J. A. Laporte Corp. v. Pennsylvania-Dixie Cement Corp.

⁶⁴⁴ Bond, O. J., delivered the opinion of the Oonrt. A buyer of cement from a manufacturer repudiated its contract before any of tbe cement had been delivered or called for, and tbe seller, treating tbe whole contract as broken, recovered judgment for damages from tbe breach measured by tbe difference between tbe cost of production and tbe contract price, in so far as it was found feasible to estimate damages; and on tbe buyer’s appeal tbe question chiefly argued is whether this was tbe correct measure of damages under tbe facts shown. The Laporte Corporation, having a contract for tbe construction of a dam on Gunpowder River and Pretty-Boy Creek in Baltimore County, to impound water for part of tbe water supply of Baltimore City, entered into a written contract on March 24th, 1931, with tbe Pennsylvania-Dixie Corporation, a manufacturer of cement, for all tbe Portland cement required' for tbe work, estimated at 200,000 barrels, to be delivered at Parkton, Maryland, prior to December 31st, 1931. Tbe price stated in tbe contract was $2.25 a barrel, in cloth sacks; and it was stipulated that tbe seller should reduce tbe price to meet any subsequent reductions by it in market price.

Testimony on behalf of both parties, however, established tbe fact that tbe price actually agreed upon was less than $2.25 a barrel; that, in order to offset a disadvantage of longer transportation for deliveries from this seller than would be necessary for a competitor nearer tbe work, fifteen cents a barrel should be deducted from that price. 'Whether tbe agreement went further, and required that tbe same deduction should be made from any subsequently reduced market price, was a question in dispute. Tbe agreement-on tbe actual price was not reduced to writing. Tbe seller is a large manufacturer and seller of cement, having in all, about tbe country, eight factories, with a total production capacity of 12,200,000 barrels a year; and its nearest factories, numbered four and six, from which cement for this contract would have been shipped, bad a total capacity of 3,700,000 barrels. Tbe total production capacity of tbe seller, according to its testimony, was of a larger amount ⁶⁴⁵ than conld be marketed at any price, however low, and the amount that could be marketed depended largely on the extent of the success or failure of efforts of its salesmen in competition with salesmen of other sellers.

Under the conditions existing in 1931, the plants worked to only forty-eight per cent, of their full capacity. 3 On March 31st, 1931, a week after the making of the present contract, the seller had on hand, at its plants numbered four and six, 577,000 barrels of cement made up, and had commitments or orders amounting to 1,037,000 barrels excluding this order. On December 31st, 1931, the date specified for concluding deliveries on the contract, it had on hand 404,000 barrels, and commitments for 1,190,000 barrels. During the year 1931 its total production at those two plants amounted to 2,613,350 barrels, and its total shipments, filling orders, amounted to 2,595,000 barrels. Erom a third plant in the same nearby region, and from which shipments on this contract might have been made, it shipped on other orders 75,000 barrels, but produced none during that year.

Within a short time after entering into the Contract, the buyer gave notice that it would not consider it binding, and made a contract with another seller and manufacturer; and it is not denied that in doing so it was guilty of a breach of its contract with the appellee. The buyer raises on appeal a question whether the contract, lacking as it does a writing of the essential element of the price actually agreed upon, is unenforceable under the statute of frauds, as embodied in the Code, art. 83, sec. 25. Browne, Statute of Frauds (5th Ed.), sec. 376; Woods, Statute of Frauds, sec. 351; 1 Williston, Sales, sec. 103; Goodman v. Griffiths, 1 Hurl. & N. 574; 1 Uniform Laws Annot. 64. This is a question which does not appear to have been raised below, and for that reason seems foreclosed as possible ground of reversal on appeal.

Code, art. 5, sec. 10. There was testimony that a writing on the actual price was lacking, but in no place does it appear to have been suggested that this affected the enforceability of the contract. The defendant prayed generally that a verdict be rendered in its favor be ⁶⁴⁶ cause there was no evidence legally sufficient to entitle the plaintiff to recover, and a ruling on the question could, perhaps, have been made on that prayer, but it has long since been decided that a prayer sufficiently general in terms to afford ground for ruling on a defense raised does not meet the requirement that the defense must plainly appear to have been raised. Tyson v. Shueey, 5 Md. 540, 552 .

A reading of the record indicates rather clearly that it was not raised in this instance. The rules for measuring damages from a buyer’s anticipatory breach of a contract of sale embodied in the Sales Act, Code, art. 83, sec. 85, are broadly stated, for they were intended to leave latitude for adaptation to the circumstances of particular cases in pursuing the effort to restore to the seller all that he might lose by loss of the sale. See Amer. Law Inst., Restatement Contracts, sec. 329, Comment; Dimmick v. Hendley, 117 Md. 464, 470 , 84 A. 171 ; Kahn v. Carl Schoen Silk Corp., 147 Md. 516 , 128 A. 359 ; Maryland Fert. & Mfg.

Co. v. Lorentz, 44 Md. 218, 235 ; Ontario Co. v. Hamilton Co., 27 Ont. App. 346, 351. No one measure is fixed upon as the ordinary or preferred measure. The comprehensive principle is stated in subsection 2: “The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer’s breach of contract”; and the ensuing subsections, providing for more particular applications of that principle, are broad and elastic in form.

The precedents in decided cases which have applied one measure and another to similar contracts are in great abundance; and not in agreement. Opposite conclusions have been reached on hardly distinguishable facts. See review in 44 A. L. R. 258. The question which finally tests the appropriateness of a given measure in a case of a breach of contract of sale of goods by a manufacturer seems to be not merely whether the contract in a particular case was one for manufacture as well as for sale; the inquiry goes closer to the effect of breach on the seller, and to the position in which it has left him.

If he should be left with goods on hand for the sale, and so with ⁶⁴⁷ their market value iu his possession and available on a market, his loss would be only the further amount of the difference between the market value and the contract price; and that difference would be the appropriate measure of damages. If, on the other hand, that further margin should not be his only loss from the breach, if there should be no market value of goods still available to him, either because he has no goods left on hand, or there is no market for any he has, then his loss would be, generally speaking, and disregarding adjustments of minor items, the difference between his cost and the contract price. In each situation the result to him would be the same in theory, the difference being that upon application of the one measure his total loss would be recovered in part from the market and in part from the buyer, while upon application of the other it would all be recovered from the buyer. 2 Williston, Sales, secs. 588, 589; Mechem, Sales, sec. 1702; 2 Sedgwick, Damages, sec. 752. But it is not always clear whether under particular circumstances the seller may fairly be said to hold goods sold, available to aid in making him whole.

In cases especially of larger manufacturers, or those whose plants are not operated from sale to sale, but continuously, the relation of production to a particular sale is, of course, not the simple, direct. one that exists in a case of goods made to order. It is then difficult, or impossible, to identify any portion of the goods produced as supply for a particular sale; and the just basis for measuring the loss and damage may be that of the effect of the breach on disposal of the seller’s whole production. The contract here was one for sale of a staple article of commerce, but by a seller known to be the manufacturer. It contains references to the seller’s plants and the effect of strikes and delays in them; and the buyer’s president, who himself bought the cement, testified that he dealt with factories in procuring prices.

Erom the testimony previously recited, it might be inferred that production at the seller’s plants did not run materially ahead of all orders, and that there was at least a probability of such a relation, or keeping pace, between total production and sales as would cause the ⁶⁴⁸ seller to be left by a repudiation practically without the means of recovering so much of its loss from the market. If its total output had to be reduced to forty-eight per cent, of its capacity, then loss of one large sale might fairly be regarded as having had the effect of staying the making up of so much cement in the end. Williston (2 Sales, secs. 583a and 584) is of opinion that, even if there are goods allocated to a particular sale, this measure of the difference between cost of production and contract price may be the right one: “If by the terms of the contract the seller was to manufacture the goods, or if the buyer had notice when the contract was made that the seller intended to furnish goods of his own manufacture, the general principles governing consequential damages would seem to permit the seller to base his damages not on the market value of his product but on the cost of manufacture, which may be much less than the market value. There seems no logical reason why this rule should not be generally applicable though the goods were completed at the time of the breach or even at the time when the contract was made.

It is true the seller still has the goods and may resell them at the market price, but by doing so he diminishes his capacity to make other