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"That it was error (for the trial court) to apply to this case the standard of persuasion applicable to criminal prosecutions" -and held that while the statute is penal in its nature, and may involve a penalized or criminal act, it is not essential to a recovery by the government that the evidence establish the violation beyond a reasonable doubt as in a criminal case, but a reasonable preponderance of proof is sufficient.

Demurrer sustained.

PUSEY & JONES CO. v. COMBINED LOCKS PAPER CO.

(District Court, E. D. Wisconsin. May 8, 1918.) 1. DAMAGES Ow23—BREACH OF CONTRACT BY SELLER—Lost PROFITS.

In an action for the price of a machine built by plaintiff for defendant, a counterclaim for lost profits because of delay in delivery of the machine cannot be maintained, unless special circumstances are shown

with respect to which the parties must be deemed to have contracted. 2. DAMAGES 40(4)—BREACH OF CONTRACT BY SELLER—DAMAGES—LOST

PROFITS.

The purchaser of a paper-making machine cannot set up, as a special circumstance entitling it to recover lost profits because of delay in de livery of the machine, a contract made by it for delivery of paper during five years, where by its terms it reserved the right to begin delivery at a date later than the actual installation of the machine.

At Law. Action by the Pusey & Jones Company against the Combined Locks Paper Company. On motion by defendant for new trial. Overruled.

Bloodgood, Kemper & Bloodgood, of Milwaukee, Wis., for plaintiff.

Bottum, Bottum, Hudnall & Lecher, of Milwaukee, Wis., for defendant.

GEIGER, District Judge. The complaint contains two causes of action, the first based upon a contract dated on or about May 15, 1916, whereby the plaintiff undertook to make for the defendant a paper machine for the agreed price of $120,000, according to the terms and specifications prescribed, and that the defendant, the plaintiff having furnished the machine, is indebted to the plaintiff in the sum of $31,215.19, with interest from March 1, 1917, as an unpaid balance of the agreed purchase price. The statement of the second cause of action recites the written undertaking on the part of the plaintiff, dated on or about July 26, 1916, to rebuild for the defendant a described paper machine in consideration of the payment of $23,750; that the plaintiff performed such contract, but defendant has defaulted upon an unpaid balance of the contract price, $4,890. On both causes of action judgment in the aggregate of $36,105.19 is asked.

The prima facie character of the plaintiff's demand was substantially admitted by the defendant upon the trial of the case, whereupon the

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

issues for trial were those tendered by the answer which set up counterclaims in substance:

That with respect to the first cause of action the plaintiff"failed to fulfill said contract by not delivering the machine therein mentioned on the 15th day of November as the contract provided, until the 3d day of April, 1917, when it was delivered to the carrier in uncompleted shape; that by reason of said delay, and the failure of the plaintiff to deliver the said machine in the time provided in said contract, and the resulting inability of the defendant to make use of said machine during the period of delay caused by the plaintiff in noncompliance with said contract, the defendant suffered great damages, namely, in the amount of thirty-four thousand four hundred ten dollars and seventy cents ($34,410.70), which damages were the direct result and entirely caused by the failure of the plaintiff to fulfill said contract as it, the plaintiff, was obligated to do, and that all of his damages necessarily resulted from default, negligence, and violation of this contract by the plaintiff."

In respect of the second cause of action the defendant alleged that the machine to be repaired was to be so repaired and delivered to transportation lines at Fitchburg, Mass., on November 1, 1916; but, "that the plaintiff delayed the delivery of said repaired machine as provided in said contract until the 20th day of February, 1917; that by reason of said delay and the resulting deprivation of the use of said machine by the defendant, the defendant suffered great damages and losses, namely, the sum of eight thousand four hundred dollars ($8,400), all of which damages and losses were directly caused by the direct and necessary result of said plaintiff's delay in the fulfillment of said contract.”

A further set-off and counterclaim, based upon alleged expenditures made by the defendant on account of supplying missing parts from the machine, traveling expenses, and the like, in the sum of $1,733.85 is offered, and the answer demands judgment for a dismissal of the complaint, and for judgment in the sum of $16,544.55, being, I assume, the excess of the damages set out in the counterclaim beyond the sum which by the answer is admitted to be due to the plaintiff.

Upon the trial of the case the defendant undertook to establish its counterclaim by evidence, most of which was tentatively received, subject to objection, but practically all of which was subsequently stricken out, whereupon a verdict was directed in favor of the plaintiff and against the defendant, and a motion for a new trial, which has been argued, presents for review the various rulings of the court upon the rejection of evidence, which led to granting the motion for a direction of verdict and a dismissal of the counterclaim.

A consideration of the motion must be addressed, first, to the general contentions of the defendant respecting the rule of recovery upon contracts such as are involved in the case, and, secondly, a consideration of the facts tendered in evidence with a view of determining whether, in any aspect, they furnish a basis for an award of damages by the jury upon the theory and the only theory offered and insisted upon by the plaintiff.

It will be observed from the pleadings that the defendant framed the counterclaims, excepting the last, solely upon the hypothesis of seeking recovery under a general rule of damages. There is no inti

mation in the pleading, except as noted, of any claim of recovery, except the general damages sustained by the defendant through a deprivation of the use of the machine during the delay period; and this brings us at once to a consideration of the bill of particulars demanded by the plaintiff of the defendant prior to the commencement of the trial. It is as follows: Per ton profit 2212-pound paper made on 176-inch machine, contract No. 1331

$9.78 Daily tonnage produce.

30 Delay on shipment, December 1, 1916, to April 3, 1917.

110 days 110 days x 30 tons

3,300 tons 3,300 tons x $9.78.

.$32,274.00 Payments to Valley Iron Works, Appleton, Wis., for

material to replace imperfect or unfinished parts called for in purchase contract.

327.30 Cash advanced to Pusey & Jones Company.

50.00

281.7 tons

Total

$32,651.30 Contract No. 1340 would have increased production from Novem

ber 1 to February 20...... Profit on increased production..

$8,119.26 Expense L. L. Alsted to Wilmington, Del., January 13, 1917

187.48 Service and expense Pittsburg testing laboratory at Wilmington and Pittsburg..

1,292.26 Express charges on delayed material covered by contract 254.11

$9,853.11 Interest on money actually expended on contracts 1331 and 1340

and on plant and equipment from date when delivery should have been made to delivery when same was actually made....

$7,500.00

In explanation of references in this bill, it may be said that the first items, under "Contract No. 1331," are pertinent to the first cause of action of the complaint and to the counterclaim averring a breach through a delay of furnishing the new machine, and that the second items, under "Contract No. 1340," are pertinent to the second cause of action of the complaint and to the counterclaim for damages for delay in repairing and shipping the old machine; whereas the last item is evidently intended to speak for itself as an interest item on purchasemoney expenditures, and "on plant and equipment from date when delivery should have been made to date when delivery actually was made.”

[1] It may be noted at this time that even in the bill of particulars the defendant is silent respecting a claim for profits based upon "special circumstances” subsequently sought to be introduced in evidence on the trial. This will be seen to be of importance, unless the court was wholly in error in rejecting the notion that profits as profits are recoverable only upon the basis of some special circumstances with respect to which the parties must be deemed to have contracted. Obviously, it is immaterial if, as defendant's counsel contends, profits are always recoverable as profits—as anticipated gains—in any action for breach of contract. This observation should be borne in mind in a consideration of the evidence respecting the defendant's dealings

with third persons pertaining to its paper output on the basis of its new installation and remodeled paper plant.

Giving to the defendant's evidence of oral communications by its officers to officers or agents of the plaintiff, prior to the execution of the written contracts in suit, the most favorable view, it is in brief:

That, approximately six weeks or two months before the contracts were signed, its president inquired of plaintiff concerning the latter's ability to make a paper machine, whereupon an interview was had in which the former disclosed to agents of the latter, in a general way, its interest in a new machine, contingent, however, upon further consideration of the matter of building a new, or remodeling its old, plant, and in a like general way the broad contingency of first ascertaining the likelihood or certainty of disposition or sale of its manufactured product. Evidently defendant's consideration of these matters—which, of course, was for itself-reached such a state of certainty that a further interview, or possibly two, which, in point of time, immediately preceded actual execution of the contracts, were had. Aside from negotiation pertaining to price, mechanical and structural detail of machine, the defendant's witnesses claim that at this latter interview or interviews there was communicated to the plaintiff's agents the fact that they now had contracts for the sale or disposition of the output of the proposed new machine; that such contract or contracts were referred to as the Sears-Roebuck contracts, or that the paper to be manufactured was for Sears, Roebuck & Co.; and one witness stated that he told plaintiff's agents such contract was to run for five years from January 1, 1917. The machine was intended to be used for making catalogue paper.

This testimony contained the first intimation in the case that defendant claimed the existence of specific contracts with third persons, knowledge whereof was communicated to the plaintiff as specific circumstances with reference to which the parties contracted, and as a result whereof the defendant, because of the breach, was entitled to recover as special damages the specific profit which could have been realized upon the sale of paper possible to have been manufactured during the delay period of the delivery of the machines; and the plaintiff objected to the reception of this testimony upon the specific ground that the pleadings, including the bill of particulars, did not justify its admission. The defendant, while suggesting its desire to amend, if its pleadings were not broad enough, did not in fact make an application to enlarge its pleadings. The court intimated that the objection interposed by the plaintiff seemed pretty good; but, it is believed that other considerations hereinafter presented dispense with the necessity of dealing with the merit of this specific objection.

[2] The defendant, in further effort to prove its damages, thereupon offered certain contracts, which in fact constituted the "special circumstances upon” which it sought recovery of profits. These will be considered:

First, a contract between the defendant and Bermingham & Seaman Company, of Chicago, whereby the defendant undertook to manufacture and deliver paper covered by the former's “contracts with

Sears, Roebuck & Co. as shown by copies, samples and blue prints, which are annexed hereto, to all the terms and conditions of which we hereby agree,” viz.: 1-Contract dated April 11, 1916, for output of Little Chute mill, or its sub

stitute plant, approximately 45,000 tors white catalogue paper. 2—Contract dated April 17, 1916, for approximately 15,000 tons white cata.

logue paper. 3—Contract order No. 4365, dated May 1, 1916, for approximately 2,500 tons

yellow index paper, etc. 4-Contract order No. 4363, dated May 1, 1916, approximately 10,000 tons

white catalogue paper. 5—Contract order No. 4364, dated May 1, 1916, 10,500 tons white catalogue

paper.

Such contract contains further details respecting price and the adoption of the Sears-Roebuck contracts as prescribing terms of payment.

It thus appears that the defendant claims to have undertaken for Bermingham & Seaman Company the manufacture and delivery of paper claimed to have been contracted by the latter for manufacture and delivery to Sears, Roebuck & Co.

Secondly, in view of the fact that the defendant expressly adopted them, the terms of the two contracts—there being three so-called order contracts, presumably given under the principal contracts—are important as evidencing the obligations in fact assumed by Bermingham & Seaman Company toward Sears, Roebuck & Co. One of the contracts, dated April 11, 1916 (in evidence as Exhibit 5), and under which I believe the three so-called "order contracts” were given, contains, among other, the following provisions :

“We propose to furnish you the entire output of 2212-pound No. 1 white catalogue paper of the Little Chute division of the Combined Locks Paper Company, located at Little Chute, Wis., subject to the following specifications and conditions:

"(1) Duration of contract to be five years from January 1, 1917, providing we succeed in erecting plant and have the same running by that time or five years from actual date the plant starts operation, which will be not later than June 1, 1917.

"(2) Approximate annual quantity, 9,000 tons."

The second contract appears to be dated April 17, 1916, and contains the following proposal by Bermingham & Seaman to Sears, Roebuck & Co.:

"We propose to furnish you a part of the output of 2242-pound No. 1 white catalogue paper of the Combined Locks Paper Company, located at Combined Locks, Wis., subject to the following specifications and conditions:

“(1) Duration of contract to be five years from January 1, 1917. "(2) Approximate annual quantity, 3,000 tons."

It will suffice to refer to the contracts entered into between the defendant and the plaintiff for the manufacture and repair of the machines, by noting merely their provisions respecting date of deliverythat for the manufacure and sale of the new machine being given as during the month of November, and that for the repair of the old machine being November 1st-and the further significant provision in each contract giving to the plaintiff 60 days' time for assembling, erect

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