Hazelhurst Oil Mill & Fertilizer Co. v. United States

42 F.2d 331 (1930)

HAZELHURST OIL MILL & FERTILIZER CO.
v.
UNITED STATES.

Congressional No. 17453.

Court of Claims.

June 2, 1930.

Christie Benet, of Columbus, S. C., and George A. King, of Washington, D. C. (George R. Shields, Wade H. Ellis, Challen B. Ellis, and Don F. Reed, all of Washington, D. C., Benet, Shand & McGowan, of Columbia, S. C., and Hatch & Reed, of Washington, D. C., on the brief), for plaintiff.

Alexander Holtzoff, of Washington, D. C., and Charles B. Rugg, Asst. Atty. Gen. (Herman J. Galloway, Asst. Atty. Gen., on the brief), for the United States.

Argued before BOOTH, Chief Justice, and GREEN, LITTLETON, and WILLIAMS, Judges.

GREEN, Judge.

The Hazelhurst Oil Mill & Fertilizer Company is one of 285 claimants whose claims are based on similar facts and which have been referred to this court by a Senate resolution. The findings show fully the proceedings which have taken place before the case came into this court. It is not necessary, however, that we should go into any details in relation thereto, for the reason that counsel for both parties to the action have agreed that the case may be submitted and judgment rendered as if it were an ordinary action commenced against the defendant, of which the court had general statutory jurisdiction. Accordingly, the case will be so treated, the claimant will be referred to in the opinion as the plaintiff and the government as the defendant, and we shall discuss in the opinion only such facts as will be necessary for the decision of the case.

Treating the case as an ordinary suit, we find it is one which is brought to recover damages alleged to have been sustained by reason of a breach of contract between plaintiff and defendant, under which contract the defendant agreed to purchase cotton linters of the plaintiff at a stated price. The defendant answers that all of the claims arising out of or under the contract, upon which suit is brought, were settled by a subsequent contract and agreement between plaintiff and defendant with which the defendant has fully complied. To this answer the plaintiff replies alleging that the contract of settlement is void, having been obtained through duress. These matters constitute the issues in the case.

In considering the facts of the case it will be observed that the findings contain no reference to federal statutes, presidential proclamations, and presidential orders which created the United States Food Administration and the War Industries Board for the reason that this court takes judicial notice thereof.

The original contract between plaintiff and defendant was made during the great World War and was subject to all of the authorized proceedings and regulations of the government made for the purpose of effectively carrying on and sustaining the part of the United States in that great conflict. With these preliminary statements we take up the facts upon which the decision of the court turns.

It appears without dispute that in 1918 plaintiff entered into a contract with the agents of the government of the United States for the production of cotton linters and their sale to the United States during the years 1918 and 1919. Linters are the short ends of staple cotton which adhere to the seed after the lint is taken off for the manufacture of cloth. They are the best known basis for nitrocellulose, which is used for the manufacture of high explosives.

In the spring of 1918 all cotton-seed oil mills of the United States were placed under the direct control of the United States Food Administration and the War Industries Board. This control was brought about by the action of the War Industries Board in fixing the price of all linters on hand on May 2, 1918, and to be produced thereafter during the period ending July 31, 1919, at $0.0467 per pound f. o. b. points of location or production, and at the same time requiring that all mills should thereafter produce a minimum of 145 pounds of linters per ton of seed crushed, as compared with a normal production of commercial linters in peace times of about 75 pounds of linters per ton of seed. When 75 pounds or less of linters are produced from a ton of cotton seed, the product is referred to as commercial linters, and when more than 75 pounds of linters are produced from a ton of cotton seed, they are called munition linters. Munition linters of 145 pounds cut have no value for commercial purposes.

As a part of this control, all mills were required to sell all linters produced during the season of 1918-19 to the Du Pont American Industries, Inc., sole purchasing agents of the United States, and were not allowed during said period to sell any linters to any other person whatsoever. Heavy penalties were prescribed for the failure to obey the orders of the government.

Another factor of this control was the action of the Food Administration whereby the prices of cotton seed and of all the derivative products thereof other than linters, the gross operating cost to the mills, the maximum freight allowance, and the profit to be made upon each ton of seed crushed during the period from August 1, 1918, to July 31, 1919, were fixed by governmental action. An operating license was required for each mill for the continuance of business which could be revoked on the failure of the licensee to comply with the orders and regulations of the Food Administration.

Under this concerted plan of governmental agencies, as above set forth, all mills were required to pay the farmers $70 per ton for every ton of cotton seed purchased during the said period ending July 31, 1919, which included all seed produced from the entire cotton crop of the South for the season 1918-19, and to sell all products derived from the crushing of cotton seed at the prices as fixed by the government.

Each of the mills subsequently received and executed a "Seller's Contract of Sale" containing the orders and regulations made in accordance with the above recitals, with which the mills complied, and by this contract the government was bound to purchase at a specified price from the mills all linters produced during the period above named. This contract contained a cancellation clause giving the government the option to terminate the contract "in the event of the termination of the present war." The contract was not terminated or canceled in accordance with the terms thereof nor was any settlement ever offered to the mills under its provisions.

On November 28, 1918, hostilities having been ceased by reason of the armistice of November 11, 1918, the government directed the mills to discontinue the manufacture of munition linters and revert to the manufacture of commercial linters, which the plaintiff and the other mills did at once. The government also notified all mills that a definite and final arrangement for discharging the obligations of the United States would be made in a few days. Numerous conferences were held between the linter committee, representing the plaintiff and the other mills, and the officials of the government with reference to the situation.

The cotton-products section of the War Industries Board ceased to function and was disbanded on December 21, 1918, and its activities with reference to linters were taken over by the Ordnance Department of the Army and the mills so notified.

On December 30, 1918, the Ordnance Department, acting through General Pierce, notified the mills, through the linter committee, that the government would take only the linters then held by the various mills, inspected and tagged, amounting to 270,000 bales, and would take only a part of the linters to be produced between January 1, 1919, and July 31, 1919, the amount to be taken at July 31, 1919, to be prorated among the mills, and unless the mills accepted this proposition as a settlement within one hour, by 7 p. m. of the same night, the United States would breach the contracts of September 26, 1918, and refuse to accept any linters whatever, either theretofore or thereafter produced.

The nature of the results that would have followed in the way of loss and damage if plaintiff refused to accede to the demands of the defendant, made through the Ordnance Department, is set out fully in finding 19.

Counsel for defendant strenuously contend that the testimony which was taken on behalf of plaintiff with reference to the results which would have followed a breach of defendant's contract in the manner threatened, is simply a guess, or at best merely the estimate of the witnesses who gave it, and is incompetent. The objection merits serious consideration; but after such consideration, we have concluded that it is not well taken. These witnesses were men of long experience in the business concerning which they testified and their competency as experts in the matters concerning which they gave testimony was fully established. As in all cases with expert witnesses, their testimony was simply their opinions in the matter based upon their experience and knowledge of the subject, and the testimony cannot be excluded on that ground. Neither can it be rejected on the ground that it is not exact and at best, so far as the figures go, is only an approximation. The real objection to the evidence, if there be any, is that it is not given with reference to actual facts which are shown to have occurred, but with reference to what the witnesses in their judgment say would have occurred had the second contract not been entered into. No precedents can be found for our guidance in any exactly similar case, but we think the general principles with reference to expert and opinion testimony apply. If the evidence is received, and we think it should be, it is because it is the best that is obtainable upon the subject, or perhaps it might be said the only evidence that can be obtained. It would be idle to tell the plaintiff that proof should be produced of the injury which would result to it if defendant carried out its threats in order to make out a case of duress and then say that the only evidence that could be obtained in the way of proof was inadmissible. We have therefore used it in making up our findings. It may be somewhat inexact but it is not necessary that it should be exact in order to show the great amount of damage that plaintiff would have received.

It is urged on behalf of defendant that the plaintiff is precluded from any recovery by the language used in the opinion of the Supreme Court in the case of the Hartsville Oil Mill v. United States, 271 U.S. 43, 46 S. Ct. 389, 391, 70 L. Ed. 822, the plaintiff therein being a corporation which was in the same position as this plaintiff, but the language of the Supreme Court upon which the defendant relies we think was intended to apply only to the evidence in that case, which was far from being complete with reference to the extent of the plaintiff's injuries and the nature thereof.

In the Hartsville Case, supra, the Supreme Court, after severely criticizing the conduct of defendant's officials, said:

"Appellant must prove the probable injury which it would have suffered from the threatened refusal of the government to carry out its contract, and that fear of that loss was the effective cause of its executing the settlement contract. Any inference that the business of manufacturing and distributing cotton seed products would have been disastrously affected, would avail appellant nothing because it does not appear what the consequences to its own business and finances would have been.

"The findings establish that on December 30, 1918, there were in the hands of manufacturers 270,000 bales of linters; but it does not appear what proportion of them, if any, were in the hands of appellant. There is no finding with respect to the amount of cotton seed or cotton seed products in the hands of the manufacturers. There is no finding with respect to the nature or extent of the commitments of the manufacturers for the purchase of seed, or as to the nature or extent of the loss which appellant would have suffered if on December 30, 1918, the government had refused to go forward with its contract, or that the legal damages for such breach of contract would not have been adequate to compensate for its loss. There is no finding that appellant was induced to sign the settlement contract by fear of the consequences of a refusal to sign."

This want of evidence has now been supplied. There are findings as to the number of bales of linters in the hands of the plaintiff, and of the amount of cottonseed and cottonseed products that it had on hand. There is a finding with reference to the extent of its commitments for the purchase of seed, and as to the extent of the loss which plaintiff would have suffered if, on December 30, 1918, the government had refused to go any farther with its contract, and finally a finding that legal damages for such breach of contract would not have been adequate to compensate for its loss and that plaintiff was induced to sign the settlement contract by fear of the consequences of the refusal to sign.

Counsel for defendant cite cases which show that it has often been held that fear that financial loss will result if a threat is carried out is not sufficient by itself and alone to constitute duress, but in most of these cases it will be found that the threat which was made was simply to exercise some legal right and this, however serious the effect might be upon the other party, never constitutes duress. In the other cases where threats to perform some unlawful act have influenced the action of the other party, it still has not been held to be duress unless irreparable injury would follow the execution thereof. But in this case the threat was made not simply to cancel the contract so far as future operations were concerned but to refuse to pay for the linters which had already been tagged and accepted — a course of action for which the government cannot present even the shadow of a legal right. The government officials also must have known the effect of the course which the Food Administration proposed to take in event the settlement was not executed. Possibly the government officials who threatened to disregard the contract for the purchase of linters were not responsible for the acts of the Food Administration, but they knew of the effect their action would have upon the Food Administration and were proposing to take advantage of it. The situation with reference to prices of cotton seed, cotton-seed oil and meal, linters, and other derivative products in that era of rapid depreciation of values was like that of a row of tenpins — when one was knocked down, all the others fell with it. The findings show that if the plaintiff and the other mills had refused to accede to the demands of defendant's agents and they had carried out their threats, the result would have been a commercial crisis in the business of buying cotton seed and manufacturing various products therefrom.

If the prices of these products were not sustained by the government and all the mills were compelled to throw the accumulated products on the open market, values, as shown by the evidence, would have immediately collapsed, and the loss to plaintiff, as the findings show, would have been around $200,000 — about the amount of its total capital and surplus.

If the loss on the linters had been all that would have resulted from the government breaching its contract, it could be properly said that plaintiff had a complete remedy at law in its suit to recover the price agreed upon in the original contract. But this was only a small part of the loss, and for the other losses which would have been sustained, as we have shown above, plaintiff had no legal remedy. It could not bring suit against the defendant to recover losses sustained by reason of the failure of the Food Administration to maintain the stabilization plan and for the depression in prices of all of the mill's products. It had no remedy except upon the linters. Above all it had no remedy for its bankruptcy and the loss of its business. As the findings show, its damage would have been irreparable.

We think these acts of the government officials constituted duress which would render the settlement void. If they did not, we are at a loss to know what would constitute duress outside of physical compulsion. In this view we think we are fully supported by the authorities. In Maxwell v. Griswold, 10 How. 242, 256, 13 L. Ed. 405, a government official had illegally assessed certain duties against imported goods, and the owner was unable to obtain possession of the goods without making payment thereof, and the court said:

"The payment of the increased duties thus caused was wrongfully imposed on the importer, and was submitted to merely as a choice of evils. He was unwilling to pay either the excess of duties or the penalty, and must be considered, therefore, as forced into one or the other by the collector, colore officii, through the invalid and illegal course pursued in having the appraisal made of the value at the wrong period, however well meant may have been the views of the collector. The money was thus obtained by a moral duress, not justified by law, and which was not submitted to by the importer, except to regain possession of his property withheld from him on grounds manifestly wrong."

In Swift, etc., Co. v. United States, 111 U.S. 22, 28, 29, 4 S. Ct. 244, 247, 28 L. Ed. 341, it appeared that the plaintiffs were manufacturers of matches upon which revenue stamps were required, and were entitled to a commission from the government on account of making their own dies for the stamps so used, but the government refused to make payment of the amount due to them except in stamps, and the Supreme Court said with reference to the transaction:

"The parties were not on equal terms. The appellant had no choice. The only alternative was to submit to an illegal exaction or discontinue its business. It was in the power of the officers of the law, and could only do as they required. Money paid, or other value parted with, under such pressure, has never been regarded as a voluntary act within the meaning of the maxim, volenti non fit injuria."

In support of the position taken, the court referred to numerous cases, saying:

"In Close v. Phipps, 7 Man. & G. 586, which was a case of money paid in excess of what was due in order to prevent a threatened sale of mortgaged property, Tindal, C. J., said: `The interest of the plaintiff to prevent the sale, by submitting to the demand, was so great that it may well be said the payment was made under what the law calls a species of duress.' And in Parker v. Great Western Ry. Co., 7 Man. & G. 252, the wholesome principle was recognized that payments made to a common carrier, to induce it to do, what by law, without them, it was bound to do, was not voluntary, and might be recovered back. Illegal interest, paid as a condition to redeem a pawn, was held in Astley v. Reynolds, 2 Strange, 915, to be a payment by compulsion. This case was followed, after a satisfactory review of the authorities in Tutt v. Ide, 3 Blatchf. 249 [Fed. Cas. No. 14,275b]; and in Ogden v. Maxwell, 3 Blatchf. 319, [Fed. Cas. No. 10,458], it was held that illegal fees exacted by a collector, though sanctioned by a longcontinued usage and practice in the office, under a mistaken construction of the statute, even when paid without protest, might be recovered back, on the ground that the payment was compulsory and not voluntary."

In Robertson v. Frank Bros. Co., 132 U.S. 17, 24, 10 S. Ct. 5, 7, 33 L. Ed. 236, customs duties collected in the threat of an onerous penalty were held to be involuntary, and the Supreme Court said:

"In our judgment, the payment of money to an official, as in the present case, to avoid an onerous penalty, though the imposition of that penalty might have been illegal, was sufficient to make the payment an involuntary one. It is true that the thing done under compulsion in this case was the insertion of the additional charges upon the entries and invoices; but that necessarily involved the payment of the increased duties caused thereby, and in effect amounts to the same thing as an involuntary payment."

We think the plaintiff has presented a stronger case than those referred to in the quotations from the opinions of the Supreme Court. The threatened action of the defendant's officers was not only illegal, but a more serious injury would result if the threat was carried out than in any of these cases and that injury would be irreparable.

The cases cited by the Supreme Court in the Hartsville Mill Case, supra, while sustaining the decision of the Supreme Court in that case are not, in our opinion, applicable to the facts shown in the case at bar. In Silliman v. United States, 101 U.S. 465, 470, 25 L. Ed. 987 (the case first cited), it appeared that the plaintiffs had leased some barges to the government, and the department informed plaintiffs that it would not comply with the provisions of the original contracts unless the plaintiffs would submit to material alterations against their interests and to the advantage of the government, and the Supreme Court said:

"The claimants could have sued for each instalment of rent as it became due, or when the government returned the barges they could have sued, as they now sue, for the whole amount due under the original charter-parties. They had a full and complete remedy by suit against the government in the Court of Claims for the enforcement of their rights under those contracts."

In the case at bar we have held upon the facts that plaintiff did not have a full and complete remedy.

The reasonable limits of an opinion forbid our taking up the other cases cited in the Hartsville Mill Case, but in each and all of them the facts are readily distinguished from those in the case at bar and we can not think that the Supreme Court intended to hold that the facts now presented to this court would not constitute duress.

It may be argued that if the acts of the government officials were sufficient to constitute duress they also constituted tort, and that no suit can be brought against the defendant for torts committed by its officials whether authorized or unauthorized. We think the answer to this is plain. In the case at bar the acts of the government officials have been ratified by the government by insisting in this suit upon the benefits which accrued therefrom, but even so, if the cause of action was based upon a tort, it is probable that no relief could be granted. But the suit is not brought upon the tort but for a breach of the contract. The tort, if there was one, was merely an incident which caused the plaintiff to agree to the second contract and now entitles it to repudiate that agreement. The tort merely prevents defendant from maintaining its defense. The damages will not be measured by the tort. If they were so measured, they might include punitive as well as actual damages. The original contract is the yardstick for measuring the plaintiff's damages and the difference between what it would have received under that contract and what it actually did receive is the amount thereof.

The second contract being void, it is clear that the original contract was breached and the next question to be determined is the amount of plaintiff's damages.

Plaintiff was paid for the linters produced up to January 1, 1919. The controversy in the case arises over those produced from that date to and including July 31, 1919, when the original contract ended. Assuming the original contract to be in full force, the findings show that from January 1, 1919, to August 1, 1919, the plaintiff crushed 7,632 tons of cotton seed for which it was entitled to $6.77 per ton under the rules prescribed by the War Industries Board and the contract of sale made with the government purchasing agent. This amounts to $51,668.64. The government paid for linters produced during this period $26,491.34, and plaintiff also received from other parties for linters $1,812.26, or a total of $28,303.60. The plaintiff is entitled to recover the difference between the amount received and the price it was agreed to be paid in the original contract. In addition thereto, we think the plaintiff is entitled to recover storage, insurance charges, and handling charges as alleged in its petition. That the plaintiff incurred these costs is shown by the evidence. The second contract made no provision for payment of storage charges, but on the contrary provided that "the seller, where it has space to do so, will store the same at buyer's risk and without charge for storage." But we have held that the second contract was void and plaintiff was not bound by the terms thereof. The original contract made no provision for storage, insurance charges, etc., but it recited that the government had bought the linters f. o. b. cars at point of production, and we think there was an implied agreement that the government should take the linters as fast as they were produced. Probably this matter was not mentioned in the contract because under the war conditions that prevailed the cotton-seed mills could not produce linters fast enough to satisfy the government needs. The provision in the second contract was evidently intended to annul this implied agreement, but, like the remainder of the second contract, it was of no force and effect.

It will be observed in this connection that abstract equity is accomplished by the conclusions above stated. The government will pay only the amount which it would have paid under its original contract, plus some incidental charges which were probably caused by the government having ceased to have any use for linters and therefore permitting them to remain in the hands of plaintiff instead of taking them promptly as it may be presumed was done while the war continued. In other words, the government is simply required to carry out its original contract which, without the slightest excuse in law or equity, its officials violated.

Under the foregoing conclusions the plaintiff is entitled to recover $25,803.74, and judgment will be entered accordingly.