The Oregon v. Pittsburgh & L. A. Iron Co.

55 F. 666, 1893 U.S. App. LEXIS 2010

• Court: Court of Appeals for the Sixth Circuit
• Decided: May 1, 1893
• Docket: Nos. 34 and 35
• Status: Published

Opinion

TAFT, Circuit Judge,

(after stating the facts.) It is contended by appellants that the provisions of the charters that the vessels should make as many trips as possible did not prevent them from towing other vessels on their trips, because it was the custom for a propeller like the Oregon, to tow two, three, and sometimes as many as five, vessels at a time. We do not see how such a custom could affect the construction to be placed, on this contract. It may be very true that propellers of the power and tonnage of the Oregon are in the habit of towing three, four, and five vessels, but they do not always do it. Mr. Harvey Brown, in giving evidence as one experienced in lake transportation, said that he had in his charge three propellers carrying iron ore between Marquette and Michigan, which towed only one vessel. Indeed, appellants’ own witnesses admitted that the number of tows was varied from one to five. It is only reasonable to suppose, therefore, that the intention of the parties to the contract in inserting the stipulation that the vessel should make as many trips as possible was to prevent delays, as well by the towing of other vessels as by other causes. We may infer, from the fact that the two contracts were executed about the same time, and for the same purpose, that the patties expected the propeller named in one to tow the schooner named in the other, although there is no such express provision in either. The Oregon towed the Palms throughout the season. The libelant had full notice of it, and did not object. This is a practical construction' of the contract by the parties that is quite conclusive. The Marsh was not carrying freight for libelant, but she and the Palms seem to have been the regular tows of the Tuttle, the propeller mentioned in the original contract, for which the Oregon was substituted, and there is no denial that the libelant knew she was being towed by the Oregon all summer. The libelant made no objection, and cannot be heard now for the first time to claim that this was a breach of the contract. There is no evidence to show, however, that libelant had any knowledge that the Oregon was towing other vessels, and we are satisfied that, in so far as this extra towage delayed the Oregon and the Palms, and made their trips less numerous, it was a violation of both contracts. It is objected on behalf of the Palms that her owners, who are not all the same as those of the Oregon, should not be responsible for the delay caused by the Oregon’s taking up other tows, because the Palms could not control the propeller’s action. There is no force in the objection. The Palms was under contract to make her trips as fast as possible. We have found from the surrounding circumstances that this meant as fast as possible with another tow and the propeller Oregon. In so far as the Palms’ making the trip without delay depended on the conduct of the steamer, her owners, in effect, agreed that the steamer should do nothing to prevent it. There is nothing unusual or impossible in one person contracting with another that a third person shall do something. But here the case is even stronger, for the managing owner of the Palms and the managing owner of the Oregon were the same person. When he allowed the Oregon to take up other tows in violation of both contracts, he made the owners of the propeller and the schooner both liable for his act, because, as managing owner for the schooner, he necessarily consented to his own conduct as managing owner of the propeller. His was a general agency for the owners of the two vessels, and he represented both sets of owners fully and completely.

The evidence shows that the delay occasioned by towing third vessels was about three quarters of a mile an hour, or 18 miles a day. This would mean a reduction of speed of one eighth. Estimating the time for a half trip, exclusive of the time for loading, as six days, though it was often longer, this would amount to a delay of about three fourths of a day for each half trip. There were ten half trips when the Oregon towed a third vessel in addition to the Palms and the Marsh, which made a delay in all, on this account, of seven days and a half. Some effort was made to show that extra tows were only taken up when no delay could occur. The captain of the Oregon said that he only took an extra tow when he calculated ahead, and found he would arrive at Marquette Saturday night, and no unloading could begin until Monday; or when he would arrive at the Sault canal too late to go through until the next morning. It was immaterial in such cases whether he arrived at ldght or the next morning, so far as the time to be consumed in the trip was concerned. The captain could only have referred in this excuse to tows which he took for short trips. The tows counted in the ten half trips we have been considering were towed all the way between Cleveland and Marquette, one way or the other; and it was impossible, with respect to a whole trip, to make such a calculation with any exactness. This excuse is of a piece with the excuse which Gilchrist and his captains offer for the flagrant and deliberate violation of the two contracts in going to Buffalo, and taking thence full up loads' of coal on the Oregon, the Palms, and the Marsh for the ninth trip. They were ready to leave Cleveland on September 15th. Gilchrist went to the secretary of the libelant company, and informed him that he was going to send Ms vessels to Buffalo, to take cargoes of coal from there to Marquette. He was told that this was a violation of bis contract. He intimated that he would do it anyhow. He says that he explained that in the heavy winds that were likely to prevail during the trip which covered the equinoctial season his vessels would make better time if loaded than light, ‘and that on the previous trip up they had been delayed by being blown around by side winds, although the record shows that to have been one of his shortest trips. The libelant objected, and sent a written protest to' Gilchrist. The captains of Ms vessels seek to sustain this explanation as a valid excuse, and argue that, even though a technical violation of the contract, it caused no delay. The district and the circuit courts evidently gave no credence to this claim, and rightly. Harvey Brown, who at this same time sent three propellers and their consorts, not very unlike in draught and tonnage to those of libelant, from Cleveland to Marquette, testifies that they had no difficulty of this kind, and made their trips very promptly. The excuse was late-horn for the purposes of the case. The real reason for taking the coal was that freight rates for coal had risen so much that Gilchrist could make upwards of $1,500 by violating his contract. This is perfectly evident from his conduct in respect to Ms last — the twelfth- — trip, when he again applied to Outhwaite, the secretary of the libelant, to take up a load of coal. Outhwaite’s statement is as follows:

“At first I refused, but be threatened to repudiate these contracts if he was not allowed to take these up loads, saying that he knew he could make more money by breaking these contracts and carrying these up loads of coal than all the damages we could recover against Mm by reason of the broach of the contract At that time it was almost impossible to get vessels to carry ore by reason of the great demand for such tonnage, and it was absolutely necessary that we should have the ore to fulfill our contracts with other parties, and for tMs reason I was obliged to yield to Ms demands, and consent to these vessels carrying on this one occasion an up load of coal, as demanded by him.”

A man who manifests such a total disregard of the obligation of his contracts cannot expect courts to look with favor or credence on the hypothetical excuses made by him or his employes for his flagrant and deliberate breaches of them. It is ample explanation of his conduct that it was more profitable for him to break than to keep his charter stipulations. The delay caused by taking an up load of coal was something more than 10 days. The vessels were ready to leave Cleveland for Marquette on the 15th of September. Instead of this, they went east to Buffalo, a distance of 200 miles, and did not leave there until the 18th. They , were then a day’s sail further away from Marquette than at Cleveland, so that, instead of leaving Cleveland on the 15th, as they ought to have done, they really began their trip from that point on the 19th, — a loss of four days. The vessels reached Marquette on the morning of the 27 th of September, and reported at the dock of the libelant, ready to load, on the morning of the 2d of October. In other words, there was a delay of six days in unloading the cargoes of coal, a delay which obviously would not have happened had the vessels gone up without a cargo. Another labored effort is made by Gilchrist and his witnesses to show that the winds were so high and so adverse that he could not have left Cleveland before the 18th or 19th, even if he had not gone to Buffalo for the coal, from which the argument is made that his trip to Buffalo and back did not cause the loss of time. Gilchrist did not produce the logs of his vessels, and gave no explanation for their absence. He preferred to rely on the unassisted’ memory of his captains as to the exact direction and force of the winds during the four days, a year and a half before they testified. This would be unsatisfactory evidence at the best, but it loses all weight when considered in connection with the absolutely truthful data taken from the weather and wind records of the government signal service office at Cleveland, which are in direct conflict with it. Without commenting on the evidence more in detail, it is sufficient to say that it clearly shows a delay of seventeen days and a half, caused by extra tows and the coal trip to Buffalo, both of which were breaches of contract by the libelees. We make no account in this calculation of the delay caused by the weight of the cargoes of coal in the tenth up trip, though we do not doubt that the trip was a slower one for that reason. It is very significant that of the 12 trips which the two vessels made, but two occupied more than 18 days. These were the two when cargoes of coal were carried on the up trip, and they occupied 28 and 26 days respectively. Excluding these two trips, the average time of the round trips when no loads were taken was 15.2 days. It is quite clear that the 17 or 18 days consumed, as we have found, by Gilchrist in breaking his contracts would have enabled his vessels to have made at least one more trip.

The defense that the libelant violated its contracts in loading hard, instead of soft, iron ore, has nothing in it. The contract mentions no particular kind of ore, and the attempt of the respondents to insert such a limitation by oral evidence is entirely unwarranted. Moreover, respondents made no objection to the hard iron ore when it was being loaded, but only advance it now, when in search oí excuses.

Were we in doubt, inasmuch as two courts have found the issue, which is purely of fact on conflicting evidence for the appellees and libelant, it would be our duty to follow their finding. Walsh v. Sogers, 13 How. 284; The Marcellus, 1 Black. 414; The Waterwitch, Id. 494; The Albany, 48 Fed. Rep. 565. But, as the whole case was vigorously reargued before us, we have thought it proper to review the evidence.

One of the chief objections by appellants to the decrees appealed from is the measure of damages enforced thereby. It is said that the correct measure is the difference between the market values of the two cargoes of ore at Cleveland and Marquette, less the contract rate of freight, whereas the measure adopted by the courts below was the difference between the contract rate of freight and the rate of freight which the libelant actually paid to transport the ore. Damages for breach of contract should be such compensation as will restore the injured party to the same pecuniary condition that he would have been in, had the con tract been performed. Where one contracts wiih a carrier to transport ordinary merchandise, having a market value, from one point to another, the profit which both he and the carrier may reasonably expect him to make out of the transaction is the difference between the market value of the merchandise at the point of destination and the market value at tho point of shipment, less the freight under the contract. The pecuniary difference between the shipper's condition with the contract performed and Ms condition if the merchandise is not shipped, but remains at, the point of shipment, is this profit, which is, therefore, Ms legal damage. But it is a general rule that it is the duty of one party to a contract which has been broken by the other to use reasonable diligence to reduce the damages arising from the breach. If, therefore, in cases of freight contracts, the carrier refuses to perform, it is the duty of the shipper, if he can reasonably expect thereby to reduce his loss, to seek other means of transportation, and perform the contract himself. In such a case the difference between Ms actual pecuniary condition and that in which he would have been had the carriel* transported the goods under the contract is, not the profit which he would have made had the contract been performed, — for the contract has been performed, and he hds .acquired the opportunity to sell his merchandise at the market value prevailing at the place of destination,----but it is the increased expense of performing the contract; that is, the difference between the contract rate of freight and the freight which he was actually obliged to pay to secure performance. And if would seem to be a good defense against a claim for profits lost by breach of a freight contract, that the shipper could have saved himself, or at any rate could have reduced his loss, by employing other means of transportation. This may be hardly consistent with Chief Justice Taney’s opinion in Harrison y. Stewart, Taney, 485, but it is in accordance with the weight of modern authority. 2 Sedg. Dam. (8th Ed.) § 482. In such a case it would be necessary for the defendant to show that the shipper could reasonably expect to reduce his loss by other transportation. But it would hardly seem so necessary, in order to justify the shipper in seeking other means of transportation and charging the carrier with the increased freight, for him to show either that the profit from the executed contract would have equaled or exceeded the increase in the freight. When a shipper contracts with a carrier to transport merchandise, he is legally entitled to have his merchandise carried without regard to the question whether the transaction would have been profitable to him or not. Were the contract one which justified a resort to a court of equity for its specific performance, it certainly would not. defeat the relief prayed for, that the result would be unprofitable to the complainant. Of course, there is a limit to the increased expense which the injured party may incur in doing what the other was obliged, under the contract, to do, and which he may charge to that other. The limit is suggested in the rule laid down in the leading case of Hadley v. Baxendale, 9 Exch. 341, under which damages for a breach are limited to such as would naturally flow from the breach within the reasonable contemplation of the parties at the time of making the contract. He cannot go to extraordinary and unreasonably excessive expense or take unusual means to accomplish that which the other party agreed to do, and thus impose on the other liability for damages out of all proportion to what either party might have reasonably expected as the loss from the breach. In Le Blanche v. Railway Co., 1 C. P. Div. 286, 302, Lord Esher, Master of the Bolls, then Mr. Justice Brett, used this language:

“We think it may properly be said that, if the party to perform a contract does not perform it, the other may do so for him, as reasonably near as may be, and charge him for the reasonable expense in so doing.”

This was approved as a correct statement of the law by Mellish and James, Lord Justices, in the court of appeal, although on the facts of the case they held that not to be a reasonable expense which Brett, J., had deemed to be so. The limitation upon the right of one party to perform the contract on the default of the pther to do so is well brought out in that case. There the plaintiff had bought a ticket entitling him to a passage to Scarborough, to arrive at a certain time. Connection was missed at Newcastle with the Scarborough train. Plaintiff would have had to wait an hour or two at Newcastle before resuming his journey by regular train, and would have arrived at Scarborough about two hours late. "There was no special reason why he should reach Scarborough at the time agreed on. He nevertheless chartered a special train, and arrived at Scarborough a very little late. He sought to impose the heavy expense of the special train upon the company selling him his ticket. It was held that he could not do so, because the means selected by him to perform the contract on the default of the railway company involved an outlay extravagant and out of proportion to the loss he would have sustained by waiting for a regular train. It was suggested that the proper standard for reasonableness of expense in such a case was that cost which the plaintiff would have incurred to avoid the delay under the same circumstances, if he had not expected to charge it to the railway company.

The case of Late Co. v. Elkins, 34 Mich. 440, upon which appellants chiefly rely, was a case the decision of which went upon the same principles as that announced in Le Blanche v. Railway Co. There the contract was to carry three cargoes of salt from Bay City to Chicago by water. The defendant did not receive the cargoes, and the plaintiff was unable, because of the close of navigation, to obtain other lake transportation. lie therefore shipped the salt in small lots, as lie needed it, by rail to Chicago, and then sought to charge defendant with the difference between the contract rate of freight on the three cargoes and the cost of transporting the same quantity of salt by rail in small lots during the winter season. If would have "been manifestly unjust to have charged defendant with this extravagant difference in the cost of freights. As compared with the means of carriage stipulated in the contract, that actually taken was excessive and unreasonably expensive, and the difference was far beyond any loss naturally flowing from the breach within the contemplation of the parties. The case was one where, because of the impossibility of securing transportation of the same character as that provided in the contract, the injured party could not perform the contract at all at the expense of the other, and was remitted to the same measure of damages which, lie would have had if he had not attempted to carry his salt to Chicago after defendant’s default; that is, to the difference between the market values of tine salt at Chicago and at Bay City, less the amount of the freight fixed by the contract. This is the only theory upon which the conclusion In that case can be explained. While Mr. Justice Campbell uses language which might seem to imply that the only measure of damages in any case for the breach of freight contracts Is that derived from market values, he refers to the rule laid down in the case of Le Blanche v. Railway Co. as authority for Ms conclusion, and states the principle there laid down as applicable to the facts before Mm.

An examination of the authorities shows that in all cases where the measure of damages for a failure or refusal of a carrier to receive goods tendered for shipment under a contract has been held to be the difference between, the market value of the goods at the destination and their market value at the point of shipment, less the contract price of the freight, the shipper has not attempted to perform the contract by procuring transportation bv other means. Bracket v. McNair, 14 Johns. 170; O’Conner v. Forster, 10 Watts, 418; Bridgman v. The Emily, 18 Iowa, 509; McGovern v. Lewis. 56 Pa. St. 231; Pennsylvania R. Co. v. Titusville & P. Plank Road Co., 71 Pa. St. 354. But where the goods, not received by the contracting carrier, are transported by another at a higher rate than the contract price, this measure is not adopted. In such a case the goods, it may be, are brought at the same time into the same market, and sell for the same market price as if carried under the contract, but it costs more to get them there. Under these circumstances, neither reason nor authority leaves any doubt that, within the limitation already referred to, that the substituted means of transportation shall be reasonable, and not extravagant, the measure of damages is the difference between the contract and the actual price of freight. The Rossend Castle, 80 Fed. Rep. 462; Lord v. Strong, 6 Mich. 61; The Flash, 1 Abb. Adm. 119; Featherstone v. Wilkinson, L. R. 8 Exch. 122; Grund v. Pendergast, 58 Barb. 216. In Cutting v. Railway, 13 Allen, 381; Spring v. Haskell, 4 Allen, 112; Railway Co. v. Henry, 14 Ill. 157; and Ward v. Railroad Co., 47 N. Y. 29, — cited on behalf of appellants, the goods were actually received by the defendant carrier, but were delayed in the delivery, and the measure of damages was, of course, held to be the difference between the market value of the goods when they should have been delivered and their value when they were delivered. But such cases obviously have no application to cases like that at bar.

It is very clear, therefore, that the measure of damages adopted by the circuit and district courts in these two cases before us was correct. In the months of October and November, when it became entirely certain that the two vessels were going to make but 12 trips, the libelant bought tonnage at the going rate of freight, i. e. 80 cents a ton more than the contract price, and shipped ore enough to make a full cargo for each vessel. This was not substituted performance of the contract by unusual or extravagant means. It was the same method of transportation, and at the same season, as that fixed in the contract. Its cost may, therefore, be properly charged to the defaulting party. As each vessel carried 1,050 tons of ore, the damages chargeable to each under the contract was $840.

The measure of damages adopted can be supported in another way. Ore tonnage between Marquette and the Lake Erie ports west of Erie has a market value, which varies from month to month in the season. Under the construction put upon these charters by the parties, the libelant had the right to sell the tonnage thereby secured to it to any one else, because, with the knowledge of the owners of the vessels, it did sell the tonnage for two trips without objection. Viewing tonnage as a commodity bought and sold, the measure of damages for failure to supply it according to contract would naturally be the difference between the market and the contract prices. Higginson v. Weld, 14 Gray, 165; Ogden v. Marshall, 8 N. Y. 340. The price actually paid by the libelant was the going or market rate of freight, and the damages found by the court below were the difference between that rate and the contract rate.

There remains to consider only the $104 charged against the Pakns. This was the profit of 10 cents a ton on one trip of that vessel where the libelant sold the tonnage to Harvey Brown at $1.30 per ton. There is no doubt of libelant’s right to sell the tonnage under the charter, because, as already stated, it had been done before, with, the knowledge and consent of the vessel’s owners. The captain of the Palms collected the entire freight from Brown, and turned it over to Gilchrist, managing owner of the Palms. The 10 cents a ton, or §101, of the freight belongs to the libelant, and the Palms or her owners should pay the same to the libelant. But the jurisdiction of this court in admiralty to render a decree for the money is denied on the ground that the cause of action is not maritime, but is a mere right to sue for money had and received at common law. As the collection of the $104 was incidental to the execution of the maritime contract sued on, and may he regarded as an overcharge of freight by appellants against appellee under that contract, we think the amount fairly recoverable as damages for its breach, and therefore fully within the admiralty jurisdiction.

The decrees of the circuit court in both cases are affirmed, with interest from their date, at the costs of appellants.