Davison Chemical Co. v. Baugh Chemical Co.

Boyd, C. J., delivered the opinion of the Court. This is an appeal from a judgment obtained by the appellee against the appellant. On the , 28th of April, 1913, a contract was entered into between the parties by which the appellee purchased from the appellant from 30,000 to 50,000 tons of clear sulphuric acid per year, delivered at the appellee’s works at Canton, Md., or to Baugh & Sons Co., Norfolk, Va., from a period beginning January 1, 1913, and ending December 31, 1917. There was to be a minimum of 30,000 tons, or a maximum of 50,000 tons of 2,000 pounds each per annum, on a basis of 50° Beaume, 60° Fahrenheit, and the appellee agreed to declare on January 2nd of each year what proportion of the 20,000 tons option it would take that year.

The price was $5.00 per ton of 2,000 pounds, delivered in storage tanks at the buyer’s works at Canton, or storage tanks of Baugh & Sons Company, Norfolk, Va., in quantities not exceeding 700 tons at one delivery. Settlement was to be made in cash on the first day of the month for all deliveries made during .the previous month, and deliveries were to be made as nearly as possible in equal weekly instalments. The contract contained the following clause: “Fire, accident or strike, in the work of any of the parties herein mentioned, obstmction to navigation, accident to acid barges, war, insurrection or other uncontrollable causes, rendering buyers unable to receive ²⁷ or sellers to deliver, shall he good and sufficient reason to make this contract inoperative during the period of necessary repairs, reconstruction or continuance of difficulties.” A trial of the case resulted in a verdict in favor of the plaintiff for $139,433.65. A motion for a new trial was made, and the Court decided that it would grant a new trial unless the plaintiff filed a remittitur of $10,922.77, and the defendant would aceeed to that.

The plaintiff agreed to file a remittitur, but the defendant declined to accede to the terms. The Court overruled the motion and a judgment was entered for the amount of the verdict. There are nine bills of exception presenting the rulings of the Court on the admissibility of evidence, and a tenth which embraced the rulings on the prayers. A case between these parties, involving this contract, was decided by us at the April Term, 1918, and can be found in 104 Atlantic, 404, and in 133 Maryland, page 203.

That was a bill for specific performance and an injunction, but the period of time and the questions involved are not the same in the two cases. At the trial of this case the plaintiff offered five prayers, all of which except the third were granted, and the defendant offered three, the first and second of which were granted and the third .rejected. A special exception to the defendant’s third prayer was: also filed and sustained. Wo do not understand the appellant to particularly complain of the rulings, on the plaintiff’s prayers, and we will therefore not discuss them in this opinion, but will only say that we find no reversible error in the granting of them or either of them.

The alleged error in the rejection of the defendant’s third prayer is specially relied on, and we will aslc the reporter to copy that in his report of the ease. It is conceded that the authorities- cited by the appellant in support- of the doctrine of pro-rating do not in terms determine the question which the appellant intended to present by that prayer, but it is contended that it contains a propo ²⁸ sit-ion “which logically follows from the general doctrine of pro-rating, as laid down in the authorities which we have cited; and that it is sound law.” The cases cited are Oakman v. Boyce, 100 Mass. 477 ; Garfield & Proctor Coal Co. v. Penn. Coal co., 199 Mass. 22 , 84 N. E. 1020 ; Met. Coal Co. v. Billings, 202 Mass. 457 , 89 N. E. 115 ; Jessup & Moore Paper Co. v. Piper, 133 Fed. 108 ; Consol.

Coal co. v. Mexico co., 66 Mo. App. 296 ; Luhrig Coal Co. v. Jones & Adams, 141 Fed. 617 ; McKeefrey v. Connellsville Co., 56 Fed. 212 , and Herman v. Bower Co., 242 Fed. 59 . It is also claimed that the former case between these parties in 104 Atl. -, especially in the quotation from Jessup & Moore Paper Co., v. Piper , adopted the doctrine of prorating in such cases. But we have found no authority to sustain the position taken in the third prayer.

The theory of it, as stated in the appellant’s brief, is that “When a manufacturer assumes future commitments for his product to an amount which, when added to existing' future commitments to his customers, exceeds the existing capacity of his plant, but at the same time undertakes additions to his plant which should be sufficient to* provide for the increased burden assumed,”' he is doing what a reasonably prudent man in the same situation would do. Or as stated elsewhere in that brief, “The appellant’s third prayer was submitted on the theory that if a manufacturer, who* has* so made additions, does not deliver upon the new contracts assumed •in reliance upon them more than the actual production due to such additions alone, and which the* plant would not have produced if they had not been made, that then the plaintiff would not be entitled to* more than his pro-rata share of the production due to the original plant alone, if distributed among those customers in like situation with itself.” We can understand why the doctrine of pro-rating should be adopted where the contracts for future deliveries have such saving clauses as that in this contract, which is quoted above. If the contract so provides, they are permitted to rely ²⁹ oil such tilings, as that clause refers to—provided, of course, they act, in good faith and are proven to be entitled to, its protection, but unless the contract does so provide the parties must generally be bold to, the terms of it. There is danger, however, of giving these saving clauses too much latitude.

This prayer must strike anyone as very unusual, and, to say the least, questionable. To permit a manufacturer to escape from bis full liability to bis regular customers, when he exceeded the amount tuhich his plant might he expected to produce, because he planned and undertook the construction of enlargements and additions to his, plant, for the purpose of enabling him to manufacture the increased production or additional articles so contracted for, would be making contracts dependent upon contingencies and uncertainties which the law does not subject them to unless the parties have contracted with reference to them. We need only recall the former case between these parties to illustrate how dangerous, such a doctrine would he. There the defendant contended that it could not, get sufficient quantities of pyrites in order to furnish its customers with the acid, and that, unless it changed its plant and furnished a much more expensive substitute, it could not supply it.

If such condition existed, why should it be permitted to enlarge its plant to the detriment of its regular customers,? Yet, according to the position appellant now takes, it could enlarge its production and is only responsible to its regular customers for the pro,-rata proportion out of the product of the plant as it existed before it was enlarged. In other words, it might have gotten sufficient pyrites, to comply with its contracts with its regular customers, hut by making a number of new contracts could not malve sufficient acid because it used some of the pyrites which it ought to have used in the original plant. Of course we understand that the defendant does not mainly rely in this case on the difficulty in procuring pyrites, but it did in some of its letters refer to it, and we speak of it as a striking illustration of the danger of such a doctrine as the appellant contends for. ³⁰ It may well be inferred from what is in the record that some of the troubles relied on by the appellant as a justification for pro-rating were not the sole causes for shortage in deliveries during the time the repairs were being made, and it would seem to be very probable that some of the shortage was owing to the overloading of the plant by reason of entering into the new contracts, which the appellant claims were to be filled with the increased production expected from the enlargements and additions to the plant, Mr. E. Wilbur Miller, president of the appellant, testified that on January 1, 1915, the capacity of the plant “was about 17,000 tons a month, 200,000 in round numbers, for the year.” He said that in the early part of that year the fertilizer business was in bad shape, and gave that as a reason for going to the DuPont Company which he found wanted a large amount of high test acid, but in point of fact the table filed by the appellant for the year 1915 shows that for January, 1915,' the commitments amounted to 17,234 and the deliveries to 16,271, for February the commitments were 17,049 and deliveries 14,544, for March the commitments were 17,577 and deliveries 18,212, and for April 17,300 commitments and 17,408 deliveries.

The difference in February is about accounted for by the falling off of deliveries to the Baugh Company of over 2,400 tons. The evidence satisfactorily shows that that was owing to the Baugh Company shutting down that month for repairs, and that it was done with the consent of the appellant, which agreed to later make it up>, and the parties finally agreed .to 1,809 tons shortage as of October 1, 1915, which, Mr. Huntington, the vice-president of appellant, wrote on October 9, 1915, “will be made up to you at the earliest possible date.” It would seem, therefore, that the testimony of Mr. Miller as to the falling off of the fertilizer business in the early part of 1915, being the reason he gave for seeking other contracts, was not borne out by his own company’s figures, at least that that did not cause a decrease of deliveries on those contracts. ³¹ Mr. Miller testified that tlie demand for sulphuric acid began in April or May, and continued until the: time he was testifying. As the agreed shortage in Baugh’s deliveries was only 1,809 tons, to October 1, 1915, it will be seen that the bulk of its shortage complained of occurred after the demand for sulphuric acid increased. In his. letter of May 13, 1915, he wrote to the Baugh Company: “As the fertilizer condition has greatly improved, we would like to know whether you would be willing to let us make an additional offer for freight, and that you would stand by ns to the extent of an additional cost on acid, not exceeding twenty-five (2oe.) per ton.

There is such an enormous demand for sulphuric acid because of the increase in ammunition manufacture, that we think it wise not to let all of the pyrites go. in this direction.” The Baugh Company a,t first declined to. agree to that, but-replied that “if you are forced to act in specific oases of bringr ing forward pyrites at an increased cost of freight and handling, we will be glad to have you take the matter up with us.” On May 21, 1915, Mr. Miller wrote to Mr. Pinkerton, treasurer of the Baugh Company, that “If the fertilizer situation has not improved, as you say it has not done, the fertilizer people have no sane right to be in business. We would be very glad to offer you $1.00 per ton to be relieved of your contract for the next two years at least, and with such conditions existing all over the country it is about time for the fertilizer people to wake up and get some backbone. I can not and I will not pay one cent beyond our pyrites contracts to deliver acid under fertilizer contracts as they exist. Our contracts with the explosive manufacturers and general chemical trade have agreed to a clause that they will pay any additional cost in getting pyrites., whether foreign or domestic, and if we are unable to. get this material they agree to have us burn brimstone, they paying the difference between our contract cost for pyrites and the cost of brimstone.” In a letter dated December 29, 1915, addressed to some bankers, in a reply to a request for information regarding the company, Mr. Miller, the president, said that the company was ³² then producing 260,000 tons per year, and with the completion of an additional unit which would he in operation March, 1916, its output would he 300,000 tons per year.

H'e said, “As a consequence of the European war, the Davison Chemical Company has open to it the opportunity either of