Texas Co. v. Pensacola Maritime Corp.

292 F. 61, 1923 U.S. App. LEXIS 2944, 1923 A.M.C. 982

• Court: Court of Appeals for the Fifth Circuit
• Decided: July 11, 1923
• Docket: No. 4001
• Status: Published

Opinions

KING, Circuit Judge.

This is the second appearance of this case in this court. The opinion on the former hearing is reported in 279 Fed. 19. Briefly stated, the case is as follows:

On July 22, 1919, the Texas Company entered into a written contract with the Pensacola Maritime Corporation, hy which it agreed to sell to said corporation from August 1, 1919, to September 30, 1920, and said corporation agreed to buy from it, all the bunker oil sold by said corporation for delivery to vessels in the port of „ Pensacola. The seller was not obligated to deliver more than. 20,000 barrels in any calendar month, except that the purchaser, by giving to the seller 10 days’ written notice, might require a total delivery of 35,000 barrels per month, or by giving 30 days’ written notice, might require the seller to furnish 50,000 barrels per month. On May 3, 1920, the Texas Company notified said corporation that it canceled said contract, and it refused to thereafter furnish to said corporation any more oil. Said corporation notified the Texas Company on May 4, 1920, that it would take the additional 30,000 barrels of oil, to wit, 35,000 barrels 10 days from the date of said notice, and 50,000 barrels 30 days from such date. This suit was brought to "recover damages for the alleged breach of said contract, averring that said corporation would have sold all of the oil required to he furnished by said contract at a greatly increased price to that at which the Texas Company had agreed to furnish the same.

The Texas Company defended on the grounds: (1) That the contract was unilateral, and not binding; (2) that the oil business of the plaintiff was a new business; that no sales were made under said contract for 7 months after July, 1919, and therefore no basis existed for the recovery of prospective profits; (3) that the contract required payment to be made promptly on completion of each, delivery of oil, and allowed a cancellation for failure to pay any amount when due, and provided that no forbearance, or course of dealing, should affect this right of the defendant; that prior to May 3d, when it gave said notice of cancellation, plaintiff had failed to pay, when due, an amount owed for oil previously ordered and delivered. To this last plea the plaintiff interposed two replications; one denying its truth, and the other alleging that before any notice of cancellation was given plaintiff had paid for all oil delivered, that defendant had never given any notice of insistence on payment at the time provided in said contract, or that it would terminate the contract as to future deliveries for failure to make payment promptly when due. No proof of the truth of said plea was offered under the replication denying the same, and on the trial it was stipulated that the facts stated in the second replication were true.

The decision rendered in this court on the former writ of error held that the contract was not unilateral, and was a binding agreement; that the plaintiff might recover for profits lost on sales of oil for delivery to ships at Pensacola, actually made, or on those which it proved it could have made, which profits were lost by reason of the breach of said contract by the defendant; and that the second replication to the plea of a failure to make prompt payment was sufficient. The case was reversed because of a failure of proof to show any loss of profits, and for error in the trial court in holding the proof then adduced sufficient, and that it showed a definite amount of lost profits. The plaintiff in error seeks to reopen the decision then made, upholding the validity of such contract and the sufficiency of said replication. For a further statement of the facts, reference may be had to the former opinion in this case.

1. While this court may have the power, under special circumstances, to re-examine questions decided on. a previous hearing of the same case (Messinger v. Anderson, 225 U. S. 436, 444, 32 Sup. Ct. 739, 56 L. Ed. 1152), as a general rule the decision on a first appeal, or writ of error, is thereafter the law of the case (Richardson v. Ainsa, 218 U. S. 289, 295, 31 Sup. Ct. 23, 54 L. Ed. 1044). We do not think that the rulings made on the former hearing should now be •disturbed.

It may be added that, as to the cancellation of the contract for alleged failure to promptly pay for oil furnished during April, 1920, the former opinion called attention to the fact that two replications were filed .to the plea alleging a failure to make prompt payment for oil furnished, one of which denied the truth of the plea, and that no proof in. support of such plea was offered; the truth of the second replication being admitted. This is still the condition of. the proof on the present record. Furthermore, the testimony in this record shows that on the day the notice of cancellation was delivered the Munsomo had been placed about 10 o’clock a. m. at the Texas Company’s dock to receive oil; that the agent of said company promised to deliver the oil to said vessel, it being stated that the Texas Company’s pump had broken down and would be started about 2 o’clock. At that hour the pump was reported to plaintiff by defendant’s agent as still being broken, but that the Texas Company would-start pumping oil into the Munsomo at 4 o’clock. At that hour it was stated the pumping would begin in a few minutes. Not until 5 p. m. was the letter attempting cancellation delivered. There is no suggestion that any sum during this entire period was due from, or unpaid by, plaintiff, or that any complaint had been made that the payments for oil previously furnished had not been satisfactorily made. Texas Co. v. Pensacola Maritime Corporation (C. C. A.) 279 Fed. 19.

2. At the request of plaintiff the court charged the juiy as follows:

“The plaintiff Is only required to prove its case, including its damages, by a preponderance of the evidence. The jury is not authorized to base its verdict on mere speculation or possibilities, but. absolute certainties are not required; (that is, you are not required to be absolutely certain that plaintiff •would have sold any particular quantity, or the whole amount, but if you can reasonably deduce, from the circumstances at the time and the condition of the market and the price of the oil that the Maritime Corporation could have delivered at, and it is a reasonable deduction and a strong probability that the Maritime Corporation could have sold it, then it would not require absolute certainty that it would sell it to make a case for the jury). If the evidence in the case is sufficient to convince the jury that plaintiff •could have, during the unexpired period of the contract, sold the quantities of oil which it had a right to demand under the terms of the contract, or some definite portion thereof, and for the purposes, stated in the contract, and the jury are convinced by the evidence that such sales could have been made at definite prices, then the plaintiff will be entitled to recover the profits, if any, it would have made from such sales.”

The portion of said charge in parenthesis was interpolated by the court. Under the above charge the jury was instructed that, if it could reasonably deduce from the circumstances at the time, and the condition of the market, and the price at which the Maritime Corporation could have delivered oil, and if it was a reasonable deduction and a strong probability that the Maritime Corporation could have sold it, then it would not require absolute certainty in order to make out the plaintiff’s case.

Under this instruction the jury was permitted to find from the evidence of the general condition of the bunker oil business at Pensacola, and of the market prices shown then to exist, which were greatly in excess of the price of oil at which the Texas Company had agreed to deliver to the Pensacola Maritime Corporation, and from the general statements of parties that they would have taken this oil from, plaintiff, that the plaintiff could have sold the entire quantity of oil which it could demand from defendant on said contract. While there were other charges delivered by the court to the jury, which, if standing alone, might have confined the use of this testimony within proper limits, they were necessarily inconsistent with the above charge, and under the facts of this case the above charge was error, harmful to the defendant.

We think that the testimony in this case as to the demand for bunker oil at Pensacola on May 3d, and thereafter was admissible only for the purpose of showing the condition of the market for such oil and the likelihood that plaintiff’s business during the remainder of the term of its contract would not have been less in amount than what it had previously reached. Eexcept for this purpose, such testimony was not admissible. It was not evidence from which the jury could properly conclude that, if the plaintiff had had the oil in question, it could or would have sold it. This could only be properly deduced from evidence of the volume of plaintiff’s business, existing at the time of the breach of the contract, or from proof of contracts in existence at the time of such breach, or offered to plaintiff subsequent thereto, and declined because of its inability to procure oil.

Giving to the testimony full weight for all admissible purposes, it does not show that the plaintiff had received, or would have received, the firm offers of sufficient contracts for the purchase of oil, for delivery to vessels at Pensacola, necessary to support the verdict found in this case. It may be that there was proof of a sufficient offer from MacDonnell for 12,000 barrels. Knowles’ testimony may have warranted, b.ut did not require, the finding that the Munsomo would have taken 40,000 additional barrels. The negotiation between Phillips and the Shipping Board does not appear to have ripened into even a conditional agreement. No definite understanding seems to have been reached with Turner.

3. We think that the contract with the Texas Company authorized a sale of oil to MacDonnell and persons similarly situated, where the oil was to be delivered to vessels at the Texas Company’s dock in Pensacola for their use as fuel, that the objections to the testimony of such offers were properly overruled, and the charges requested on the subject of such proposed sales were properly refused.

4. The defendant contends that the proof showed no basis for any recovery, except for the oil contracted to be furnished to two steamers, the Munsomo and the Ohioan, and that a recovery based on the prospect of future business during the remaining months of the contract is too speculative to be allowed. This was not the case of a business yet to be established. It had been conducting active solicitation for orders since August 1, 1919. It had made sales during April 1920. It had made contracts to be filled in May. It therefore had the basis of business conducted and'of actual sales made and contracted for before breach as an evidence of its probable future business, with the evidence adduced at the 'trial showing the acute demand for bunker oil at Pensacola during the entire remaining period of the contract. It is not absolute certainty of damage that is required to be proven, but only a reasonable probability of damage and of its amount. The rule is well stated as follows:

“An attempt Is sometimes made to distinguish between certainty that some damage has been caused, and certainty as to the amount of damage; but no broad statement can be made that where it is uncertain that any damage has been caused by the breach no recovery is allowable. In almost every case where? prospective profits are allowed, it will be true that the profit was' a chance — dependent upon the ability to make a large number of contracts with other persons on advantageous terms. All reasonable expectations might have been disappointed by the happening of divers contingencies. But if the plaintiff has given valuable consideration for the promise of a performance which would have given him a chance to make a profit, the defendant should not be allowed to deprive him of that performance without compensation unless the difficulty of determining its value is extreme. In a recent English case the plaintiff by contract was entitled to become one of 50 persons, 12 of whom were to be selected by judges for the bestowal of prizes. The plaintiff was not notified ,of the time when the decision and award was to be made, and therefore failed to present herself, and 12 other persons were awarded the prizes. A recovery of substantial damages was upheld. It was recognized that the plaintiff would have had. if the defendant had not committed a breach, about one chance in four of securing a prize. The court declined to take a distinction between a chance and a probability so far as the right to recovery was concerned. As was said in a Minnesota decision: ‘It is no exoneration to defendant that his misconduct, which has made inquiry as to the quantum of harm necessary, renders that inquiry difficult. The best the law can do is to award approximate compensation. Its failure to do even and exact justice in such case is not more conspicuous than in many others. No other remedy is available. To allow only for loss of time and expenses would put a premium upon breaking contracts and deny substantial justice.’ Though the fact that the plaintiff’s damage is uncertain in amount, or even that it is uncertain that substantial damage has been caused, should not deprive the plaintiff of a right to compensation for the loss of the defendant’s performance which would have given the plaintiff a chance to make profit or avoid damage, such uncertainty is a good reason for applying some other test, if another test is possible, for estimating his damage, than by letting a jury guess at the value of the plaintiff’s chance or probability by seeking to estimate his probable profits and losses. For- this reason where the performance of which the plaintiff has been deprived has a market value, courts will' be more reluctant to allow the test of prospective profits than in a case where, if prospective profits are not allowed, the plaintiff will be denied relief altogether. Thus, where the defendant has wrongfully broken a contract to furnish power to run a mill, some courts restrict the damages to a difference between the rental value of the mill, if the contract had been kept, and its rental value in view of the breach. Other courts allow loss of profits to be estimated by the jury. But courts which would deny the plaintiff in such a case the right to recover anticipated profits would doubtless allow proof of such profits in a case where no other method of estimating the plaintiff’s damage was possible, and where, therefore, a rejection of the test of anticipated profits would result in denying the plaintiff all substantial relief. Where a breach of contract involves deprivation of a chance which has value in a business sense, a just reluctance will be felt by most courts to deny altogether the recovery of substantial damages.” Williston on Contracts, § 1346.

The following case is not unlike the present in principle. There the plaintiff had been given an agency to sell a given quantity of fruit jars. After the contract was in operation, it was repudiated. It was held that affirmative proof that the plaintiff could have sold all of the jars agreed to be furnished was not required, where the evidence was sufficient to reasonably tend to show that they would have been sold. On the question of the certainty of proof required it is held:

“Nor was the proof of probable sales open to the criticism of uncertainty and speculation in the legal sense. The evidence tended to show that the Owens jar was received with great favor by the trade; that the prospects of large sales during the season were good. Before the contract was terminated plaintiff had actually sold 32 cars. One of plaintiff’s customers afterwards asked for 2 extra cars. Twelve cars were sold by Ball to jobbers in Toledo after the purchase of defendant’s plant. There was evidence tending to show the likelihood of making sales to other named customers. The jury was instructed, in substance, that it was not limited, in its consideration to sales which would probably be made .by defendant, to the consuming capacity of the several firms which had already been interviewed by the plaintiff. This instruction is criticized by defendant, who insists that, if plaintiff had sold every customer it approached to the extent of the latter’s full capacity to handle fruit jars, the sales would have aggregated only 158 cars, the commissions and prerniums on which would have amounted to but $4,266. We think, however, in view of the nature of the evidencé already referred to, defendant’s contention is not well founded, and that the trial court took the correct view of the subject. As said by Judge Grover (quoted in Wakeman v. Manufacturing Co., 101 N. Y. at page 212, 4 N. E. 268, 54 Am. Rep. 676), with respect to the uncertainty of profits: ‘It is not an uncertainty as to the value of the benefit or gain to be derived from performance, but an uncertainty or contingency whether such gain or benefit would be derived at all. * * * It is sometimes said that speculative damages cannot be recovered because the amount is uncertain; but such remarks will generally be found applicable to such damages as it is uncertain whether sustained at all from the breach.’ The evidence as to the probable amount of sales was thus not speculative. The other elements entering into the loss of profits were commissions, premiums, and expenses of sales.” Hollweg v. Schaefer Brokerage Co., 197 Fed. 689, 702, 117 C. C. A. 83, 96.

The proof here fairly showed that, if this contract had not been breached, the plaintiff would have sold at least 20,000 barrels of oil to the Munsomo, the Ohioan, and the Wisconsin in May, and under the evidence as to the demand for bunker oil at Pensacola from May 1 to October 1, 1920, the jury might have found that plaintiff would have sold an equal amount monthly during the remaining term of its contract.

5. The charges requested by defendant, to the effect that, if plaintiff was entitled to recover on the basis of its existing business, such business done in April, or in April and May, prior to the attempted cancellation of the contract, should be prorated over the entire time during which the contract had been in existence, were properly refused. The proof shows that during the months preceding March, 1920, the demand for bunker oil was dull. During these earlier months the plaintiff was engaged in establishing its business. Its active business in bunker oil began about April 1st. The proof was that thereafter the demand for bunker oil was great and the price advancing. It is not unreasonable to conclude that the business of April and the actual requirements for May were not less than a fair test of - the business plaintiff would have done in succeeding months, if it had been furnished with oil by the defendant as provided in the contract, and not that its business in succeeding months should be judged of on the basis of prorating the business done after April 1st over the entire period from August 1, 1919, when the contract came into operation.

6. Of course, the profits, if any, found should be diminished by the expenses necessary to make the same. No proof was offered'by the plaintiff as to the expenses, if any, which it would have incurred in making the prospective profits, additional to those which it did incur in carrying on its business. It should have offered proof as to the expenses not incurred, which would have been, had the sales been made.

7. It would also seem that a liability for which the plaintiff is responsible has been asserted against it for expenses caused to the Munsomo and Ohioan for failure to furnish them with oil according to agreement. The proof indicates that a demand for such expenses has been made by persons in such relation to the owners and charterers that it is equivalent to a demand by the one entitled to make it. If the plaintiff is liable to vessels for expenses caused to them, by reason of its failure to deliver oil at Pensacola, such failure resulting from the refusal of the Texas Company to furnish oil contracted to be delivered, and the inability of the plaintiff to procure it elsewhere, the Texas Company would be liable to the plaintiff for the loss thus occasioned to it.

8. On the question of damages for delay to these vessels the charter parties of the Monsomo and Ohioan were introduced in evidence. Objection was made to the admission of these charter parties, so far as they were offered as evidence of their daily hire value, sought to be recovered, during the time they were delayed by reason of the plaintiff’s failure to furnish them with bunker oil; such failure being caused by the Texas Company’s breach of its contract to furnish oil to the plaintiff. This objection was overruled and the charter parties admitted.'1 The defendant also requested the court to charge the jury that they could not look to the charter party of the Ohioan as a source of information touching the daily value of the ship’s lost time, which requested charge was refused.

We do not think the court committed error in admitting these charter parties as evidence bearing on the question of the value of the ships' time during the periods they were delayed. The court properly instructed the jury that they were admitted to assist them in ascertaining the facts as to such value, but that the charter hire alone was not the absolute test; the real value being such sum as the charterer would have made by the use of the vessel during such time had he not been prevented from using her. Charter parties are competent evidence for the ptirpose above stated. Spencer on Marine Collisions, § 204; The Conqueror, 166 U. S. 125, 133, 17 Sup. Ct. 510, 41 L. Ed. 937.

9. So far as they were correct, the charges requested were fully covered hy the instructions given to the jury. The brief of counsel for plaintiff in error seeks a review of the several questions therein set out, grouped under five heads, and the argument was restricted to these subjects. The foregoing opinion deals with each of the subjects presented by said brief or argument.

10. As held in the former opinion in this case, the plaintiff, if entitled to recover, may recover the loss of profits which it has sustained on contracts which it made, or which it shows by proof it could, have made, had the contract not been broken by the defendant, to furnish oil for delivery to vessels at Pensacola during the remaining period thereof. In estimating , this' profit, the jury may consider the. sales made by the plaintiff under the contract, and any proof offered of firm contracts actually offered to plaintiff for delivery to vessels at Pensacola of definite quantities of oil at fixed prices during the remaining period of said contract. If the proof does not satisfactorily show such offers, the jury may consider the proof of sales actually made, and the proof whether or not such scale of sales would reasonably have continued to have been made during the remaining period of such contract. If the proof indicates the prices at which such sales would probably have been made, such prices should be regarded. In the absence of any proof indicating different prices, proof of the market value of oil for delivery at Pensacola to vessels for fuel during the period may be considered by the jury in connection with all the proof in the case, as indicating at what prices such sales, if any, might have been made. From these profits, if any, should be deducted any additional expenses to be incurred in making the same as a basis for estimating such probable profits. Unless the proof satisfactorily shows such prospective profits, the same should not be included in any verdict rendered; but, if it does show to the satisfaction of the jury that an amount would have been realized as such profits, such amount may be included in said verdict.

• For the error in the charge, in not restricting the probative value of the testimony of general market conditions of the bunker oil business at Pensacola, the judgment of the District Court is reversed, and the case remanded, with direction fo award a new trial.