212 F. 834 | 5th Cir. | 1914
Lead Opinion
(after stating the facts as above). The jurisdiction of a court of equity over the action is sought to be sustained upon two grounds:
(1) That the Mississippi statute (section 536 of the Code of Mississippi) confers on the chancery court of the state—
“jurisdiction of attachment suits based upon demands founded upon any indebtedness, whether the same be legal or equitable, or for the recovery of damages for the breach of any contract, express or implied, or arising ex delicto, against any nonresident, absent or absconding debtor, who has lands or tenements in this state.”
The suit was brought in the state chancery court by attachment against the lands of the defendant under this statute, and removed by him to the Circuit Court of the United States. The contention of
There was, at least, some ground for equitable jurisdiction, as for an accounting. It was not a case where the cause of action was indisputably a legal one. It was open for contention between the parties as to whether a sufficient case for an equitable accounting was presented. The defendant in the lower court made no contention against the equity of the bill, but consented to proceed with the cause upon the equity side of the court, and first objected to the exercise of the equity jurisdiction of the court below after appeal had been perfected from the decree of the lower court, and by a motion to dismiss the appeal, made in the appellate court. Having been tried as an equity case in the court below, and without objection by the ap-pellee, and the cause of action being one embraced with one of the general heads of equity jurisdiction, the issue as to whether the pleadings and facts brought the case sufficiently within the jurisdiction of a court of equity will not be permitted to be made by the appellee, for the first time, in this court, but it will be treated in this court, as it was tried in the lower court, as an equity cause and properly
The motion to dismiss the appeal is therefore dismissed. This renders it unnecessary for us to consider appellee’s motion to dismiss a writ of error, which was subsequently sued out by appellant; the contention being that it was sued out after the expiration of the six months within which a writ of error lies to this court.
Coming to the merits, the purpose of the bill was to recover amounts alleged to be due under a contract entered into between the plaintiff and defendant, for an accounting to determine the amounts so due, and for the recovery for damages for its alleged breach. The cross-bill sought to recover certain items alleged to be due appellee under the contract, and for the recovery of damages for the alleged breach of the contract by appellant. At the time the contract was entered into, the plaintiff was the owner of about 12,000,000 feet of timber and a sawmill, which it was operating, cutting the timber which it owned. The defendant was the owner of about 80,000,000 feet of timber, adjoining plaintiff’s, but had no mill. The then price of lumber was such as to make the-manufacture of lumber attractive to both parties. In this situation the parties opened negotiations. The defendant was anxious to arrange for the cutting and sawing of his timber at the plaintiff’s mill, This was agreeable to the plaintiff, provided the cutting and sawing of the defendant’s timber was deferred until the plaintiff’s timber had been first cut and sawed and marketed. Each party was desirous of getting the benefit of the present market prices for lumber, and naturally wished its or his lumber to be first-disposed of. This obstacle to agreement was surmounted by the defendant’s purchasing the plaintiff’s timber on a stumpage basis, and the plaintiff agreeing to cut and saw the timber so purchased, as well as that originally owned by defendant, for a consideration to be paid it by defendant. On this basis the contract of March 26, 1906, that which is alleged to have been broken, was entered into. It provided for the logging, sawing, grading and placing, on railroad cars of all merchantable pine timber, 10 inches and larger at the stump, that was then standing on lands owned by defendant in Harrison county, and which was indicated on a plat attached to the contract. The defendant agreed to pay the plaintiff $9 a thousand feet for the services to be rendered by it, to be paid between the 10th and 15th of each month for all lumber sawed the month previous, the amounts to be arrived at by the measurements of two tallymen, one furnished by each party, the final tally of all lumber sawed, and upon which final settlement
The plaintiff duly entered upon the performance of the contract, commencing with timber, theretofore owned by it, and which was nearer to the mill, and the parties continued operations for some months before any dispute arose between them. The defendant paid the $10,000 in cash to plaintiff for the advance stumpage, and settlements were -made, during the first few months, on account of saw bill and stumpage. The mill was changed-by plaintiff from a circular to a band sawmill. The dry kilns were changed to steam and a machine shop was built, according to the terms of the contract. In May, 1907, the greater portion of the timber which had belonged to plaintiff was cut and sawed, and before the' plaintiff ceased operations, the defendant’s original timber was being cut and sawed. On February 22, 1908, a fire occurred which destroyed plaintiff’s dry kiln, dry shed, and a large amount of lumber on its yard. In April, 1908, the plaintiff had rebuilt its mill and resumed operations, which continued until May 11, 190S, when the plaintiff shut the mill down and finally ceased operations under the contract.
Commencing with the fall of 1906, friction had arisen between the
. [3] Before the cause was at issue the parties agreed upon the appointment of a master by the court, and upon an order making the appointment, which was in this language:
*841 “Order Approving Special Master.
“In tire Circuit Court of the United States, Southern Division, Southern District of Mississippi.
“Hattiesburg Lumber Company v. Fred Herrick.
“No. 83.
“In the above'cause it is ordered by consent of the parties made known in open court that the defendant have 30 days from this date in which to file his answer and cross-bill, and that complainant have 60 days thereafter in which to file answer to said cross-bill, each as of this term, and it is further ordered and decreed, by consent of the parties as aforesaid, that C. 6. Mayson, Esq., be and he is hereby appointed a special master or commissioner of this court in said cause, and that said commissioner be and he is hereby vested with the power and authority to hear all testimony in said cause, to fix a place or places for said hearing and to adjourn same from time to time, and to suitable places to be determined by him, to require the attendance before him of all witnesses with books, papers, and documents in their possession or under their control, and to administer all oaths, to issue commissions for depositions of nonresident witnesses, and to receive and consider all depositions taken by either party, and to examine all said witnesses and exhibits of documents, papers, and writings to the full extent that he, said commissioner, shall deem lawful and proper, and that he view all physical evidence offered by either side, including a personal inspection of the premises involved in said suit, if, in his discretion, same may be of benefit in determining any question m said cause, and that all the testimony of the witnesses be reduced to writing, and that said commissioner report all same to this court at its next regular term with all exhibits and all depositions of nonresidents offered, together with his conclusions and findings, both upon the evidence and the law of said cause.
“Ordered, adjudged, and decreed this the 17th day of February, A. D. 1909.
“H. C. Niles, Judge.
“Filed February 17, 1909.”
The master, after hearings, which consumed 11 weeks, made his report to the court, stating his findings of facts and his conclusions of law thereon. After his report was filed, each party filed exceptions to it, which are set out in the record. The court, after hearing the exceptions, entered a decree, in which he partly sustained and partly overruled the findings of the master, both upon questions of fact and questions of law. This is the decree from which both parties appeal.
The first question presented for our consideration is the weight that is to be given the report of the master, as to his findings of fact, and under the terms of the order, by which he was appointed. The appointment of the master was by consent, and not alone by the action of the trial court. So, by consent of the parties, his authority was not restricted to the mere taking of the testimony and the submission of it, when taken, to the coúrt. He was given, by consent of the parties, the power not only to take evidence, but to hear all evidence, taken in the case, by himself or by others, in the shape of depositions, to examine any physical evidence submitted by either party, and to inspect the premises involved in the controversy, if he found it of advantage to do so; and to report his findings of fact and conclusions of law to the court. It is clear that the authority so conferred made of the master more than a mere commissioner to take testimony. He was authorized to hear testimony taken by other com
In the case of Kimberly v. Arms, 129 U. S. 512, 524, 525, 9 Sup. Ct. 355, 359, 360 (32 L. Ed. 764), the Supreme Court, distinguishing the authority of a master appointed in the ordinary way and one to whom, by consent of parties and an order of the court, the issues in a cause were referred, said:
“It is not within the general province of a master to pass upon all the issues in an equity case, nor is it competent for the court to refer the entire decision of a case to him without the consent of the parties. It cannot, of its own motion, or upon the request of one party, abdicate its duty to determine by its own judgment the controversy presented, and devolve that duty upon any of its officers. But when the parties consent to the reference of a case to a master or other officer to hear and decide all the issues therein, and report his findings, both of fact and of law, and such reference is entered as a rule of the court, the master is clothed with very different powers from those which he exercises upon ordinary references, without such consent; and his determinations are not subject to be set aside and disregarded at the mere discretion of the court. A reference, by consent 6f parties, of an entire case for the determination of all its issues, though not strictly a submission of the controversy to arbitration — a proceeding which is governed by special rules— is a submission of the controversy to a tribunal of the parties’ own selection, to be governed in its conduct by the ordinary rules applicable to the administration of justice in tribunals established by law. Its findings, like those of an independent tribunal, are to be taken as presumptively correct, subject, indeed, to be reviewed under the reservation contained in the consent and order of the court, when there has been manifest error in the consideration given to the evidence, or in the application of the law, but not otherwise.
“The reference of a whole case to a master, as here, has become in late years a matter of more common occurrence than formerly, though it has always been within the power of a court of chancery, with the consent of parties,’ to- order such a reference. * * * The power is incident to all courts of superior jurisdiction. * * *
“By statute in nearly every state, provision has been made for such references of controversies at law. And there is nothing in the nature of the proceeding, or in the organization of a court of equity, which should preclude a resort to it in controversies involving equitable considerations.-
“By the consent in the case at bar it was intended that the master should*843 exercise power beyond that of a reporter of the testimony. If there had been such a limitation of his authority, there would have been no purpose in adding to his power ‘to hear the evidence’ the power ‘to decide all the issues between the parties and make his report to the court, separately stating his findings of law and of fact,’ together with the evidence. To disregard the findings and treat the report as a mere presentation of the testimony is to defeat, as we conceive, the purpose of the reference and disregard the express stipulation of the parties.”
In the case of Davis v. Schwartz, 155 U. S. 637, 15 Sup. Ct. 239, 39 L. Ed. 289, the Supreme Court, reaffirming the case of Kimberly v. Arms, supra, said:
“The question of the conclusiveness of findings by a master in chancery under a similar order was directly passed upon in Kimberly v. Arms, 129. U. S. 512 [9 Sup. Ct. 355, 32 L. Ed. 764], in which a distinction is drawn between the findings of a master under the usual order to take and report testimony and his findings when the case is referred to him by consent of parties, as in this case. While it was held that the court could not, of its motion, or upon the request of one party, addicate its duty to determine by its own judgment the controversy presented, and devolve that duty upon any of its officers, yet where the parties select and agree upon a special tribunal for the settlement of their controversy, there is no reason why the decision of such tribunal, with respect to the facts, should be treated as of less weight than that of the court itself, where the parties expressly waive a jury, or the law declares that the appellate court shall act upon the finding of a subordinate court.”
After restating the rule laid down in Kimberly v. Arms, the court proceeded:
“As the reference in this case was by consent to find the facts, we think the rule in Kimberly v. Arms applies; and, as there is nothing to show that the findings of fact were unsupported by the evidence, we think they must be treated as conclusive.”
In the case of Farrar v. Bernheim, 75 Fed. 136, 139, 21 C. C. A. 264, 266, this court said:
“It is, moreover, true, as insisted by the appellee, that, under a certain consent to refer all questions of law and fact to the determination of the particular standing master, the finding of that officer is usually conclusive. Such a consent, entered as an order of court is a submission of the controversy to a special tribunal selected by the parties, to be governed by the ordinary rules applicable to the administration of justice in tribunals established by law; and its determinations are not subject to be set aside and disregarded-at the mere discretion of the court.”
In the case of U. S. Trust Co. v. Mercantile Trust Co. et al., 88 Fed. 140, 31 C. C. A. 427, the Circuit Court of Appeals for the Ninth Circuit, referring to the effect of' the findings -of such a master, said:
“Before entering into a consideration of these propositions, there is a preliminary question to be disposed of, and that is as to the effect to be given to the findings of fact of the special master. It is contended, at the outset, by the counsel for appellant, that this court and the court below are bound by the findings of fact made by the special master. It will be observed that the reference, by the court below, to the special master * * * was not that of an ordinary reference to take and report testimony, but it was stipulated and agreed between counsel representing all the parties that the special master should ‘take the proofs of the respective parties, and report the same to the court, with his findings of fact and conclusions of law thereon.’ The effect of this stipulation was undoubtedly to constitute, to a certain extent, the special master as judge of the facts presented to him. * * * So far, there*844 fore, as the findings of fact by the special master, under the stipulations referred 'to, are based upon conflicting evidence, or upon the veracity of witnesses, or so far as there is evidence consistent with the finding they are conclusive and binding upon the court.”
The authorities quoted from establish the principle that the findings of fact of a master, vested with the authority of the master in this case, are subject to review only when it is shown that they are not supported by any legal evidence, or are contrary to all the evidence submitted to him, in which cases the questions presented for review are questions of law and not questions of fact.
The plaintiff filed further exceptions to the original report and to the master’s answers to certain interrogatories propounded by defendant, which involved matters of fact. These exceptions, however, were conditioned expressly by plaintiff upon a holding by the court that the findings of fact of the master could be reviewed. The plaintiff by failing to filé exceptions in time would lose its right to have the master’s findings reviewed, though the court held them to be subject to review. The defendant, having filed exceptions as to matters of' fact, we do not think the plaintiff lost its right to insist upon the proper effect of the findings of fact, by taking the necessary steps to preserve its right to review them in the event the court differently construed the effect of
This conclusion would require the findings of the master, which related to matters of fact, as distinguished from questions of law, to be sustained by the court unless there was an entire absence of evidence in support of them. The findings excepted to by the defendant, except those to which his tenth and sixteenth exceptions relate, relate to matters of fact, and, in our opinion, have the support of legal evidence, and the findings should have been sustained by the court below. (1) The master’s finding upon which the defendant’s tenth exception was based is to the effect that the title to the timber, under the contract, passed to the defendant when it was sawn into lumber and stacked upon the yard. (2) The master’s finding upon which the defendant’s sixteenth exception was based is to the effect that the plaintiff had the right to cease operations under the contract at the time it did, and that the cross-bill of the defendant should be dismissed.
2. We are also of the opinion that the master correctly decided that the plaintiff was justified in ceasing operations under the contract in May, 1908, and that the defendant was entitled to no damages because thereof.
This results in a reversal of the cause upon the direct appeal, with directions to the court below to enter a decree confirming th.e report of the master, with the remittitur, and as amended by him, so far as its findings are affected by the exceptions of the defendant, and granting plaintiff the appropriate relief to which it is entitled under the master’s report, and the affirmance of the decree so far as it is affected by the cross-appeal.
“As tlie differences between the parties in this case arose over the construction of the contract, and as each party manifested a willingness to carry it out according to his own interpretation, I do not find that either party has a right to claim of the other prospective profits.”
This finding was excepted to by the plaintiff, and the court below overruled the,exception, to which action the plaintiff assigns error in this court, which is insisted upon.
The ground upon which the court below overruled the plaintiff’s exception to this finding of the master is thus expressed in the opinion of the district judge:
“The principle of law controlling the proposition under discussion as to complainant’s right to recover for outlay and loss of profits is clearly stated in the case of United States v. Behan, 110 U. S. 338 [4 Sup. Ct. 81, 28 L. Ed. 168]: ‘If a party injured by the stoppage of a contract elects to rescind the contract, he cannot either recover for outlay or loss of profits, but only for the value of services actually performed, as upon a quantum meruit.’ It is a well-settled principle of the law that to justify one party to a contract in abandoning it, and.at the same time entitle him to recover damages and the*847 future profits which he may have realized had he completely executed it, the opposite party must have been guilty of such a breach as to prevent or absolutely put an end to further operations under the contract by the party complainant.”
We think neither the reason given by the master in his report, nor the different reason given by the District Judge in his opinion, are sufficient to justify the denial of damages to plaintiff, either for its outlay or for loss of future profits, if it has shown itself to be otherwise entitled to them.
Dealing, first, with the reason assigned by the master for his finding. The settled measure for recovery for a breach'of contract is an amount which fully compensates a plaintiff for the loss sustained by the breach of «contract, which includes the benefits and gain he would have realized from its performance, or, in the event they are too uncertain for assessment, then reimbursement for the expense of the outlay the plaintiff incurred in preparation for its performance. This is as much a part of the plaintiff’s actual damages as is an amount due for a part of the contract performed before breach, and can no more be denied the plaintiff. Its recovery by plaintiff is a matter of right, and not of discretion with the court.
In the case of Robertson v. Cloud, 47 Miss. 208, the court said:
“Tbe rule Is that if complete performance of a contract is prevented by one party thereto, tbe other, who bad complied, or was able and willing to comply, shall be compensated in damages to tbe extent of mating him whole”
■ — which the court'held to include “compensation for partial performance, according to the terms of the contract, and such damages as would legitimately result from the refusal of the plaintiff to permit a full performance.”
In Trigg v. Clay, 88 Va. 335, 13 S. E. 435, 29 Am. St. Rep. 723, the court said:
“It has been held that, when the defendant refused to allow the contracts to be executed, the jury should allow the plaintiffs as much as the contract would have benefited them — profits or advantages which are the direct and immediate fruits of the contract, entered into between the parties, and part and parcel of the contract itself, entering into and constituting a portion of its very elements, something stipulated for, and the right to the enjoyment of which is just as clear and plain as to the fulfillment of any other stipulation. * * * An examination of the cases will show that the courts have been endeavoring to establish rules by the application of which a party will be compensated for the loss sustained by the breach of contract; in other words, for the benefits and gain he would have realized from its performance, and nothing more.”
In Howard v. Stillwell Mfg. Co., 139 U. S. 199, 11 Sup. Ct. 500, 35 L. Ed. 147, the Supreme Court said:
“But it is equally well settled that the profits which would have been realized had the contract been performed, and which have been prevented by .its breach, are included in the damages to be recovered in every case where such profits are not open to the objection of uncertainty or of remoteness, or where from the express or implied terms of the contract itself, or the specific circumstances under which it was made, it may be reasonably presumed that they were within the intent and mutual understanding of both parties at the time it was entered into ”
The reason given by the District Judge for denying the plaintiff damages by way of prospective profits or reimbursement for outlay was that the plaintiff had elected to rescind the contract after a breach by the defendant, which did not amount to a total abandonment of the contract on his part, and did not absolutely put an end to further operations under the contract by the plaintiff. The rule, as settled by the authorities, would seem to be that the prior breach upon defendant’s part must have an effect that would render the plaintiff’s subsequent performance of the contract difficult, and such as would greatly decrease the profits which the plaintiff would otherwise have made.
In the case of Anvil Mining Co. v. Humble, 153 U. S. 540, 14 Sup. Ct. 876, 38 L. Ed. 814, the Supreme Court said:
“It is insisted, and authorities are cited in support thereof, that a party cannot rescind a contract and at the same time recover damages for its nonperformance. But no such proposition is contained in that instruction. It only lays down the rule, and it lays that down correctly, which obtains when there is a breach of a contract. Whenever one party thereto is guilty of such a breach as is here attributed to the defendant, the other party is at liberty to treat the contract as broken, and desist from any further effort on his part to perform; in other words, he may abandon it and recover as damages the profits which he would have received through full performance. Such an abandonment is not technically a rescission of the contract, but is merely an acceptance of the situation which the wrongdoing of the other party has brought about. Generally speaking, it is true that when a contract is not performed the party who is guilty of the first breach is the one upon whom rests all the liability for the nonperformance. A party who engages to do work has a right to proceed free from any let or hindrance of the other party, and if such other party interferes, hinders, and prevents the doing of the work to such an extent as to render its performance difficult and largely diminish the profits, the first may treat the contract as broken, and is not bound to proceed under the added burdens and increased expense. It may stop and sue for the damages which it has sustained by reason of the nonperformance which the other has caused.”
In the case of Horst v. Roehm (C. C.) 84 Fed. 570, the court said:
“On behalf of the defendant it has been contended that, ‘assuming that the action can be maintained, the measure of damages must be restricted to the loss, if any, upon the deliveries which should have been made prior to the bringing of the suit.’ I cannot yield assent to this proposition. It conflicts with the principle that the measure of damages in every case must be such as, when applied, will result in ascertainment of the sum necessary to make good the entire loss sustained by reason of the act or default which constitutes the cause of action. The plaintiffs were, by the act of the defendant, prevented from making the deliveries called for by the contracts. It is this an-*849 tieipatory denial and obstruction of the right to deliver, not a tender and refusal, which is the ground of the suit, and the measure which might otherwise have been applicable is therefore wholly inappropriate. The law of damages is not comprised in a set of' arbitrary rules. Where a contract has been broken or a wrong has been committed, compensation must be made. This is the underlying principle, and any standard of measure which does not accord with it cannot be applied, but some other, which is fairly compensatory to the one party, and not unjust to the other, must be resorted to. Carroll-Porter Boiler & Tank Co. v. Columbus Mach. Co., 5 C. C. A. 190, 55 Fed. 451. In this case the plaintiffs have shown that they could have made subcontracts for the delivery of the hops, according to their contracts with the defendant; and, whatever might be the rule irí a case in which this could not be shown, I am of the opinion that where, as in this instance, that fact appears, the difference between the price at which such subcontracts could have been obtained and the price named in the contracts between the parties is manifestly the amount of the loss actually suffered, and therefore must be the correct measure of the damages recoverable. Hinckley v. Steel Co., 121 U. S. 264, 7 Sup. Ct. 875 [30 L. Ed. 967]; Mining Co. v. Humble, 153 U. S. 540, 14 Sup. Ct. 876 [38 L. Ed. 814].”
The case of Roehm v. Horst reached the Supreme Court of the United States, 178 U. S. 1, 20 Sup. Ct. 780, 44 L. Ed. 953, and was affirmed, and that court said, on page 20 of 178 U. S., page 780 of 20 Sup. Ct., on page 961 of 44 L. Ed., as follows:
“As to the question of damages, if the action is not premature, the rule is applicable that plaintiff is entitled to compensation based, as far as possible, on the ascertainment of what he would have suffered by the continued breach of the other party down to the time of complete performance, less any abatement by reason of circumstances of which he ought reasonably to have availed himself. If a vendor is to manufacture goods, and during the process of manufacture the contract is repudiated, he is not bound to complete the manufacture, and estimate his damages by the difference between the market price and the contract price * * * and the cost of performance. Hinckley v. Pittsburgh Bessemer Steel Co., 121 U. S. 264, 7 Sup. Ct. 875, 30 L. Ed. 967. Even if in such eases the manufacturer actually obtains his profits before the time fixed for performance, and recovers on a basis of cost which might have been increased or diminished by subsequent events, the party who broke the contract before the time for complete performance cannot complain, for he took the risk involved in such anticipation. If the vendor has to buy instead of to manufacture, the same principle prevails, and he may show what was the value of the contract by showing for what price he could have made subcontracts, just as the cost of manufacture in the ease of a manufacturer may be shown. Although he may receive his money earlier in this way, and may gain, or lose, by the estimation of his damages in advance,of the time for performance, still, as we have seen, he has the right to accept the situation tendered him, and the other party cannot complain.
“In this case the plaintiff showed at what prices they could have made subcontracts for forward deliveries according to the contracts in suit, and the difference between the prices fixed by the contracts sued on and those was correctly allowed.”
The authorities cited show that it is sufficient to show that the plaintiff was so interfered with by defend&nt, or that defendant so far repudiated the contract or breached its conditions, as that future performance by plaintiff would have been substantially more difficult and more expensive, so that its anticipated profits would have been materially lessened thereby.
The case of United States v. Behan, 110 U. S. 338, 4 Sup. Ct. 81, 28 L. Ed. 168, is not in conflict with this rule and does not control this
“When a party injured by the stoppage of a contract elects to rescind it, then, it is true, be cannot recover any damages for a breach of the contract, either’for outlay or for loss of profits; he recovers the value of his services actually performed as upon a quantum meruit. * * * But when he elects to go for damages for the breach of the contract, the first and most obvious-damage to be shown is the amount which he has been induced to expend on the faith of the contract, including a fair allowance for his own time and services. If he chooses to go further, and claims for the loss of anticipated profits, he may do so subject to the rules of law as'to the character of profits which may be thus claimed.”
In the instant case, as in the Behan Case, the plaintiff did not elect to rescind the contract, but was compelled to abandon its further performance by the conduct and breaches of the defendant, and is not thereby precluded from recovering anticipated profits, if they are ascertainable with reasonable certainty, or, if they are not, then at least the amount of the necessary outlay to enable it to perform the contract.
The master and the District Judge each found that the defendant first breached the contract, in a manner that entitled the plaintiff to refuse to proceed further with it, and yet recover all amounts due plaintiff up to the time of its refusal to proceed. We think the record shows that the breaches on defendant’s part were such as to constitute legal prevention of performance by the plaintiff. The defendant, prior to cessation of operations by plaintiff, had repeatedly failed to pay monthly for all the lumber sawed the previous month; had failed to furnish saw bills and shipping instructions for the lumber sawed for a long period, so as to keep the plaintiff’s loading crew unemployed; had permitted the lumber to accumulate on the yard largely in excess of the maximum stipulated in the contract; had refused to pay either stumpage or saw bill on lumber burned, though its presence on the yard was due to his negligent failure to give proper disposition; he wrongfully charged back to plaintiff a substantial part of the amount plaintiff had expended in changing the dry kilns and erecting a machine shop; he denied liability for unpaid stumpage, upon the ground that Hemphill had made no estimate of it, and had scaled down the lumber sawn by plaintiff for the purpose of increasing its grade, thereby wrongfully diminishing the amount due plaintiff on account of saw bill; he asserted that plaintiff had no valid contract of any kind with him, and in response to plaintiff’s inquiry as to his future course, had notified plaintiff that he would proceed with the contract only upon the construction given it by him in the past, and which the master and the court below correctly determined to be an improper one. Under defendant’s construction, the plaintiff could have proceeded to carry out the contract only with greatly diminished returns.
On the other hand, the market price of lumber had fallen, and it was to defendant’s interest that the mill should be shut down. He had made request of the plaintiff that it be shut down because of the condition of the marketj had thrown obstacles in the way of plaintiff’s operations, and evinced his reluctance to take the output of the mill.
In the final negotiations the plaintiff’s representatives showed a dis-pdsition to adjust their differences with defendant, and to make concessions not required by the contract of it, and implored him to make concessions such as would make the continued operation of the mill possible. The defendant had the advantage of position in the trading, since the plaintiff, if the contract were abandoned, had an expensive, mill on its hands with its own timber substantially cut and sawn, and no timber other than defendant’s adjoining it. The defendant’s attitude was unreasonable and uncompromising, and can be reconciled only with the idea that he was anxious to compel the plaintiff to shut down the mill. The interest of the plaintiff to continue operations, and that of the defendant to have operations cease, bear out this view of the final negotiations.
Our opinion is that the plaintiff was prevented from performance by the conduct of the defendant, and was entitled to discontinue operations, without waiving its right to insist on compensation, not only for amounts then due under the contract, but as well for loss of future profits, if it could establish their amount with reasonable certainty, or, if not, then reimbursement for the amounts, if any, expended by it to perform the contract, and which were of no advantage to it for any other purpose.
The remaining question is whether the plaintiff should be allowed to recover anticipated profits under the facts of this case. The profit for manufacture, als it existed at the time of the shutting down of the mill, was determinable with reasonable certainty. The contract price was $9.50 a thousand feet, and the then cost to plaintiff of manufacture, left it a substantial margin of profit. There remained uncut, at the time of the shutdown, about 80,000,000 feet of timber. About 16,000,000 had been cut by plaintiff from March 27, 1906, until May 11, 1908. Excluding the period during which the mill was not operated after the fire, from February, 1908, until April, 1908, and the total operations would cover a period of approximately two years, and the rate of the cutting approximately 8,000,000 feet annually. At this rate, 10 years would be required to cut all the timber covered by the contract. If the plaintiff’s cost of cutting 'and sawing remained constant during that time, as was the case with the contract price of $9.50, the
We turn to the alternative method of assessment, that of reimbursement to plaintiff for its necessary outlay for preparation. The record clearly shows that it did certain things, in response to the stipulations of the contract itself, that were expensive to it, that it would not otherwise have done, and that were of' no, or of but partial, advantage to it, apar.t from the fulfillment of the contract. We instance the ■change of the mill from circular to band saw construction, the change of the dry kilns, and construction of the machine shop, so far as there was an excess over the $5,000 agreed to be paid plaintiff by defendant for that construction, and the construction of railroad or logging tracks to reach the timber on defendant’s property. It is a reasonable inference that the small amount of timber owned by plaintiff would not have justified it in expending the amounts,'aside from its expectations from the performance of the contract. With the contract set aside, the plaintiff had on its hands a costly mill and equipment, with no available timber tributary to it. The tracks constructed on defendant’s property were useless to plaintiff, except for the purpose of bringing defendant’s timber to plaintiff’s mill under the provisions of the contract.
It is clear that the plaintiff was put to a large expense for an outlay that had little value to it, in the absence of a performance of its contract with the defendant. The evidence shows that the amount of this outlay was in the neighborhood of $90,000. From that amount there should be deducted an amount which would represent the value of the use of the outlay during the time the contract was being performed by plaintiff, and the added value to plaintiff’s mill and property, if any, due to the expenditure, and upon the hypothesis that it had no contract with the defendant. The present record probably furnishes data from which the correct result might be arrived at. In the court below no damages were allowed by the master or the court, either for future profits or reimbursement for outlay. In view of this determination of the court below, neither the parties, the master, nor the court probably had their attention sufficiently directed to the proper amount to be allowed on this account. We, therefore, think that it would be better not to attempt to fix the amount upon this record, but permit the parties to present their data again, after the proper legal measure of the recovery, on this account, has been fixed by this court.
The cause is remanded to the District Court, with directions to confirm the master’s report upon the exceptions of both parties, except as to his finding that the plaintiff was entitled to no damages for loss of profits or expense of1 outlay, and to re-refer the cause to the master to permit the parties to present before him evidence only upon the question as to the amount of plaintiff’s loss by reason of the preparation and outlay for the performance of that part of the contract which
Rehearing
On Application for Rehearing.
This cause came on to be heard upon the application of both the appellant and the appellee for a rehearing, and was submitted on briefs by counsel; and, it appearing, to the court that the evidence in the record tended to show that the appellant had collected the sum of $3,500 on account of fire insurance for the lumber destroyed by fire, and that the bill of complaint offered to credit said sum against any amount that might be found due to complainant from defendant, and it not appearing with certainty from the record whether the appellee was entitled to said credit or whether it had in fact been allowed said credit, on consideration of said applications, it is now here ordered and adjudged and decreed by this court that the decree of reversal heretofore rendered in this cause be and it is hereby modified, so as to direct that the case be re-referred to the master for the purpose, in addition to that named in the original decree, of ascertaining whether the appellee is entitled to a credit against the amount found due from him to the appellant for the said amount of insurance, and whether or not the said amount was in fact credited in the report of the master, and with said modification said decree of reversal is confirmed, and the applications for a rehearing of the said original decree are hereby denied.
