAMAN, Circuit Judge,

after stating the facts, delivered the opinion of the court.

■ The plaintiff in'error in the original suit, who was the defendant below, is designated- in-this-opinion as the “Piano Company/’ while the plantiff below is-referred to-as the “Sprinkler Company.” As each prosecutes a writ of error, their contentions under one and the other writ are respectively so considered.

I. On the W.rit,of the Piano Company.

Upon the finding of facts the sprinkler company recovered judgment for $1,685.9.8, as damages caused by fire and recoverable against the piano company under a clause of the contract between them for a sprinkler equipment.- Reversal is sought by the piano company upon various assigiiménts of error, which are summarized and discussed in the brief of counsel under five propositions, substantially as follows: (1) That the findings of the referee establish nonperformance by the .sprinkler ,compan}r of the terms of the contract in suit, both in the time fixed for delivery of the materials ón the ground and in the prosecution and completion of its work within a reasonable time, and thus preclude recovery upon the contract; (2) that the agreement as to loss or damage by fire is not applicable to equipment affixed to the premises of the piano company; (3) that error was committed in sustaining the demurrer to the plea of set-off; (4) that the sum of $597.50 “for underground materials not destroyed by fire” was erroneously included in the judgment; (5) that the contract for indemnity against loss by fire was ultra vires the charter of the piano company.

1. The first proposition is untenable, unless the want of an amended declaration of record, setting up the waiver and excuse found by the referee, constitutes reversible error, under the Illinois rules of pleading and practice which govern the solution. It is true that the contract in writing, which was declared upon and produced, obligated the' sprinkler company to have all materials “on ground September 1, 1902,” and that the referee states (in the second findr ing) that it failed, without cause, to have any such materials on the premises at the date so fixed. The referee further finds, however (Id.) that the breach “was condoned and waived by the defendant,” by payments made- and letters written subsequently (which appear in and sustain the finding), and by its conduct “in’ repeatedly urging plaintiff to complete said contract without suggesting or intimating” that it would 'terminate the contract or claim damages. So, the referee further reports (in the fourth finding) that:

“Plaintiff dicl not prosecute or complete said contract within a reasonable time, but that this unreasonable delay was not the proximate cause of the loss sued for herein and was contributed to by the defendant, through its failure to provide tank foundations and supports.”

Assuming that the breaches on the part of the sprinkler company thus reported were of conditions precedent in each instance— promises which were dependent and not independent, under the rule defined in Dermoth v. Jones, 23 How. 220, 231, 16 L. Ed. 442—the facts settled by these findings (and not reviewable) absolve the sprinkler company from each of the breaches referred to, if such facts of waiver or excuse are open to consideration upon this review. In other words, the findings are, in effect, that the contract was modified in respect of these terms by consent of parties, with no breach of the ultimate contract on the part of the sprinkler company. Nevertheless, it is contended, in effect, that the declaration and additional counts present issue only upon the contract as written, and the finding of breach thereof is conclusive against recovery.

The declaration contains a special count upon the contract as written and the common counts. Under the rules at common law, preserved in Illinois, respecting the forms of pleading, it is unquestionable that waiver of a breach is not provable under this special count, and that, without full performance on the part of the plaintiff, the count upon such contract will not authorize recovery. Crane Elevator Co. v. Clark, 80 Fed. 705, 111, 26 C. C. A. 100, and authorities cited. The additional counts filed declare upon the written contract, with allegations of delay caused by the defendant which authorize proof of the facts found by the referee excusing completion of the work within the time contemplated by the contract; but no allegations appear touching the failure to deliver all materials at the time stipulated. Thus issue was not tendered of waiver or consent to later delivery, by either of the special counts, and the question arises: On this state of the record, must the referee’s finding of waiver be set aside, and judgment be reversed upon the finding of delay in the delivery which then remains ? Reference to the provisions and policy of the Illinois statutes, regulating the practice — and supplementing the provisions of section 954, Rev. St. U. S. [U. S. Comp. St. p. 696]—frees the inquiry from the strict common-law rule which would otherwise stand in the way, and authorizes a solution, as we believe, in conformity with the issues which were in truth submitted.

While the forms and general rules of pleading at common law are in force in Illinois, the provisions for “amendments and jeofails” in chapter 7 of the Revised Statutes of the state (1 Starr & C. Ann. St. 1896, c. 7) are extremely liberal, both for the allowance of amendments in furtherance of justice, before or after judgment (paragraphs 1 and 2), and for curing or disregarding errors or defects in pleading and variances in proof, after verdict and judgment (paragraphs 6 and 7), and they impress us as equally comprehensive with the Code provisions for like object in neighboring states. The fact that no amendment of the declaration appears of record is not material upon this review, as it was plainly amendable to conform to the proofs, were objection raised in the trial court at any stage, and the submission, with or without amendment, leaves the finding and judgment unassailable (Id., par. 6) for the variance or omission on which they are now challenged. I. & St. L. R. R. Co. v. Estes, 96 Ill. 470, 473; Dick v. Eddings, 42 Ill. App. 488, 489. The general rule in such case, under like statutes of jeofails, is to treat the pléading as having been amended in conformity with the proof (Columbus Const. Co. v. Crane Co., 98 Fed. 946, 951, 40 C. C. A. 35; 1 Ency. Pleading & Prac. 609, 611), but in any view the objection is not available to reverse the judgment.

2. The second contention-rests on the theory that equipment affixed to the premises under the contract became the property of the piano company, and thus not within the clause on which recovery for fire loss is awarded. The sprinkler company contracted to equip the plant of the piano company with a sprinkler system, under a proposal by the former, written on one of its printed forms, which contains (in print) this clause:

“It is also agreed that any loss or damage by fire which may occur to our materials and equipment while in your premises shall be borne by you.”

When the equipment was nearly completed, with materials furnished by the sprinkler company, and in so far as concerns the present inquiry affixed to the premises, the entire plant was destroyed by fire, together with the materials and equipment so furnished under the contract. The loss thus suffered by the sprinkler company is the main element of the recovery, and, if the above-mentioned agreement does not plainly extend to equipment affixed in the course of performance, error is well assigned.

The subject-matter of the contract, as recited, was “equipping the property” of the piano company with a sprinkler system; the sprinkler company furnishing all materials and “erecting a system.” In the light of the description so given to the undertaking, we are of opinion that the terms of the proposal for indemnity against fire loss, “to our materials and equipment while in your'premises,” are unmistakable in their meaning, as applicable both to “materials” brought to the premises and to the “equipment” as it was constructed; that each term was appropriately used in such sense — without reference to the technical status of equipment at any stage as a fixture in the plant — and was not ambiguous; and that the contention for excluding the equipment, as affixed to the realty and no longer the property of the sprinkler company, is unsound.

The propositions that the agreement must be strictly construed, both as one in derogation of the general rule and as one proposed and drafted by the sprinkler company, are unquestionable and consistent with the view above stated. The contention, .however, that the equipment as it progressed became realty, passing title to the piano company, is untenable, as we believe, within the terms of the contract and under the established doctrine applicable to property so annexed. While it is true that the contract provides for a lien in favor of the sprinkler company “upon the materials and equipment until full payment,” it stipulates, as well, “the right to enter upon the premises and remove the same in case of any default.” The rule is well recognized that personal property does not become realty through annexation alone, and that, when one contracting party affixes it to the realty of another, the title to the fixture is either reserved in the one or passes to the other, as the nature and terms of the contract intend. This contract was entire, not sever-able as the work proceeded, and under the general rule applicable to ir, irrespective of the provision for removal, there was no severance of ownership, but title to his work remained in the contractor until completion. Huyett & Smith Co. v. Edison Co., 167 Ill. 233, 236, 239, 47 N. E. 384, 59 Am. St. Rep. 272; Tompkins v. Dudley, 25 N. Y. 272, 273, 82 Am. Dec. 349. With the above-mentioned express reservation of right to remove equipment in case of default, it is clear that no passing of title in the course of performance was intended or effected. The other provision for lien until full payment is not inconsistent with this view, as each provided an alternative remedy. While the lien presupposes the passing of title, the waiver of other remedies for its exercise was optional, and it was open to the contractor to waive one or both of these provisions for suit upon the contract.

3. The demurrer to the amended plea of set-off was rightly sustained. The plea avers, in substance, nonperformance by the sprinkler company, within reasonable time, of its contract to equip the plant of the piano company with the sprinkler system, the sole object of which was protection of the plant against fire; that the plant of the value of $200,000 was destroyed by fire, pending performance of such contract, and the defendant suffered damage to the amount of such value by reason of such nonperformance; and judgment is demanded therefor, less any damages awarded the plaintiff. The defense of nonperformance clearly arose under the general issue and is concluded by the findings. Evidence admissible under this plea was equally admissible under that issue, except in reference to establishing the alleged cause of action on behalf of the piano company for its loss by fire, and the allegations of the plea are plainly insufficient for such recovery. The rule is elementary that damages to be recoverable must be the natural and proximate result of the breach or act complained of. Its application to the multitudinous phases of contract obligations — involving, directly or indirectly, anticipated profits and like contingencies — is not always free from difficulty, and it may well appear that the decisions are not harmonious in observing the limitations of the rule; but the general doctrine above mentioned is settled. Howard v. Stillwell & Pierce Mfg. Co., 139 U. S. 199, 206, 11 Sup. Ct. 500, 35 L. Ed. 147. Or, as further defined in Primrose v. Western Union Telegraph, 154 U. S. 1, 29, 14 Sup. Ct. 1098, 38 L. Ed. 883, the damages under any contract are “limited to those which may be fairly considered as arising according to the usual course of things from the breach of the very contract in question, or which both parties must reasonably have understood and contemplated, when making the contract, as likely to result from a breach.” The plea states no ground for recovery of the fire loss within either definition, even were it assumed to be a credible and provable fact, as averred, that destruction of the plant “would have been impossible” had the equipment been completed.

4. Error is assigned for including in the judgment “$597.50 for underground materials.” The referee expressly finds (eleventh finding) that the fire caused loss to, materials and equipment, in “materials erected as stipulated, $3,950.50”; and in a subsequent (twelfth) finding states: ■

“There is evidence tending to show that underground materials of the value of $597.50 could be taken up and reused, but no evidence of the cost of taking up such material and preparing the same for reuse. There is also evidence tending to show that the entire equipment was destroyed by said fire of January 19, 1903.”

Also (eleventh finding), that "the underground materials are included in the statement” above mentioned. The stipulation of facts is "that the value of the pipe valves and fittings placed underground and included in the above item of $3,950.50 was and is $597.50.”

Thus the loss caused by the fire is positively found, in the item referred to, and the confusion arises from the irrelevant reference to evidence which is not preserved. It it unnecessary, however, to rest support for the judgment on the first-mentioned finding, as controlling, for the reason that the fact appears from all the recitals that the so-called “underground materials” were completed portions of the equipment, and, as such, became useless for the purposes of the contract when the plant was destroyed. The contractor had converted his materials into equipment in performance of his contract, and thus brought it within the stipulated liability for “loss or damage by fire which may occur.” With its identity, and value as a sprinkler equipment lost by fire, his loss was total in the sense of the contract, and liability therefor was not dependent upon actual destruction by fire of the materials in the structure. 2 May on Insurance, § 421a. The contract imposed no duty upon the sprinkler company to recover materials so used, and it is not chargeable with their value as wreckage. Any value they may have for use in a restored plant does not concern the sprinkler company after payment of its loss. No reversible error appears in this allowance.

5. The remaining contention, that the agreement to pay the loss 'was ultra vires the corporation, is without merit. That the piano company, a manufacturing corporation, cannot embark in th!e business of insurance, banking, or other lines not authorized by the statute under which it is organized (section 1, c. 32, 1 Starr & C. Ann. St. Ill.); is unquestionable. Within the lines of business for which it is incorporated, however, the' power to enter into contracts is commensurate with that of natural persons. Incidental to the contract for the sprinkler equipment is the assumption of risk for any loss by fire to the contractor’s property while engaged in the work. The right to contract for the work extends to the incidental terms and obligations, and the agreement in question is of this character whether named an insurance promise or otherwise. It appears to be unobjectionable for other cause, and is not ultra vires.

TI. On the Cross-Writ of the Sprinkler Company.

Errors are assigned for the several deductions made by the trial court from the allowance by the referee, in entering judgment, namely: (1) The sum of $1,610.55 for “labor” and “superintendence”; (2) $321 for “tools” on the premises when the fire occurred; (3), $3!5.18 deducted from the finding of $783, as the value of “sprinkler heads.”

The first and second items referred to were rightly excluded, as there are no facts found to bring either within the contract in suit. Assuming that the item of $1,610.55 inierentially represents the expenditure for labor and superintendence, the actual value only of “materials and equipment” lost by fire is recoverable. Upon such bare statement, in the absence of evidence to fix the value of the product, the fact of expenditure is insufficient to that end — cannot be accepted as primary evidence of value, and if admissible in any view must be accompanied with proof of reasonableness. The charge of $321, as stated in the finding (twelfth), applies, without discrimination, to tools used in performing another contract, and no fact is found to authorize recovery under the contract in suit, in any view of its terms. So the question discussed in the briefs, whether tools are within the meaning of the terms “materials and equipment,” does not require solution. The deduction of $345.48 from the valuation of sprinkler heads in the finding impresses us to be unauthorized. The judgment recites that all exceptions to the report of the referee are overruled, that the findings of fact “are in all respects approved and affirmed,” and that, “as a conclusion of law,” the above-mentioned deduction is made from the value fixed by the referee. The referee states the single valuation of $783, together with the fact of loss. No other facts appearing, the value was purely a question of fact. So, if the cost of labor entered into that valuation (as stated in the opinion filed at the hearing below), such fact — were consideration of its value deemed erroneous, which we do not intimate — is not preserved in the record and with the findings of fact adopted by the court, the conclusion to deduct $345.48 cannot be upheld.

Upon the original writ of error the judgment is affirmed. Upon the cross-writ the various assignments of error are overruled, except that in reference to the above-mentioned deduction of $345.48. Such assignment is sustained, and the judgment will be corrected accordingly. The cause is remanded for further proceedings in conformity with this opinion.