Gulf States Creosoting Co. v. Loving

• Decision Date: 22 May 1941
• Docket Number: No. 4737,4738.,4737
• Citation: 120 F.2d 195
• Parties: GULF STATES CREOSOTING CO. v. LOVING et al. SAME v. TIDEWATER CONST. CORPORATION et al.
• Court: U.S. Court of Appeals — Fourth Circuit

120 F.2d 195 (1941)

GULF STATES CREOSOTING CO. v. LOVING et al. SAME v. TIDEWATER CONST. CORPORATION et al.

Nos. 4737, 4738.

Circuit Court of Appeals, Fourth Circuit.

May 22, 1941.

COPYRIGHT MATERIAL OMITTED

William B. Campbell, of Wilmington, N. C. (L. J. Poisson and E. K. Bryan, both of Wilmington, N. C., on the brief), for appellant Gulf States Creosoting Co.

Kenneth C. Royall, of Raleigh, N. C., for appellees Loving and others.

Kenneth C. Royall, of Raleigh, N. C., and Charles E. Ford, of Washington, D. C. (Philip W. Murray, of Newport News, Va., on the brief), for appellees Tidewater Const. Corp.

Before PARKER, SOPER, and DOBIE, Circuit Judges.

SOPER, Circuit Judge.

These companion cases grow out of two contracts of Gulf States Creosoting Company, defendant below, to furnish creosoted piling and lumber to the Tidewater Construction Corporation and to T. A. Loving, trading as T. A. Loving & Company, later T. A. Loving & Company, a corporation, respectively, to enable them to construct certain parts of the Albemarle Sound Bridge which they had agreed to build under contracts with the State Highway Commission of North Carolina. The defendant failed to comply with its contracts in regard to the delivery of the material, and the plaintiffs sued for damages, crediting upon their claims the balances due the defendant for goods delivered and not paid for. In the District Court the Creosoting Company defended on the ground, amongst others, that it was not responsible for the delays in delivery which occurred, but this issue was decided against it by the Special Master and the District Judge, and is not pressed in this court. The principal contentions here are that the District Court erred (1) in finding the terms of the contracts with regard to deliveries, and (2) in failing to hold that the defendant was not responsible for the damages claimed since they were special damages, not in the contemplation of the parties. In the Loving case, the additional defense is made that no recovery should be allowed because Loving assigned the contract without the consent of the defendant. (3) The defendant also attacks the findings of the court with respect to specifications of damage.

The report of the Special Master finding substantial damages in favor of the plaintiffs was adopted in its entirety by the District Judge in the Loving case, and with one correction, hereinafter discussed, in the Tidewater case. The Master found that the Creosoting Company, through an agent who negotiated the contract between it and the Tidewater Company, had full knowledge of the State Highway Commission's plans for the bridge, and in fact had assisted in the preparation of the specifications; that the plans showed the lengths of piling and dimensions of lumber required; that the agent was informed that the Tidewater Company would need deliveries in a uniform and balanced schedule and intended to finish the job in 1937; and that with this knowledge, the defendant, on January 25, 1937, quoted prices for the piling and lumber, and asserted its ability to deliver the material as fast as needed. On February 1, 1937, the defendant gave the Tidewater Company a formal quotation for the material, wherein it was stated that changes or cancellation of any order could be made by mutual consent. On February 4, 1937, this quotation was revised, and on February 5, 1937, was accepted as satisfactory by the Tidewater Company in a letter which contained the following paragraph: "It is understood that you agree to begin shipment within not more than seventy-five days from date of this letter and that you agree to complete the order in its entirety, within two hundred days from this date. This guarantee for delivery is based upon our furnishing you a complete list of the piling and lumber requirements on or before February 22, 1937." This delivery period was modified as the result of subsequent correspondence in which the quantities, prices and terms of sale were fixed, and it was finally agreed that shipments should begin on May 1, 1937, should be completed in two hundred days from March 2, 1937, that is, on September 18, 1937, and should be made in a certain order of lengths and upon a uniform and balanced schedule.

The Master reached the conclusion from the evidence that such was the agreement between the parties. The defendant does not deny that such an agreement was formed, but contends that certain modifications of the contract took place after March 10, 1937, whereby the beginning of the period of the two hundred days was postponed. There is, however, no foundation of fact for the argument. It is based chiefly upon a revision in the lengths of piling required, which was sent by the Tidewater Company to the defendant on June 4, 1937, in order to comply with certain changes made by the State Highway Commission in the structure of the bridge occasioned by unexpected conditions on the work. The change was made by the State Highway Commission under the authority of the bridge contract, of which the defendant had notice, and the defendant accepted the change without protest. No request was made by the defendant for a modification of the period of delivery, and there is no reason to believe that such a modification was contemplated by the parties. Other modifications of the contract were equally immaterial.

A similar defense in the Loving case is likewise lacking in merit. The Master made similar findings as to the knowledge of the defendant of the plans and specifications of the bridge contract, and the purpose of Loving to finish the bridge in 1937, and held that the parties entered into a contract on March 10, 1937, wherein the defendant agreed to begin shipping on May 1, 1937, to make the shipments in a certain order of lengths upon a uniform and balanced schedule, and to complete the deliveries by September 18, 1937. The defendant contends that this period was extended because on March 30, 1937, the parties agreed to special terms of payment for the material, and on April 30, 1937, fixed for the first time the shipping points for the first carloads of material to be delivered. The complete answer to this contention is that the defendant accepted the changes, neither of them affected the defendant's ability to make the deliveries as originally agreed, and nothing in the evidence indicates that the parties contemplated a change in this respect.

The defendant also contends that there can be no recovery under the Loving contract between the defendant and T. A. Loving, individually, trading as T. A. Loving & Company, because the latter, without the knowledge or consent of the defendant, assigned the contract to T. A. Loving & Company, a corporation, on November 12, 1937. On that date he formed the corporation of that name and transferred to it all the assets and rights of his contracting business, the corporation assuming all the liabilities thereof. The position of the defendant is that despite its breach of contract and the damages that flowed therefrom, neither Loving nor the Loving Company can recover in this suit. The argument runs as follows: The defendant entered into the contract in reliance upon the character and solvency of Loving individually, and hence the contract could not be assigned so as to bind the defendant without the defendant's consent. It was in fact assigned without the defendant's knowledge or consent, and the shipments were continued in the belief that Loving was the recipient of the material, whereas they were received and used by the corporation. Thereby the defendant was deprived of its right to deal with Loving, and of its right to refuse to go on with the shipments after the assignment. The plaintiffs bring the pending suit as a unit, claiming damages and admitting liability for the unpaid bills as a single organization. The Special Master, fixing the total damages suffered at $52,346.98, and the total credits for goods shipped at $34,160.20, recommended a judgment for the plaintiffs of $18,186.78. But he made no apportionment of the rights or obligations between the two plaintiffs. He found that the major part of the damages was suffered after the assignment, but he made no attempt to ascertain the amount thereof, and hence there can be no judgment even for the damages incurred before the assignment on the theory that such damages were assignable, because the amount thereof has not been ascertained.

Clearly there is no merit in this argument, for the assignment of the contract affected neither the ability of the defendant to deliver the goods, nor the prospect of payment therefor in accordance with the contract. The Master found that the deliveries and payments were carried on, so far as the defendant was concerned, in the same way after, as before the assignment. The personal liability of T. A. Loving to pay for the goods delivered was in no way affected by the assignment. Notwithstanding the corporation's assumption of liability under the contract, he remained personally obligated to pay for the goods which, without notice of the assignment, the defendant delivered to the new corporation of which Loving was the head. The added liability of the corporation to pay for the goods which it received was equally clear. The defendant itself recognized this situation by filing a counterclaim against both Loving and the corporation for the unpaid bills. The assignment was merely part of the transfer of assets to a corporation formed to take over a going business, and after the transfer, the same persons were in control. Under such circumstances, an assignment of a contract does not ordinarily fall within the rule that denies assignability where the personal element is a material factor. See 8 Fletcher on Corporations, § 4011; Walker v. Mason, 272 Pa. 315, 116 A. 305; Bradford & Carson v. Montgomery Furniture Co., 115 Tenn. 610, 92 S.W. 1104, 9 L.R.A.,N.S., 979.

It thus appears that the credit risk of the defendant was in...