W.R. Grace & Co. v. Luckenbach S.S. Co., Inc.

• Decision Date: 24 May 1919
• Citation: 258 F. 49
• Parties: W. R. GRACE & CO. v. LUCKENBACH S.S. CO., Inc., et al.
• Court: U.S. Court of Appeals — Fourth Circuit

258 F. 49

W. R. GRACE & CO. v. LUCKENBACH S.S. CO., Inc., et al.

United States District Court, E.D. Virginia.

May 24, 1919

This case was heretofore heard and decided by this court on the 12th day of March, 1918, and will be found reported in 248 F 953, to which reference is made, without restating the facts and the cause. is now before the court upon the exceptions of the libelant and respondents to the report of Commissioner D Lawrence Groner, to whom the same was referred by order of the 25th of April, 1918, filed herein on the 25th of November, 1918. The report is as follows:

Preliminary Statement.

The libelant, Grace & Co., a Connecticut corporation, a part of whose business is the importation of nitrates from South America to the United States and their sale to customers here, entered into a written contract with the Luckenbach Steamship Company, Incorporated, on or about the 25th day of October, 1916, as the result of which it was agreed between the parties to the contract that the steamship company would provide for Grace & Co. freight room for 75,000 tons, 10 per cent. more or less, at the option of the steamship company, of nitrate and/or ores, between the 1st of December 1916, and the 31st of July, 1917, such cargoes to be loaded at one or two ports between Valparaiso and Pasagua, in Chili, and transported thence to one port between Savannah, Ga., and Boston, Mass., in the United States. The freight rate provided in the contract was $15.50 per ton of 2,240 pounds delivered, less 2 1/2 per cent. 'address commission,' or, in other words, a net rate or charge of $15.11 1/4 per ton.

The contract was complied with by the steamship company only to the extent of one shipment, aggregating 5,998 tons, which was delivered at the port of New York between the 22d of April, 1917, and the 9th of May, 1917. However, on the 23d of April, 1917, Edgar F. Luckenbach, president of the steamship company, wrote and forwarded to Grace & Co. a letter, in answer to one from it inquiring as to the dates when other ships might be expected to be furnished, in which he said: 'In answering the same, beg to inform you that we cannot carry out this freight room contract, which was supplemented by the usual form of nitrate charter party adopted and used by your company, and which usual form of nitrate charter party was made a part of the freight room contract, for the reason that a state of war exists between this government and the government of Germany, and we are released under article 13 of this nitrate charter party reading: 'The * * * enemies, pirates, * * * arrest and restraint of princes, rulers and people, political disturbances and impediments, * * * always mutually excepted."

The refusal by the steamship company thus announced to carry out the contract was the basis of this proceeding. Grace & Co., having thereafter made other arrangements resulting in bringing forward the nitrate, filed a libel in personam in this court against both the Luckenbach Steamship Company, Incorporated, and the Luckenbach Company, Incorporated; the joinder of the latter company as a defendant being because, as was alleged, the two companies were identical, having the same ownership, directors, and officers, and the steamship company, the immediate party to the contract, being a mere agency of the Luckenbach Company for greater convenience in financing and carrying out the contracts of the latter company. The defense set up by the defendant was that, because of a state of war existing between the United States and Germany and the danger of capture of the vessels proposed to be used, it was released and discharged from the performance of the contract. Your honor held the clause of the contract so invoked inoperative under the circumstances, and also held that the two companies were substantially the same, and were in their joint capacities carrying on the business out of which the breach of contract arose, and were jointly and severally chargeable with the carrying out of the same, and, the defendants declining to make any other or further defense, the case was by proper decree referred to me to ascertain the amount of damages suffered by the libelant.

Part I.

It will be seen by reference to the foregoing statement that the contract which is the subject of this suit was made October 25, 1916, and by the terms thereof was to be performed between the 1st of December, 1916, and the 31st of July, 1917, a period embracing eight calendar months. It was contemplated between the parties that the movement would average approximately 9,000 tons per month, but this understanding was subject to a further provision 'that all quantities and deliveries to be mutually arranged between the party of the first part and the party of the second part to suit the steamers of the party of the first part. ' As early as November, 1916, Grace & Co. begun asking for definite information from the steamship company as to what arrangements were being made for carrying out the contract, and correspondence on this subject between the parties was introduced in evidence and is returned herewith, marked 'Libelant's Exhibits 11 to 43, inclusive. ' This correspondence runs through the months beginning with November, 1916, and ending the latter part of April, 1917. Throughout it shows, on the one hand, Grace & Co. urging the carrying out of the contract and seeking information as to the probable arrival dates at the loading ports of the promised vessels, and, on the other hand, the steamship company giving information and assurances of the movements of their vessels and repeated promises of their early dispatch to the nitrate ports for loading. Throughout the period mentioned there is not a single suggestion on the part of the Luckenbach Company of a repudiation of the contract. On the contrary, there is a recognition of its binding character and reiterated statements apparently showing a determination to furnish the vessels and lift the nitrate. While, therefore, it is undoubtedly true that the provision of the contract as to the time of the delivery of a part of the nitrate was then in default, and while it is perhaps equally true that this failure might, at the option of Grace & Co., have then and there been made the basis of a suit for damages, it is also true that by agreement of parties this provision of the contract was not insisted upon, and it follows that, if thereafter the steamship company had furnished the required tonnage in the amounts contracted for, no breach would have occurred. In other words, the agreement for vessel space for 9,000 tons per month, beginning with December, was not insisted upon by Grace & Co. as the result of the direct promise of the steamship company that it would thereafter furnish the vessels.

1 It follows, therefore, that there is no merit in the position of the steamship company that it was incumbent upon Grace & Co., immediately upon the failure of the steamship company in December and January, and so on, to furnish the tonnage contracted for then and there to obtain other tonnage to carry out the contract. The attitude of the parties conclusively shows that they did not so interpret the agreement, and to hold now that the one for whose benefit it was made, and who, to accommodate the other, did not insist that it be fulfilled, had thereby waived its right thereafter to claim a full compliance with the obligation to furnish the tonnage contracted for, would be unconscionable, and would permit the other party, by whose promises of the tonnage on fixed dates the waiver was induced, to take advantage of its own default. It therefore follows that the time provisions of the contract were, as stated, extended by agreement of parties, and that there was, under the circumstances, no actionable breach thereof until the letter of April 23, 1917, from the steamship company to Grace & Co., in which the latter was advised by the former that the contract would not be carried out. In my opinion, the rights of the parties were fixed as of this date, and a right of action then and there accrued to Grace & Co. to establish and thereafter to sue for the damages which it had thereby sustained. That the contract was lawfully made between the parties is admitted. That it was breached by the steamship company has been decided by your honor in the opinion upon the previous hearing.

2 It follows, therefore, that the damages to be allowed should be computed on the basis of such compensation to the injured party as shall be necessary to place it in the situation that it would have occupied if no breach had occurred. Such damages as will restore to it all that it has lost in the instant case would include such expenditures as were necessary in the exercise of ordinary prudence on his part in the carrying out of the terms of the contract. While this is true, it is equally true that the law imposes upon a party subjected to injury from a breach of contract such as is here shown the duty of making reasonable exertions to render the injury as light as possible. These two general principles are fully recognized by all the authorities, and excellently stated in the opinion of the Circuit Court of Appeals, Sixth Circuit, speaking through Judge Taft, in The Oregon, 55 F 666 et seq., 5 C.C.A. 229, from which it may not be amiss to quote the following: 'Damages for breach of contract should be such compensation as will restore the injured party to the same pecuniary condition that he would have been in, had the contract been performed. * * * If, therefore, in cases of freight contracts, the carrier refuses to perform, it is the duty of the shipper, if he can reasonably expect thereby to reduce his loss, to seek other means of transportation, and perform the contract himself. In...