Sand Filtration Corp. of America v. Cowardin

29 App. D.C. 571 | D.C. | 1907

Mr. Chief Justice Shepard

delivered the opinion of the Court:

The auditor’s report contains a careful review of the testimony produced before him, relating to the alleged duplication of assets in the transfer of construction plant and material from the Cowardin Company and May and Jekyll to the Sand Filtration Corporation, and a well-reasoned conclusion against the contention of the latter.

It appears that schedules were carefully prepared, and referred to in the several contracts, showing each item of construction plant and material that was finally delivered to the Sand Filtration Corporation; and that the same were verified by the latter’s financial expert. The books and accounts of all parties were open to inspection, and the mistake, if it occurred, passed unnoticed. No question in respect of it seems to have been raised until nearly three years thereafter, when the time for final settlement arrived. Under these conditions the filtration corporation assumed a heavy burden in attempting to show that a mistake had been made in some one of the items of the schedules. Without adding anything to the auditor’s discussion of the evidence, we agree with him that the showing made was insufficient, and with the court in confirming his report.

As regards.the $8,000 payment ordered to be made to May and Jekyll, the .contention is, first, that the obligation of the contract, of the appellant with the Cowardin Company was to pay said sum in the event only that the appellant should make a profit in carrying out the contract. In this connection, it is conceded that the appellant, instead of making a profit, actually sustained a loss considerably greater than that amount.

The second contention is, in case of the denial of the first, that no profit was made in the transaction by the Cowardin Company. The contract by the Cowardin Company, which the appellants assumed, with Jekyll and May, was to pay them the $8,000. out of the net profits which the Cowardin Company might realize from the construction of that portion of the filtration works which they had contracted for with the United States. In .contemplation of that contract, the Filtration Corporation, on the same day, assumed the performance of the contract of the Cowardin Company, and, in consideration thereof and of the construction plant derived from May and Jekyll through.the Cowardin Company, agreed to pay the said sum of $8,000 to May and Jekyll, as well as the sum of $65,000 for the said, plant which was then and there received. There was no condition in .this contract making that payment dependent upon the making of a profit by the filtration company in the transaction; nor is there any language used from which such a condition can be inferred. The fact that the filtration company undertook the completion of the contract at all indicates its certain expectation of profit in the transaction; and if it feared that the expected profit would not exceed the $8,000 payment assumed, it was its duty to protect itself in that particular by some express stipulation to that effect. Having failed to so provide, May and Jekyll, who furnished a consideration for the undertaking, and have also sustained a substantial loss, cannot be made to bear the consequences of the failure of those expectations.

The court was right also in holding that the Oowardin Company derived net profits of more than $8,000 from their contract with the government. May and Jekyll not only repaid them every dollar of their original outlay, — $15,000, in round numbers, — 'but also turned over to them $50,000 worth of additional construction plant and material that had been purchased by them. In the new contract with the filtration corporation, the latter assumed the complete performance of the government contract for the money payable thereunder, and made performance secure by the exacted bond in the sum of $150,-000. The filtration corporation, in order to secure this contract, took over the plant which had been relinquished by May and Jekyll to the Oowardin Company at the agreed price of $65,000, payments of which in instalments were required to bo deducted from the government’s payments by the receiver and paid to the Oowardin Company. Notwithstanding the losses of May and Jekyll on the one hand, and the filtration corporation on the other, the Oowardin Company realized a net profit of say $65,000. Without one dollar of actual expenditure in the performance of their contract with the government, so far as the record shows, they secured its performance by others, and received the sum of $65,000 for the plant, mainly derived from May and Jekyll, who gave it up in order to be released from their first contract.

Had the Cowardin Company not contracted the plant to the filtration corporation, but, after securing the final performance of the government contract by the latter, had sold the plant to others, tbe amount received, therefor would have been a net gain. Its character as gain or net profit was not changed by selling the plant to the filtration corporation. Having made this net profit, the liability of the Cowardin Company, assumed by the filtration corporation, became fixed and enforceable.

An appeal by the appellant to the Supreme Court of the "United States was allowed on May 21, 1907.

The court rendered the proper decree under the facts presented by the record, and it will therefore be affirmed, with costs. It is so ordered. Affirmed.