Baltimore & O.C. Terminal R. Co. v. Becker Milling Mach. Co.

• Decision Date: 12 March 1921
• Docket Number: 2847.
• Citation: 272 F. 933
• Parties: BALTIMORE & O.C. TERMINAL R. CO. v. BECKER MILLING MACH. CO.
• Court: U.S. Court of Appeals — Seventh Circuit

272 F. 933

BALTIMORE & O.C. TERMINAL R. CO. v. BECKER MILLING MACH. CO.

No. 2847.

United States Court of Appeals, Seventh Circuit.

March 12, 1921

James M. Sheean, of Chicago, Ill., for plaintiff in error.

Robert J. Cary, of New York City, for defendant in error.

Before BAKER, ALSCHULER, and EVANS, Circuit Judges.

BAKER Circuit Judge.

Railroad Company, defendant, admitted its liability for destruction of two milling machines, property of Becker Company, plaintiff in transit from Chicago to Boston, and the only litigated question was the amount of recovery. Trial was had before the District Court without a jury.

Plaintiff at Boston was manufacturer of a particular type of milling machine devised by it, and it owned the special plans prints, patterns, dies, jigs, tools, etc., necessary for manufacturing. It also had its selling arrangements through which alone these machines, when new, could be purchased by users.

Users of these machines were manufacturers of various steel products who procured them at the most convenient machinery center from independent firms or corporations that were acting as 'manufacturers' agents,' and installed them as plant equipment.

Having a larger demand in 1916 to 1918 than it could supply through its own factory, plaintiff engaged Miehle Company of Chicago to fabricate two hundred of these machines. Under this arrangement Miehle Company furnished its factory, the raw materials and the labor, and plaintiff furnished the special prints, patterns, dies, tools, etc., through which alone these machines could be made, and also its own mechanical engineer to inspect materials and workmanship during manufacture in order to see that the machines as finished corresponded to specifications.

Plaintiff was given judgment for $4,010 for each machine. From evidence of demand for the machines and numerous sales by the aforesaid 'manufacturers' agents' at that unvarying price, fixed by plaintiff, the court found that such was their 'market value.' And now plaintiff contends that the judgment is unassailable because such finding of fact was not properly questioned, and because even if it had been, it is supported by the undisputed evidence. True, the finding of 'market value' Based on sales as aforesaid must stand; but the ultimate fact for the court to find as the only legal basis of recovery was the amount of money that would make plaintiff whole for the destruction of the machines. And if the uniform price that users were paying to the 'manufacturers' agents' for plaintiff's machines was not the true measure of plaintiff's loss, defendant's objections to the adoption of that standard must be considered.

Defendant's first insistence is that the recovery should have been limited to $1,850 for each machine, that being the amount plaintiff paid Miehle Company for fabrication. Manifestly the cost of replacement was more, for we know from common knowledge that the expense of maintaining engineering and experimental departments in factories, as well as expense for superintendence and all other proper items of overhead, must be apportioned to product and charged as parts of the manufacturing cost. Defendant engaged to deliver the machines at Boston, and therefore must compensate plaintiff for the loss caused by the failure to deliver. As defendant was not guilty of any intentional wrong, and as no special use of the machines by plaintiff to bring Hadley v. Baxendale, 9 Exch. 341, into the case was shown, plaintiff was entitled only to compensation. And manufacturing cost is not necessarily commensurate with compensation. If, the machines having been delivered, plaintiff would have made a net profit above manufacturing cost, that would have been its good fortune; and if a loss had resulted, plaintiff would have had to bear it. There is no objection to profits as such; it is only when an attempt to ascertain them leads to conjecture and speculation that profits are rejected.

Against adoption of the $4,010 that purchasers had to pay for a Becker machine as the measure of plaintiff's damage, defendant argues that, because there was no market place or public exchange in which by competitive offers and bids the 'market price' of these machines could be determined, they had no 'market price' from which the court could find their 'market value.' Thus defendant would admit liability to the grower of inspected and graded wheat, which is bought and sold in public markets or exchanges, for the amount purchasers were willing to pay, but would deny liability to the maker of a specific type of automobile, which could be purchased only through the maker's selling arrangements, for the amount purchasers were willing to pay. It seems clear to us that in either case the amount purchasers were willing to pay would be evidence of the sales value.

In their discussion of 'market price' as evidence of 'market value' and of 'market value' as measurement of plaintiff's damage the parties have cited numerous cases. ^[1]

For the purpose of determining whether the 'market value' correctly measured plaintiff's loss we note certain additional cases. ^[2]

Cases cited by the parties have to do with breaches of sales contracts. In controversies of that character the thing destroyed is the sales contract, and the plaintiff, either seller or buyer, is entitled to compensation for the loss occasioned by its destruction. That loss is measured by the distance between the contract price at one end and the market price as evidence of market value at the other; and there is no reason for inquiring what selling costs or what buying costs were in incurred in making the original sale and purchase because seller and buyer met and each included all his costs in agreeing upon the price; and similarly if the plaintiff has fixed his loss by a resale or a repurchase (it being immaterial whether he has or not, for the measure of his damage is the same in either event), the costs of resale or repurchase are included in the new price; and neither party to the suit should be permitted to add to or subtract from the difference between contract price and market value an expense that has been satisfied in the new price.

Is a manufacturer whose finished articles are destroyed entitled to recover what purchasers were willing to pay against a defendant who is only liable to make good the manufacturer's actual loss? We had hoped to find an answer in cases against carriers or against insurers; but we have found no case in which the question of the defendant's right to have deducted from the 'market value' the manufacturer's selling costs has been explicitly considered. When the property was...