Unexcelled Chemical Corp. v. Drake Mfg. Co.

• Decision Date: 08 March 1957
• Docket Number: Civ. A. No. 334-55.
• Parties: UNEXCELLED CHEMICAL CORPORATION, Plaintiff, v. DRAKE MANUFACTURING COMPANY, Defendant.
• Court: U.S. District Court — District of New Jersey

149 F. Supp. 484

UNEXCELLED CHEMICAL CORPORATION, Plaintiff, v. DRAKE MANUFACTURING COMPANY, Defendant.

Civ. A. No. 334-55.

United States District Court D. New Jersey.

March 8, 1957.

Carpenter, Bennett, Beggans & Morrissey, Jersey City, N. J., by Milton A. Dauber, Jersey City, N. J., for plaintiff.

Samuel A. Wiener, Paterson, N. J., for defendant.

WORTENDYKE, District Judge.

In this diversity action plaintiff seeks damages for defendant's alleged breach of its agreement to deliver to the plaintiff certain prescribed minimum quantities of bomb parachute opening delay bodies¹ during the months of September, November and December, 1953. Defendant, admitting the charged breaches of its contract with the plaintiff, asserts that its failure to make delivery according to the contract schedule was caused by plaintiff's failure to perform its reciprocal agreement to furnish to the defendant clips² required to be attached to the bodies in the course of their processing by defendant. The answer, moreover, includes a counterclaim for damages for plaintiff's alleged failure to furnish required materials and to make payment as prescribed by the terms of the contract; also by reason of claimed unwarranted cancellation of the contract with consequent loss to the defendant.

Plaintiff charges that the bodies which defendant was called upon to process and deliver under purchase orders Nos. 11,603 and 11,604 were required by the plaintiff for its performance of its prime contracts with the Government, designated respectively as CML-37 and CML-50, to which the purchase orders expressly related, and that deliveries precisely according to schedule were necessary to enable plaintiff to fulfill its commitments under the prime contracts.³ The damages which the plaintiff seeks are alleged to have resulted from the failure of the defendant to make deliveries in accordance with the schedule agreed upon.

The bases upon which plaintiff rests its claims for damages are three: (1) unproductive overhead expense which it necessarily incurred in reliance upon the promised availability of the bodies for further processing resulting from interruption of production by defendant's failure to meet delivery schedules; (2) general administrative expense necessarily incurred for the same purpose and continuing despite such interruptions of production; and (3) necessarily incurred stand-by labor costs during periods of such interruptions.

The asserted bases for defendant's counterclaim for damages are (1) alleged loss of profits by reason of plaintiff's premature cancellation of its contract (P.O. 11,604) with defendant, and (2) the amount of defendant's alleged consequent commitment to its subcontractor, D-E Industries, Inc., for latter's loss of profits and cost of tooling.

By its invitation No. CML-11-021-53-5 issued August 4, 1952, the United States Department of the Army called for competitive bids for the furnishing of 2,088,170 bomb parachute opening delay units designated as E10R1 in accordance with drawing No. D-14-32-3, and set forth that delivery was desired in the following quantities in the following months, viz.:

                  April 1953                 104,409
                  May 1953                   313,255
                  June 1953                  417,634
                  July 1953                  417,634
                  August 1953                417,634
                  September 1953             417,634
                

Plaintiff was the successful bidder under this invitation and a contract⁴ was accordingly awarded to it.

Plaintiff originally sub-contracted with D-E Industries, Inc. for some of the processing of the bomb parachute opening delay bodies referred to in the prime contract. This subcontractor was a corporation all of the stock in which was owned by Newman H. Drake, who was also the president and in exclusive managerial control thereof. By letter dated August 27, 1953, Mr. Drake advised the plaintiff as follows:

"Due to financial pressure we have found it necessary to introduce additional capital and have brought this about by forming a new company, namely, Drake Manufacturing Co., Inc. We therefore request that you cancel your P.O. to us, #8010-QQ-2, dated 7/2/53, for 464,038 pieces Bomb Delay Bodies, in its entirety, and re-issue it to Drake Manufacturing Co., Inc., Burgess Place, Mountain View, New Jersey. We also request that you cancel the unshipped balance of 361,000 pieces, Bomb Delay Bodies, on your P.O. #7810-WW-4, dated 7/2/53, in the original amount of 550,000 pieces.

"Upon the execution of these requests, we will automatically release you from all cancellation charges, legal responsibilities, and any other claims except any monies due on the final shipments against P.O. #7810-WW-4."

To the foregoing communication the plaintiff replied by letter of August 28, 1953 advising that it had cancelled and was reissuing purchase orders in accordance with the request of D-E Industries, Inc.; reminding the latter as follows:

"As you know, we have been depending upon you for a regular daily delivery of E10R1 acceptable bodies, and in response to this letter you are requested to immediately confirm in writing the schedule of shipping dates you will be able to maintain through the life of the aforementioned."

The superceding purchase order, #11,603, dated October 28, 1953, expressly referred to the number of the plaintiff's contract with the Government and provided for shipment of the bodies contracted for in quantities of 200,000 during September 1953 and 161,000 during October 1953. Purchase Order 11,604, of the same date, provided for shipment of bodies as follows: "39,000 Oct. 1953; 212,519 Nov. 1953; 212,519 Dec. 1953; deliveries on this schedule to follow those on P.O. 11,603." Each of these purchase orders provided further, in part:

"The Clip, Dwg. B14-32-11 to be furnished by the Unexcelled Chemical Corporation,"

and each of the purchase orders prescribed the same unit price, $165 per thousand. Purchase Order 11,603 bore a stamped-on legend that it was covered by United States Government contract No. DA-11-021-401-CML-37, and Purchase Order 11,604 bore a similar stamp; referring however to CML-50 instead of CML-37. Each of these stamped legends provided that the purchase order was subject to all of the terms and conditions of the Government contract.

Drake Manufacturing Co., Inc. was the corporation to which each of the superceding purchase orders was issued. Mr. Newman Drake was president of both D-E Industries, Inc. and Drake Manufacturing Co., Inc. The former corporation owned 50% of the stock of the latter corporation; the balance being owned by one Goldman, or The Clifton Metal Products Company.⁵

Since the defendant admits that it failed to comply with the delivery schedules prescribed in the superceding purchase orders, it was guilty of a breach of the contract or contracts evidenced thereby unless its failure to perform in this respect has been shown to have been due to the failure of the plaintiff to comply with its contractual undertaking to furnish the clips necessary to enable the defendant to process and deliver the bodies. Much of the evidence adduced upon the trial bore upon the question of whether plaintiff made available to the defendant the necessary quantities of clips to permit the defendant to complete and deliver the required number of units as prescribed by the terms of the purchase orders. Mr. Drake testified that the clips which were to be supplied by the plaintiff were never furnished in sufficient quantities to enable the defendant to produce 10,000 units per day as claimed by the plaintiff. Plaintiff's plant manager, Lyman, testified on cross-examination that, during the period of September through December 1953, plaintiff did not deliver to defendant a sufficient quantity of clips to permit the defendant to produce 10,000 pieces a day during that period. Mr. Drake does, however, admit (as plaintiff asserts) that from July 1 to December 4, 1953 the defendant and its predecessor D-E Industries, Inc. received from or for the account of the plaintiff, 562,000 clips. He says that from July 7 to August 23, 1953 D-E shipped to the plaintiff 144,282 units; having commenced on July 7 without any clips on hand. From delivery tickets attached to the answers to interrogatories we discern deliveries of 195,000 clips during July and 60,000 in August, for a total of 255,000 clips, against which we must credit the delivery by D-E of 144,282 bodies, leaving a balance on hand, at the time of the changeover from D-E to Drake, of 110,718 clips. In September the delivery tickets indicate a delivery to defendant on September 10 of 52,000 clips; making a total available to meet the September quota of 162,718 clips. However, during September Drake furnished only 3,782 acceptable units, which would leave a balance of 158,936 clips to meet subsequent quotas.

Because there is no indication in the record before me to the contrary, and by reason of the exception of October from the claimed deficiencies, we must assume that the defendant met its required quota for October, which is indicated as a total of 200,000 units. Utilizing the total of 158,936 available clips against this quota, we have a shortage going into November of 41,064 clips. On November 19 there was a delivery to Drake of 25,000 clips, leaving a net deficiency of 16,064 for November, and the records indicate acceptance of a total of 109,076 units during November, from Drake. This would make a total deficiency of 125,140 clips up to the commencement of December. On December 4 there was a delivery of 200,000 clips against which we must charge the shortage above referred to, which would leave a net of 74,860 clips against the December quota, and during December Drake shipped 144,631 accepted units. Thus we calculate a total of 69,771 delivered acceptable units in excess of the aggregate number of clips furnished by the plaintiff.

From the foregoing it will be noted that at no time, except during September, were there ever...