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BENJAMIN V. MALONEY.

(Circuit Court, W. D. Pennsylvania. August 3, 1907.)

No. 19.

1. SALES-BREACH OF CONTRACT BY PURCHASER–MEASURE OF DAMAGES.

The measure of the damages recoverable by a seller for the breach by the purchaser of a contract for the sale of a quantity of scrap steel, which on the failure of the purchaser to take it was sold by the seller at the market price, is the difference between such price and the contract price.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 43, Sales, $ 1098.] 2. DAMAGES-PLEADING-AFFIDAVIT OF DEFENSE,

An affidavit of defense, attempting to plead a claim for damages for breach of contract, must allege facts showing, not only the right to such

damages, but from which the amount can be ascertained. At Law. On rule for judgment for want of sufficient affidavit of defense.

O. S. Richardson and W. D. N. Rogers, for plaintiff.
Watterson & Reid, for defendant.

EWING, District Judge. On December 4, 1905, the defendant entered into a contract with the plaintiff for the sale of 500 tons of heavy melting steel scrap, to be delivered f. o. b. cars Pittsburg at $17.05 per ton, or 350 tons thereof to be delivered in Allegheny at $17.35 per ton, or 350 tons or more for Pittsburg delivery and the balance to Sharon, Pa., at $18 per ton, deliveries to be made in December and January, and plaintiff to give two 60-day acceptances for $2,000 each on account; the balance to be settled for on basis of 30-day draft from date of invoice for each car. Pursuant to this contract one car of scrap was delivered, of the value of $414.29. No other scrap was delivered to the plaintiff, and he alleges that the time of delivery was by agreement postponed from time to time, and that finally, without his knowledge or consent, or previous notice, the defendant sold the scrap to other parties, and has refused to refund to him the amount of his payments on account, viz., the two drafts, aggregating $4,000, less the $414.29 for the one car delivered; and it is for that amount, to wit, $3,585.71, with interest from February 2, 1906, that this action is brought. The defendant filed an affidavit of defense and this matter is now before the court on a rule for judgment for want of a sufficient affidavit of defense.

The payment of the $4,000 by the plaintiff and the delivery of the one car of scrap, of the value of $414.29, are admitted; but the defendant denies that he ever consented to an extension of the time of delivery, and avers it is not true that plaintiff had no notice of defendant's intention to resell said scrap, and alleges that the facts are as set forth in extracts from letters which passed between the parties, recited in the affidavit of defense, and claims to be indebted to the plaintiff only in the sum of $2,461.69, for which check was sent to the plaintiff and refused. The correspondence set out shows that the defendant was anxious to have the scrap delivered and that the plaintiff was not ready to receive it; but at no point in the correspondence quoted is definite notice given to the plaintiff that, unless he gives shipping directions within or by a certain date, the same will be sold in the open market or otherwise disposed of at his risk. The last correspondence set out is a portion of the letter of April 20, 1906, from the defendant to the plaintiff, in which he states:

"Your favor of the 16th inst. received, stating that you hope that I would not press you on the shipment of the steel, as you say you would lose considerable money on the deal. Would say I have certainly gave you all the time any reasonable person could, so I certainly have to straighten it out by the first of the month. So I hope to be able to see you before that time.”

And the reply of the plaintiff thereto, the date of which is not stated, to the following effect:

"We are in receipt of your letter of the 20th inst. in regard to the steel scrap which you owe us, and note all you have to say. In reply we beg to state that Mr. Benjamin will be unable to run down to Pittsburg next week, as he has some very important business in the East which will take all of his time next week. He, however, expects to run down to Pittsburg the following week, when he will call on you, and hope that he will be able to straighten this matter out."

Following this correspondence the defendant states that he sold the heavy melting steel scrap at the market price then ruling, and thereafter sent the plaintiff a statement, dated May 3 (31), 1906, a copy of which is attached to the affidavit of defense and made part thereof, marked "Exhibit A,” showing the items of the transaction, and that he sent to the plaintiff his check for the $2,461.69, being the balance shown by said statement, which plaintiff refused to accept, and beyond that sum he claims not to be indebted to the plaintiff. The statement referred to as "Exhibit A” is as follows:

Pittsburgh, Pa., May 31st, 1906. Benjamin Iron & Steel Co., Buffalo, N. Y., in Account with T. J. Maloney,

Twenty-ninth Street and A. V. R. R. Date Car No. 1 Proceeds $1,000.00.......

$ 988 33 2 12 Dic't $1,000.00 renewal.

11 67 1 Part Proceeds $2,000. Renew..

975 00 3 5 Part Proceeds $2,000. Renew..

1,000 00 3 12 Dic't $2,000. Renewal...

25 00 5 31 Profit on 500 ton steel as per itemized bill herewith........ 1,119 97

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An affidavit of defense is required to set forth specifically the nature and character of such defense, and it will be noted that in the defense here set up neither the date nor place nor market price of the steel scrap sold is given, but that the manner in which the defendant arrives at the balance which he admits to be due is simply by deducting from the amount claimed by the plaintiff an item of profit on 500 tons steel “as per itemized bill herewith, $1,119.97.” Naturally the construction to be placed upon that is that such profit is the difference between the cost of the steel scrap to the defendant and the price at which it was contracted to be delivered to the plaintiff; for it cannot be the profit which the defendant made on the resale thereof to some third party or parties, else he would sustain no loss and be entitled to no set-off against the plaintiff's claim.

Admitting the defendant's contention that this was an executory contract, and that upon the plaintiff's declination to receive the goods according to contract he had a right to dispose of them elsewhere, his claim against the plaintiff for his abrogation of the contract would be damages measured by the difference between the market price at the place of delivery at the time plaintiff refused to receive and the contract price. But this, however, is not what the defendant claims, as shown by his affidavit of defense. Consequently, the defense he makes to a portion of the plaintiff's claim is founded upon an erroneous basis, and cannot be supported. For all that appears in the affidavit of defense, the defendant may have disposed of his scrap at a price in advance of his contract with plaintiff; for, while he says he disposed of it at the market price then ruling, he does not give that market price, nor, as above stated, when and where he made the sale.

The affidavit of defense is therefore adjudged insufficient, and the rule to show cause made absolute.

SOUTHERN RY. CO. V. BLUNT & WARD.
(Circuit Court, S. D. Alabama. July 30, 1907.)

No. 1,282,

1. RAILROADS-CONTRACT GRANTING RIGHT TO BUILD SHIPPING PLATFORM

VALIDITY.

A contract by a railroad company, granting the right to another to build a platform on its right of way from which to load cotton for shipment over its lines on condition that the builder shall indemnify it against any loss or damage it may sustain by reason of such structure, is not contrary to the public policy of the state of Alabama.

[Ed. Note.--For cases in point, see Cent. Dig. vol. 41, Railroads, $ 182.] 2. CONTRACTS-PRESUMPTION OF CONSIDERATION-ALABAMA STATUTE.

Under Code Ala. 1896, § 1800, every written contract made the basis of a suit is presumed to have been made on a sufficient consideration, and the burden of impeaching such consideration rests upon the defendant.

[Ed. Note.--For cases in point, see Cent. Dig. vol. 11, Contracts, & 401.] At Law. On demurrers to complaint. Pettus, Jeffries & Pettus, for plaintiff. De Graffenried & Evins and Thomas E. Knight, for defendants.

TOULMIN, District Judge. The questions raised by the demurrers, which go to the substance and maintenance of the action, are: First. Is the contract on which this suit is based in contravention of public policy, and therefore void ? Second. Is it without consideration ?

The contention of counsel for defendants is that the contract is against the public policy of this state, and public policy generally. Contracts against public policy are divided into several classes—among

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others, contracts to offend against the laws and public duty. Kellogg v. Larkin, 3 Pin. (Wis.) 123, 56 Am. Dec. 164. If the contract in question is objectionable at all, it must be as a "contract to offend against the laws and public duty.” The public policy of the nation or state must be determined by its Constitution, laws, and judicial decisions. U. S. v. Trans-Mis. Freight Ass'n, 58 Fed. 69, 7 C. C. A. 15, 24 L. R. A. 73; Swann v. Swann (C. C.) 21 Fed. 299; Hartford Fire Ins. Co. v. Chicago, M. & St. P. Ry. Co., 70 Fed. 201, 17 C. C. A. 62, 30 L. R. A. 193; same case 175 U. S. 91, 20 Sup. Ct. 33, 41 L. Ed. 81. What is there in the Constitution, laws, and judicial decisions of this state establishing or recognizing a public policy hostile to the enforcement of this contract? My attention has not been called to any provision of the Constitution against which this contract offends, or to any provision prescribing any public duty, the performance of which is abandoned or sought to be avoided by the contract, and I know of none.

But the contention of counsel is that the statute of the state provides that "a railroad company is liable for all damages done to persons,

or for any negligence on the part of such company or its agents,” and cites section 3443 of the Code of Alabama of 1896; and their contention, further, is that, the Supreme Court of Alabama having decided that it was negligent for a railroad company to allow dry grass or other inflammable material on its track or roadway, it is plain that, when the plaintiff contracted with the defendants for the construction of a platform on its right of way, it contracted to do something which the statute had expressly forbidden under penalty. The substance of the argument in support of this contention is that, inasmuch as the platform was to be used for shipping cotton over the lines of the plaintiff's railroad, and inasmuch as cotton is known to be a highly inflammable material, the contract in question was clearly an offense against the statute referred to, and the public policy of the state, as evinced by the decision in the case of L. & N. R. R. v. Miller, 109 Ala. 500, 19 South. 989.

I know that section 3443, Code Ala. 1896, provides that a railroad company is liable for all damages done to persons or property, resulting from failure to comply with the requirements of certain sections of the Code, or for any negligence on the part of such company or its agents. The sections referred to in section 3443 are regulations affecting public safety, but have no application to the burdening or use of the right of way of railroads with structures or otherwise, and no penalty is prescribed in section 3443 or the other sections mentioned. I ain not aware of any statute of the state which forbids, under penalty, a railroad company from building, or granting the right to another to build, a platform on its right of way from which to ship cotton over its lines. I am aware that the Supreme Court of Alabama, in the case cited (109 Ala. 500, 19 South. 989) has held that, as fire will escape from locomotive engines in sufficient quantities to ignite combustible material along the track or roadway of a railroad company, if dry grass or other combustible material was on such roadway in consequence of the railroad company's negligence, any person suffering damage therefrom would be entitled to recover if he proved his case in

155 F.-32

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other particulars. In that case it was found as a fact that the railroad was in that instance guilty of negligence in allowing the combustible material to be on the roadway.

If I understand these propositions of counsel I am inclined to think they are mistaken in the contention that there is a statute in this state which forbids under penalty the making of such a contract as the one under consideration. Moreover, there is nothing in this contract which attempts to relieve the plaintiff from liability in a case like that cited from 109 Ala. 500, 19 South. 989. The contract here in question, as I construe it, does not disable the plaintiff from the performance of the functions pertaining to the exercise of its powers granted by its franchise. The plaintiff does not by the contract abandon or attempt to abandon the discharge of any of its duties or liabilities to the public; nor did it assume by the contract to relieve itself of any liability or essential duty, as a common carrier, under the statute of the state or at common law.

In answer to the argument of counsel that "anything, the tendency of which would be to cause a relaxation of the highest degree of care and diligence in a common carrier, is therefore

* in contravention of the general policy of the law,” I cite the case of S. C. & G. R. Co. v. Carolina, C. G. & C. Ry. Co., 93 Fed. 560, 35 C. C. A. 441, where the court said:

"It is not enough to avoid a carrier's contract, as in contravention of public policy, to show that because he is protected from loss he may be tempted to violate his duty to the public.” Phoenix Ins. Co. v. Erie Trans. Co., 117 U. S. 324, 6 Sup. Ct. 750, 29 L. Ed. 873; Carolina Ins. Co. v. Union Com. Co., 133 U. S. 415, 10 Sup. Ct. 365, 33 L. Ed. 730.

"Before the court should determine a contract to be void as contravening public policy, where the contract is made in good faith and stipulates for nothing that is malum in se or malum prohibitum, it should be satisfied that the advantage to accrue to the public for so holding is certain and substantial, not theoretical or problematical." Kellogg v. Larkin, 3 Pin. (Wis.) 123, 56 Am. Dec. 161.

"The true rule of construction is that illegality is not to be presumed, but the contract is to be assumed to have been made in good faith for the purpose which appears on the face of it, and not colorably for any other.” Ū. S. v. Trans-Mis. Freight Ass'n, 58 Fed. 78, 7 C. C. A. 15, 24 L. R. A. 73.

"The burden is on the party who seeks to put a restraint upon the freedom of contract to make it plainly and obviously clear that the contract is against the public policy of the state or nation.” U. S. v. Trans-Mis. Freight Ass'n, supra; Hartford Fire Ins. Co. v. Chicago, M. & St. P. Ry. Co., 70 Fed. 201, 17 C. C. A. 62, 30 L. R. A. 193; same case 175 U. S. 91, 20 Sup. Ct. 33, 44 L. Ed. 84.

"The contract ought not to be declared void on the ground of adverse public policy, unless it clearly appears that there is a recognized or established public policy touching the subject-matter, which will be violated if the contract is enforced.” Hartford Fire Ins. Co. v. Chicago, M. & St. P. Ry. Co., supra.

The contract here stipulates for nothing malum in se or malum prohibitum; and it does not appear clear to me that there is in this state a recognized or established public policy touching the case presented on the record now before the court. No court ought to refuse its aid to enforce such a contract on doubtful and uncertain grounds. Authorities cited supra.

Second. Is the contract without consideration? “A valuable con

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