Ed S. Michelson, Inc. v. Nebraska Tire & Rubber Co.

• Decision Date: 25 February 1933
• Docket Number: No. 9592.,9592.
• Citation: 63 F.2d 597
• Parties: ED S. MICHELSON, Inc., v. NEBRASKA TIRE & RUBBER CO.
• Court: U.S. Court of Appeals — Eighth Circuit

63 F.2d 597 (1933)

ED S. MICHELSON, Inc., v. NEBRASKA TIRE & RUBBER CO.^*

No. 9592.

Circuit Court of Appeals, Eighth Circuit.

February 25, 1933.

William G. Boatright, of Kansas City, Mo. (I. J. Ringolsky and Harry L. Jacobs, both of Kansas City, Mo., on the brief), for appellant.

Richard S. Righter, of Kansas City, Mo. (T. H. Reynolds, George O. Pratt, and Lathrop, Crane, Reynolds, Sawyer & Mersereau, all of Kansas City, Mo., on the brief), for appellee.

Before KENYON, GARDNER, and SANBORN, Circuit Judges.

GARDNER, Circuit Judge.

This is an action brought by the appellee as plaintiff against the appellant as defendant, to recover the sum of $40,000, the alleged value of certain tires deposited by plaintiff with defendant to insure the performance of a certain contract between them.

The answer put in issue the allegations of the petition, and pleaded certain counterclaims which in effect charge that the tires as manufactured by plaintiff did not comply with the specifications mentioned in the contract, in that they were short in weight, and by reason of the failure of the tires to comply with the specifications they were of less value, resulting in damage to defendant in various large amounts, aggregating approximately $465,724.

The parties will be referred to as they were designated in the lower court.

Plaintiff had owned and operated a tire factory at Omaha, Neb., for a number of years, and since 1921 had sold to defendant the largest part of its output. Defendant supplied plaintiff with all the crude rubber necessary for the manufacture of the tires it purchased, and also advanced cash at times to plaintiff. The sole customer of defendant for the tires manufactured by plaintiff has been the Western Auto Supply Company, which has conducted a large retail tire business, and each year that defendant has made its contract with plaintiff it has entered into a contract with the Western Auto Supply Company for resale of plaintiff's manufactured product at a price in advance of that to be paid by it to plaintiff. Defendant did not handle the tires ordered, but sent orders to plaintiff, and plaintiff in turn shipped the tires direct to the Western Auto Supply Company. Invoices for the cost of the tires were sent to defendant, and on these invoices credits were indorsed for the amount of crude rubber supplied by defendant and supposed to be contained in the tires invoiced.

The contract here involved was for the year 1927. On February 23, 1927, defendant entered into a contract with Western Auto Supply Company, by which it agreed to furnish that company with requirements of tires during 1927, and following its practice of preceding years, it then entered into a contract with plaintiff for the manufacture and purchase of the tires necessary to enable it to furnish the Western Auto Supply Company with the tires covered by its contract with that company. By its contract with plaintiff plaintiff undertook and agreed to manufacture and sell defendant, and defendant agreed to accept and pay for, not less than a minimum of 10,000 tires per month, beginning April 1, 1927, and ending December 31, 1927, and not to exceed a monthly maximum of 30,000 tires. Within these limits the quantity of tires to be manufactured by plaintiff was solely at the option of defendant. Defendant agreed to furnish all crude rubber necessary to manufacture the tires ordered by it, and as tires were shipped and invoices sent to defendant, an allowance and deduction was to be made on such invoices for the value of the crude rubber contained in the tires covered thereby. Concurrently with the signing of the contract, and pursuant to one of its provisions, plaintiff delivered to defendant tires of the value of $40,000 acceptable to defendant, to be held by defendant as security for the full and faithful performance of the terms of the contract. Defendant was given the right to sell these tires at such time and for such price as it should deem advisable, and to hold the proceeds of such sale in lieu of the tires, as security.

Defendant resold the tires which it alleges were defective, to the Western Auto Supply Company at a profit of approximately 10 per cent., and it received the full agreed contract price for them. Mr. W. W. Humphrey, secretary and general manager of that company, testified that the prices of tires set out in the contract between his company and the defendant were the fair and reasonable prices for the tires furnished; that the weight of the tires furnished under the contract with defendant was not a material factor, and that tires were not bought by weight; that all adjustments on tires purchased from the defendant in 1927 were made satisfactory to the Western Auto Supply Company; and that the tires purchased from the defendant during the year 1927 were equal or superior to those purchased in the same class of tires from the defendant during 1926. The witness further testified:

"Q. Now, you say that the tires you received from Mr. Michelson, and from the Nebraska Tire Company were as good as the tires you had ordered — contracted for, is that right? A. Yes.

"Q. Came up to the tires you contracted for, is that right? A. Yes.

"Q. And that they were worth as much as the tires you agreed to pay for, is that right? A. Yes."

The court in effect instructed the jury to find in favor of the plaintiff in the sum of $39,795 on its cause of action, but submitted the issues raised on defendant's counterclaims under instructions, to certain of which exceptions were saved by defendant. The jury returned a verdict in favor of the plaintiff, finding against the defendant on its counterclaims. From the judgment entered on this verdict defendant has appealed, contending that the court erred: (1) In admitting evidence of the price obtained by defendant on resale of the tires to Western Auto Supply Company; (2) in charging the jury that it might consider the evidence of the price obtained on resale in determining whether plaintiff had substantially complied with its contract by furnishing tires equal in value to those contracted for; (3) in admitting evidence tending to show that it was not customary in contracts of the character here involved, to specify the weight and crude rubber content, or if specified that they were only approximations; (4) in charging the jury that the crude rubber content was determined solely by the quantity of crude rubber placed in the batch; (5) in directing the jury to find for plaintiff on its cause of action; and (6) in sustaining demurrers to certain paragraphs of its counterclaims.

So far as the argument is directed to the ruling of the court in admitting evidence of the price received by defendant on resale of the tires, it should be noted that the assignment of errors filed in the lower court with the petition for appeal contain no objections, no rulings by the court, and no exceptions by the defendant. When the assignment of errors upon which defendant is relying were printed in its brief, it was sought to expand and enlarge them, and there have been brought into them pages of printed matter not embodied in the assignment of errors as filed with the lower court. There has been no application made to this court for leave to file additional, or supplemental, or amended assignment of errors, and appellant is, therefore, bound by the assignment of errors as filed in the lower court, and they are obviously insufficient to present any question of the alleged error of the court in admitting evidence. The point is not of the utmost importance because the same objection is urged to that part of the instructions wherein the court charged the jury that it might consider the evidence of the price obtained by defendant on a resale, in determining whether plaintiff had substantially complied with its contract by furnishing tires equal in value to those contracted for.

It is insisted by defendant that the correct measure of damages applicable to the facts in this case was the difference between the value of the tires as actually manufactured, and their value had they been manufactured in exact accordance with the specifications contained in the contract. Defendant relies largely upon what is said by this court in Union Selling Co. v. Jones (C. C. A. 8) 128 F. 672, 678, where, in an opinion by Mr. Justice Van Devanter, then a judge of this court, it is said: "The proper measure of damages applicable to a case like this is the difference between the actual value of the property at the time of the sale and what its value would have been if it had conformed to the warranty. Schreiber v. Andrews, 41 C. C. A. 663, 666, 101 F. 763. And neither the vendee's right of recovery, nor the measure of his damages, is dependent upon a resale by him or upon the price obtained at a resale. At most, the price thus obtained may be some, but not conclusive, evidence of the actual value. Muller v. Eno, 14 N. Y. 597, 607, 609; Bach v. Levy, 101 N. Y. 511, 515, 5 N. E. 345; Brock v. Clark, 60 Vt. 551, 15 A. 175; Atkins v. Cobb, 56 Ga. 86, 90; Reggio v. Braggiotti, 7 Cush. Mass. 166, 169; Clare v. Maynard, 7 C. & P. 741, 32 E. C. L. 849. But where the resale is with a warranty of quality, or in ignorance of the actual quality, it is not any evidence of the value of the article in its inferior condition. Muller v. Eno, supra; Brown v. Bigelow, 10 Allen Mass. 242; Miamisburg, etc., Co. v. Wohlhuter, 71 Minn. 484, 74 N. W. 175."

The facts in the case of Union Selling Co. v. Jones, supra, are in two particulars at least quite different from those in the case at bar. In that case, Jones sued to recover damages for breach of an express warranty of the quality of twine sold him by the Union Selling Company under a written contract. He was a retail dealer and purchased the twine for sale to farmers in his vicinity, to be used by them in binding their grain. In other words, he bought the twine for resale on the open market, while in the instant...