Northwestern Steam Boiler & Mfg. Co. v. Great Lakes Engineering Works

• Decision Date: 26 July 1910
• Docket Number: 3,148.
• Citation: 181 F. 38
• Parties: NORTHWESTERN STEAM BOILER & MFG. CO. v. GREAT LAKES ENGINEERING WORKS.
• Court: U.S. Court of Appeals — Eighth Circuit

181 F. 38

NORTHWESTERN STEAM BOILER & MFG. CO. v. GREAT LAKES ENGINEERING WORKS.

No. 3,148.

United States Court of Appeals, Eighth Circuit.

July 26, 1910

[Copyrighted Material Omitted]

H. B Fryberger (Sullivan & Grant, on the brief), for plaintiff in error.

W. D Bailey (J. L. Washburn and Oscar Mitchell, on the brief), for defendant in error.

Before SANBORN, HOOK, and ADAMS, Circuit Judges.

SANBORN Circuit Judge.

This writ of error challenges a judgment for damages for delay in the construction of two boilers for a steamship. The Great Lakes Engineering Works, a corporation, had agreed to complete and deliver a steamship to the Cleveland Cliffs Iron Company at Detroit, in the state of Michigan, on July 20, 1905, for $380,000, and to pay the Cliffs Iron Company for any delay beyond that date $100 per day for the first 10 days and $200 per day for any delay thereafter. Thereupon the engineering works made two contracts with the Northwestern Steam Boiler Manufacturing Company of Duluth, a corporation, for the construction and delivery of two boilers for the steamship. There was substantial evidence that before these contracts were made the engineering works informed the boiler company that it was liable to pay $100 per day for the first 10 days' delay after July 20, 1905, in the completion of the steamship, and $200 per day for all delay thereafter, that it would hold the boiler company for these stipulated damages if the completion of the steamship was delayed by a failure of the boiler company to deliver the boilers in the time specified in the contracts and that with knowledge of and in view of these facts the boiler company made its agreements. By the first of these contracts the boiler company agreed in January, 1905, to construct and deliver the two boilers at the dock of the Engineering Works in Detroit on June 1, 1905, for $12,450. On June 17, 1905, the boilers were not completed, and the boiler company was in financial difficulty when the parties made a second contract that the boiler company transfer the title to the materials which it had assembled for the boilers and to the incomplete boilers to the engineering works, that the engineering works would pay for the materials and labor necessary to complete the boilers on the request of the boiler company, and would charge these payments against the purchase price thereof; that the boiler company would provide everything except the labor and materials for the completion of the boilers, and would deliver them finished at the shipyard of the engineering works in Detroit on or before July 15, 1905; and that the engineering works on becoming dissatisfied with the progress of the work or whenever it should become evident that the boilers would not be completed by the time specified had the right to enter the plant of the boiler company, to use that plant to finish the boilers, and to charge the expenses of their completion against the purchase price.

There was substantial evidence that the steamship was completed ready for the boilers on September 23, 1905, and that the boilers were not delivered until November 23, 1905. On account of this delay, for which it was claimed that the boiler company alone was responsible and on account of other delays in completing the steamship, the engineering works was compelled to pay, and did pay, to the Cliffs Iron Company, $13,300, and in this action it sought to recover of the boiler company, among other things, $6,000 on account of this delay. At the close of the trial, the court below denied a request of the boiler company to instruct the jury that the engineering works was not entitled to recover anything upon this claim for damages for delay, and this denial is the subject of the most serious complaint of the trial of this case below.

Counsel contend that the provision of the contract of June 17, 1905, that the plaintiff below had the right to enter the plant of the defendant, to use it to complete the boilers, and to charge the expenses thereof against the purchase price whenever it became evident that the defendant would fail to complete the contract on time, furnish the only measure of damages for any delay of the boiler company recoverable under this agreement. If the contract had never been completed, and if the plaintiff was seeking in this action to recover speculative damages measured by the difference between the estimated cost of a completion that was never effected and the contract price, this argument might be worthy of more serious consideration. American Surety Company v. Woods, 105 F. 741, 106 F. 263, 45 C.C.A. 282; Hunt v. Oregon Pacific Railway Company, 36 F. 481, 1 L.R.A. 842. But in the case in hand the boiler company made an absolute covenant to complete and deliver the boilers on a certain day. With the requested aid of the engineering of law and definite facts measure the damages for this delay and the fact that the plaintiff had an option, which it never exercised, to take possession of the plant of the defendant and to complete the work the boiler company had undertaken to do, did not deprive the engineering works of its right to recover these legal damages. An unexercised option to take possession of contract work and finish it in case of delay does not deprive a contractee of his right to recover damages for the delay in finishing it of a contractor who completes it after the day specified for its completion.

In support of the denied instruction, counsel argue and cite authorities which to them seem to support their views to the effect that the amount of $100 per day for the first 10 days' delay and $200 per day for delay thereafter, is so out of proportion to the price of the boilers and to the profit of the boiler company upon their construction that it could not have been in the contemplation of the parties that the boiler company should pay this amount unless it expressly agreed to do so, or unless it contracted so to do impliedly by reason of notice to it that it would be held liable for these damages, or unless the whole transaction showed that the boiler company consented to become liable therefor. The questions raised by these contentions are not novel. They have been exhaustively considered and discussed, and have been repeatedly decided by this court. A reconsideration of them in the light of the authorities cited by counsel for the boiler company has served but to confirm our opinion that these are the rules of law applicable to this issue of the measure of damages:

(1) Those damages which are the natural and probable result of a breach of a contract, those which the parties may reasonably anticipate as the effect of the breach under the particular circumstances of the case which are known to them when the contract is made, and those only, may be recovered in an action upon a contract. Rockefeller v. Merritt, 22 C.C.A. 608, 617, 76 F. 909, 918, 35 L.R.A. 633, and cases there cited.

(2) In the absence of proof aliunde of knowledge by the defaulting party at the time the contract is made of special circumstances which make other damages the natural and probable effect of a breach, such damages only as are implied by the contract itself, such as would naturally flow from its breach in the usual course of things, such as would reasonably be anticipated by the parties to such contracts in the great multitude of such cases, and such damages only, may be recovered. Drug Co. v. Byrd, 92 F. 290, 34 C.C.A. 351; Railroad Co. v. Bucki, 16 C.C.A. 42, 46, 68 F. 864, 868; Hadley v. Baxendale, 9 Exch. 341, 354, 356; Primrose v. Telegraph Co., 154 U.S. 1, 29, 14 Sup.Ct. 1098, 38 L.Ed. 883; The Ceres, 19 C.C.A. 243, 72 F. 936, 943; Boyd v. Brown, 17 Pick. (Mass.) 453, 461; Ingledew v. Railroad, 7 Gray (Mass.) 86, 91; Railway Co. v. Mudford, 48 Ark. 502, 3 S.W. 814, 816; Kempner v. Cohn, 47 Ark. 519, 527, 1 S.W. 869, 58 Am.Rep. 775.

(3) Proof of knowledge by the defaulting party at the time he makes the contract of special circumstances which make damages other than those implied by the contract, and naturally flowing from it, the natural and probable effect of its breach, will warrant the recovery thereof. Boutin v. Rudd, 27 C.C.A. 526, 82 F. 685; Central Trust Co. v. Clark, 34 C.C.A. 354, 92 F. 293, 297; Accumulator Co. v. Dubuque Street Ry. Co., 12 C.C.A. 37, 64 F. 70, 78; McDonald v. Kansas City Bolt & Nut Co., 79 C.C.A. 298, 149 F. 360, 365, 8 L.R.A. (N.S.) 1110; Iowa Mfg. Co. v. B. F. Sturtevant Co., 89 C.C.A. 346, 162 F. 560, 462, 18 L.R.A. (N.S.) 575.

In the case last cited, the very question in hand, the question whether or not one who contracted to furnish machinery for a builder who was, with knowledge of the contractor when he made his agreement, liable to pay $25 per day for any delay in completing the building, was liable to pay these damages for such delay in completing the building, to furnish the machinery at the stipulated time, was argued, considered, and decided, and in our opinion rightly decided in favor of the builder.

There was evidence in the case at bar for the consideration of the jury to the effect that, before the contracts in suit were made, the boiler company was notified that the engineering works was liable for $100 per day for the first 10 days' delay in the completion of the steamship and for $200 per day for any delay thereafter, and that, if by its failure to complete and deliver the boilers at the time fixed by the latter contract it caused such a delay in the completion of the steamship, the engineering works would hold it liable for those damages. In the absence of evidence to the contrary these damages appear to have been moderate and reasonable. They were stipulated to be the damages for the loss of the use of steamship worth $380,000, and they do not...