Everett Plywood Corp. v. United States, 512 F.2d 1082

512 F.2d 1082 | Ct. Cl. | 1975

Per Curiam:

This case comes before the court on plaintiff’s and defendant’s exceptions, filed October 1, 1974, and October 30, 1974, respectively, to the recommended decision of Trial Judge Hal D. Cooper, filed July 12, 1974, pursuant to Rule 134 (h). The court has considered the case on the briefs and oral argument of counsel. Since the court agrees with the recommended decision of the trial judge, with minor modifications by the court, it hereby adopts the same, as modified, as the basis for its judgment in this case as hereinafter set forth. Therefore, it is concluded that plaintiff is entitled to recover in accordance with the opinion and judgment is entered for plaintiff in the sum of $34,570.83.

Trial Judge Cooper’s opinion, with minor modifications by the court, is as follows:

This action asserts a breach by the Forest Service of a contract for the sale of timber on Tonga Ridge. It is a sequel to the court’s earlier decision in Everett Plywood & Door Corp. v. United States, 190 Ct. Cl. 80, 419 F. 2d 425 (1969), hereinafter referred to as Tonga I. In Tonga I, the court found a breach of warranty of quantity for which plaintiff was awarded damages. The present case asserts an additional breach of the same contract based on defendant’s refusal to grant an extension thereof which would have allowed plaintiff to cut the remaining timber on Tonga Ridge. In addition, plaintiff seeks recovery of certain road repair and maintenance costs it incurred in the performance of the contract.

In defense, it is contended that plaintiff has so split its cause of action that, by reason of the court’s judgment in Tonga I, plaintiff is barred from any further relief. Also defendant denies there was any breach of the contract and denies that plaintiff is entitled to any recovery whatsoever.

The facts regarding the contract were fully stated in Tonga I and will be restated here only to the extent necessary to an understanding of the parties’ contentions. The original term of the contract, executed in 1955, extended to December 31, 1960. When plaintiff commenced logging, excessive defects in the timber were discovered, resulting in a substantial underrun. It was this underrun that was the basis for the Tonga I case. During the pendency of that suit, filed in 1964, plaintiff was granted successive extensions of the contract and logging continued through the 1967 season. By that time, the only remaining timber was on Unit 15 of Tonga Ridge.

In requesting an extension of the contract for the 1968 season, plaintiff assigned as the reason therefor the difficulties presented by the short logging season at the high elevation at which Unit 15 was located and closed its request with the statement that “we should have no trouble completing the sale this coming season.”

The Forest Service’s policy governing extensions, both when the contract was entered in 1955 and when plaintiff’s request for 1968 was made, was a very liberal one. The Forest Service Handbook stated it in the following terms:

2433.12 — Procedure. Ordinarily, the timber sale contract is written on the basis that time is not of the essence. The termination date is fixed when the sample contract is drafted and thus becomes a condition of sale, * * * an extension of time may be granted by the officer approving the sale, his successor, or his superior, unless disadvantageous to the United States.

Extensions were regularly granted for a variety of reasons ranging from bad weather to poor economic conditions. Forest Service personnel testifying at trial could recall no specific instance where, prior to 1969, an extension had been denied and plaintiff had never been denied an extension on any of its other Forest Service contracts. The fact is that extensions of contracts were granted by the Forest Service with very little urging.

On April 8, 1968, the Forest Service granted plaintiff’s request for an extension, but warned plaintiff that “only under extraordinary conditions will this sale be considered for another extension.”

Plaintiff attempted but failed to complete logging on Unit 15 in the 1968 season. Although a number of excuses were given, it is doubtful, in view of the normally adverse conditions prevailing at high elevations, that any of the difficulties encountered by plaintiff were truly “extraordinary.”

In November 1968, prior to any request by plaintiff, the Forest Service decided to grant no further extensions of the contract. This decision was communicated to plaintiff on December 20,1968. By letter of January 24,1969, plaintiff formally requested an extension of the contract for the 1969 season. There then followed a series of events, summarized in finding 19, the net result of which was the grant of a one-month extension of the contract from March 81,1969 to April 30,1969, followed by a final refusal, on April 22,1969, of any further extension. Meanwhile, on March 20, 1969, the trial judge’s decision in Tonga I was handed down.

When its request for reconsideration of the Forest Service’s decision was denied, plaintiff appealed to the Board of Forest Appeals which, ultimately, dismissed the appeal on the ground it had lost jurisdiction by reason of the subsequent resale of the timber on November 30,1969, by the Forest Service. The Board’s dismissal occurred on February 2,1971, some 14 months after the court’s per curiam affirmance of the trial judge’s decision in Tonga I.

I. The Split Cause of Action Defense

On the foregoing facts, defendant contends that plaintiff has split its cause of action and is barred from any further relief.

In Nager Electric Co. v. United States, 177 Ct. Cl. 234, 368 F. 2d 847 (1966), the court, in considering the issue of statute of limitations, stated the controlling principle governing the rule against split causes of action:

For reasons of judicial economy, convenience, and fairness to litigants, it is important to retain the principle that one non-divisible contract normally gives rise to only one claim, not to a succession of individual-item claims with all the burdens they would bring and problems they would entail. Supra at 254, 368 F. 2d at 861.

See, also, eestatemeNt, judgmeNts § 62 (1942).

Nonetheless, a separate action founded on a single non-divisible contract may be maintained if the later claim is severable from the earlier one, and, if at the time of commencement of the earlier suit, the later claim was not then capable of being asserted. United States v. Pan-American Petroleum Co., 55 F. 2d 753, 777 (9th Cir. 1932), cert. denied, 287 U.S. 612; Fellows v. National Can Co., 13 F. 2d 210, 211 (E.D. Mich. 1926); eestatemeNT, judgments § 62, example (h.) (1942).¹ However, if the claimant, before filing its first suit, is in possession of all the facts on which its second suit is based, the splitting of the claims into multiple suits is fatal to maintenance of the later-filed action. Container Transport International, Inc. v. United States, 199 Ct. Cl. 718, 468 F. 2d 926 (1972).

In this case, essentially three claims are presented, the principal one being based on the Forest Service’s refusal to grant an extension. A final decision on the request for an extension was not made until April 22, 1969, and the contract did not expire until April 30,1969. Obviously, until the Forest Service had finally refused an extension, any claim based on a refusal to extend the contract would have been premature. Hence, it appears that it was not until April 22,1969, at the earliest, that the extension claim accrued. The road repair claim arose in late 1968 and the road maintenance claim did not accrue until after the contract had expired.

Thus all of the claims now asserted arose some four or more years after the first suit had been filed and subsequent to the trial held in 1967 in Tonga I. Moreover, two of the three claims accrued after the opinion of the trial judge had been filed in the earlier case.

It is recognized that this court’s holding in Electric Boat Co. v. United States, 81 Ct. Cl. 361 (1935), cert. denied, 297 U.S. 710 (1936), requires a litigant to seek to amend a pending suit to add later accruing claims under a single contract if he is to avoid dismissal of a later suit on the ground he has split his cause of action.² However, defendant has cited no authority, and none has been found, to support the proposition that the obligation to amend extends to claims accruing after a trial has been held and after the trial judge’s decision has been rendered. While, in an appropriate case, it may be desirable even under those circumstances for a party to seek to amend, it does not follow that judicial economy, convenience, and fairness to litigants will always be served by imposing such a requirement either on the parties or the court.

In the context of this case, the Forest Service notice in December 1968 that no further extensions would be granted was the first indication to plaintiff that it may have another claim against defendant. At that point, plaintiff had several options. Plaintiff might have treated the communication as a breach, but because trial was completed and briefs had been filed in Tonga I, it would have had either to file a new petition or seek leave to amend the pending suit. Had the latter course been followed, and assuming such a belated request had been allowed, it still would have entailed additional discovery, a second trial in Seattle, Washington, and additional briefs by the parties. The alternative, and the one followed by plaintiff, was to seek resolution of the issue by asking the Forest Service to reconsider its position in light of specific reasons supporting the request for an extension. The latter approach was entirely reasonable and in keeping with the notion that parties should be encouraged to resolve their differences rather than rushing into court at the first hint of a claim.

By April, when the Forest Service had rejected the formal request for an extension, matters had changed somewhat. By that time, both parties were aware of the trial judge’s decision and, as more fully discussed infra, the implicit assumption therein that plaintiff would receive all of the timber yet to be cut on Tonga Ridge. At that point, it would not have been inappropriate to bring the evolving controversy to the court’s attention.

Neither party did so and, since the assumption in the trial judge’s decision as to the volume of timber plaintiff would cut was only indirectly related to the computation of damages and had no effect at all on the issue of defendant’s liability,³ it is understandable that they did not. Moreover, in view of the advanced stage of Tonga I, there would have been little, if any, savings in terms of convenience and expense to the litigants had they done so. The only potential saving is that, had the court been made aware of the additional claim by, say, May 1969, it might have suspended its review of the trial judge’s decision pending a trial and decision on the additional count, thereby combining all matters in a single review. However, balanced against that saving is the substantial additional delay plaintiff would have encountered in obtaining a recovery on its breach of warranty claim.

Under the circumstances present in this case, it is concluded that it would be an unwarranted extension of Electric Boat to hold that plaintiff’s failure to seek to assert the present claims in Tonga I bars it from any further relief. Accordingly, the defense based on splitting of the cause of action is denied.

II. The Refusal to Extend Claim

Plaintiff contends that defendant’s refusal to grant a further extension of the contract which would have enabled it to cut the timber on Unit 15 was arbitrary and capricious and constituted a breach of the contract. Defendant denies that this is so, maintaining that the refusal was entirely proper in view of plaintiff’s inability to perform the contract.

While plaintiff apparently construes the contract, particularly in light of the decision in Tonga I, as giving it an unfettered, absolute right to the timber remaining on Unit 15, neither the contract itself nor the court’s earlier decision supports such a position. In Tonga I, the court was concerned with timber that defendant had warranted to be present but was not; here, the issue is as to timber that was present but which plaintiff did not receive. Although the court clearly assumed that plaintiff would receive all of the timber yet to be cut, nothing that was said in Tonga I can be construed as a holding that defendant was obliged to extend the contract ad infinitum.

That the original term specified in the contract, 5 years, was unrealistically short is undisputed. The parties contemplated, at the time of entering into the contract, that extensions of the term would be requested by plaintiff and granted by defendant. However, the contract itself offers no guidelines by which to govern the grant of those extensions.

But the evidence is clear that, at the time the contract was executed, the Forest Service had a well-established practice or custom with respect to granting extensions. As noted previously, this practice was a very liberal one in which extensions were granted with very little urging by the contractor, and plaintiff was well aware of that practice. In practical operation, extensions of contracts were always granted by the Forest Service unless there was a demonstrable disadvantage to the United States.

An oft-used principle in contract law is that where a well-established practice or custom is shown to exist, it is assumed that the parties to a contract intended that practice or custom to apply, in the absence of express language in the contract to the contrary. Robinson v. United States, 80 U.S. (13 Wall.) 363, 366 (1871); John McShain, Inc. v. United States, 199 Ct. Cl. 364, 462 F. 2d 489 (1972); Buffalo Merchandise Warehouses, Inc. v. United States, 115 Ct. Cl. 568, 572, 88 F. Supp. 276, 277 (1950). Also, regulations in effect at the time of a contract are a useful guide in the resolution of a contract case. Firestone Tire & Rubber Co. v. United States, 195 Ct. Cl. 21, 444 F. 2d 547 (1971). Here, usual custom or practice was for the Forest Service to set a fixed term for performance; however, it was recognized by the parties that time was not of the essence and it was the practice of the Forest Service that the term originally set would be liberally extended in accordance with published Forest Service regulations. Those regulations, together with the custom of the Forest Service in granting extensions for a variety of reasons, make it clear that extensions would be 'granted, upon request, unless, as stated in paragraph 2433.12 of the Forest Service Handbook, it would be “disadvantageous to the United States.”

In entering into this contract, plaintiff had every reason to assume, there being nothing in the contract to the contrary, that it would receive extensions in accordance with the prevailing custom or practice. Indeed, the evidence is that, from 1960 to 1968, plaintiff did receive extensions on that basis. The rights and obligations of the parties under the contract must, therefore, be construed in light of this established practice or custom. Stoeckert v. United States, 183 Ct. Cl. 152, 165, 391 F. 2d 639, 647 (1968). If, in refusing to extend the contract for 1969, defendant departed from that practice, and in fact used a different basis in passing on the requested extension, plaintiff’s claim for breach is sustainable. Cf. Perry v. Sindermann, 408 U.S. 593 (1972). Specifically, the question is whether defendant denied the extension because it was “disadvantageous to the United States” or on some other, and materially different, basis.

Although the warning in 1968 that no further extensions would be granted except “under extraordinary conditions” is not itself inconsistent with a determination by the Forest Service that further extensions would be disadvantageous to the United States, there has been no showing that the Forest Service evaluated the matter in that context. From the evidence, it appears that the warning was principally based on the belief that plaintiff would not make any effort to clear the remaining timber from Unit 15 until after the court’s decision in Tonga I. However, even if the belief were correct, there is no evidence that the Forest Service made any determination that such inactivity by plaintiff would be disadvantageous to the United States.⁴ In any event, and more importantly, testimony at trial revealed that this belief was based on no facts whatever and was sheer speculation by some of the Forest Service personnel. A standard of “disadvantageous to the United States” vests wide discretion in defendant in passing on requests for extensions. Even so, the exercise of that discretion must be fair and reasonable, not arbitrary and capricious. Pacific Far East Lines, Inc. v. United States, 184 Ct. Cl. 169, 184, 394 F. 2d 990, 998 (1968); Gadsden v. United States, 111 Ct. Cl. 487, 490, 78 F. Supp. 126, 128 (1948). To impose, unilaterally, an additional condition on further extensions merely on the basis of speculation is neither fair nor reasonable and is contrary to defendant’s obligation to administer the contract in an evenhanded manner consistent with its well-established practices and published regulations.

What has been said, of course, does not establish an actionable breach for if, in refusing an extension for the 1969 season, defendant fairly determined that a further extension would be disadvantageous to the United States, the prior warning is irrelevant and plaintiff has no cause for complaint. But it is apparent that the requirement of “extraordinary conditions,” rather than disadvantageous to the United States, was the basis for the determination not to extend the contract. That was the principal reason given to plaintiff,⁵ and internal correspondence of the Forest Service confirms that to be the fact. That correspondence also indicates that the Forest Service, in early 1969, was still acting on the belief, unfounded in fact, that plaintiff was “holding back” from cutting the timber pending the outcome of Tonga I. None of the Forest Service employees testifying at trial knew of any disadvantage to the United States by a further extension of the contract. Nor is there any doubt that the efforts made by plaintiff in 1968 to remove the timber, together with the conditions it encountered on Unit 15 in that year, would have been accepted, in prior years, as sufficient grounds for granting a further extension. The fact is that the Forest Service’s decision rested squarely on its determination that none of the excuses advanced by plaintiff amounted to “extraordinary conditions,” a standard entirely different from that theretofore applied by the Forest Service, both under this contract and all other contracts.

It is concluded that defendant had an obligation to administer this contract and to evaluate plaintiff’s requested extension in conformity with its own regulations and its then-existing policy of granting extensions unless disadvantageous to the United States. Its unilateral imposition of an additional condition for obtaining an extension, having no apparent relation to its past administration of that policy, constituted a breach for which plaintiff is entitled to recover damages.

Turning to the matter of damages, plaintiff’s claim is in two parts, the first seeking an award, in addition to that given in Tonga I, for loss of road amortization, and the second being based on the value of the timber it was denied from Unit 15.

As to the matter of road amortization, it is clear from finding 37, in Tonga I, that the award for road amortization was based on the assumption that plaintiff would cut all of the remaining timber on Unit 15. Based on that assumption, the computation included the uncut timber as a part of the timber volume plaintiff would realize under the contract. By reason of defendant’s breach, the volume plaintiff received was less than that. By utilizing the computations employed in Tonga I, it appears defendant’s refusal to permit cutting of the remaining 3,000 MBF on Unit 15 resulted in plaintiff failing to recover $29,295.27 of its road-development costs. The refusal having been improper, plaintiff is entitled to recover that amount as one element of damage flowing from the breach.

As to the timber itself, and after several revisions in its approach, plaintiff ultimately tried the case on a theory of lost profits, contending that it is entitled to the profits it lost as measured by the difference between the contract price and the price it would have received upon resale of the timber in the export market. According to plaintiff’s calculations, this amounted to $145,846.05.

The usual measure of damages for the failure to deliver goods is the difference between the contract price the buyer was to pay and the fair market value of those goods. Dulien Steel Products, Inc. v. United States, 143 Ct. Cl. 484 (1958); McCormick, Damages § 175 (1935); Uniform Commercial Code § 2-713. In making its calculations, plaintiff’s experts took as fair market value the price the logs would have commanded in the export market in the latter part of 1969 and the first half of 1970 and, from this base, then calculated the profit plaintiff would have made at those prices.

Reliance on the export log market is inappropriate as a measure of damages.⁶ Use of the export log price has the effect of treating the contract as one for the purchase of goods for resale. In a purchase for resale, it is appropriate to measure the buyer’s damage upon nondelivery as the difference between the contract price and the price at which the goods were to be resold. Benjamin v. United States, 172 Ct. Cl. 118, 145, 348 F. 2d 502, 520 (1965); McCormick, damages, supra. Had this been a purchase of timber for resale, the price plaintiff could have obtained in the export market would have been pertinent. However, this contract was not of that character. Plaintiff is a manufacturer of plywood, not an exporter of logs. Its timber purchases are for the purpose of supplying its plywood operations and it was for that purpose it entered the present contract. Nor is there a showing that an important part of its business consisted of selling logs to others at export prices. In that context, the foreseeable damages, Dale Construction Co. v. United States, 168 Ct. Cl. 692, 734 (1964), for which defendant is properly charged are the additional costs plaintiff incurred, or would have incurred, in procuring timber for its operations to replace the timber denied to it by defendant’s breach.

Under the facts surrounding this contract, plaintiff’s claim for lost profits based on resale of the timber in the export-log market must be viewed as consequential damages and can be recovered only if it is shown that defendant knew, or should have known, that plaintiff intended to resell a substantial number of the logs and that plaintiff sought to prevent its losses or mitigated its damages by procuring other timber. Uniform Commercial Code § 2-715. Neither condition has been satisfied in this case. As stated previously, plaintiff is a plywood manufacturer. There has been no showing that defendant had any reason to know that any substantial amount of the timber would have been used for any purpose other f.ba.n in plaintiff’s operations. Nor is there any evidence that plaintiff ever advised defendant that it intended to export the logs remaining on Unit 15, or to sell a substantial number of them. Also missing is any evidence that plaintiff made any effort to cover by procuring or diverting other logs to the export market or that, if it did so, it suffered any damage whatever. In particular, although plaintiff logged more timber in 1969 than it had in previous years, and apparently exported some, there is no evidence that any portion of that timber was logged as a substitute for the Tonga Eidge timber or, if so, that it cost plaintiff anything more than the Tonga Eidge timber would have cost. Under these circumstances, plaintiff’s claim for consequential damages must be denied.

Consequential damages not being recoverable, there remains the question of whether plaintiff is entitled to any damages at all. Had plaintiff procured timber to replace the Tonga Eidge timber, it would have been entitled to recover the amount it had to pay in excess of the contract price. There is no evidence that this happened. In fact, it appears that plaintiff had a number of contracts with the Forest Service and had no difficulty in obtaining as much timber as its operations could handle. Nonetheless, to the extent the contract price was below fair market value, plaintiff is entitled to the benefit of its bargain as measured by that difference.

But therein lies the real difficulty. Plaintiff’s evidence as to fair market value is based on the inappropriate resale price for export logs. This evidence is inappropriate because, as already suggested, there is insufficient showing that the plaintiff or any manufacturers of plywood would have resorted to the export market to buy logs for manufacturing purposes. The appraisals conducted by the Forest Service in redetermining the rates for Unit 15 and the subsequent resale of that timber by the Forest Service are the only other evidence bearing on this issue. That evidence is that the Forest Service appraised the timber on Unit 15 for 1969 at about $50 per MBF, established an advertised bid rate of $47.40 per MBF, unsuccessfully offered it at $34.50 per MBF and ultimately sold it at $23 per MBF. Under the contract, plaintiff was obliged to pay a minimum of $26.55 per MBF for approximately 1,300 MBF and a redetermined rate for the remainder. However, even the $26.55 was only a minimum figure, for the Service had the right to redetermine the rate upward any time it extended the contract. In fact, it never did raise the rate, and did not plan to do so in 1969, because of the road amortization. This is clear from its redetermination appraisal for 1969 where it allotted a figure of $46.29 for road amortization, thereby arriving at a redetermined rate of $3.20 to be charged plaintiff. However, by the award in Tonga I and the additional award for road amortization it is entitled to receive in this case, plaintiff has been fully compensated for its road-development costs, so road amortization is no longer a factor to be included in determining the stumpage rate plaintiff was to pay under the contract. Thus, considering the road fully amortized, plaintiff is not entitled to the $3.20 rate as a contract price but rather the rate should be increased by $46.29.

What all of this adds up to is that, by reason of the re-determination provision, and assuming no factor for road amortization, plaintiff would have been obliged in 1969 to pay a contract price that was reasonably reflective of fair market value.⁷ Stated otherwise, the evidence indicates that the price plaintiff would have had to pay, had it sought to procure comparable timber in the marketplace, would have been essentially the same as the redetermined value it was obligated to pay for the timber under the contract. If anything, the evidence suggests that plaintiff would have paid less in the marketplace. This is borne out by the redetermined value of approximately $50 established for 1969 as compared to the advertised bid rate of $47.40, the offer at $34.50, and the actual sale of that timber at $23.

Under these circumstances, it is concluded that plaintiff suffered no compensable damage by the denial of the timber and is entitled to no recovery on this phase of its claim. Gulf Chemical Metallurgical Corp. v. Sylvan Chemical Corp., 122 N.J. Super. 499, 300 A. 2d 878, aff'd, 126 N.J. Super. 261, 314 A. 2d 73 (1973). In so concluding, it is recognized that this court has, where the proofs are uncertain but it is clear some damages were suffered, entered a judgment in the nature of a jury verdict. See, e.g., Specialty Assembling & Packing Co. v. United States, 174 Ct. Cl. 153, 355 F. 2d 554 (1966). That approach is deemed inappropriate here because it has not been satisfactorily shown that plaintiff suffered any damage not otherwise compensated for by the additional road-amortization award.

III. Road Repair and Maintenance Claims⁸

The first of these claims occurred in early 1968, when the main Tonga Ridge road was washed out. (Findings 9-11.) The contracts for two of the three timber sales serviced by that road required defendant to bear all of the repair costs. The other contract, the one here in issue, placed the burden for road repairs on plaintiff. Defendant refused to share in any of the costs initially incurred by plaintiff in repairing the road and agreed to defray only 5% of those costs thereafter.

Defendant’s argument that plaintiff repaired the road as a “volunteer” is utterly without merit. Plaintiff, before undertaking the work, asked defendant to share in the cost, and defendant promised to have a response in 10 days. Four months elapsed before defendant replied. In the meantime, plaintiff had to proceed with the repairs if it was to have any hope of completing operations on Unit 15 in the 1968 season. Having inexcusably delayed in responding to plaintiff’s request, defendant is in no position to reap the benefits of plaintiff’s labors on the basis they were volunteered.

Nor can defendant’s contention that it was obligated only to pay 5% of the costs be accepted. That figure might have validity if the costs were for repairs occasioned by past use of the road, but that is not the case here. The repairs were needed to restore the road for future logging operations and as to those, 80.5% of the timber remaining to be transported over the road was from sales on which defendant was obliged to bear the repair costs. Applying that percentage, defendant should have borne $5,275.56 of the costs, and plaintiff is entitled to reimbursement in that amount.

The other road claim is as to maintenance work performed in 1969 by plaintiff under section 40(1) of the contract. That provision required plaintiff, at the conclusion of the contract, to perform final maintenance work on the roads. Consistent with its position that the contract was at an end, the Forest Service, on May 14, 1969, directed plaintiff to perform this work. |

It is clear that, under the contract, plaintiff had the obligation to maintain the roads, both at the close of each season and at the termination of the contract. It is unclear from plaintiff’s proofs precisely what work was done and for what purpose since some of the work was apparently performed prior to the directive by the Forest Service on May 14,1969. In any event, there is no evidence that the maintenance work was anything other than what was required of plaintiff under the contract.

Since there is nothing in the contract to indicate that this obligation was dependent or contingent on plaintiff’s cutting any specific volume of timber, the question is simply whether, by reason of defendant’s breach, plaintiff was excused from performance of this obligation under the contract.

It is concluded that it was not. When, in 1969, defendant refused to grant a further extension, plaintiff had already cut and removed 43,000 M board feet of the total 46,000 M board feet available. Plainly, defendant’s breach neither defeated the whole purpose of the contract nor deprived plaintiff of substantially all that it had bargained for. To the extent it was deprived of anything, plaintiff has, through recovery of the road amortization, been fully compensated for all the damages it has been able to prove. Giving consideration to all of the circumstances, restatement, CONTRACTS § 275 (1932), it is concluded that defendant’s breach was not of such a character as to relieve plaintiff of its obligation to perform road maintenance at the conclusion of the contract.

Accordingly, plaintiff is not entitled to recover the costs it incurred in meeting its obligations under the contract.

In summary, plaintiff is entitled to recover a total of $34,570.83.

FINDINGS OF FACT

The court, having considered the evidence, the report of Trial Judge Hal D. Cooper, the briefs and argument of counsel, makes findings of fact as follows:

1. In Everett Plywood, & Door Corp. v. United States, 190 Ct. Cl. 80, 419 F. 2d 425 (1969), plaintiff recovered damages it suffered by reason of a breach by defendant of a warranty of quantity. The contract there in issue is the same contract involved in this suit; findings 1-3, 6-8, 10-17, 29, and 30, made in the prior suit and incorporated herein by reference, provide some of the background of the contract and a summary of the pertinent events up to July 1967.

The duration of the contract, executed in 1955, was specified in the following language:

Period of Contract. — 3. Unless extension of time is granted, all timber shall be cut and removed and the requirements of this agreement satisfied on or before December 31, 1960. Unless such amounts are changed in writing by the Regional Forester, at least 45,000 M board feet shall be cut prior to June 1,1959.

2. Plaintiff is a cooperatively owned and operated plywood mill that obtains the predominance of the timber used to produce plywood from federal timber lands. Hemlock and fir are two species used in the production of plywood. Logs not usable in its operations are either sold or bartered to sawmills for logs that can be used. The logs plaintiff uses are the higher-grade logs.

In a sense, a cooperative mill is not run for profit; the principal objective is to keep the plant operating in order to provide jobs for its shareholders. When the company makes a profit, wages are raised, dividends may be paid to the shareholders, and the value of the shares increases. However, the first consideration in determining the disposition of timber is the requirements of the mill and the logs needed to keep the mill operating. Aside from that, its logging operations are in large part governed by plywood prices. When plywood prices are low, plaintiff reduces its logging operations and will use the low plywood prices as the basis for requesting extensions of its timber sale contracts. Although depressed for a number of years, plywood prices peaked in September 1968 through April 1969, plummeting again in the summer of 1969.

3. Under the contract in suit, plaintiff received, upon request, successive one-year extensions up through 1967. By that date, only a part of Unit 15 on Tonga Ridge remained to be cut. On January 4, 1968, plaintiff requested a further extension of the Tonga Ridge contract, from March 31,1968 to March 31, 1969, assigning as the reason therefor the difficulties presented by the short logging season at the high elevation at which Unit 15 was located. The request closed with the statement that “we should have no trouble completing the sale this coming season.”

4. Applicable regulations governing extensions were stated in the Forest Service Handbook at page 191:

2433 J. — Extension of Timber Sale Contracts

❖ * * * $

2433.12 — 'Procedure. Ordinarily, the timber sale contract is written on the basis that time is not of the essence. The termination date is fixed when the sample contract is drafted and thus becomes a condition of sale, * * * an extension of time may be granted by the officer approving the sale, his successor, or his superior, unless disadvantageous to the United States.

5. Plaintiff had never been denied a requested extension of the termination date of a timber sale contract on any Forest Service timber sale; nor is there any evidence that the Forest Service denied requested extensions of timber sale contracts to other purchasers prior to 1969. Extensions of such contracts were in fact granted with very little urging and for a wide variety of reasons ranging from bad weather to unfavorable economic conditions. It was a well-established practice, known to all in the business and in effect throughout the period of the contract, that the Forest Service would grant an extension of a contract if a contractor had a reasonable basis for the request and there was no disadvantage to the United States. Logging difficulties encountered at high elevations were an acceptable basis for requesting an extension.

6. In granting plaintiff’s requested extension to March 31, 1969, the Forest Service advised plaintiff, on April 8, 1968, that “only under extraordinary conditions will this sale be considered for another extension.”

7. In 1967, a fire damaged timber belonging to the Weyer-hanser Company. By agreement dated April 22,1968, plaintiff agreed to purchase this fire-damaged timber, agreeing to log an estimated 5,843 MBF by November 1, 1968. This agreement was known as the “14-J sale.”

8. Plaintiff employs no loggers and does not engage in any logging operations. All of its logging operations are performed by independent logging companies. In a given year, plaintiff bids on 100-200 sales and obtains timber from some 25 sales. It attempts to retain loggers on a year-round basis by having them work on high-elevation sales in summer months and then move to low-elevation sales in the winter months. Nelson Bros, had contracted with plaintiff in August 1967 to complete work on the northern part of Unit 15, Tonga Ridge. By purchasing the 14 — J timber and subcontracting with Nelson Bros, to log that timber, plaintiff was able to induce Nelson Bros., by contract of May 22, 1968, to log the southern part of Unit 15 as well.

9. In the winter of 1967 and the spring of 1968, a severe washout of the mainline Tonga Ridge road knocked out several legs of the switchback. This road had to be rebuilt prior to the commencement of operations on Unit 15 in 1968. The mainline road to Tonga Ridge provided access to three separate Forest Service timber sales to plaintiff: Tonga Ridge, Tonga Deception, and Carroll Creek. Section 40 of the Tonga Ridge contract required plaintiff to perform all road repairs and maintenance for that sale. The Tonga Deception sale, on the other hand, placed the burden of repair costs on defendant. The Carroll Creek sale placed the burden of repair costs on defendant if the damage to the road was extraordinary. The washout was extraordinary damage.

On April 24, 1968, plaintiff requested the Forest Sendee to share in the cost of the necessary repairs. On May 24,1968, defendant replied that plaintiff would have its answer within 10 days. The answer was not received, however, until September 25,1968.

10. Plaintiff, in good faith, started the road repairs in June and they were accomplished by July 10, 1968. Nelson Bros. did the work and that work was a prerequisite to its being able to move into Unit 15 in July 1968. The repair cost was $6,553.50. Defendant’s letter of September 25, 1968, in reply to plaintiff’s request for a sharing of road costs, stated that defendant would share in any future road-repair costs to the extent of 5%. The 5% figure was chosen on the basis that, of the timber moved on Tonga Ridge road up to the time of the washout, only 5% was timber other than from the Tonga Ridge sale. The letter further stated that the repair done during June and July, 1968 was “voluntary” and therefore would not be reimbursable by defendant even to the extent of 5%.

11. Had defendant’s prorata share of the road repairs been determined according to the amount of timber remaining to be logged from the three sales serviced by the road, defendant’s share of the expenses would have been 80.5% of the repair cost of $6,553.50, or $5,275.56.

12. Due to the high elevation and the short season, logging on Unit 15 was unpredictable. Snow and wet conditions, both in the late spring and early fall, are normal conditions which greatly foreshorten the available time for logging operations. The rugged terrain added to the difficulties to be expected in logging the timber.

13. In July 1968, when enough snow had melted to permit operations to begin, a part of Nelson Bros.’ men and equipment moved into Unit 15 and began building spur roads and logging operations. The construction of the spur roads was hampered by wet weather and an excessive amount of surface water and muddy conditions. The road construction under such conditions was too costly, and the construction of the spur roads was suspended. Meanwhile, logging operations continued; however, Nelson never did set up a yarder on Unit 15, using only a loader, a piece of equipment used for logging short distances along a spur and with small crews. It was impossible to have completed logging Unit 15 in 3968 without a yarder. Nelson’s yarder, together with the rest of its men and equipment, was engaged in logging the 14-J sale for plaintiff, with logging of that sale continuing on into October. Nelson left Unit 15 on October 23,1968, after a snowstorm of at least 2 feet, and briefly logged for plaintiff at Carroll Creek which was at an elevation 500 feet lower than Unit 15.

14. It does not appear that plaintiff made any special efforts to complete logging on Unit 15 during the 1968 season. Its logger, Nelson Bros., was the only logger plaintiff planned to use on Tonga Ridge that year and the same logger was to handle the 14-J sale as well. Plaintiff’s failure to complete the Tonga Ridge sale in 1968 was due to the wet conditions encountered, the consequent delay in construction of a spur road, and Nelson’s lack of available capacity to handle the volume of logging contracted to it by plaintiff in 1968. None of the factors affecting plaintiff’s operation on Tonga Ridge in 1968 appear to be classifiable as “extraordinary.” However, plaintiff made reasonable efforts to log Unit 15 in 1968 and its operations were consistent with those to be expected of any contractor.

15. The following table shows the quantity of timber (MBF), logged by Nelson Bros, for plaintiff in the period May 1 through November 30,1968:

Sale

Weyer-Barclay Carroll Tonga haeuser Johnson Monthly Creek Creek Ridge VrJ Creek subtotal

May. 154 349 503

June.-. 832 •_.. 832

July. 133 719 . 852

August.-.--.. 263 724 _-.. 987

September_ 6 _--_ 152 824 ■_ 982

October........i. 32 238 751 138 -. .... 1,159

Novembcrii^r;-.-;.- 1,241 _1,241

Sale subtotal. 1,279 238 1,299 3,391 349

Totals. 6,556

The amount of timber still to be logged on Unit 15 at the close of the 1968 logging season was:

Mboard feet

White fir_ 1, 666

Hemlock_ 1, 277

Alaska yellow cedar_ 48

Total_ 2, 991

16.The letter of April 8, 1968, advising plaintiff that no further extensions were to be granted except for “extraordinary circumstances” was written to carry out instructions of the associate deputy chief of the Forest Service, dated March 8,1968, which stated:

Your letter to the company extending the sale and establishing the rates should emphasize the need to complete the cutting during the extension period. The file indicates the sale has been extended nine times.

17. Prior to his letter of March 8,1968, the chief received copies of a memorandum written on February 1, 1968, by A. Mason, forester. That memorandum included the following:

I personally doubt that the company [Everett] will do much to remove the remaining sale timber until the results at the hearing are known. (My doubts are shared by a number involved in this sale).

Testimony at trial, including that of A. Mason, revealed that there was no factual basis for the above-quoted statement. Mason referred to it as “speculation.”

18. Prior to plaintiff’s actual request for an extension for the 1969 logging season, defendant determined that no extension would be granted. A letter to the chief from the regional forester on November 29,1968, included the following:

It appears that the purchaser has made no real effort to complete the sale prior to the March '31, 1969 termination date. It is improbable that the sale will be accessible for logging during the remaining four-month period. The sale has been extended eight times since the original termination date of December 1960. It seems probable that the purchaser is deliberately holding back on the operation of the contract, pending the outcome of Court of Claims Case No. 40-64.

The reply on December 9,1968 stated in part:

We have reviewed your recommendation not to extend the Tonga Ridge sale beyond its present termination date of March 31,1969.

As you point out, this sale has already been extended eight times, since its original expiration date in 1960. Further, it can be resold at rates higher than current contract rates.

The purchaser was warned, in the Forest Supervisor’s letter of April 8, 1968, that the sale would not be considered for any further extension, except for “extraordinary conditions.” Conditions this summer were such that he could easily hare finished logging the sale if he had chosen to do so.

Accordingly, you are authorized to inform the purchaser immediately that the case has been reviewed by the Chief, to remind him of the April 8 warning, and further inform him that there were no “extraordinary conditions” involving logging the sale this year. Therefore, the Forest Service does not choose to extend the sale, which will expire on March 31, 1969, as scheduled.

This decision was relayed to plaintiff on December 20, 1968.

19. By letter of January 24, 1969, plaintiff formally requested an extension for the 1969 logging season. The following events then occurred:

February 25,1969 — Plaintiff’s request denied by the Forest Supervisor;

March 20, 1969 — Trial Judge Hogenson’s decision in Tonga I handed down;

March 31,1969 — Forest Service extended contract from March 31, 1969 to April 30, 1969 to permit further evaluation of plaintiff’s request for an extension; April 22, 1969 — Deputy Chief, Forest Service, upheld the denial of a further extension;

April 30, 1969 — Plaintiff requested reconsideration;

May 15, 1969 — On reconsideration, defendant denied extension;

June 12, 1969 — Plaintiff appealed to Board of Forest Appeals. Board instructed Forest Service not to resell the timber until Board had acted.

June 1969 — Plaintiff filed suit seeking an injunction against resale of timber. Suit was ultimately dismissed ;

August 30, 1969 — Forest Service advertised remaining timber on Unit 15 for resale;

November 18, 1969 — Forest Service readvertised Unit 15 timber and sold it;

December 12, 1969 — Court of Claims issued per curiam decision in Tonga I;

March 10,1970 — Board dismissed plaintiff’s appeal;

March-April 1970 — Board granted plaintiff's motion for reconsideration;

October 1970 — Plearing held before the Board;

February 2, 1971 — Board vacated prior dismissal but dismissed appeal for lack of jurisdiction in view of prior sale of Unit 15 timber;

September 27, 1971 — Plaintiff filed suit in the Court of Claims.

20. In denying plaintiff’s requested extension, the Forest Service relied on the absence of any “extraordinary conditions” encountered by plaintiff in 1968. It made no determination that the extension would be disadvantageous to the United States. There was an indirect reference to that standard in the letter of April 22, 1968, where an acute shortage of lumber was asserted as one reason for requiring plaintiff to cut the timber during 1968. Although this implied that the Forest Service was anxious to have Unit 15 cut to help alleviate the market shortage, the fact is that the Forest Service, at that time, did not intend to reoffer Unit 15 for sale, the market shortage notwithstanding. It was only at the urging of the Department of Justice, for reasons unrelated to market conditions, that it was reoffered and sold in 1969.

21. Paragraph 40(1) of the contract included the following provision:

(1) Maintenance of Roads Constructed or Reconstructed by the Purchaser: * * * Upon the termination of this agreement and on seasonal operations at the end of the operating season, maintenance work will be done to minimize damage from the elements, such as a final blading to remove ruts and other irregularities that would prevent normal road surface runoff, and a final clearing of drainage ditches and culverts as necessary to insure satisfactory functioning of the road drainage system.

By a directive dated May 14,1969, plaintiff was required to perform final maintenance work on the roads. Based on work performed during the period January to October, 1969, plaintiff expended $14,422.72 in performing the final maintenance of the roads.

22. In early 1969, defendant reappraised Unit 15 and redetermined the rates to be charged in the event the contract was extended for the 1969 season. The redetermined rate for hemlock, in excess of competitive quantities, was $3.20 per MBF; however, in arriving at that figure, defendant credited plaintiff with road amortization at the rate of $46.29. Without a road-amortization credit, defendant’s appraisal computation would have resulted in a redetermined stumpage rate of approximately $50, or more. The figure of $46.29 was far in excess of the road-amortization rates set in the contract (finding 17, Tonga I) and would have permitted plaintiff to amortize the road at a much more rapid rate. Thus, at a competitive-volume price of $26.55, timber appraised at $50 would have given plaintiff an amortization rate of $23.45 while, on volumes in excess of competitive volumes, the redetermined price of $3.20 would have given plaintiff the $46.29 rate for road amortization.

23. In 1969, the Forest Service appraised Unit 15 and established an advertised rate of $47.40 for hemlock. When, on September 30, 1969, the Forest Service attempted to sell the remaining timber on Unit 15, eight bidders were present but no bids were received at the advertised minimum price of $34.45 per MBF. The subsequent sale of the timber, on November 18,1969, was at $23 per MBF.

24. Plaintiff presented expert testimony on the issue of fair market value. Its experts appraised the timber to a log market, as opposed to the analytical-appraisal procedure used by the Forest Service. (Finding 15, Tonga I.) The value the experts assigned to the timber, $63 per MBF, was based on average export prices for logs in the fourth quarter of 1969 and the first two quarters of 1970, reduced by the cost of logging the timber and putting the logs “in the pond.”

Although it did export some logs in 1969, plaintiff is not in the business of exporting logs, the great bulk of its logs being used in its plywood operations. The Tonga 'Ridge timber was purchased by plaintiff in 1955 for use domestically, not for export. There is no evidence that plaintiff ever informed the Forest Service that it intended to export any substantial number of the logs from Tonga Ridge and it was not until immediately prior to trial that plaintiff asserted a claim for damages on that basis.

Plaintiff offered no evidence as to what the fair market value of the timber would be to a purchaser, such as plaintiff, who was in the business of manufacturing plywood and was seeking to obtain timber for its plywood operations. The Great Northern Sale, on which plaintiff relies, was an export log sale.

25. The liberal extension policy of the Forest Service was changed drastically after 1970. The Forest Service Manual for May 1,1972, states:

—Period of Contract (B8.8, A19).

# * !S * *

The contract period will be established with consideration of the size and type of offering. It should be long enough to minimize the need for extension action.

Sale size: Operating seasons

Up to 2 MMBF_ 2

2-5 MMBF_ 3

5-10 MMBF_ 4

10-25 MMBF_ 5

Over 25 MMBF_ 6 or more

Variations from the above guidelines may be appropriate in the following circumstances:

1. Additional time should be considered for such special requirements or conditions as extensive road construction. * * * Additional operating seasons may also be necessary for high elevation sales with abnormally short operating seasons.

26. Finding 37 in Tonga I was based on the assumption that plaintiff would cut 40,000 MBF of hemlock to be amortized at $6.72 and 1,717 MBF of hemlock to be amortized at $11.79. In fact, plaintiff cut only 38,653 MBF. The calculation in finding 37, when adjusted to reflect the timber plaintiff failed to realize as a result of defendant’s breach, is:

Fir_ $50, 150. 52

Cedar_ 8, 681. 31

Pine_ 3, 507. 00

Hemlock — 38,653 at $6.72_ 259, 748. 16

Total_ $322, 086. 99

Unrealized Road Amortization_ $351, 382. 26

-322, 086. 99

Total — ___— $29, 295. 27

CONCLUSION OE LAW

Based upon the foregoing findings of fact and opinion, which are adopted by the court and made a part of the judgment herein, the court concludes as a matter of law that plaintiff is entitled to recover, and judgment is entered for plaintiff in the sum of $34,570.88.

1 The proposed revision of .the restatement takes the same position with respect to successive breaches of a contract, restatement (second) judgments § 61.2, pp. 132-33 (Tent. Draft No. 1, 1973).

2 Electric Boat was concerned with the effect of pursuing permissive administrative relief instead of seeking to amend to assert the claim in a pending suit. It is unclear from the evidence in the instant case precisely what claims plaintiff presented to the Board. It appears that the road claims never were presented and, of course, the breach claim for damages was beyond the Board’s jurisdiction. Accordingly, in considering this issue, it has been assumed that the relief sought from the Board was permissive.

3 Tonga I was only concerned wth timber warranted to be present but which In fact was not. In computing damages for the breach of warranty, It was necessary to determine the quantity of timber present on Tonga Eldge and then determine the damages to plaintiff, based on the difference between the timber that was there and the timber warranted to be there. In so doing, It was assumed that plaintiff would receive all of the timber that was present and the award of damages was based only on the missing timber. However, In making that assumption, the court credited plaintiff with recovering certain costs which, as appears infra,, it In fact did not recover due to its failure to receive aU of the timber present on Tonga Eldge.

4 Although there Is some indication the Forest Service wanted the timber cut so as to provide accurate Information for use in Tonga I, the Insubstantial nature of that interest Is revealed by the fact the Forest Service had no intent to reoffer unit 16 after plaintiff’s contract was allowed to expire.

5 The additional reason stated to plaintiff that the timber was needed to relieve an acute lumber shortage played no part in the decision. In fact, the Forest Service had no intention of putting the timber on unit 15 on the market and it was only at the urging of the Department of Justice attorney that it ultimately did so. The timber sold for less than what defendant would have received under the contract with plaintiff.

6 Equally Inappropriate as transactional evidence of fair market value is the Great Northern sale, which was an export log sale.

7 Although plaintiff argues that the Forest Service redetermination appraisals do not reflect fair market value, the court’s findings 14 and 15 in Tonga I are to the contrary and are controlling here. In any event, there is no evidence from which It can be determined how much, if any, the appraisal is below fair market value,

8 Although not raised by the pleadings, defendant offered no specific objection and plaintiff was permitted to proceed at trial. (See Rule 3:9 (b).)