Joseph E. Seagram & Sons v. Bynum

• Decision Date: 10 September 1951
• Docket Number: No. 14213,14214.,14213
• Court: U.S. Court of Appeals — Eighth Circuit
• Parties: JOSEPH E. SEAGRAM & SONS, Inc. et al. v. BYNUM et al. BYNUM et al. v. JOSEPH E. SEAGRAM & SONS, Inc. et al.

191 F.2d 5 (1951)

JOSEPH E. SEAGRAM & SONS, Inc. et al. v. BYNUM et al. BYNUM et al. v. JOSEPH E. SEAGRAM & SONS, Inc. et al.

Nos. 14213, 14214.

United States Court of Appeals Eighth Circuit.

August 23, 1951.

Rehearing Denied September 10, 1951.

COPYRIGHT MATERIAL OMITTED

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Shields M. Goodwin, Little Rock, Ark., for appellants Joseph E. Seagrams & Sons Inc.

Longstreet Heiskell, Memphis, Tenn. and DuVal L. Purkins, Warren, Ark. (John Baxter, Dermott, Ark., on the briefs), for appellees Bynum et al.

Before GARDNER, Chief Judge, and THOMAS and JOHNSEN, Circuit Judges.

THOMAS, Circuit Judge.

The appellees in No. 14,213, appellants in No. 14,214, hereinafter referred to as the Bynums, brought suit in the district court against Joseph E. Seagram & Sons, Inc., and one of its affiliates, hereinafter referred to as Seagram, for specific performance of a contract of lease conveying a stave and heading mill to the lessees for a period of two years from August 1, 1945 (afterwards extended through July 31, 1950), for damages and an accounting; for a decree requiring the mill to be operated at its reasonable capacity for the entire term of the lease; for damages for the alleged breach and for an accounting under a contract for the manufacture of staves by a mill near Gleason, Tennessee; and for damages for an alleged breach of contracts of employment with three of the Bynums.

The lease of the plant at Dermott, Arkansas, provided for a fixed rental of $3,000 a month (afterwards reduced to $2,750 a month) and for "additional" rentals for staves and heading produced during the month above a fixed minimum. The court granted judgment to the plaintiffs for such additional rentals accruing at the Dermott plant after May 31, 1947, and for other items in the amount of $173,201.77, with interest to April 5, 1950, in the amount of $22,549.46, or a total of $195,751.23, less credits in the amount of $88,752.92.

The court also found for the plaintiffs on their claim for additional rentals on the staves and heading produced or "to be manufactured from the Gleason tract" and on the price of red oak timber sold from the tract in the amount of $31,821.70, with interest to April 5, 1950, in the amount of $2,892.74, or a total of $34,714.44.

For the alleged breach of the contracts of employment of three of the Bynums judgment was entered against the defendants for the total amount of $34,818.58.

The court denied the Bynums' claim that Seagram should operate the Dermott plant to its reasonable capacity for the full five-year term of the lease.

In No. 14,213 Seagram appealed from the judgments against it, and in No. 14,214, the Bynums filed a cross appeal from the denial of their claim that the Dermott plant was required to be operated at its reasonable capacity to the end of the five-year term of the lease.

The opinion of the district court is reported in 89 F.Supp. 780.

The two appeals were consolidated for submission to this court, and they may be disposed of in one opinion.

No. 14,213.

The leased plant at Dermott, Arkansas, was used for the manufacture of staves and heading for barrels. The term "bourbon staves" means standard staves for use in making whiskey barrels. "Oil staves" means all other staves 30 inches or more in length. A "set" of staves means a sufficient number (18 to 28) of finished staves to make a barrel, and a "set" of heading consists of one head for the top and one for the bottom of a barrel. A "matched set" means the staves and heading necessary to make a complete barrel.

Seagram's first contention is that the court erred in fixing the amount of the judgment for "additional" rentals and some other items in the amount of $195,751.23 for staves and heading manufactured at the Dermott plant after May 31, 1947. That plant was operated at capacity until June 27, 1947, after which date operations were curtailed, and the plant was finally closed on February 26, 1948, and it was not operated thereafter. Seagram contends that the correct amount due the plaintiffs for additional rentals and other items is only $39,145.88.

As observed, supra, the rentals reserved under the lease consisted of two elements, a fixed rental of $3,000 a month until June 28, 1946, and $2,750 a month thereafter until the end of the term. The fixed rentals were paid until the end of the term and are not in dispute.

The formula for computing the "additional" rentals provided in the lease is as follows: "In addition to the fixed rental * * * above provided, the Lessee agrees to pay to the Lessors the following amounts:

"1. A sum equal to twenty per centum (20%) of the market price of all oil staves which during the term of this lease are manufactured and made ready for shipment at said plant.

"2. Sums equal to the following percentages of the market price of all bourbon staves which during each twelve months of the term of this lease are manufactured and made ready for shipment at said plant:

"a. On the first 10,000 sets of bourbon staves, fifteen per centum (15%) of the market price;

"b. On all sets of bourbon staves between 10,000 and 20,000, twenty per centum (20%) of the market price;

"c. On all sets of bourbon staves between 20,000 and 30,000 twenty-five per centum (25%) of the market price;

"d. On all sets of bourbon staves between 30,000 and 40,000 thirty per centum (30%) of the market price;

"e. On all sets of bourbon staves above 40,000, thirty-five per centum (35%) of the market price;

"3. In the event the Lessee shall cause to be removed or shipped from the premises air dried and listed staves, such staves shall be included in determining the number of staves produced during each twelve months of the terms of this lease, and the Lessee shall pay to the Lessors sums equal to the percentages of the market price of such staves on the same basis and in the same manner as is provided in Paragraph 2 hereof.

"4. A sum equal to twenty per centum (20%) of the market price of all heading for barrels which, during the term of this lease, is manufactured and made ready for shipment at said plant."

Following these numbered paragraphs the lease reads:

"As used in Paragraphs 1, 2, 3 and 4 above, the term `market price' shall be the applicable ceiling price at Dermott, Chicot County, Arkansas, so long as O. P. A. regulations establishing such prices shall remain in effect. If, however, the use of ceiling prices should be abolished prior to the termination of this lease, during that portion of the term of the lease in which no ceiling prices exist the market price for each month's output of manufactured staves and heading shall be determined by taking the average price in Louisville, Kentucky, for such month of staves and/or heading of similar value, and deducting therefrom the cost of transportation of such staves and heading in carload lots from Dermott, Arkansas, to Louisville, Kentucky."

When the lease was entered into the Price Control Act of January 30, 1942, was in effect and O.P.A. ceiling prices had been placed on all or most of the articles manufactured at the leased plant. Ceiling prices were abolished March 27, 1946, and it became necessary for the parties to construe and apply the terms of the lease. Their officers accordingly met in conference at Louisville, Kentucky, December 10, 1946. At this conference the parties agreed:

"The percentage rental provided for in said lease agreement, with respect to the number of sets of finished bourbon staves and finished bourbon heading, manufactured and made ready for shipment as defined in said lease agreement, after the elimination of OPA prices through May 31, 1947, shall be computed by applying the applicable percentage, set out in said agreement, to $15.00 per set for said described staves, and to $5.00 per set for said described heading; said values so used shall be net with no deductions to be made for cost of shipment; the said agreed values for said purpose of computing shall be effective only through May 31, 1947; * * *"

The parties could not agree upon the application of the contract rule, supra, to the price of staves and heading manufactured at Dermott after May 31, 1947; but it is agreed that during the period under consideration there was no current over-the-counter market for staves and heading at Louisville, Kentucky. Economic conditions had so changed after the end of the war in Europe in 1945 that the demand of the distillers for whiskey barrels was largely, but not entirely, supplied by their own mills. In this situation the court found:

"23. The fair average price at Louisville, Kentucky, for the monthly periods subsequent to May 31, 1947, after deducting cost of transportation in carload lots from Dermott, Arkansas, is $15.00 per set for finished bourbon staves; $5.00 per set for finished bourbon heading; $2.80 per set for finished oil staves, and $1.15 per set for finished oil heading.

"24. The fair average price of air-dried and listed staves for the monthly period subsequent to May 31, 1947, after deducting cost of transportation in carload lots from Dermott, Arkansas, is $12.00 per set for bourbon staves and $4.00 per set for bourbon heading."

It will be observed that the prices fixed by the court following May 31, 1947, were the same prices agreed upon by the parties at their conference on December 10, 1946, for the period prior to May 31, 1947. Seagram contends that in so finding the court erred.

While there was no current over-the-counter market for staves and heading at Louisville, Kentucky, nor anywhere else in the United States, after May 31, 1947, there were occasional sales of staves and heading and also of whiskey barrels at Louisville and elsewhere. This situation was due to the fact that after the war in Europe ended conditions affecting the market changed radically. One reason for this was the difficulty of the distillers to procure grain for making whiskey due to the "Marshall Plan" which became effective...