Gridiron Steel Co. v. Jones & Laughlin Steel Corp.

• Decision Date: 11 June 1966
• Docket Number: No. 16125,16126.,16125
• Citation: 361 F.2d 791
• Parties: GRIDIRON STEEL COMPANY, Plaintiff-Appellant, v. JONES & LAUGHLIN STEEL CORPORATION, Defendant-Appellee. GRIDIRON STEEL COMPANY, Plaintiff-Appellee, v. JONES & LAUGHLIN STEEL CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

361 F.2d 791 (1966)

GRIDIRON STEEL COMPANY, Plaintiff-Appellant, v. JONES & LAUGHLIN STEEL CORPORATION, Defendant-Appellee.

GRIDIRON STEEL COMPANY, Plaintiff-Appellee, v. JONES & LAUGHLIN STEEL CORPORATION, Defendant-Appellant.

Nos. 16125, 16126.

United States Court of Appeals Sixth Circuit.

June 11, 1966.

Harold K. Bell, Cleveland, Ohio, Spieth, Bell, McCurdy & Newell, Cleveland, Ohio, Hal D. Cooper, Cleveland, Ohio, on brief, for Gridiron Steel Co.

Walter J. Blenko, Pittsburgh, Pa., Walter J. Blenko, Jr., Pittsburgh, Pa., on brief; Blenko, Hoopes, Leonard & Buell, Pittsburgh, Pa., Richard F. Stevens, H. Stephen Madsen, Baker, Hostetler & Patterson, Cleveland, Ohio, of counsel, for Jones & Laughlin Steel Corporation.

Before WEICK, Chief Judge, CELEBREZZE, Circuit Judge, and CECIL, Senior Circuit Judge.

WEICK, Chief Judge.

Gridiron Steel Company,¹ an Ohio corporation, sued Jones & Laughlin Steel Corporation, a Pennsylvania corporation, in the District Court to recover unpaid royalties due under the provisions of a patent license agreement covering metal ironing tables, and also for damages for breach of the provisions of the agreement which granted an option to the licensor, upon termination of the agreement, to purchase special tools and dies in current use by the licensee in the manufacture of the ironing tables.

The case was submitted to the Court without the intervention of a jury. The District Judge in a carefully prepared Memorandum Findings of Fact and Conclusions of Law, determined that J&L breached the agreement, but rendered judgment only for nominal damages in the amount of $500. With respect to the claim for royalties, he found that the sum of $12,289.95 was due Gridiron under the provisions of the license agreement and rendered judgment against J&L in that amount.

Gridiron appealed in case number 16,125 from the judgment in its favor in the amount of five hundred dollars, on the grounds that the award of damages was inadequate and that the District Judge applied the wrong measure of damages.

J&L appealed in case number 16,126 from the judgment against it for royalties in the amount of $12,289.95. Its appeal was dismissed as untimely filed but the judgment of dismissal was reversed by the Supreme Court and the appeal has since been reinstated. 382 U.S. 32, 86 S. Ct. 152, 15 L.Ed.2d 26 (1965).

BREACH OF AGREEMENT

The license agreement upon which the action was brought was entered into on February 8, 1940, between Gridiron, as licensor, and Geuder, Paeschke & Frey Co., as licensee. Attached as an exhibit thereto was a list of pending applications for patent owned by Gridiron, on which four patents were subsequently issued which relate to this case and will be discussed later in this opinion. Geuder manufactured and sold ironing tables under the license agreement and paid certain royalties therefor.

On September 1, 1957 Geuder sold to J&L its metal ironing table business, including special tools, dies, ironing board leg patents, and patent applications therefor, and assigned to it the license agreement. J&L assumed all of Geuder's obligations under said license agreement.

J&L manufactured and sold ironing tables, using the tools and dies which it acquired from Geuder. On March 10, 1958, J&L gave to Gridiron written notice of termination of the license agreement to become effective on February 8, 1959. At that time patents 2,215,918 and 2,233,735 had expired. Patent 2,263,765 ran until November 11, 1958 and patent 2,319,397 ran until May 18, 1960.

The licensing agreement provided that the licensee had the right to terminate the agreement on any anniversary date by giving ninety days' written notice. The agreement granted to Gridiron the option upon termination to purchase all dies and special tools used to manufacture ironing tables, in the following language:

"Further agreed that if and when this contract shall be terminated, from whatever cause, and upon the completion of the manufacture and delivery by Geuder of any boards previously sold but still undelivered, Gridiron shall have an option for a period of ninety (90) days to purchase from Geuder for the sum of Seven Thousand Five Hundred Dollars ($7,500) cash all dies, patterns, and special tools at that time in current use by Geuder in connection with the manufacture of ironing tables under this contract."

The agreement further provided that upon termination Geuder was to transfer to Gridiron, at its actual cost, whatever patent rights or license it might have for ironing board legs or supports.

Without notice to Gridiron, J&L sold to Arvin Industries on June 2, 1958, its ironing table business, including the dies, tools and leg and support patents which were the subject of the option provisions above set forth.

Upon the termination of the license agreement, namely, on February 24, 1959, Gridiron gave written notice to J&L of its exercise of the option to purchase the tools and dies for the sum of Seven Thousand Five Hundred Dollars, but J&L, having previously sold them to Arvin, refused to comply with the option agreement.

In the District Court, as well as here, J&L contended that it had no dies and tools "in current use" on the date of the termination of the license agreement since it had previously sold them to Arvin, and that it therefore was under no obligation to perform the option provisions of that agreement. In other words, it was the view of J&L that all it needed to do to avoid liability under the license agreement was to sell the optioned property to a third party.

A statement of this proposition is its refutation. Even where liability under a contract depends upon a condition precedent, one cannot avoid his liability by making the performance of the condition precedent impossible, or by preventing it. Lee Shops, Inc. v. Schatten-Cypress Co., 350 F.2d 12, 16 (6th Cir. 1965); Gulf Oil Co. v. American-Louisiana Pipe Line Co., 282 F.2d 401 (6th Cir. 1960).

The District Court was correct in holding that J&L breached the agreement. The only question remaining is whether the award of nominal damages was proper.

DAMAGES

Gridiron contended that the District Court applied the wrong measure of damages. It claimed that ordinarily it would have been entitled to recover the difference between the market and the contract price of the tools and dies, but since it was agreed that there was no available market, the measure of recovery was the cost of manufacture of new tools and dies, less the option price. It relied on E. W. Bliss Co. v. Buffalo Tin Can Co., 131 F. 51 (2nd Cir. 1904) and Rochester Lantern Co. v. Stiles & Parker Press Co., 136 N.Y. 209, 31 N.E. 1018 (1892), and other cases to the same effect.

These two cases involved breach of contract by sellers of articles to be manufactured, i. e., new products. In the present case Geuder made the dies in its own shops, and the tools and dies had been used for some time by Geuder and J&L, and later by Arvin. We may infer from the evidence that they were in good condition when sold to J&L and to Arvin because they were being used in the manufacture of ironing tables, but they were not new. In our opinion, Gridiron was not entitled to recover the cost of new dies and tools, but only the value of the used ones, less the option price.

J&L did not carry the tools and dies on its books at any stated figure. Its sale to Arvin was for cash and shares of stock. Other items were included in the sale and the value of each item was not specified.

The dies and tools were custom made and unique. It was difficult for Gridiron to prove the value of the tools and dies at the time the contract was breached. They were no longer in the possession of J&L and had been removed to the plant of Arvin. Gridiron did procure estimates of the cost of replacement of new tools and dies necessary for the manufacture of the ironing table, which amounted to $83,230 and $115,480.

Answers of J&L to interrogatories were offered in evidence, which disclosed that J&L in connection with its purchase had received from Geuder a report of an independent appraisal of certain tools and dies, made on January 18, 1957, which was attached as an exhibit to its answers. The District Court found that in the appraisal the replacement costs of the tools and dies listed therein were valued at $46,500, and the sound value thereof at $34,875.

Although not binding on Gridiron, the answers by J&L to the interrogatories constituted admissions against its interest. Heilig v. Studebaker Corp., 347 F.2d 686 (10th Cir. 1965). Answers by a party to interrogatories may be used for any purpose. Rule 26(d) (2), Fed. R.Civ.P.; 4 Moore's Fed.Prac. 2nd Ed. § 33.29, p. 2342.

J&L ought not to be permitted to complain because the damages cannot be measured with precision since it was responsible therefor. Story Parchment Co. v. Patterson Parchment Paper Co., 282 U.S. 555, 563, 51 S.Ct. 248, 75 L.Ed. 544 (1931); Smith v. Onyx Oil & Chem. Co., 218 F.2d 104, 50 A.L.R.2d 216 (3rd Cir. 1955); Bishop v. East Ohio Gas Co., 143 Ohio St. 541, 545-546, 56 N.E.2d 164 (1944).

In such circumstances, the actual value of the dies and tools must be determined by the District Court from the best evidence available. Expert testimony may be used for this purpose. The Court may consider the evidence as to cost and other factors which may affect value or tend to show worth. Gridiron is entitled to be fully compensated for its loss. Bishop v. East Ohio Gas Co., supra.

When the value has been ascertained, the measure of damages is the difference between the option price and the value of the dies and tools so determined. Sinclair Refining Co. v. Jenkins Petroleum Process Co., 289 U.S. 689, 697, 53 S.Ct. 736, 77 L.Ed. 1449 (1933); Benjamin Harris & Co. v. Western Smelting & Refining Co., 313 Ill.App. 455, 40 N.E.2d 747, aff'd, 381 Ill. 443, 45 N.E.2d 639; Bishop v. East Ohio Gas Co., supra; 78 C.J.S. Sales § 549, pp. 240, 241.

We are not unmindful of the...