Consolidated Flour Mills Co. v. File Bros. Wholesale Co.
| Decision Date | 22 March 1940 |
| Docket Number | No. 1951.,1951. |
| Citation | 110 F.2d 926 |
| Parties | CONSOLIDATED FLOUR MILLS CO. v. FILE BROS. WHOLESALE CO. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Austin M. Cowan, of Wichita, Kan. (C. A. McCorkle, W. A. Kahrs, and Robert H. Nelson, all of Wichita, Kan., and Orel Busby, L. H. Harrell, and A. W. Trice, all of Ada, Okl., on the briefs), for appellant.
Robert Wimbish, of Ada, Okl., for appellee.
Before PHILLIPS, BRATTON, and HUXMAN, Circuit Judges.
The Consolidated Flour Mills Company1 is a corporation organized and existing under the laws of Kansas. File Brothers Wholesale Company2 was a copartnership composed of G. L. File and E. L. File. E. L. File died on December 10, 1937. Bessie File is the administratrix of the estate of E. L. File.
On July 21, 1937, at Coalgate, Oklahoma, J. F. Skelton, a salesman for the Flour Company, and E. L. File negotiated a contract for the sale, by the Flour Company to File Brothers, of 2,000 barrels of Kansas Best flour. The contract was signed by E. L. File and Skelton at Coalgate, Oklahoma. It expressly provided that it was subject to confirmation by the Flour Company at Wichita, Kansas. It was received by Wiley T. Hawkins, sales manager of the Flour Company, on July 21, 1937, at Wichita, Kansas, and was there confirmed by Hawkins, acting for the Flour Company.
The contract stipulated that the flour was to be manufactured. It provided that the Flour Company should deliver the flour f. o. b. carrier at shipping point and prepay or allow the freight to Coalgate, Oklahoma; that the flour was to be shipped on directions of File Brothers to be given on or before March 1, 1938; that File Brothers should pay for the flour on "arrival draft with bill of lading attached"; that "subject to the lien of Seller3 for the unpaid purchase price, delivery of goods by Seller to the carrier at point of shipment" should "constitute delivery to Buyer";4 that the flour should be representative of the brand or grade specified and equal to the minimum requirements of the law of the state of Oklahoma; that File Brothers would waive any claim or defense based on the quality of the flour unless it should send to the Flour Company at its main office, within twenty days after receipt thereof, a letter by registered mail specifying the nature of the complaint, and, by express prepaid, a 5-pound sample of the flour alleged to be defective or inferior, and within thirty days after the arrival of the flour, an itemized, verified statement of all loss and damage claimed as a result of alleged defective or inferior flour.
The contract further provided:
The contract further provided that should File Brothers fail to furnish shipping instructions on or before ten days prior to March 1, 1938, and fail to notify the Flour Company of its intention not to accept further deliveries under the contract, then, unless the Flour Company should elect to terminate the contract, it would be extended automatically from day to day until File Brothers should furnish shipping instructions or notify the Flour Company of its intention not to accept any further deliveries under the contract, and that File Brothers would pay the Flour Company carrying charges at the rate of one-sixth of one cent per barrel of flour per day.
Immediately on receipt of the contract, Hawkins purchased for the Flour Company 9200 bushels of wheat from which to manufacture the flour.
On June 5, 1938, after 315 barrels of flour had been shipped to File Brothers on its direction, G. L. File notified the Flour Company that no more flour would be taken under the contract. Thereupon the Flour Company elected to terminate the contract and brought this action to recover damages for the breach in accordance with the provisions of the contract.
At the close of the evidence, both sides moved for a directed verdict. The trial court discharged the jury, took the case under advisement, and thereafter entered a judgment that the Flour Company take nothing and G. L. File and Bessie File recover their costs. The Flour Company has appealed.
In addition to the facts above stated, the proof adduced by the Flour Company established that the price of wheat per bushel was $1.13 on July 21, 1937, 60 cents on June 6, 1938, and 56.2 cents on July 2, 1938; that in 1938 the cost of selling flour was 21.15 cents per barrel and in 1937 in excess of 20 cents per barrel; that the Flour Company paid a commission to its salesmen of 20 cents per barrel; that the commission was paid as the flour was delivered; that the carrying charges on wheat during the years 1937 and 1938 were not less than one-sixth of one cent per barrel per day; that it had not paid the commission on the undelivered flour but had incurred the selling expenses thereon; that flour was shipped under the contract as follows: 85 barrels on September 16, 1937, 105 barrels on October 6, 1937, 75 barrels on November 2, 1937, and 50 barrels on March 21, 1938; that it required 1449 bushels of wheat to manufacture the flour shipped, leaving on hand 7751 bushels of the wheat purchased to fulfill the contract, and that the market decline on wheat was 53 cents per bushel.
The Flour Company also introduced proof of the damages calculated under the provisions of the contract as follows:
Carrying charges on 1685 barrels
of flour unshipped at one-sixth
cent per barrel per day from
July 21, 1937 to June 6, 1938
318 days ........................ $ 893.05
Cost of selling 1685 barrels of
flour at 20 cents per barrel .... 337.00
Market decline on wheat on hand
purchased to fulfill contract, 53
cents per bushel — $2.438 per
barrel on 1685 barrels of flour 4,108.03
_________
Total ......................... $5,338.08
The trial court erroneously found that the contract was confirmed by the agent who negotiated it and that it was made at Coalgate, Oklahoma, and concluded that §§ 9489 and 9490, O.S.1931, 15 Okl.St. Ann. §§ 214, 215,5 rendered the provisions therein for liquidated damages void and unenforceable. G. L. File testified that the order for the flour was taken by the Flour Company's salesman, Skelton. The contract on its face shows that it was confirmed by the Flour Company's sales manager, W. T. Hawkins. The contract expressly provided that it was subject to confirmation at Wichita, Kansas, and we think the evidence clearly indicates it was there confirmed. A contract is deemed to be made at the place where the final assent is given.6 Here, final confirmation was made at Wichita, Kansas, and the contract was therefore made in Kansas.
The flour was to be manufactured by the Flour Company at its plant at Hutchinson, Kansas, and, under the express terms of the contract, delivery of the flour by the Flour Company to the carrier at the point of shipment was to constitute delivery to File Brothers. It follows that title to the flour would have passed on delivery thereof to the carrier at Hutchinson. The contract was, therefore, to be performed in Kansas, except as to the payment of the drafts for the purchase price.
The law of the place where the contract is made governs its nature, validity and interpretation unless it appears that the parties, when entering into the contract, intended to be bound by the law of some other place.7 We must, therefore, look to the law of Kansas to determine the validity of the contract provision for liquidated damages.
Kansas has adopted the modern rule with respect to provisions for liquidated damages, which is to look with candor, if not with favor, upon such provisions in contracts when deliberately entered into between parties who have equality of opportunity for understanding and insisting upon their rights, and to give effect to such provisions in accordance with the intention of the parties where the damages are uncertain in nature or amount, or are difficult of ascertainment, and the amount stipulated does not manifestly exceed the injury which will be suffered.8 Provisions for liquidated damages substantially like those provided in the contract in the instant case have been sustained in many adjudicated cases.9
The contract here called for a special brand of flour to be manufactured by the Flour Company and to be delivered in the future. Deliveries were to be made at File Brothers' option as to time within a period of approximately seven months. The price of wheat is subject to great fluctuation. A miller who contracts for the manufacture and future delivery of flour at a stipulated price must immediately purchase the wheat from which to manufacture the flour in order to protect himself against...
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