Madeirense Do Brasil S/A v. Stulman-Emrick Lumber Co.Madeirense Do Brasil S/A v. Stulman-Emrick Lumber Co.
Lead Opinion
This is an action, brought in the District Court because of the diverse citizenship of the parties, wherein Madeirense do Brasil S/A, a Brazilian corporation, sues to recover the balance due on a shipment of lumber to the defendant, Stulman-Emrick Lumber Co., in New York. In its complaint plaintiff set forth the contract and shipment on which it based its claim, and also explained that a later contract had been can-celled by defendant. It claimed a balance due on the purchase price of $1,078.98 and a refund of “excess freight” charges of $2,490, with interest and costs. In its answer defendant pleaded at length facts hereinafter discussed, to show that it was entitled to deduct from the purchase price the excess freight charges paid by it, and also, by way of counterclaim, asked for
Defendant buys and sell-s lumber and operates a lumber yard in Brooklyn. Originally there was a second defendant, Brazilian Minerals & Timbers Corporation, a New York lumber broker, who effected the contracts; but plaintiff has dismissed the action against it. Some dispute developed below as to whether Brazilian was plaintiff’s or defendant’s agent, and hence whether the orders from defendant to Brazilian, rather than those from Brazilian to plaintiff, constituted the real contracts. But, as we shall point out, the differences between these forms were not important enough to change the result, and it is not necessary to determine this question of agency.
The affidavits below brought before the court the extensive communications between Brazilian and each of the parties hereto. It therefore appears by Brazilian’s confirmation order to plaintiff of October 15, 1940, that there were sold to defendant 140,000' of Braz-ilian pine lumber, kiln dried, and 310,000' (later increased to 360,-000') of naturally dried lumber, at a price of $40 for the former and $38 for the latter “per 1,000 feet c & f New York,” for “immediate shipment up to the 31st day of October at the latest,” with inspection “upon arrival of the steamer in New York” and terms of “Letter of credit for 90% of the f.o.b. value, and the balance of 10% after arrival of the shipment in New York, the freight charges of $12.00 per 1000' to be paid in New York for your account.” Plaintiff then had trouble i*n obtaining a ship, the Lamport & Holt line, by which plaintiff had intended to ship, being required by the English government to carry cotton to Canada. Eventually plaintiff was able to make arrangements for a ship from the Lloyd Brasileiro line, subject to the condition that the minimum shipment would be 1,000 tons of 710,000'; and plaintiff, beginning November 22, 1940, urged Brazilian to have its customer increase its purchase to take the minimum. After some negotiations as to price, the second contract was entered into, as shown by Brazilian’s confirmation order to plaintiff of December 5, 1940, which was of substantially the same tenor as the first contract, except that it was for 250,000' “naturally dried” lumber at “$40.00 per 1000' C. & F. New York,” with “shipment up to December 31, 1940 at the latest” and with the terms changed to substitute $14 for $12 for the freight charges to be paid on arrival. And the contract called for “clean lumber, perfectly dried,” free from knots or other defects. As the correspondence showed, the increase of $2 per 1,000' over the earlier contract was demanded by plaintiff because of the increase in shipping rates.
Plaintiff, however, still found difficulty in procuring shipping, and on January 8, 1941, cabled that Lloyd’s would take only the lumber of the first contract below deck, while the other could be loaded only on deck at “buyer’s responsibility” for “any deterioration.” Brazilian immediately cabled that the pine “on deck” was absolutely unacceptable, and that only the lumber under deck should be shipped. This it reiterated by letter, demanding dried lumber and shipment by another steamer. On January 9, 1941, plaintiff wrote asking for cancellation of this order, since Lloyd’s had now increased the freight rate to $33.13 per 1,-000'. Brazilian cabled on January 22, 1941, that it was impossible to cancel the contract, as buyers demanded compliance, and asked plaintiff to “cable urgent date of shipment.” There were further demands for shipment; but under date of January 23, 1941, plaintiff refused to ship unless the increase in the freight rate was “for account of the buyer,” and suggested that claim be filed with the Brazilian embassy in Washington. On March 4, Brazilian wrote plaintiff that the first shipment was being unloaded that day, and again said that the buyers allege that they cannot excuse delivery of the 250,000' “under penalty of much more considerable losses.” Plaintiff replied March 12, 1941, that “as we had already written you, this lot is definitely can-celled oil account of force majeure, which compels us to do so against our will.”
In this action plaintiff contends that it did not breach the contract relating to
Plaintiff argues further that it has duly performed because a c. & f. contract requires it only to deliver, or to tender delivery of, the lumber to a carrier in Brazil. The term “c. & f.” means that the price includes in a lump sum “cost” and “freight” to the named destination. Segall v. Finlay,
Indeed, here the necessary inference is the same as that for a c. i. f. contract, since the documents showed that insurance was to be effected by the buyer. Hence the risk during transit is upon the buyer, thus indicating an intention that title is to pass upon shipment and, as in the c. i. f. contracts, requiring delivery to a carrier only. Seaver v. Lindsay Light Co.,
Plaintiff further seeks to excuse its failure to perform by claiming that it could not deliver the goods as required, because no ships were available. Although this claim is disputed by defendant, the factual issue need not be decided, for even had there been no ships available, plaintiff was not, under the circumstances of this case, excused from performance. For plaintiff’s letters indicate clearly that at the time of the making of the second contract it was aware of the fact that boats were at a premium. Indeed, it pressed for the second contract largely because it expected that additional shipment to facilitate its procuring a ship. There was no startling change in conditions. The war in Europe had been under way for more than a year, and Pearl Harbor was still in the future. Neither the United States nor any of the South American countries entered the war for a year or more after the making of the contract. Hence the lack of ships in January, 1941, was a foreseeable risk which plaintiff willingly took upon itself; and it cannot under such circumstances plead the defense of “force majeure.” Companhia De Navegacao Lloyd Brasileiro v. C. G. Blake Co., supra,
What has already been said concerning the seller’s obligation ultimately to meet the cost of transportation under a c. & f. contract also leads to the conclusion that plaintiff is not entitled to a refund of defendant’s deductions for extra freight charges. Plaintiff contends that, in view of the terms of the first contract quoted above, defendant was entitled to deduct only $12 per 1,000' from the purchase price to pay the freight. But the order is primarily a c. S¿ f. contract; and here the provision for payment in New York for the seller’s account of freight charges of $12 per 1,000' can, therefore, be construed only as estimates of freight charges made in order to compute the amount of the letter of credit against which plaintiff was permitted to draw. This is the construction actually made by plaintiff as a ground for increasing the price under the second contract and later for treating it as at an end and refusing to do further business unless the increased freight rates were chargeable to the buyer. The various letters indicate full realization upon plaintiff’s part that it had assumed the risk of increased freight rates. The District Court, therefore, correctly held that plaintiff was not entitled to a refund of the additional freight charges of $4.08 per 1,000' actually made by defendant and charged by it against the purchase price.
Plaintiff finally objects to the award of damages for breach of contract against it on summary judgment. Tt attacks an affidavit by defendant’s president that it was practically impossible to obtain Brazilian lumber in New York in January, 1941, and thereafter, and that the price of American lumber was not less than $65 for 1,000'; and it claims the right to cross-examine this gentleman on his assertions. But it is clear that this was not the measure of damages, and that it was not the basis used below. It is settled that the damages must be the difference in market value and contract price at the time and place of delivery, Segall v. Finlay, supra; Saxe v. Penokee Lumber Co.,
The District Court accepted a statement by plaintiff in its letter of January 9, 1941, “Our FOB price is on the basis of $28.00 per 1,000 sq. ft.” as fixing market value, and, adding to it the freight charge of $33.13 as stated in this letter and repeatedly in other letters of plaintiff claiming cancellation of the contract, deducted the contract figure of $40 per 1,000' — which included the $14 allowance for freight — to obtain the damages of $5,282.50 which it allowed. We think the court properly accepted plaintiff’s own figure for freight charges of $33.13, used by plaintiff as the basis of its repudiation of the contract, thus repeatedly stated and never challenged nor other figure ever suggested. The summary judgment procedure under Federal Rules of Civil Procedure, rule 56, 28 U.S.C.A. following section 723c, as we said in Engl v. Ætna Life Ins. Co., 2 Cir.,
This accounts for damages of the difference between the al-lowed-for and the actual freight charges, i. e., $29.13 per 1,000'; the additional award of $2 per 1,-000' comes, of course, from the court’s acceptance of the f. o. b. price at $28 per 1,-000' as stated in plaintiff’s letter of January 9. Since this involves reliance on a single admission, rather than a series of admissions, by plaintiff, this part of the award may be thought more doubtful, though in the opinion of a majority of the court doubt can in no event extend farther than to the additional $500 thus awarded. For all the earlier negotiations, as well as the agreed price of both contracts — a proper evidence of value, Parrott v. Allison, 2 Cir.,
But we are disposed to conclude that no reason appears for a different treatment of this item than of the other, or for finding error in a judgment which treats them alike. That this was a definite and clear-cut admission, made at or about the time of breach,
Here the analogy suggested in Sartor v. Arkansas Natural Gas Corporation,
Judgment affirmed.
Notes
Since there is no contention or suggestion that the market price was falling, there is no occasion to consider whether plaintiff might be entitled to prove a potential gain to defendant by the breach as a possible offset to the loss on freight charges — a suggestion • perhaps rather doubtful, in view of the separate nature of these contract items. Beinhauer v. Gleason,
The parties had extended the date of performance from December 31, 1940, to expire January 31, 1941; and the District Court has found the breach complete at the latter date, and has awarded interest from it. As a matter of fact, plaintiff requested cancellation in its letter of January 9, protested further on January 22, apd definitely repudiated the contract January 23, 1941, in a letter repeating the objections made before.
Sartor v. Arkansas Natural Gas Corp., supra, reversed the award o£ damages on summary judgment; the ease was quite different, however, from that here at bar, turning, among other things, on the evaluation of expert testimony, and it is not to be taken as a bar to such an award in a proper case. See Notes to F. R. C. P., Rule 56, Preliminary Draft of Proposed Amendments, 1944, 67 ; 7 Fed.Rules Serv. 974 ; 3 Moore’s Federal Practice 3175, 3186, 1944 Cum.Supp. 246.
Dissenting Opinion
(dissenting).
I dissent with respect to the decision awarding damages to the buyer (defendant) on its counterclaim because I think my colleagues are stretching Rule 56 as to summary judgments far beyond what the Supreme Court intended in promulgating that Rule. That intention the Supreme Court put beyond question when it said in Sartor v. Arkansas Natural Gas Co.,
1. The purpose of awarding damages, in situations like that in the instant case, is to put the buyer in as good a position as he would have been had the seller performed his obligations under the contract.
The loss in the present case, therefore, must be computed in this manner: To (a), the amount by which the market price in Brazil at the time and place for delivery per contract exceeded the contract price at that time, there must be added (b) the cost of freight to New York, which the seller agreed to pay. If (a) is zero, then the loss
My colleagues make the curious suggestion that the buyer is entitled to a judgment for item (b) unless the seller introduces proof by way of what my colleagues call an “offset,” through evidence as to item (a). Surely there is no such rule. The buyer has the burden of proving that he suffered a loss, and that loss here is a unitary fact.
2. In excusing the buyer here from making any showing as to (a) — the market price in Brazil — my colleagues reason thus:
(A) The contract price, they say, is some evidence of the market price. I agree. It could be the basis of an inference which; had the case gone to trial, a jury could have drawn. But surely that evidence is not conclusive even as to the market price at the date when the contract was made; for the seller may have made a good bargain (i. e., may have contracted to sell at a price well above the market). On such evidence, the court, after a trial, could not, I think, have directed a verdict for the buyer on the damage issue. Moreover, here the breach occurred several months after the contract was made.
(B) Presumably because they recognize the insufficiency of such evidence, my colleagues fall back on what they call the seller’s “clear-cut admission,” which they purport to find in its letter of January 9, 1941, to the Brazilian Mines & Timber Corporation, the intermediary. That letter is not an admission. It purports to be only a statement of the seller’s price, not the market price. The suggestion of an increase was based solely on the increase in the cost of the freight transportation; the letter did not discuss or intimate anything whatever as to the market price in Brazil of the lumber itself. From the context of the letter, the quotation of price appears to be set forth either as a supporting argument (together with the increased freight charges) for its request for cancellation or as a suggestion for novation (compare the statement that “from now on” the seller would accept business only on an F. O. B. basis, with the buyer responsible for the freight), or as both.
The most that can be said is that, the seller, when seeking to re-negotiate the item of the freight cost, remained silent as to the contract price of the lumber itself. Surely there is no justification for saying that such conduct comes within the doctrine of admission by silence; that doctrine covers only situations, unlike that here, where a party by failure to dissent acquiesces in a statement made in his presence, or makes an evasive response to a direct question, or the like.
At best, the letter and negotiations are merely some evidence from which an inference might properly be drawn by a jury. Such an inference is not compulsory, especially as the letter and negotiations occurred on or prior to January 9, 1941, and the critical market price, if we accept the trial judge’s finding as to the date of the breach, is as of January 31.
The cases cited in the majority opinion are therefore not in point: In Pence v. United States,
3. My colleagues thus are here making a remarkable ruling: a court on a summary judgment motion has the power to treat a permissible inference as conclusive, although the court could not have done so had the case gone to trial. To put it differently, my colleagues are saying that a court on a motion for summary judgment has far wider power to dispense with a jury than after a trial — and that, too, on the issue of damages despite the Sartor case.
Moreover, if the seller here had not pleaded to the counterclaim but had defaulted, the trial court would have been required to call a jury on the issue of damages. Rule 55(b) (2). I cannot believe that, had the buyer then offered evidence before the jury consisting only of what now appears in this record, a jury verdict for more than nominal damages could have been sustained. If this is correct, then the seller in this case is worse off because it responded to the summary judgment than if it had allowed itself to be defaulted. That conclusion seems passing queer to me.
My colleagues’ basic reason for their decision appears to be this: The seller should have disclosed in its affidavits any evidence it had which bore on the question of market price; its silence should therefore be penalized. In other words, to induce discovery, my colleagues are using a harsh rule on a motion for summary judgment. I think such a device is improper. I favor liberal rules for discovery.
It is a “fundamental principle that damages are only to provide indemnity.” Weirton Steel Co. v. Isbrandtsen-Moller Co., 2 Cir.,
1 Sedgwick, Damages, 9th Ed.1913, § 170 ; Burke, Kuipers & Mahoney v. Dallas Dispatch Co.,
The case cited in the majority opinion, Beinhauer v. Gleason,
The majority opinion refers to a repudiation on January 23rd; but negotiations between the parties continued into March.
See, e.g., Hoffman v. Palmer, 2 Cir.,