Petition for Writ of Certiorari — Maddox v. Shroyer

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SEN curr OF THE UNITED SATE

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‘ ROCK ISLAND MOTOR TRANSIT COMPANY, -

- Petitioner, ©

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. CONDITIONED AIR CORPORATION,

ie Respondent. -

- PETITION FOR WRIT OF CERTIORARI

To the Supreme Court of the State of Iowa.

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500 Bankers Trust Building,

Des Moines 9, lowa,- -

Attorney for Petitioner.

81. Louis Law Puuntine Co., Inc., 415 N. Eighth Street. CEntral 1-4477.

Standard Oil v. U. S., 107 F. 2d 402, 419... 0000500,

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ie Page

Petition ....,... Cie eee Voare arent Pegteiten 1

Reasons relied upon for allowance of the Wrik, oe aiae

-. Argtment .............- ee) Charen T eae |’

BO ee od TTT PETTY PO ee ree

The discount allowed ...;.... ges Re eee |

The ‘‘ov erhead expense”? PTE pg ate 15

: . Appendix 1—Opinion of the Iowa Supreme C ourt . 23 -

- Appendix 2—Portions, of. record ech aS seein 2 37

Cases . Cited. Tee

——€onditioned Air Corporation v. ‘Rock Island Motor

“Transit Company, 114 N. W. p eee seteeeees 1

Gardner, Trastee.. v. /Mid- C athens Grain Co: 168 F.-

hh ae ESted Sapa Ege ap ae Cy eee | 14

Illinois Central Railroad Co. v. Crail, 281 U. S. 57, 74 2

L. Ed. 699 ..... Sveti: sons ity see, 14, 17, 18, 19

“Marcia ‘Dress: Frocks, ae, v. New York Dress De-

livery, 29-N. Y. Supp. ROR at AS ae erie ee

Meletio Sea Foods Compary v. Gordon’s Trakepett: |

-Ine., 191. S. W. 2d 983 (Missouri Court of Appeals) 18

Missouri Pacific Railroad Company v. H. Rouw Com-

pany, 258 F. 2d. 445 ..... OR EOE Pe pea ore

Pacific Portland Cement ‘Co. v. Food: Machinery and

’ Chemical Corporation, 178 F. 2d 9) ee

Ruggles v. Buffalo Foundry and Machine Company,

2 Ae e Sreerrr eer Sea dsatersl nasal es ae

ii

Act of June 25, 1948, 62 Stat. 929; Title 28, Section

1257; U. i ive oau ou \ 2

Interstate Commerce -Act, par. 11, See. ae | 3, i 8,9, jl

Textbooks Cited. °

_ 9 Am. Jur. Carriers, Sec. 781 eer tc ak: RVs ; ‘18

‘13 Corpus. Juris Secundum, par. 267, p. G19. ..0..4.,..° 13:

25 Corpus Juris Secundum, pp. 459 and 460.....:.... 12 _

. Restatement of Torts, Sec. 928 .............. aiveegs cw

| Index to Appendices ee

Appendix 1 ..... ROE IRS PING a anon veeree: 23

Opinion of Supreme Court of Iowa....... ; lieved case ae

Judgment Entry i in Trial Court... Seb eds gh eos Weics 35

pe ET IEDs Pe PE, NED re POE UY ak

Respondent’s Petition :.....:.....2..ceeceee Sons ae

-Petitioner’s Answer ..... SESE \ Sepia eed hrs icwis tae

Amendment to Petition. oe cer ecerccccscvceveres eee ie

Amendment to Answer peeagens baevevks Lip ed dcones 40

Record—Otfeetions to Respondent’s Exhibit es ie

A LUI peu dasp udp ert receseus obi Sisanes 41

Objections of Petitioner to Offer of Exhibit “pr, sxie5” &

Objections of Petitioner to Offer of Exhibit ““G’’ and

*: Megotiations With Contractor. ken Gene sennenvenss 44

_Petitioner’s Request for Findings of Fact and Conelu-

\ sions of Law...........7 Pre PEE eae ee ery Oe 47, 48

Proceedings ip lows Suprinic: Court After Filmg of

Opinion ........ see ereese ne ogc teccccengececodocs 03

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ROCK ISLAND MOTOR "TRANSIT COMPA

} Petitioner,

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CONDITIONED AIR CORPORATION,

: Respondent.

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PETITION FOR WRIT OF CERTIORARI

_ To the Supremie Court of the State of Iowa.

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Petitioner, Rock Island Motor: Transit Company, an

Illinois corporation, engaged in business as a certificated

_ motor carrier of general commodities, , speks ‘a review by

this Court of the decision and judgment of the Supreme -

Court of the State of Iowa, involving the proper measure .

of its liability for damage to an interstate shipment, and as

grounds therefor states:

(a) The opinion of the court below is unofficially re-

ported as Conditioned Air Corporation v. Rock Island

Motor Transit Company, 114 N. W. 2d 304, advance sheets

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of. May 2, 1962, not yet: ve in the official Towa re-

ports. : :

(b) 1. The judgment sougit to be reviewed is dated

“April, 3, 1962, and was entered on that date.

2, Timely petition for rehearing was filed by petitioner

in the court below, and was denied May 8, 1962. No appli-

Yeation for extension of, time for filing this petition has

' been made.

- 3. Jurisdiction to review the judgment below is con-

_ ferred upon this court by the Act : June 25, 1948, 62

- Stat. 929; Title 28, Section 1257, U. Code Ann.’ The

case is governed by par. 11, See. 20 bai the Interstate Com- —

merce Act. :; i ag

. (c) Respondent, an air conditioning contractor, sued

petitioner for damages to aluminum panels- and building

trim, shipped’ from Indianapolis, Ind. to it at Des Moines,

* Iowa. Petitioner, the delivering carrier, is made liable by

Sec. 20 (Par. 11) of the Interstate Commerce Act for the

full loss, damage or injury to property in transit. Re-

spondent replaced the damaged panels at a cost to it for

‘all labor and materials ineluding social security and un-

employment taxes, workmen’s compensation insurance,

and contributions to union welfare funds of $5,462.11.

Neither petitioner, nor its connecting carrier, was noti-

fied that the panels and trim were the subject of a sale,

_ or,.if replacement of some panels became necessary, dif-

ferences in color would occur between the panels origi-

‘nally shipped and replacements, which ‘would be the basis

of claims for breach of contract against respondent. Not-

withstanding this lack, the trial. céurt, over petitioner’s

objections, received. evidence that respondent granted a

discount of $1,250 in its contract price to its purchaser,

solely because of differences in color between the —

! shipped and the replacements.

—-

oo

The trial court also. received int evidence, over objections

of petitioner, an accountant’s audit o: respondent's busi-

ress. for the years 1959 (xegr of shipment) and 1958, dis-

closing, respondent’s overhead cost of doing business,

including executives’ salgries and expenses, rent -of. build-

ings, depreciation, clerical hire, insurance, professional

fees, outside engineering services, telephone, telegraph,

- automobile and travel. expense, - ‘and similar items,

amounted to 221% per cent of its total direct job costs in

1959, and 17 per cent in 1958. Although requested to elim: |

inate these. items as not. recoverable damages, the trial

court included the discount of $1,250 and $928.56 for over-

head expense in its judgment. These rulings were ap-

proved, and the jrdgment was —_—e by the Supreme

Conrt of Towa. |

The questions presented by ‘this petition may be stated

as:

Do Rection 20 (11) Interstate Commerce Act and the °

common law, as recognized ‘and applied in the federal

courts, authorize recovery of discounts, granted by a con-

signee of property Jost or damaged in transit: to a pur-

chaser, because of differences in color between the prop-.

erty shipped and replacements, ‘when no notice of the

existence of a sales,contract, or the probability of loss to

consignee in addition to the actual cost” of replacement,

was given to the carrier?

Do the statute and the. ‘common lew,.} in eases of loss or’ -

damage i in transit, authorize a consignee to recover from °°

a carrier, not only the cost of replacing damaged articles,

- but also a pro. rata portion of overhead costs, such as

executives’ salaries and egpenses, rental of buildings,

clerical hire, depreciation, i insurance, professional fees, out-

_ side engineering service, telephone, telegraphy automobile .

and travel expense, and similar items, not ineurred or

increased by the necessity for the replacenient?

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(d) « Section 20, Par. 11 of the Interstate Commerce Act

provides:

‘Liability of initial and delivering carrier for ‘loss;

limitation of liability; notice and filing of claim. Any

common carrier, railroad, or transportation company

subject to the’ provisions. of : this chapter receiving |

property for transportation from a point in one State

or Territory or the District of Columbia‘to a point

in another State; Territory, District of Columbia, or

- from any point in the United States to a point in ‘an’. .

adjacent foreign country shall issue a receipt. or bill

of lading therefor, and shall be Tiable to the lawful-

holder thereof for any- loss, damage, or injury to such

property caustd by it or by any comiuon carrier, rail-

road, or transportation company to which such prop-

.» erty may be delivered or over whose line or lines such_

property may pass within the United States or within

an adjacent foreign country when transported on a.

through bill of lading, and no contract, receipt, rule,

regulation, or other limitation of any character what-

- soever shal] exempt stich common carrier, railroad, or

transportation company from the liability imposed;

and any such common carrier, railroad, or transporta-

tion company: so receiving property for transportation

from a point mone State; Territory, or the District

of Columbia, or from any point in the United. States to

a point in an adjacent foreign eountry, or for tréfispor-

tation wholly within‘a Territory, or’ any common car-

rier, railroad, or transportation company delivering

' said’ property so received and transported shall be li-

able.to the lawful holder of said receipt or bill of lading

or to any party entitled to recover’ thereon, whether

‘ su¢h receipt or bill of lading has been issued or not,

‘for the full actual loss, damage, or injury to such

property caused by it or by any such eommon carrier,

railroad, or transportation ‘company to which. such

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property. may. Abe deliv ered or over ‘whose line or lines -

such property may pass within the United States or

within an adjacent |foreign country when transperted

on a through bill of ‘lading, notwithstanding any limni-

; ? tation of liability of limitation of the amount of re- ¢

eovery or er A PG or agreement as to value in»

any such receipt or bill of lading, or in any contract,

rule, regulation, or in-any tariff filed with the Initer- ‘

‘state Commerge, Commission; * * *’’ °

. (e) Statement of the Case. - Petitioner is an interstate

common carrier by motor vehicle, and respondent’s prin-

cipal business is the installation and servicing of air con-

ditioning. equipment. It also fabricates sheet metals as a

contractor. Its petition, or complaint, in the trial court

- alleged it was the owner of certain aluminum panels =.

building trim shipped to it at Des Moines, Towa, from

Indianapolis, Indiana, via Daum Freight Lines and peti-

tioner’s truck line, portions’ of which were damaged in

transit: By amendment to its complaint, it alleged that-

‘despite due diligence it was unable to fully replace -

or repair said. panels and trim in that the coloring

thereof could not he duplicated, all to tesa g

special‘damage in the amount of $1,750.’’

Before trial, petitioner admitted liability’ for the cost

of replacement of eighty-six. panels, denied, daraage té

others, and offered to confess judgment for a substantial

sum, but contested the extent of respondent’s, damage.

Upon conflicting ‘evidence; the trial court found that 153

panels were damaged so as to require replacement, and

respondent was entitled to the following items as damages:

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Replacement materials purchased aun ese $2,840.31

Crating materials for shipping replaced panels

' to Indianapolis and return.................. - 99.46

Freight on replaced panels and return cauaals ‘363.53

Anodizing charge of Colors, Inc, at Indianapolis, |

plus C. 0. D. fee....... Gu dae Cy CLAS RRA ES $35.18

| Actual labor cost in _ Processing replaceinent, aa

OE ies Sai ves cnua eteceecesn Kaien. eee !

i "U nemployment and social security taxes, work-

men’s compensation’ insurance, and contribu- |

tion to’ Union Welfare Fund, 10 . cent of

cosas Hiner» ER ee Lee Perey er re Cree 119.89

’ Fair and’ reasonable overhead charges for use

of machinery, -rent, management salaries,

ete., in the reasonable sum of 17 per cent of |

above WE Sain aks suns ee ees cad tin ees 928.56

Lose on account of changes i in. color of panels. . — 1,250.00

(See Record pp. 89, ines 28-34, ine. and 90, lines. 1-17, ine.,

91, lines 24-34, i inc., 92, lines 1-6," inc. and Appendix 2

p. 50, asides 6, to p. 51, par. 1, and. p. 92,. ~- —

This case inv wivée the last ‘two items listed. On appeal,.

the highest Iowa court, after stating the facts,, said:

‘“As the parties agree, liability’ for damage to ‘this.

‘interstate shipment is governed by subparagraph 11,

"See. .20,°U. S. C. A. Defendant is liable. according

to the statute ‘for the full actual loss, damage or in-

jury to such property. caused by it.’ ”

Following this, the Court discussed the general rule of dif-

ference ‘in markét value of the praperty at destination ‘‘if .

it had not been injured, and such value in its injured

» eonditiof.”’ The Court then quoted from the Restatement,

‘ aia Séc. 928, to the effect that the cost of repairing a

_ damaged chattel *‘with due allowance for any aitgrence

between the original value and value after’ repairs?” might

be applied at plaintiffs: election... Continuing, the Court

said: — ee

: “We. think the rule from the Restatement may

properly be applied here and that it supports allow-

‘ance to plaintiff of the - $1,250. Unless this sum is

included in the award to plaintiff. it will not be reim-

bursed for ‘its full actual loss’ as the statute con-

_.templates.”’ pre be : .

7

The Court thei said ‘that: the fact that respondent w as

required to accept $1,250 less than its full contract price

because the replaced@panels ‘did not mateh in color those — |

shipped was evidence that, the replaced panels were not

of the same value as those originally shjpped. -In support

-of this conclusion, the Court cited authorities holding that |

proof that damaged goods were sold at the best obtainable

‘price is some evidence of actual or market value. With

_Tespect to petitioner’s contention that the $1,250 discount

was an item of “special damages,’’.for which no recovery

could be had in the absence of notice of the circumstanées |

to the carrier, the Towa Court said:

““The general rule is that special damniges are not

- recoverable from a carrier for injury. to goods shipped -

unless it had notice or know ledge of the special cir-

* eumstances from -which such damages would flow.

Perey v. Chicago, R. I. & P. R. Co., 207 Towa 889,

892-4, 293 N. W. 879; Alfon R. Co. v. Oklahoma Fur-

_niture Mfg. Co., 190 :Okla. 216; 122 P. “2d 152, 166.

.A.-L, R. 1030, 1032 and Anno. 1034: 13 C. J. S., Car-

riers, Section 267;:.9 Am. Jur., Carriers, Section. 789.

There is no evidence defendant was informed at the

time of the original shipment. of the purpose for

. which the panels were to be used,

— om

‘‘However, we are not persuaded the item of $1,250_

constitutes special damages within the above rule,

Certainly the difference between the value of the

original shipment if it had not been injured and the ©

value in its injured condition would constitute general, —

not special damages. And we ‘think, in lieu thereof,

the reasonable cost of restoring the injured’ panels,

‘with’due allowance for the difference between their

original value and the value after restoration, also -

constitutes general, not special, damages. As stated,

defendant” concedes liability for the cost of restora-

tion. We aré cited to no authority for the proposition

that depreciation in-value of: the restored goods-con-

stitutes special damages which are not allowable -in ©

the absence of notice.’’ “ ;

( See Appendix 1, pp.. 28 and 29.)

«+

The Iowa Court also sustained the action of the trial

court in receiving in evidence the accountant’s audit of.

_Tespondent’s business for the years 1959 and 1958, saying:

‘‘We think defendant’s liability for. plaintiff’ s ‘full

~ actual logs,’ which the federal statute contemplates,

includes not only the direct: cost.of labor and materials

‘in replacing the injured panels, which is concededly

due, but also a fair allowance for the cost of furnish-

ing officers and supervisors, buildings, machinery, and

. power and other items” of operation and ‘overhead.

There is substantial evidence to supnort the amount of

the trial court’s allowance for these items if the

plaintiff i is entitled to any recovery therefor. did

(The snbstantial evidence referred to was the accountant’ 8

andit. y

(f) As already pointed ont the parties before trial.

-agreed that the case. was governed by Sec. 20: (11) of the

j. e Wine

Interstate Commerce Act. - The opinion of the Iowa Su-

preme Court recites that the parties | were in agreentent

in this respect. ;

The making of the shipment, ownership of the aluminum

panels, issuance of a bill of lading by the initial carrier .

and. the manner of packing and crating the shipment

were. stipulated by the parties, as was: the fact that

some damage to the shipment occurred in transit. The

contested issues were (a) extent of the damage, (b) the

measure of damages to be applied, and (c) admissibility of

evidence as_to a discount allowed by respondent to its pur- .

chaser because the replaced panels failed to match. the

eolor of thos# undamaged in the original shipment.

With respect to the discount of $1250 allowed by re- ,

spondent to its vendee, when inquiry. was first made on

-this subject, counsel for petitioner objected ‘‘as immaterial

-and-ineompetent, no bearing on any issue before the court,

not the proper measure of. damages, and no foundation laid:

for any claim of that type or character’? (Record, pg. 23,

lines 24-29, ine., and Appendix 2, pg. 43 and 44).

By agreement’ between counsel and the trial court, the

objections were made -applicable to any inquiries with

respect to Exhibit G, or any settlement with the con-

"tractor sbi Se ii i a 2, pg. sith .

— REASONS RELIED UPON FOR ALLOWANCE

OF THE. WRIT.

1.: The Supreme Court. of Towa has construed the provi-

sions of Sec. 20 (11), Interstate Commerce <Act,. which

make petitioner, as the delivering carrier, liable for the:

full loss, damage or injury to property transported over

lines of other carriers, liable also for special or consequen-

tidl damages ‘to the owner of property transported, even

o. .—- agen ee

in the absence of notice, contrary to the rules of the com-

mon law and the Provisions of the statute. oe

2, The ‘Towa Supreme-Court has decided laenionk ques-

tions of Federal law in a manner directly cont to an

applicable decision of this court in Illinois Ce ntral Rail- |

rpad Co. v. Crail, 281 U. S. 57, 74 L. Ed. 699, and has thus _

created confusion and uncertainty as to the proper con-

struction and application of the Carmack and Cummins

Amendments to ‘the liability of carriers for damage to

interstate shipments. - oar aes ¥

—_——_——

3. The Iowa’ Supreme Court has decided cinttinns of

Federal law of: great importance to all shippers and re- ~

_ceivers of freight and to carriers, in a way in conflict

with applicable decisions of this Court, and of the Courts .

of Appeal for the various circuits, as well as contrary to

a principles: of the common law.

Se eS ens

a fen

ARGUMENT.

The Statute.

Section 20° (114 of -the Interstate Commerce Act, in its

present form, makes both the initial and the delivering

_ ¢arrier-responsible to the owner for ‘‘the full actual loss,

damage, or injury to” such property caused by it or-by

any such common ecarrier.’’ Except for this qnodifieation,

the common law With respect to the liability of a carrier

for damage to shipments remains unchanged. It is im-

portant that all concerned bear in’ mind that the statute .

imposes no greater degree of liability. upon a carrier than _

did the common law, except that both initial ‘and deliver-

ing carrier are. ‘made liable to the owner for loss or dam-

age in transit. The opinion of the court below broadens

the liability of common carriers for purely remote, con-

sequential, or special damages in a manner, and to an

- extent, not ‘provided by the words of the statute. -

The. Discount Allowed. —

a The Iowa Snpreme Court sustains the trial court in

awarding respondent damages of $1, 250 because the panels

‘in the original shipment (153 of which the trial court

found were damaged) did not match, in color those pre-

pared by respondent to replace the panels damaged. The

differences in color were due to variations in the process

of’ anodizing the two lots. (Anodizing is a process of

applying’a thin coating of pure aluminum to the aluminun:

alloy panels, performed for both the original and — )

panels. at Indianapolis, Indiana. )

The Iowa Court based its affirmance of the trial court.

on:

(a) The replaced: sass did -not have the same value

to respondent as those damaged in ‘shipment, and unless

—— te

—12— : -*

compensated: for the’ discount allowed ‘to its purchaser, |

respondent ‘will not be reimbursed , for its ‘full actual

loss’ ax the statute contemplates.”

* (b) Although recognizing the universal rule of the com- |

mon law that carriers are not liable for “special damages,”

in ‘the absence of notice of circumstances, the court ig-

nored the rule by : by holding the $1,250 itenr of discount was

not special but “general” damages. To support this clearly

erroneous result, the court referred again to the discount

granted as, in reality, a difference in value between the

panéls damaged in transit. and those made up as replace-

ments. The lowa Court thus construed the statute so as _

to sustain the award of $1,250 discount as an item of |

“general” damages recoverable in every case of loss or:

damage, although it. ‘was due to special circumstances of

respondent of which petitioner was not advised.

. 25 Corpus Juris Secu jum, pp. 459 and 460, defines the

term “special damages”’ as:

" “Special, as contradistinguished ‘from general, dam--

ages are those which are the natural, but not neces-

‘sary, consequence of the act.complained of. They are ~

such as actually result from the commission of the

wrong, but are not such-a necessary result thai they

will be implied by law, or will be deemed to have been

"within the contemplation of the parties.

“Special damages always grow out of an ‘iment

or-peculiar state of facts, which may be known to

one of the parties but not ta the other, and follow

the injury as a natural and proxiniate consequence

in the particular case by reason of special cireum-

. stances or conditions. « | |

“In cases of tort it may be said that special dam-

-ages are such consequences of ‘an injury as are ‘pe-

‘culiar to the circumstances and conditions of the in- |

jured party. |

As applied M3 a carrier ’s liability for less or damage to.

property shipped, 13 Corpus Juris § mage , par. 265, eee :

619, says with respect to “special damages”

“In an action for-loss of, or injury to, goods shipped,

only such damages are - -recoverably” ax were. COn-

templated, or inight. reasonably have been contem-

plated, by the parties. To poomars a recovery of

such damages as would not gtdinarily flow from the

loss. or injury, it is exsentiak that, at the time of ship-

nient, the peculiar. circumstances from which special

damages would arise because of such loss or injury

‘should be made known to the carrier.”

The decisions of the Courts of Appeal for the various

circuits. support the statement’ quoted above. Thus the

Court of Appeals for‘the Sixth Cireuit in Ruggles v., Byf-

falo Foundry and . Machine Company, 27. F. 2d 234, dis

‘tinguished between, general and special damages. as:

'. “The distinction between “general and special dam- |

ages is not that one’ is and the other is not the direct |

and proximate consequence of the breach complained

of, but that general damages are such as naturally

and ordinarily. follow the breach; whereas special

damages are those that ensue,’ not necessarily or

ordinarily, ‘but because of special cireumstances.”

And in Gardner, Trustee, v. Mid-Continent Grain Co.,

168 F. 2d 819, the Court of Appeals for the Eighth Cireuit

in holding a railroad not liable for delay to a “shipment

of soybeans which had heen previously wet, said:

. “While. it- usually is said that only. such damages

can ‘be recovered for delay in transportation as ‘may

reasonably be regarded as havi ing been within’ the

contemplation of the parties at the time the contract.

‘of carriage was made, liability in relation to special

circumstances has some times been recognized on. the.

basis of notice to the carrier after the teneigestatien

has commenced. inaies

>

, —_14-

“In the present ease, therefore, the failure of the

_ carrier to have transported the soybeans to Kansas

. City before the expiration of the ten orgwelve, days’*

period, in which the. court found that they . would

" spoil because: of their special condition, would not

make the carrier liable for their spoiling (such as’

might perhaps be the situation generally in the éase

of perishable goods as # matter of contemplated dam-

ages) if the carrier had no notice of the special von

dition of the soybeans, so as to impose upon it a duty

to act in relation thereto.”

Additional authorities from state and federal courts

might be cited to demonstrate that damage items, such as

' the discount -allowed to. respondent have universally’ been

held recoverable, only ‘upon a showing of advarice notice -

to the carrier of the.cireumstances of .the parties which

would produce loss. The Iowa court disregarded the au-

‘thorities in holding that the discount item of $1,250 was

' ‘general damages”, and not “special damages.” Thus, the

Iowa court has reached an erroneous conclu-ion of law,

in part by disregarding established’ rules of the common

law, and in part by.a construction of the statute;- not

justified by its terms and contrary. to that adopted by this

court in the case of Illinois Central Railroad Company v.

Crail, 281 U. S. 57, 74 L. Ed. 99, wherein this court guled

that the measure of damages for toss of 5,500 lbs. from a

-earload of coal was the cost of replacement and no more.

The case of Gardner v. Mid-Continent Grain Co., 168 F.

2d 819, clearly shows that had‘this case been decided -in

the United States Court of Appeals for the Eighth Circuit,

imposes liability upon a earrier for such special, remote

and consequential damages as were awarded by the high-

est Iowa court. This holding of the Iowa court makes

remote and consequential damages sustained by a shipper

| @ directly contrary result would ‘have: been reached.

Neither the Interstate Commerce Act nor the common law

——————————

—

_ recoverable in the absence-of notice to the carrier of

special circumstances from Which such damages’ will

follow, : } @*

The “Overhead Expense” Claim.

As we have seen after computing all material, labor,

‘ transportation, anodizing, and other incidental costs in-

‘ eurred by respondent to replace the damaged panels, the

trial court added 17 per cent of the total for -

“fair and reasonable overhead charges for the use ‘of

machinery, rent, management’ salaries, etc., in the

sum of $929.56." ae °

As we have seen, the. lowa Supreme Court sustained -

this award ‘saying: -

“The full nite loss, which the federal statute con-

templates, ineludes not only the direct. cost, of labor

and materials in replacing the injured panels which

is concededly due, but also a fair allowance. for the

cost of furnishing officers and supervisors, buildings,

‘machinery, , and power and other items of operation

and overhead. ” v

‘No attempt was made to show that any of the overhead

expense items were incurred or increased by the necessity -

to replace the panels damaged. While respondent’s presi-

dent testified that the replacenient. required. the time of

supervisory employees, no record of which was kept, the

accuracy of this statement was challenged by the evidence

of the superintendent. of. respondent's sheet metal depart-

ment who testified’ that much of the replacement work

was done at night, when he was not present ( Record, page

59, lines 13 to 20,ine.).

At the close of the evidence, petitioner’s counsel re-

quested the court to rule as a matter of law that the dis-. .

count ‘item of $1,750 (consisting “of $4,250 for the school’

district, and $500 to the contractor, vendee; for extra

fil cia

labor, no ‘allowed by the trial court) “constitute special

‘damages, and that the ev idence is wholly insufficient to

establish that defendant is in any manner liable for such.

Joss” (Record, pg. 74, lines ‘19-27 and see Appendix 2,

page 47). Counsel for petitioner further requested the

‘¢ourt to rule that thé measure of respondent’s recovery

was the actual cost. of reproducing the panels (Record pg.

75, line 11; and Appendix 2 , pages 47 and 48).

With respect to the so-called “overhead cost” of $928.56 |

when counsel for respondent -first made inquiry concern-

ing Exhibit “F”, the accountant’s audit report of respond-

ent’s business counsel for petitioner stated that he wished

to Sbject to the report. as irrelevant and immaterial, not

bearing on-any element of damage for which defendant

could possibly be responsible (Record; pg. 19, lines 3-9

ine., and see Appendix 2, pg. 42). To the offer* of Ex-

hibit “F”, petitioner objected “as immaterial and irréle-

vant to any issue before the court, that the general overall

business situation and volume of business and the over-

head items of rent, officéfs’ salaries, . -expenses, ete., gre

wholly immaterisi \to any issue presented, and have no

' bearing upon the. proper measure of damage atid do not

in any way measure the actual loss suffered or incurred |

by plaintiff.” These objections were overruled but were

allowed as standing objections to all further inquiries

concerning the Exhibit (Record pg. 19, lines 21-34, pg. 20,

lines 1 to 20, ine., and Appendix 2, pages 42 and 43).

At the close of the evidence, counsel for potstiener Te- |

quested the trial court to rule that:

‘The cost of doing business on the basis suggested

by. counsel in his opening statement and by the evi-

dence received. over objection is not a recoverable

item of damage, is speculative and remote, and in the -

nature of special damages, not recoverable in this

proceeding”’ (Record, p. 75, lines 12-19, ine., and -

pendix 2, pages 47 and 48).

ep ;

ot

It is appar _ that o-called overhead expense items in-

volved-no los. r damage to the property itself, and no

-actual loss to respondent within the meaning of the

words, ‘‘loss, —* and injury,’’ as used in the Inter-

state Commerce Act. |

We think it clear that ‘the pane tw we of the Iowa Conrt

that the statute authorizes recovery for so-called ‘‘over-

head expense’’ ignores the decision of this Court in IIli-

nois Central. Railroad Company v. Crail, 281 U. S. 57, 74

L. Ed. 699, a coal dealer sued the. railroad for.the retail

price of 500 pounds of coal lost from a carload in

transit. He contended that the statute could be satisfied

only by an award of damages for the cost of replacing, the

coal in the retail market at destination. .The Court of —

Appeals for the Eighth Circuit ‘agreed, but this. court re-

versed in an opinion. written by Mr. Justice Stone, who . .

said: piers ty .

‘‘This contention (consignee’s claim) ignores the

basic principle underlying commion I¢w. remedies that

they shall afford only “neato for the injury:

9 (citing cases), and leaves’ out of account the —

language of the amendment which likewise gives only

a right of recovery for ‘actual loss.’ ’’

. Continuing, Mr. Justice Stone pointed out that had the

entire car of coal been lost, the cost of replacement would

- have been the wholesale cost of the car at destination.

Respondent there suffered no loss of either overhead, or

of profits, since the éoal. was replaced from carload ship-

“ments at the mine price. It seems plain that the Towa

Court has ignored this pronouncement which is closely in

point with the case at bar. | |

In Marcia Dress Frocks, Inc., v. New York Dress De- |

livery, 29 N. Y. Supp. 2d -322, defendant, a common car-

rier, lost a number of dress fronts consigned to plaintiff.

Plaintiff claimed the remainirig portions of. the dresses,

j= 1B

which were not shipped, were rendered valueless ‘because’

* of impossibility of: procuring matching materials to make

new dress fronts. The trial court rendered judgment for

the ful] value of dresses as though completed. In ‘re- |

gversing thie judgment, the appellate division of the New

York Supreme Court said:

‘*The defendant, truckman, is s liable’ only for the

value’ of the merchandise lost.’ me

eo

In Meletio’ Sea Foods Company: v.-Gordon’s Transport,

. Ine., 191 8. W. 2d 983 (Missouri Court of Appeals), plain-

tiff shipped 1,250 pounds of a prepared food product,

portions of which became contaminated in transit. The

‘invoice price to the purchaser was $13.20 per. ewt.° The

trial court found the actual cost to prepare the product

was $10. 349 per ¢wt., but awarded the shipper the in-

voice — price. On aypeal, the Missouri court ruled that

the actual cost of replacement | of the, quantity damaged

‘or destroyed was the measure of plaintiff’s Tecayety. The

court said:

: As already pointed out, the federal act gives only ;

‘ a right of recovery. for actual loss, and in that re- °.

spect conforms to the basic principle of the law of

‘damages, which contemplates. that the remedy pro-

vided in a given case shall only. afford compensation

for whatever : ‘injury is actually sustained. ”’ Tilinois

. Cent. R. R. Co. v. Crail, supra; . Am. Jur., Carriers,

Ree. 781.

Continning its diseussion of the rules to be spnlint, the

Missouri vourt said: :

_‘*While the federal act. unquestionably provides

that in'the event of the carrier’s failure to make de-

_ livery of afy part ‘of a shipment without legal ex-

use, the holder of the bill‘of lading is ‘entitled’ to

recover his full actual loss at the point of destina-

—S

‘

d

ie

ore oF ie rey

tion, we do aot understand that the full actuat loss

‘for which the carrier is liable may exceed the market

| value of the lost or damaged goods at destination,

or the contract price where tht goods were*shipped

pursuant to a contract of sale, plus whatever inci-

dental damages may naturally and proximately have

resulted from the loss or injury coimplaired of. In

other words, the act does not contemplate that the

shipper shall be pernfitted to enhance his damages

by manufacturing goods, to. replace ‘those whieh had

been lost, and afterwards recover the cost. of manu-

facture if such cost exceeds the contract price. But,

of course, if he replaces the damaged goods, and the

cost of replacement (as in this ease) ix less 4 the

contract “price, then the carrier, under the general

law of damages, may show and rely upon such fact

in mitigation’ or reduction of the amount which it Y

must pay in order to afford just compensation. @

-The very recent ease of isonet Pacific: Railroad Com-

- pany v. H. Rouw Company, 268 F, 24445, involved an in- ‘

_ terstate shipment of perishable vegetables, to a commis-

“ion, merchant for siile for shipper’s account on the market

at destination. A commission was charged ‘to .the ship-

per and deducted from the destination price. The district

court, sitting without a jury, ‘granted judgment for the .

difference in ‘the selling price at destination, and its full.

market value had it been delivered without damage. The

sole question urged op appeal was that the carrier was

entitled to a. déductidl of. the commission charged. The’

United States Court of Appeals for the Pifth Cirenit re-,

ferring “to ‘the ision of this courf in Tllinois Central

Railroad Company v. Crail, 281 0. S. 57, 58. Ct. 180, 74

L. Ed. 699, said:

“We think that the rigid application of the eae |

value rife“ here resulted in awarding Sgr more

ff

y

increased more than. 5% above its average cost of pro-

+ 9) —

than. its actual loss; and there is ground to believe

that the court helow, had the same'feeling, =

‘““We are not, eke. undertaking | to weigh or

appraise the evidence as to damages. We hold simply -

that the judgment appealed from clearly includes the

award of some damages to which appellee was not

entitled, growing out of the holding of the court below

that no deduction should be made of sales commissions

and other charges figured on the amount of the dif-

ference in market: value between delivery in good

order and delivery in had order. A/ppellee’s recovery .

should be based’ upon this. difference in market values,

- but not to exceed indemnity. =

5 These authorities, we believe, ‘make it plain that the

owner of property damaged in transit is entitled only to

his actual loss and no more. ‘It-is~ plain that respondent

incurred no loss in connection: with the rental of build- |

|

‘ings, executives’ salaries, depreciation of machinery and.

equipment, or the other items ~éntering into its so-called

overhead costs of ‘doing business, because of damage to

_ the panels: These items of expense were n ither incurred

nor increased because the shipment was damaged. They

were simply a part of. respondent’s cost of doing business

‘which would have been the sanie- ; ierebpective of - the dam-.:

‘age in transit.

The Iowa court cites .in support of its conelugions that.

purely overhead costs are. recoverable as damages, deci-

* sions of which Pacific Portland Cement Co. v. Food Ma-

chinery ‘and Chemical Corporation, 178 F. 2d 541, is

typical. ° There ,the parties entered into a contract by

which the cement company agreed to purchase all gypsum

produced at a certain. ‘plant for a period of twenty-five

years, but with an ‘‘esealator’’ clause which. proyided if

vendor’s cost of production, for any. twelve month period

,

a”

‘ducing gypsum in the preceding . twelve ‘months, then

vendor after notice might increase its selling’ price, ‘‘not

_ to exceed the actual advance in cost of manufacture.”’

The trial court ruled that general and administrative ex-

pense was not to be included in determining ‘‘cost. of

nyanufacture.’? This conclusion was held erroneous by the .

Court of Appeals for the Ninth Circuit. That court re-

ferred to the fact that there had been no production of

gypsum _at the defendant’s plant prior to the contract and

large expenditures had been made ‘to equip the plant for

such production, entailing supervisory costs. Also in

‘ereases had been accepted including general, administra-.

tive expense prior to suit. The decision of this Court in

Standard Oil v. U. S., 107 F. 2d 402, 419, is etted 3 in sup-

port of the decision sence. :

It is s apparent, of course, that inclusion of ‘‘overhead

@osts’’ in a transaction of the character here ‘under con-

sideration is not supported by the statute or the record

before ‘the Iowa Court. Here respondent was entitled to’

. its “full actual loss’’. It lost nothing by reason of damage |

to the panels except the out of pocket cost of replacing”

them. .Its ‘‘overhead’’ expense was. not increased one 7

penny by the damage. to the shipment. No-evidence of any

" . increase in general or overhead expense was offered.

We pital: that there must be a uniforny rule with re-

spect to the measure of recovery under the Interstate Com-

merce Act when goods are damaged in transit while in,

the custody of a. motor carrier, or any other common car-

rier. The prior decisions of this Court have laid down:

the rules which govern under the statute. The Iowa court

has added almost one-half to respondent's. recovery by

inclusion of unwarranted items of damage, therein.

(i) There is . appended, hereto, as Appendix I, a copy of |

the opinion of the’ Supreme. Court of Iowa; which affirmed

pe on

the judgment of the. trial court, together with a. copy: of

the judgment rendered in the district court of = state .

x

of Iowa in and for Polk County, ©. ay

' In Appendix 2, we, set. forth the following:

1. The: petition or complaint of respondent in the trial

. court, |

2, Petitioner’ 's answer,

3. Respondent’s ainendment to petition, |

4. Pefjtioner’ 's amendment to its answer,

-5. Portions of the record with page references thereto

showing that petitioner objected to the receipt of evidence

with respect to the item. 6f $1,250 discount, allowed by —

respondent to its purchaser of .the panels, and the objec-’

tions lodged ‘to the offer of Respondent’s Exhibit fi gel

6. The request for findings of fact and conclusions of

law made by respondent’ at the close of evidence,

. The findings of fact and. conclusions of law of the

ae court, and .

8. The proceedings in the Supreme Court of Iowa sub-

sequent to the filing of the opinion on April 3, 1962.

. Petitioner respectfully prays that this court grant the

writ of certiorari to review the judgment of the Supreme

Court of the state of Iowa in this cause, and that upon

final submission, judgment of the Supreme Court of Iowa

be reversed in accordance with the controlling rules of the

federal law hereinbefore set forth.

' ALDEN B. HOWLAND, |

500 Bankers Trust Building,

Des Moines 9, Iowa,

Attorney for Petitioner.

ee, Soe

APPENDIX 1.

The opinion of the Iowa Supreme Court reported at 114

. N.“W. 2d 305-311, inclusive, is copied as follows: *

, Garfield, Chief J ustice.

This appeal involves the measure of recov ery. from de-

fendant Rock Island Motor Transit Co. for damage to a

shipment of aluminum panels. Trial .was to the court

‘without a jury. Defendant has appealed from judgment

allowing most, but not all, of plaintiff’s claim. Errors are

assigned ‘in receiving evidence of, and allowipg for, two

items of damage ‘defendant ontends are improper.

Plaintiff’s place of business ‘is in Des Moines. It -had

a contract with Bowers Construction Co., herein ealled

Bowers, to furnish .206 anodized aluminum panels, about

- 10 feet- long and 28 inches wide, for use in constructing

‘a new school building at’ Montezuma for which Bowers

was principal contractor. Plaintiff formed and: bent the

panels and shipped them by defendant’s truck and semi-

trailer to Colors, Ine. in Indianapolis to: be anodized, _i. e.,

to have a thin protective coating of pure aluminum ap-

-plied to. prolong their life. After the anodizing was done,

the return shipment was damaged in transit. The trial

court found 153 panels were damaged so they were unfit

for use on the. job.

‘ As soon as the damaged panels were inagected and

- eounted plaintiff ordered new material to replace them,

formed and bent 153 new panels and shipped ‘them .to

Colors, Inc. to be anodized. ° When these new panels were

received back by. plaintiff they did not match in color

the panels not damaged in the first shipment. The trial

court found it was impossible to match the color of the

- first panels. Substantial evidence supports this finding. ~ |

= ae

The first panels were anodized in March, the second ship-

ment in July. A different ‘‘batech’’ of aluminum was used

in Anodizing the replacement panels. There is ‘undisputed

testimony that the only wa¥ in which identical color could

have been obtained on all the panels was to replace all -

206 and that would be more expensive.

‘The Montezuma school board and Bowers were unwilling

to accept the 153 new panels, because the color did not

match those in the first shipment. However, negotiations

between. plaintiff, Bowers and. the’ school board resulted

" . * in their acceptance “at a reduction in cost to the school

district of ‘$1250 which was charged ‘o plaintiff. Bowers

also charged plaintiff $500 for its extra work in sorting

and placing the panels. The ‘trial court allowed plaintiff

’ the cost of replacing. the damaged panels, ineluding cost ~

of ‘material, labor, anodizing: and freight to and from

Indianapolis, and also the $1250 ‘it was compelled to de-

duct from the contract price. The $500 deduction in favor

of Bowers was disallowed. Defendant took and retained

possession of the 153 damaged panels from the first ship-

' ment. They have a salvage yalue to defendant of about

13 cents a pound.

Defendant’ s first two ‘assigned errors complain of the

* admission of evidence, over its objections, of the reduction

in cost to the school district. of the $1250 and allowance

of this amount to_plaintiff.

"TER.

-The court also received evidence, over defendant’s ob-

jections, of plaintiff’s overhead and operating expenses”

for 1959, the year the panels were furnished. They totaled

about 221% per cent of Jits direct expense for labor and

material. The court-allowed plaintiff $928.56, 17 per cent

of its direct expense for labor and material in furnishing

the replacement panels. Defendarit’s third and fourth as-

signed errors are directed to the receipt of this evidence

*

PS bet —

e : a om Te

and allowance to plaintiff of this item., Defendant con-

cedes it is liable for the actual cost of replacing the dam- .

aged panels. :

I. As the parties agree, defendant's liability for damage

‘to this interstate shipment is governed by subparagraph

* (11), section 20, 49 U. S. C. A. Defendant is liable, ac-"

cording to the statute, ‘‘for the full sai ep loss, damage,

_ or injury to such property caused by it.’’ See Adams

Express Co. v. Croninger, 296 U. S. 491, 506; 33 S. Ct.

‘148, 57°L. Ed. 314, 320, 44 L. R. A., N.S. 257; 13 ©. J. &.,

Carriers, §§ 263-264; 9 Am.” Jur., Carriers, section 778.

[1] The most commonly. applied measure of a ‘shipper’s .

loss for injury to the shipment is the difference between

its market value at destination if it had not been injured

and such value in its. injured condition. Gulf, C. & 8S. F.

R. Co. v. Texas Packing Co., 244 U. S. 31, 37, 37S. Ct. 487,

1 L. Ed. 970, 973;.13 C. J.'S., Carriers, § 264a; 9 Am.

Jur., Carriers, section 780. See also Parsons v. a

States oxpress Co., 144 Iowa 745, Lis 123 N. W. 776, :

LR. A..N. 8. 842.

“The test of market value is at best’ but a convenient

means of getting at the loss-suffered, It may be discarded

and other more accurate means resorted to, if, for special

reasons, it is not exact or otherwise not applicable.’’ Tli-

nois Cent. R. Co. v. Crail, 281. U. S. 57, 64-65, 50 S. Ct.

180, 181, 74 L. Ed. 699, 703, 67 A. L. R. 1423, 1426; 9 Am.

Jur.,. Carriers, section 780.

It is fiot unusual to allow recovery for the reasonable —

cost of repairing or restoring injured property, especially

where the expense of so doing is less than the diminution

in value’ because of the injury. And if the value of the.

repaired or restored property is less than the value of the

property before the injury, such, difference in value is

‘also allowed, in addition to the reasonable cost of repair

.

<a

or restoration. 956. Sd. S., Damages, § 83b, page 599; 15

Am. Jur., Damages, section 124, page 534.

=

[2] Restatement Torts, section 928, sets forth this rule:

‘*Where a person is entitled to a judgment for harm to

chattels not amounting to a total destruction in value, the

damages inelude compensation for (a) the difference ‘be-

tween the value of ‘the chattel before the harm and the

value after the harm or, at the plaintiff's election, the ;

reasonable cest of repair or restoration where feasible,

with due allowance for any difference between the origittal

value and the vatue-after_repaigs, * ° °."" As noted in

comment a to this section, if *t does not venponbly appear

economical ‘to repair or replace the damaged « hattel, ‘‘the

damages are the full value of the subject matter at the

time of the tort, less the jynk value of the remains.’

The rule just ‘stated is approved in 1 Bartl v. © ity of New

‘Ulm, 245 Minn: 148, 72 N. W. 2d 303, 305, and citations;

Hermes v. Markham (N. D.), 60.N. W: 2d 267, 273. ‘Plan-

_ _- tiff cites this rule in support of the trial court's allowance

. of the $1250. item. Defendant contends its liability ‘is

limited to the cost of replacing the damaged panels and

that the item just menttanes jx not included therein.

'3] II. We think the wat from the. Restatement may

properly be applied here.and that it supports allowance

to plaintiff of the $1250. Unless this sum is included in

‘the award to plaintiff it will not be reimbursed for its

‘*full actual loss’’ as the statute contemplates. Expendi-

ture of the remaining amounts included in the judgment .

was insufficient to replace the damaged panels in their :

5 original condition or value. It is not contended this was.

through any fault’ f plaintiff. As previously stated, there

is evidence it’ was \impossible to match the color of the

first shipment. Thus the court could properly find the

difference in color was: aiso not vhevguiiie ‘to any fault

of Colors, Ine. The court found, we think justifiably, the

plan plaintiff, followed in replacing the damaged panels

. was the only: practical and, economical, method it could

pursue. Certainly it was much less expensive than re-

placing all 206 panels, so the color would be uniform

throughout. :

[4] It is true no witness testified directly that value of

-the 153 replacement panels was $250 less than the value

of those replaced if they had not beengdamaged in transit.

Such testimony might well have -been produced and per-

haps would have simplified our problem. But we feel evi-

dence that plaintiff was compelled to accept for the re-

placement panels $1250 less than’ it would have received

for the original ones, if not damaged, is substantial evi-

dence of their reduced value. It is not suggested plaintiff

did not negotiate in good faith with the principal contrac-

tor and the school board, nor that it did not effeet the

best possible sale of the replacement panels. Of course

it was to its advantage to do so. See Meltzer v. Pennsy!-

‘vania R. Co., D. C. Pa., 29 F. Supp. 840, 842.

[5] Evidence of the price for which personal property

sells at a bona fide sale is competent evidence of its value.

Vincent, Albin & Strahl v. Hines, 198 Towa 1224, 1230, 200

_N. W.'1, and citations; Southwestern R. Co. v. Davis, 58

Ga. App. 712, 186 S.-E. 899, 902; Gartington v. Ft. Worth

-& D.C. Ry. Co., 34 Tex. Civ. App. 274, 78 S.-W. 368, 369;

Rodgers v. Texas & P. Ry. Co., Tex. Civ. App., 172 8. W.

1117; 2 Sutherland on Damages, 4th Fd. section 447, page

- 1448: 13 C. J. &., . Carriers, § 255, 1 (2), page 573, § 264a

pages 611-612; 32 €. J. S., Evidence, § 1049a; 20, Am. Jair.,

_ Evidenee, section: 373...

The’Garlington and Rodgers cases, supra, hold evidence 5

is receivable that damaged goods were sold for the best.

— 28 — ae

price obtainable’ and what such price was. See also Gulf,

(. & S. PF. R. Co. v. Texas Packing Co., supra, 244 U.S...

31, 34, 37 S. Ct. 487, 61 L. Ed. 970, 973.

There is authority that the contract price is also evi-

dence of the value of the goods shipped. Lyons v. Grand

‘Trunk R. Co., 185 Mich. 417, 152 N. W. 88, 89, Ann. Cas

IMITD, 162, 164;.13 ©. J. S., Carriers, § 264e, -page —_

9 Am. Jur., Carriers, section 783.

Our conclusion also finds support in Weirton Steel Co.

hag cessed Moller Co., 2d Cir., N. Y., 126 F. 2d_ 593,

; Meltzer v. Pennsylvania. R. Co., supra, D. C. Pa., 29

~~ Supp. 840, 842; Cordery v. American Ry. Exp. Co., 5

N. J. Mise. fi, 137 A. 719.

_iTL. Defendant's sities argument in support of its

first two assigned errors is that the item of $1250 consti-

tutes special. damages which are not recoverable unless

at the time the shipment was made it was notified of the

facts upon. which the claim therefor might be based.

[6] The general rule is-that special damages are not

recoverable from a carrier for injury to goods ‘shipped

unless it had notieé or knowledge of the special ‘cireum- .

stances from which such damifges would flow. Percy v.

~ Chicago, R. L & P. R. Co., 207 Iowa 889, 892-894, 223.

N. W. 879; Alton R. Co. v. Oklahoma Furniture Mfg. Co.,

190 Okl. 216, 122 P. 2d 152, 166 A. L. R. 1030, 1032, and

Anno. 1034; 3¢. J. S., Carriers, § 267; 9 Am. Jur., Car-

riers, section 789. There is no evidence defendant was

informed, at the time of the original oem, of the pur-

pose for which the panels were to he used.

[7] However, we are not persuaded, the item of $1250

constitutes special damages within the above rale. Cer-

tainly the difference between the value of the original

shipment if it had not been injured and the value in its

4

~My i

--

—~ qeiotmmtn “4 4

ae

injured condition would constitate general, not special,

damages. And we think, in hen thereof, the reasonable

cost of restoring the injured panels, with due allowance

for the differenee between their original value and the

value after restoration, also constitutes general, not spe-

vial, damages. As stated, defendant concedes liability for

the cost of restoration. We are cited to no authority for

the proposition that depreciation in value of the restored

- goods constitutes aptciel damages which are not allowable

in thie absence of notices

IV. As previously stated, defendant's remaining. as-

signed errors are directed to the receipt of evidence of —

‘ plaintiff’s overhead and. operating expense for 1959, the

year the panels were furnished, and thé allowance to plain,

tiff therefor of $928.56, 17 per cent of its direct expense -

for labor and material in replacing the injured panels. —

It is argued this item is not shown to be part of the actual

loss plaintiff sustained: : / ,

Over defendant's objection as irrelevant, immaterial and

not bearing on the proper measure of damages, a state-

ment prepared -by competent accountants was received in .

evidence showing plaintiff's operating and overhead ex-

pense for 1959. It contains 29 items, with the cost of each.

The total is about $225,000. Nearly ‘half this figure con-

sists of officers’ salaries and wages other’than direct. We

understand this means pay of administrative and super-

visory personnel. Other principal items include building

rent, travel, depreciation on miachineryo(the largest item

aside from officers’ and indire¢t compensation), auto, truck

and plane expense, operating supplies -and expense, in-

surance, telephone and telegraph; and moving to a new

building: °

The statement Also iithadlai payroll taxes, of about -

$9500 and iin to ‘employees’ welfare and education

;

ad

,

—_— P= 2

funds of about $5300. Insurange totals more than $10,000.

- The court added to the direct cost of labor ‘for which re-

covery was. allowed ) per cent of the amount actually

\ paid in wages, to’ cover payroll taxes, employees’ welfare

and @ducation funds and workmen’s compensation insur-

ance. These items total about 10 per cent of the wages

paid. They are duplicated in the statement of overhead

and operating expense.

The .total of all these dooms ($2 95,000) is shout 221%

per cent of plaintiff’s direct expense for all labor and

material during 1959. The allowance to plaintiff of 17

per cent of its direct cost for labor and material -in_ re-

placing the injured panels ix therefore a reduction of sub-

stantially 25 per cent from the proportionate cost of

overhead (224% per cent) for the entire year. . This, of

course, much more than makes up for duplication of the

items added to the wages paid for labor, The reduction

would also include several other items, such as plaintiff's —

expense of $6500 in ‘moviiig into a new building, for which .

-the court may have conchuded no allowance should be

made,

The vital question raised by these assigned errors is .

whether. plaintiff is entitled to recover, as part of its cost

. of replacing the injured’ panels, the above portion of, its

operating and overhead expense in addition to its direct

cost for labor and material on this job. It is a difficult

question to be solved with little help from the briefs. If ©

.the right answer is in the affirmative, the objection urged

. to the evidence was properly overruled. We do not under-

stand defendant objects primarily to the extent of the al-

towance but ‘to any. allowance for operating and overhead

expense. :

8] ‘We think defendant's liability for plaintiff's “fall -

actual loss’’, which the federal statute contemplates, in-

|

a]

o— 1 ~-

*

eludes not only the direct cost of labor and materials in

replacing the injured panels, which is*concededly due, but

also a fair allowance for the cost of furnishing offieers and °

supervisors, building, machinery, power and other items

of operation and overhead... There if substantial evidence

to support the amount of the trial court’s allowance for

these items if plaintiff is entitled to any recovery therefor.

We are not called upon to say what, if anything, .we would’

allow if we were triers of the facts or if our review were |

de no 0 as in equity cases.

‘Plaintiff's president testified without dispute, “In. con-

nection with doing the work we incurred ¢ertain overhead

expenses in the operation of machines, suclf as presses,

stamping machines, and electricity. The machinery has

to be housed and supervisors and officers to be paid—cost

items and overhead which any factory of this nature has.’’

On eross-examination as to operating and overhead ex-

pense this witness said, ‘‘we spent more proportionately

on the Montezuma job than any other we have had, in

comparison with volume, due to this mishap in shipment,”

Plaintiff’s president also testified; ‘‘In the contracting -

business this overhead, * * * and referring to these panels

and nothing else our overhead, would be much higher than

22%.’’ Further, ‘‘We have had much more supervisory

ekpense on-this job than any other since Ihave been in

the business which is not reflected in the ‘labor costs. ”

The authorities generally distinguish bet ween operating

_and overhead expense. The, former consists of those. items

_ inseparably connected with the’ productive end -of “the

‘ business. The latter consists of charges+generally of a

nonproductive or -indirect nature such as admijistrative

costs incident to the_ management, supervision or conduct

_ of the capital outlay of the business. Lytle, Camphell &

Co. v. Somers, Fitler & Todd Co., 276 Pa. 409, 120 A. 409,

a0

=» 39 —2 -.

27 A..L. R. 41, 43-44; Mann v. Schnarr, 228 Ind. 654, 95

"Nv KB. 2d 138, 141, 142-143. ;

se ae ‘Overhead’ cannot be defined with precision. ‘It may

be said to inelude broadly the continuous expenses of a |

business irrespective of. the ‘outlay on particular con-—

tracts.’’? W ynkoop - Hallenbeck Crawford Co. v. Western

Unian Tel. Co., ‘ 268 ‘N. Y. 108, 196 N. E. 760, 761; Grand

Trunk Western-R. Co. v..H. W: Nelson Co., -6 Cir. Mich., -

116 F. 2d 823, 839.

Under ‘‘cost-plus’’ construction contracts it is generally

held the contractor may not include overhead expense as

part of the costs unless the contract expressly so provides.

‘An important reason for this seems to be that the parties.

evidently intended the percentage payment (usually 10

or 15 per cent in addition to. labor and material cost) to

compensate for the contractor’s overhead. Lytle, Camp-

bell & Co. v. Somers, Fitler & Todd Co., supra, and Anno:

27 A..L. R. 48, 50-51; Shaw v. G. B. Beaumont Co., 88

N: J. Eq. 333, 102 A. 151, 2.A. L. R. 122, and Anno, 126;

Jensen v. Manthe, 168 Neb. 361, 95 N. W. 2d 699, 703;

‘ Nolop v. Spettel, 267 Wis. 245, 64 N. W. 2d 859, 862-864.

We feel these precedents do not conflict with thé conclu-

sion herein reached. The Lytle, Campbell & Co. case,

supra, observes, “This charge must be determined as each

* ease presents its own peculiar circumstances. ” (Page 411

of 120-A.)

Several precedents lend support to our decision on this

point. Grand Trunk Western R. Co. v. H. W. Nelson Co.,

supra, 6 Cir., Mich., 116 F. 2d 823, 839, holds overhead

expenses of a-contractor may be considered in computing

damages for breach of a construction contract. ‘The jury _

was not required to view appellee’s loss as totally. sepa-

rate and apart from its general work.’ Salaries of ex-

=

*

— ib

ecutive officers there made up about half the claim for

overhead, | . ‘e

United, Electrical, R. & M. Workers v. Oliver Corp, 8

Cir, lowa, 205 F. 2d 376, 387-89, approves recovery for

‘overhead in an employer's action against a labor union

for damages for violation of a no-strike clause in the em-

ployment contract. The opinion says, ‘‘In determining

the amount of ‘an admitted damage. mathematical ac-

curacy is not required of juries. Ht is sufficient that a

reasonable estimate based on relevant facts is reached’’

(page 389 of 205 F. 2d). ; .

In Pacifie Portland Cement Co. y. Food Machinery &

Chemical Corp., 9 Cir., Cal., 178 F. 2d 541, 555, declaratory

relief was sought as to the meaning of a contract provision

relating. fo an. increase in cost of production of gypsum.

After considering the question at length the opinion holds

indirect or overhead expense ‘was part of the cost of pro-

~ duetién. ‘In the case of corporations operating on a

‘large scale ‘it is considered legitimate accounting practice

“to allocate general overhead expenses to particular opera-

tions upon. a percentage basis.’ (citations)”’ :

_ Patent infringement cases frequently ‘hold the infringer

is entitled to set off ‘a reasonable allowance for overhead

as against profits from manufacture of the patented article

for which he is liable to the patentee. Sammons v. Colonial

Press, Ist Cir., Mass., 126 F. 2d 341, 350-351; Alfred Bell

& Co. v. Catalda Fine Arts,-D. C. N. Y., 86 F..Supp. 399,.

415. See also Levin Bros. v. Davis Mfg. Co., 8th Cir.,

Minn., 72 F. 2d 163. The Samimons and Alfred Bell cases

pgint out that to be allowable, overhead need not be ‘a

direct expense on the. particular job—indeed if expense

were direct it would not be overhead.

Gorden Form: Lathe Co. vy. Ford Motor Co. 6th Cir.,

Mich., 133 -F. 2d 487, 500- 501, is a patent infringement

a 3h

case which considers the effect of overhead in determining

profits. We quoté from the opinion: ‘‘It is a matter of’

common knowledge that all.well-managed manufacturing

businesses recognize overhead costs as financial outlays

expended in-the production of an article or process.

‘*There is probably . no ‘inate phase of determining cost

of: manufacturing a deyice or machine which is’ more elu-

sive or difficult than the allecation of overhead to a par-

ticular article. The impossibility of precise allocation is

\

generally recognized and the law is not so exacting as to i

require a delicately balanced scientific method of deter-

ininetion which reaches a mathematieal eértainty. To

-- **The cost of manufactured products consists of the sum ~

of direct.costs, that is, direct, material and‘ direct labor,

plus indirect costs, or manufacturing expense. Because

of its indirect and general nature, manufacturing expense

cannot be charged direetly to°each production order as can

_ direct material and direct, labor. It must therefore be dis-

’ tributed over production. in such manner that each kind of

PA, product and each lot of work produced oo be charged

with its fair share of the ones expense, r

a

V. The precedents defendant cites in amen of its third

rand. fourth assigned errors aré not in point. Principal

reliance ‘is upon Iilinois Central R. Co. v. Crail, supra, 281 .

‘e

. U.S. 57, 50 S. Ct. 180; 74 L. Ed. 699, 67-A. L R. 1423, and

- Brown Coal-('o. v. Illinois Central R. Co., 196 Towa 562,

. 192 N. W. 92... In each case ‘a coal dealer sought recovery

for a shortage” Of something over 5000 pounds in’ a car-.

-load shipment .of coal at the retail pri¢e of coal in small

lots. . Neither plaintiff had resold the coal but intended ,

y mérely to add it. to his stock. Both decisions hold the ”

-* anéasure of .the loss was the wholesale market price at

destination rather than the retail price of the small quan-

' tity in. the shortage. In each case the plaintiff was able

=<) —

to purchase other similar coal at wholesale. Each plaintiff

sought to recover from the railroad the profjt -he would ”

have earned had he sold at retail the coal which was short,

without deduction for. any of the expense that would have

been incurred in sue ‘h sale, but which in fact was ‘not

ineurredy oe

Thre paar ee of the cited decisions is searcely open to

“question. See Annos. 50-A. L. R.,1467, 67 A. L. R. 1427;

9 Am. Jur, Carriers, section 784. Plaintiff here makes:

no, claim for any profit Trom te injury to the panels. It.

seeks to recov er only its loss therefrom. ‘The judgment

appealed from does no more than compensate = such

loss and no profit is included therein.

Affirmed.

“All Justices coneur. eae

The judgment. of the trial court was as follows:

vd ; t

Iv DGMENT TONTRY.

“Now. on this 10th day of: March, 1961, this matter

comes on for final hearing’ and determination the

plaintiff Conditioned “Air Corporation, appearing by

‘-H. M. Coggeshall, its attorney and the defendant,

Rock Island, Motor Transit (Company appearing by

A. B. Howland, its attorney. ‘

‘*And now upon the issues joined, and the court

having heard the ev idence and arguments. of counsel

and the cause having been duly tried and submitted,.

and the court having, heretofore filed hevein its find-

‘ings of fact and conclusions of law which by this

reference are made a part hereof, and the court being.

- fully advised in the premises;

“Tt Ts Therefore Ordered, Adjudged and Decreed

that the plaintiff, Conditioned Air Corporation, have

— 36 —"

Qo

and recover judgment against the defendant, Rock

Island Motor Transit Company, in the amount of

$7,640.67. together with five (5) per cent interest per

: annum thereon from and after July 15, 1959 until paid.

“It Is Further Ordered, Adjudged and Decreéd -

that the panel salvage now in the possession of the

defendant is the property of the defendant. -

‘It Is Further Ordered, Adjudged and Decreed that

_ judgment. for the court costs he entered against the

defendant. |

s/ hp ('. Fountain,

| Judge. so

bie 92, lines 26-34; R. 93, lines 1-27.)

»'

APPENDIX 2.

The following portions. of The Record are. herewith -

reproduced to show the pleadings filed in the trial court,

the findings of fact, and conclusions of law, of that court,

together with the) objections to evidence offered and re-

ceived upon the trial, requests for findings and conelu-

sions with respect to questions of law presented by this

Petition for Certiorari:

“On April 25,. 1960; plaintiff filed in. the office of

the Clerk of the Polk County District Court the -

lowing: -

PETITION.

‘*“Comes the plaintiff and for cause of action states:

1. That the plaintiff is a corporation organized and

ae under the laws of the State of Iowa.

_ That the defendant was ‘at all times material

acai a common motor carrier operating a fleet of

trucks for the transportation of property for com-

pensation in interstate commerce.

3. That on or about the 16th ‘day of March, 1959,

Colors, Ine., of EIndianopolis, Indiana, delivered to

er Daum Freight Lines aluminum siding owned by -plain-

tiff, for transportation to plaintiff at Des Moines,

Iowa; copy of bill of lading issued is attached and

made a part hereof and marked Exhibit ‘‘A’’.

4. That the said aluminum was delivered to. Daum

at Indianopolis, Indiana, in good condition for ship-

ment to the plaintiff.

5. That defendant, pursuatit to said bill of lading,

transported said aluminum and deliv ered it .to plain-

tiff at Des Moines, Towa. |

sj. That the defendant was so negligent in citing

and transporting said aluminum that a-large portion —

pee eed

jae OR oes

thereof, was destroyed except for salvage and a por-_

.tion. thereof was damaged, all to plaintiff's damage

in the sum of $9,566.00.

. The portion so destroyed except for salvage con- .

pee of 165 10. x 2 aluminum. outside wall panels

‘and metal trim; the portion of said lot damaged con-

sisted of 18 aluminum. outside wall panels,

8. That the said salvage has been delivered to, re-

ceived, and accepted hy. the defendant ‘and is and has

been in its possession.

9. That plaintiff paid to defendant its freight bill

for said shipment in the amount of $229.08.

‘‘Wherefore plaintiff prays: for judgment against

the defendant in the sum of $9,795.08 and. interest

from March 19, 1959’ (R. 3, lines -1-34; R. 4, lines

1-19). , :

‘On May 26, 1960, within the time allowed by the

_ . Court, Rock Island Motor Transit Company filed. the

following:

ANSWER.

‘Defendant for answer fo the petition of plaintiff

states and shows the Court as follows:

1. This defendant admits’ the ——* of — “ |

. graph 1 of plaintiff’s petition. ;

2: This defendant admits that it was at all times

material a certificated motor carrier and was the

holder of. éertain certificates issued by the Interstate

Commerce Commission authorizing it to operate as

a motor carrier between Des Moines, Iowa, and Chi-

cago, Illinois. :

3. This defendant: ‘admits that'on or about’ March

16, 1959, a shipment of aluminum siding was billed |

by Colors, Inc., of Indianapolis,/Indiana, to plaintiff

/.

ad

anf

at Des Moines, lewa, and that said ‘shipment was

reuted via- Daum Freight Lines from Indianapolis,

Indiana, to Chicago, - Illinois, thenee to Des Moines,

’ Towa, via Rock Island Motor Transit Company. « This

defendant is -without information as to whether the

copy of the bill of Jading attached as Exhibit ‘*A’’

to plaintiff's petition is a true copy. of the bill of

lading issued, and, therefore, denies same. — ;

4. This defendant denies the. allegations of a

graph 4 of plaintiff's petition.

5. ‘This defendant admits that it incmuaianiel the

shipmerit referred to in the foregoing paragraphs .

between Chicago, Tlinois, and Des Moines, Towa, and

~ tendered same to plaintiff at Des Moines, Iowa. This

defendant denies that said shipment was delivered to

plaintiff and alleges that plaintiff without good cause

refused to receive. certain portions of said shipment.

6. This defendant denies each, all and every alle-

gation set forth in ‘paragraph 6 of plaintiff's petition.

_7. This defendant denies each, all and ‘every allega:

tion set forth in paragraph 7 of plaintiff's. petition. —

8. This, deféndant admits that certain portions of

the shipment. improperly rejected by ‘plaintiff are in

its possession.

9. This defendant admits the allegations of para- .

‘graph 9 of plaintiff's petition.

“Wherefore, having fully’ answered the petition of

plaintiff, defendant, Rock Island Motor Transit. Com-.

pany, prays that the same be dismissed’’ (R. 4, lines

94-34; R. 5, lines 1-34; R. 6, lines 1-13).

***On the 5th day of January, 1961, appellee filed the

following:

Pk,

a

_-— AMENDMENT To Petition.

/

‘Comes the plaintiff and leave of court having been

-obfained amends its — by adding ee | 10

as follows: : ;

10. That despite diligence plainiff was. unable to

fully replace or repair said panels and trim. in that —

the coloring thereof could not be duplicated, all to

plaintiff's special damage in the amount of $1,750.00.

‘Wherefore plaintiff prays as°in its petition’? (R.

6, lines 27-34; R. 7, lines 1-7).

“On February 20, 1961, appellant filed the fol-

lowing: -

AMENDMENT TO ANSWER.

“Comes Now defendant, "Rock Island Motor Transit

* Company, and amendy its answer heretofore filed

. herein to make the same applicable. to the amendment

to plaintiff's petition filed on or about January -5

1961, and thereupon states and shows the Court as .

follows:

“This defendant admits that plaintif was required

to and did make an adjustment in the contract price

for the panels te te supplied to the Montezuma Com-

munity School District but alleges that such items are

not preper damages reeoverable in this case and that

this defendant is in no manner responsible for or li-

ee able for any loss sustained by plaintiff in said respects.

“Wherefore, having fully answered the petition of

plaintiff as amended, defendant, Rock Island Motor

Transit Company, prays as in it* original answer"

_. (R. 7, lines 9-33).

‘The following occurred. during the direct examination

of Ray Cummings, president of the Conditioned” Air Cor-

poration: / °

aoe

. “TP had occasion‘to make a bid in connection with

, a job involving the construction of a schoolhouse at .

- Montezuma, Lowa, in either 1958 or 1959. ,The hid was

accepted by the contractor. * |

“Exhibit A is the acceptance of our proposal made

to the’ Bowers Construction Company for performing

this works in the amount of $15,870. There were three

parts to the work under this contract. One was to

_ furnish aluminum ‘fascia, or trim, as you have’ called

it. The other was to furnish these exterior panels as

displayed here in the courtroom, and the third was

to’ furnish insulation, or backing, to these panels mak.

ing up the total of our contract.

“Mr. Coggeshall: We offer and introduce in evide nee

Exhibit A. is

“Mr. Howland: Objected to as irrelevant and im”

material, having no‘hearing on any action of damages

before the Court for consideration in this proceeding,

“or other matters in this proc veoding, and not the proper

' “measure of damage. ne

_. ‘Mr. Coggeshall: 1 will. coneede that the measure

"of damage, as snch, is not the contract price or any

differential in'connection therewith, but in. connection

with our claim of special damages we need to estab-

lish a base to show the reasonableness of the deduc-

tioris made hy the contractor and in that connection

the contract price: is relevant” (R. 12, lines 10-34;-R.

13, lines. 1-11). .

“The Court: Overruled’ | af cdi

“Mr. Coggeshall: Can # be agreed Exhibit F is an

audit prepared by Peat, Marwic ‘k, Mitchell & Co., for.

the. year 1959 for the. plaintiff? ° :

“Mr. Howland: It is agreed that Exhibit F ‘is an

-andit.of the business and financial transactions of the

plaintiff corporation for the year,ending Deceinber 31,

1959, prepared and transmitted to the witness, as”

i.

Vie

president of the plaintiff, by Peat, Marwick, Mitchell

& Co., certified publie accountants. -

‘‘Mr. Coggeshall: May we further agree that the

accountants are competent?

‘‘Mr. Howland: Well, there is no qusdion as to the

competency -of the accountants, but if the exhibit is

‘to be offered in evidence, I want to object to. it as

irrelevant and immaterial, not bearing on any element.

of damage which the defendant could sete be re-

sponsible for.

**The Witness: In connection witli iste the work

our company incurred certain overhead expenses in

the operation of inachines, such gs presses, stamping

machines, and ‘electricity used in the course-of the

work, The machinery has to be housed, and there are

supervisors and officers to be paid-—cost items and

overhead which any factory of ‘this nature has.

Mr. Coggeshall: 1 would like to introduce Exhibit —

_ Fat this time,

‘Mr. How land: The’ offer of Exhibit F is ditsoted

fo as immaterial and. irrelevant to any issue before

the C ourt for determination, that the general over-all

* business situation and the volume of business and the

overhead items of rent, general officers salaries, ex-

penses, ete., are wholly immaterial to any issue pre-

sented in this case and have no bearing upon the

proper measure of damage and do not in any way

meastre the actual loss suffered or incurred by plain-

tiff in-connection with this. transaction.

“*The Court: Overruled. It may be admitted.

“Q. Was the general relationship of overhead ‘to

direct expense pretty’ constant thronghout 1959?

‘*Mr. Howland: May the kame objections made to

Exhibit F stand without repetition to any inquiries

with respect to the subject of. overhead expense or —.

allocation of overhead expense? :

“The Court: I may.

“Mr. Coggeshall: We will agree to that’’ (R. 18,

lines 20-34; R. 19, lines 1-34, R. 20, lines 1-20).

“Q. Looking ‘at Exhibit F ean you tell us during

the year 1959 the direct eXpense in doing business

of your firm, I mean the direct out of : on expense

including overhead? .

.**A. Our total out of pocket cost of doing business

is the sum of two figures; $898,128 plus $41,863, which /

‘appears on, page 3 of the exhibit. They are carried

under the items, ‘Direct costs on completed contracts,

$898,128.84,’ and ‘Cost of sales, $14,863.01". Our over-:

head expense for the year 1959 was $224,841, or a

percentage of overhead to direct expense of 2214%.

Exhibit F contains a schedule showing a breakdown

of the overhead expense of $224,841.84, which appears

on page 8 of Exhibit F, including items of officers’

‘compensation, salaries and wages—other than direct |

-—warehousing expense, rent expense, outside engitieer-

ing services, traveling expense, and depreciation. The

depreciation shown is on machinery only, not build-

ings. The building we occupied was Tented, and the

rent expense constitutes the rental the company paid

for’ the building. Other items are included’’ (R. 21,

lines 11-34; R: 22, lines 1-6). |

“*Q. And shortly thereafter or about that time did

you have occasion to have a conference or reach a

settlement with the contractor on the job?

‘*Mr. Howland: Objected ts as immaterial and in-:

competent, no bearing on any issue before the Court;

. not the proper measure of damages, and no founda-

_ tion laid for ‘any claim of that type and character.

‘The Court: Overruled.’’ ,

_ (Exhibit G marked for identification.)

*Q. Did you handle the matter for the plaintiff of

settling with the contraetor?

~

ea ere

“A. Yes.

‘*Mr. Howland; ae we have the same objection

stand without repetition as to further inquiries with

respect to the exhibit or any settl¢ment made with the

contractor?

**The (‘ourt: It may so stand,

“**The contractor on the job was Bowers Construction

Company. Mr. Richard Bowers is the owner. We re-

ceived a communication from Mr. Bowers which is

identified as Exhibit G. The letter was sent to me

_in relatiozi to settlement with the sehool board. I know

the final settlement which we made with the con-

tractor. The settlement was this: Because of the re-

placed panels ‘being a different color, but being me-

chanically sound, the School Board_objected to the

“architectural appearance, and $0 did the architect,

and it being a question of the opening. of school in

September we made a settlement with them whereby

Bowers Construction Company gave the school board

.. $1250 to accept the variation in color, and we gave

the Bowers Construction Company the $1250 to give

to the school board and $§00 for extra labor in

. bandling and sorting of the panels in order to reduce ~

the objections to variations’ in color, The cost was

$500 plus $1250, making a total of $1750. The reasori

for the. variation in color is that, like carpet out of.

a different dye vat, maybe it is hard to see, but on .

a building in the bright sunlight you can notice it,

and the only way to keep true ‘color all the wdy —

through would be to replace all the sheets on the ~

building, which we did not do sud which would have

. been more expensive. |

‘Mr. Howland: I move to exelnde the answer of the _

_witness in its entirety on the grounds urged in the

objeetion, and further that the witness is giving hear-

say testimony consisting of 6pinions and conclusions;

45,

that © no foundation has been laid for the introduction

of any such evidence to make ‘it compétent and ma-

terial, and that. with respect to conversations with the

contractor and conversations of the contractor with

UJ the school board the testimony constitutes unadul-,

terated hearsay evidence; there has beén and will be-

no opportunity afforded -for cross-examination; and

the testimony is therefore wholly incompetent and

improper.

“The Court: Overruled.

**Q. Do you know what Exhibit (i is?

“*A. Yes, ‘1 know what Exhibit G is, and I also wae_

in on the negotiations with Bowers and the school \

board and Mr. Ed MeNeal,’ president of ' the school ‘

board, so it was firsthand information that I have.

- Mr. Howland: I again renew the motion to strike

the statements: as hearsay and incompetent. °

**The Court: Overruled. |

“Exhibit G contains the settlement as I have ex-—_

pressed it to the Court’? (R. 23, lines 19-34; R.-24, lines

1-34; R. 25, lines 1-34; R. 26, lines 1-13).

On cross-examination of this wae, he testified as

follows:

“On one sheet in Exhibit Ff, ie page X,

schedule II, ‘Statement. of operating expenses. for the

year 1959,’ the total operating expense’ was shown —

‘as $224,841.84. Included in that schedule on page &

of Exhibit F is an item of rental expense that was the

“ yental of the building that the company occupied with

its shop and offices at a fixed monthly rental. That

was a liability of the corporation irrespective of the

amount of business that it did. That is a part of

what I have included in operating expense here. The -

rent would have been the same whether we ever had

this contract for the school job at Montezuma or not.

co

~ ¢

amin AG, ant A °

‘There -is a charge of outside engineering service of

$1,000. I can’t tell you what the nature of that was, __

but we do employ outside engineering at:times. That 0

had no connection, as far as | know, with the Monte-

zuma schoolhouse job. We have an item of travel

expense for the year 1959 of $10,840.85. 1 do not

know how much of that represented traveling expense

incurred in connection with the Montezuma school- ae

house job, but I would like to answer your question

with this qualification, that we have spent more pro-

‘ portionately on the Montezuma school job than any

other job we have had in comparison with the volume

due to this mishap in shipment. Lhave no idea what

it arhounts to. _ The depreciation item of $17,854.85 is’. -

‘depreciation on machinery and equipment for the

year. We wouldn't have been able to do the Monte-

zuma school job without the machinery. The de-’

' preciation which would not have been incurred had

we not had the Montezuma school job and similar

_jobs like it, because that was,on the equipment used

in the Montezuma school job.” We didn’t buy any

equipment to do this job with specifically. We take

our depreciation.on a flat basis, which is recognized

by the Internal Revenue Department” (R. 28, lines

33-34; R. 29, lines 1-34; R. 30, lines 1-9). °

_ “There is an item of professional feds 'of $1,984 for

the year 1959: That includes legal fees and other

_ normal professional’ fees. The company probably

paid fees to accountants jp addition to legal fees. The

$224,841.84 was our overhead cost -and constituted

22%4% of our direct: costs. on completed contracts, .°

which amounted to $898,128.84 and costs of sales of

$41,863.01. We added. the two figures together and —

took the proportion that this 224,000 odd-«ellars bore

to those figures. Page 8 of the schedule shows an

item of moving expense, $6,409.23. /That was expense

—47 —

of moving equipment when we moved from the New

~York Avenueocation out to the new factory on Bell

_Avenue. That was probably actually done after the

Montezuma job had been’ fully ee, (R. 31,

lines 2-20).

At the close of all the evidence, counsel for petitioner

made the following request. for findings of fact and con-

clusions of law: |

“Mr. How land: At this time, at the close of the evi-

dence, we ask the Court to render hie decision in writ-

ing, finding the facts and stating his conclusions of

law with respect to any ‘recoverable items of damage

shown by the evidence; in that° connection we ask —

the Court, as a, matter of law, to state in his con-

clusions that the items totaling $1,750, claimed by

plaintiff as a part of: the damages sustained, consti-

tute special damages, and that the evidence is wholly

insufficient to establish that the defendant is-in any

manner liable for such loss. We further ask the

Court to incorporate in his gonclusions of law a state-

ment that. as to 27 of the panels which are in issue,

that no substantial damage thereto was sustained, and:

that the same were improperly rejected by plaintiff

and should have been retained.. We ask further that

the Court: find and determine.as a fact that 66 of the

panels couid have been reanodized and repaired at a

proportionate cost, as testified to by the witness Borg,

sand that 66 panels were in fact improperly rejected 5

and should have been reanodized’ rather than new |

material ordered and additional labor expended’ to

“ reproduce the panels, We further ask the Court to _

include in his statement of coneliisions that the meas-

ure of damage to which the plaintiff is entitled is the!

actual cost of reproducing the panels which were

properly rejected, and that the cost of Ming business on

of) tm

fhe basis suggested by counsel.in his opelfing state-

nent. and by the ev idence received, over objection is

not a recoverable item of damage and is speculative |

and remote and in the nature of special damage, not

recoverable in this proceeding”’ (R. 74, lines 14-34;

R. 75, lines 1- 19). : :

_ The Rene shows the ‘following with respect to Ex-

“hibit i ie we La | i:

| “Exhibit F is an accountants’ report of Peat, Mar-

wick, Mitchell & Co., Certified Public Accountants,

Des Moines office, consisting of a cover .sheet, trans-

mittal letter, a balance sheet statement of financial

condition as of December 31,4 1959, referred to as Ex-

hibit ‘*A’’ thereto, a _ statement of earnings and fe:

tained earnings of Conditioned Air’ Corporation for -

the year ended December 31, 1959, with comparative |

figures for. 1958, which is referred to as Exhibit ae",

notés numbered: (1) to (4), inclusive, to financial state-

‘ments, and a schedule of contracts in progress: show-

ing assets and liabilities with respect thereto, and a —

statement of operating expenses for the year ended -

December 31, 1959, with, comparative figures for 1958.

The statement of operating expenses is reproduced as

e follows’? (R. 82, lines 1-21): |

oe]

t

“?¢

AD me | Se.

‘Conditioned Air Corporation. .

Statement. of Operating Expenses. ,;

° > ~~ Year ended. December 31, 1959

with Comparative figures for 1958

Increase

1959 1958 (Decreuse)

Officer's compensation ....... ..$ 24,000.00 17,200.00 6,800.00 ©

Salaries and wages —other than . "*

ee SE en 85,875.02 . 69,714.77 26,160.25

” Warehousing expense ........ ky tue a » , 932.68 (932.68)

Rent ‘expehse ..:......... ‘o... 7,840.00 7,920:00 (80.00)

Outside engineering services . 1,000.00 10;127.06 (9,127.00) -

‘Traveling expenses ...... “14... 10,840.85 ° 11,436.33 - ” (595.48)

Depreciation '............ Fite es -» 17,854.85 13,226.94 ° 4,627.91

Payroll taxes. ........ eee 9,462.68 9,159.72 - 302.96

Auto, truck, and plane expense... 11,526.43 7,041.96 4,484.47

Local and county taxes ......... 754.72 614.88 139.84

Operating supplies—sheet metal $ 6,043.42 ‘+ 3,995.71 2,047.71.

’ Advertising ............. eae 710.59, 752.16. (41.57)

Insurance ..... TE CR Te \ aah _ 10,216.67 * 6,178.75 4,037 92

Operating supplies—general \ . * 3,867.80 8,950.48 | (5,082.68)

‘Interest expense ........°. \ 2164.89 1,550.88 614.01

Telephone and telegraph ..... \. 5,002.89 3,749.73 1,253.16

Employer's welfare fund .....) 4,885.21 7,103.44 (2,218.23)

Employees’ -education trust ...\. 392.89 * 871.46 (478.57)

Heat, light and water .......:..., 2,959.69 1,944.28 = 1,015.41

Office supplies and expense .... 1,280.65 1,177.73 - .102.92

- Professional fees ......... ... 1,984.66 — , 1,¥80.77.-- 803.89.

, General expense ..... seseeeees 2,660:38 1,876.44 - 783.94

Service expense ............... 1,992.84 271.70- 1,721.14 .

gk eee ee vrre 128.53 | 319.64 . (191.11)

inouranoe—life ... 2.0 cecceee 1882 (10.78). 21.60

Dues and subscriptions .....-.. 771.92 242.25 529.67

. Postage ....... Siceniauestetacce. - cee 293.58 . 63.99

Contributions ........ eaeueivones . 242.87 —.. 117.50 125.37"

Operating expense—scrap metal.. 3,503.77 1,809.75 1,694.02

Moving expense seesssiverecees » 6,509.23 ee 6.59.23

_-- —

$224,841.84 179,749.75. °45,092. 09

—_ = —_—— --—

The findings of fact and conclusions of law of the trial

court were as follows: .

“*The above entitled cause camé on for trial before

‘the Court without the intervention of a jury, the

adage appearing by its Attorney, Harris Cogge-

.

2

ee

shall, and the defendant appearing by its Attorney,

A. B: Howland; and the Court having héard the evi-

_ dence introduced and stipulations made, examined the

_ exhibits and the autherities cited, and being now.

fully advised in the premises makes the following:

-

Finpinas or Fact.

1. That. on or slid November 17, 1958, the sitiahi |

tiff’s proposal on the sheet metal and insulated panel -

_ work for’the Montezuma; Iowa high school addition

was accepted by the Bowers Construction Company, -

the primary contractor, for the agreed sum of $15,870.

2. That the plaintiff fabrivated a number ,of alu- °°

minum panels and shipped them to Indianapolis, In-

diana, to ‘be anodized: ;

3. That on or sions the 19th day of March, 19: 59,

the shiyffrent of panels was returned to the plaintiff

by the. defendant, but the shipment was in bad order.

4. That 153 of the panels were damaged by crack-

ing, denting, scraping and rubbing off of the anodiz-

ing so that they were unfit for use on said high school

addition; and the plaintiff to comply with his contract.

had to refabriecate-153 new panels and have them —

anodized. '

5. That said 153 damaged panels were returned by |

the plaintiff to the defendant, who still has possession

of the same.

6. That in ariodizing aluminum panels as in this

case, it is impossible to secure identical coloration; — ©

_ and because of the variation in color in the two proc-

esses of anodizing - the sum of $12 a0 was deducted ;

from the contract price.

. . AI

7. That the materials for the replacenient panels

were purchased from Robinson Brothers at a cost of

$2840.31; that there was paid to Jewett Lumber Com-

pany for crating miatesials for shipping, $90.46; that

the freight charges paid on said pane ‘Is from Des

‘Moines to Indianapolis amounted to $221.33, and

freight charges paid’ from Indianapolis to Des Moinés,

153 panels, $143.20: that there was paid +o Colors

—Ine., as: an. anodizing charge on 153 pane's, $830.17

plus c. o. d. fee! of $5.01; transportation charges to

Ww atson Bros., $1.84

8. That plaints actual labor cost in processing re-

placement panel& was: paid | to employeés, FITIS.90;

paid unemployment tax, social security tax, workmen’s

compensation, union welfare, efe., a total of 10% of.

the ahove wages, or $129.89. . ey ie

9. That the fair and. reasonable overhead charges

for the use of the: machinery, renf, management sal-

aries, ete., were in the reasonable sum of 17% of the

above items, or a total sum of $9298.56.

10. That the piaintiff has failed to sustain by a

preponderance of the evidence its allegation that it

used materials from its own stock in replacing anid

panels in the sum. of. $18. 79.

11. That the plaintiff has failed to sustain by a@ pre-

ponderanee of the evidence that the additional de-

duction of $500 made by the Bowers Construction Com-

pany for extra work performed by its personnel in

‘sorting and placing the panels was related to or had

any connection with the 152 replacement panels.

12. That the plaintiff is entitled to interest on the

_ sums due it at legal rafe from July 15, 1959.

7) «

— J. —

13. That the plan followed by the plaintiff in re- ©

placing the 153 damaged panels by new panels was

the only practical and economic method it could have

followed.

S ONCLUSIONS OF: Law, -

“1. The federal law provides that the carrier in such

_- a situation as this is liable to the plaintiff for any loss,

_ damage or injury to the property covered by the bill

of lading, and in that respect conforms te the basic

principle of the law of damages which contemplates - ;

that the remedy provided in a given case shall only |

afford compensation for whatever injury is actually

sustained.

2. In this case the actual loss is to be ascertained

from. the special circumstances of ‘the case rather than:

by rigid adherence to some fixed rule or formula,

such as value of the property at. the point of destina-

tion af the time delivery should have been made.

_ 3. The important factor in this case is, that the

plaintiff upon the happening of the loss had to replace

the damaged panels, and even then was compelled to —

take ‘a $1250 discount off its contract price because

of the differences in color; consequently, the plaintiff ,

is entitled to recover its actual loss, which was ob-

viously the cost of replacing the damaged panels plus

the incidental expenses, including: cost of materials, -

$2,840.31, and crating, $99.46; transportation charges

to Indianapolis and Sag $368.37; anodizing charges”

and c.-o. d. fee, $835.18; labor costs and overkead,

$2247.35; loss on Eig of changes in color, $1 250.00,

for a total of $7,640.67, with interest at 5% trom

July, 1959. a tae

4. That as the.defendant has saan and retained

the damaged 153 panels, itis entitled to dispose of

eae - q

— 53 —

them and to retain any sums received as salvage

therefor.

‘*The plaintiff may prepare a judgment in aecord-

anee with the Findings and Conelusions, submit it

to the defendant for approval as to form, and to the

Court. for signature:

‘‘Both parties except.

‘Signed this 8th day of March, 1961.

s/ Ray C. Fountain,

Judge.”’

(R. 88, lines 19-34; R. 89, lines 1-34; R. 90, lines ~

1-34; R. 91, lines 1-34; R- 92, lines 1-: 21.)

’ This cause was submitted on abstract ee arguinent with

oral arguments. of counsel for both sides to the Supreme

Court of lowa on February &, 1962.

Thereafter there was filed on April 3, 1962 , the. opinion

of the court printed herein as Appendix 1, and the follow-

-ing journal entry was made in the official Journal of the

court.

a April 3, 1962.

“In this cause, the Court being fully adv. ised j in the

prenrises, filed their written opinion affirming the judg-

ment of the District Court. It is therefore considered

by the Court that the judgment of the Court below he

amd if is her: hy .

" Affirmed. :

Thereafter and within the time allowed by the statutes

and rules of the Towa Supreme Conf, there was filed

appellant’s ‘ °

, Petitiox ror Reneanine. -

" Said petition for rehearing was predicated on the fact that

the $1,250 disecount,. referred to in the-opinion of the court,

¢

ore

was ‘special’? or ‘teonsequential’ damages, not recover. -

:

able in the absence of notice to the carrier that such dam- -

‘ages would: result in loss or damages or injury to the

panels in transit, and that the Federal statute (Section 20,

paragraph 1b, Interstate Commerce Act), which provides

that a carrier **shall be liable for any loss, damage, or’

injury to sueh property, does not-impose liability for ven

eral overherd expenses of a business enterprise of a “ship-

per, in no way connected with replacement of articles: lost

or damaged in transit.” :

Thereafter, ard on May's, 1962, the following order was

entered hy the-Supreme Court of lows: .

’ - ; ‘< Sidetladene Denten.’

°

There is filed herewith a certified copy of the record on

appeal, order and proceedings on submission, opinion, and

Judgment affirming jhe Polk County, lowa, District Court,.

uppellant’s petition for re hearing and order overruling

petition for rehearing, dated May S, 1052,