(242 Fed. 59) HERRMANN v. BOWER CHEMICAL MFG. CO. No. 2213. 1. SALES 421-BREACH BY SELLER-ACTIONS-INSTRUCTIONS. A contract for the sale of prussiate of potash, the principal ingredient of which was carbonate of potash, which defendant claimed it could not obtain because of the European war, provided that the sellers should not be liable for delays due to causes such as war, etc., preventing or impeding the manufacture or delivery of the merchandise. In an action by the buyer for breach of such contract, the court charged that, where a party contracted for the delivery of certain merchandise, he was obliged to use diligence to supply himself with sufficient quantities to carry out his contracts, if he could do it in the exercise of due diligence; that the questions for consideration were whether defendants used the diligence which a reasonably prudent man in good faith, desiring to carry out the contract, would exercise; that after the war broke out it was defendant's duty to take notice thereof, and after a German embargo was laid, and after a British Order in Council interfering with importations from Germany, it was their duty to take notice thereof, and if there was reasonable ground for apprehension that the supply of carbonate of potash would be cut off, and that they would be prevented or impeded in manufacturing or delivering under their contract, then it was their duty to provide themselves through other sources with a sufficient supply to carry out the contract, and if they failed in the exercise of that diligence and due care plaintiff was entitled to recover. Held, that plaintiff had no ground to complain of this instruction. [Ed. Note. For other cases, see Sales, Cent. Dig. §§ 1214-1223.] 2. SALES 421-BREACH BY SELLER-ACTIONS-INSTRUCTIONS. An instruction that if the carbonate of potash which came into defendant's possession, and the prussiate of potash which was bought and sold, should, in the exercise of the diligence and reasonable prudence which a reasonably prudent man should exercise, be apportioned to the contracts made before the beginning of the war, then, as to any quantities which should have been devoted to the performance of the contracts with plaintiff, plaintiff was entitled to delivery of his proportionate share, and to the extent that he was deprived of those quantities he would be entitled to recover, was not erroneous, where it was plaintiff's contention that it was defendant's duty to apply such carbonate of potash as it could secure to plaintiff's contract, and not to prorate it with later made contracts. [Ed. Note. For other cases, see Sales, Cent. Dig. §§ 1214–1223.] In Error to the District Court of the United States for the Eastern District of Pennsylvania; J. W. Thompson, Judge. Action by Morris Herrmann against the Bower Chemical Manufacturing Company. Judgment for defendant, and plaintiff brings. error. Affirmed. Louis Marshall, of New York City, John G. Johnson, of Philadelphia, Pa., and Abraham Benedict, of New York City, for plaintiff in error. James Piper, of Baltimore, Md., George Wharton Pepper, of Philadelphia, Pa., and Francis J. Carey, of Baltimore, Md., for defendant in error. For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes Before BUFFINGTON, MCPHERSON, and WOOLLEY, Circuit Judges. BUFFINGTON, Circuit Judge. In the court below, Morris Herrmann, surviving partner of Herrmann & Co., a citizen of New York, brought suit against the Henry Bower Chemical Manufacturing Company, a corporate citizen of Pennsylvania, to recover damages for breach of contract. The trial resulted in a verdict for defendant. On entry of judgment on such verdict, plaintiff took this writ of error. The proofs in this case tended to show that by written bill of sale, dated June 10, 1914, the defendant sold plaintiff 400,000 pounds of "prime yellow prussiate of potash (standard technical quality)," with an option for an additional 100,000 pounds, declarable April 1, 1915. The deliveries were to be "in equal monthly installments over the year 1915." The bill of sale further provided: "Seller not liable for delays due to causes beyond their control, or for nonarrival of any shipment lost in transit, or for causes, such as strikes, lockouts, war and insurrection, fires, accidents, or the like, which may prevent or impede the manufacture or delivery of the merchandise herein contracted. In such event, shipments or deliveries may be suspended during the period required to remove the cause of or to repair the damage, or until there is a normal production again." The proofs showed the seller made at its works in Philadelphia prussiate of potash, and that its principal ingredient was carbonate of potash, which is practically an exclusive European product, and almost exclusively one of German make and export. For that reason the fulfillment of the contract was largely affected by the European war, and defendant, as a result, did not make the deliveries provided by the contract. At the trial the court refused plaintiff's point that: * * "The provision in the contract to the effect that the 'seller is not liable for causes, such as war, which may prevent or impede the manufacture or delivery of the merchandise herein contracted,' relates solely to a war in the United States, or in which the United States is engaged or directly concerned, and not to a war in which the United States is not thus engaged or concerned, between two or more other countries, from one of which is obtained a supply of materials needed in the manufacture of the merchandise sold." We find no error in the refusal of the court to give this binding instruction as to the construction to be placed on contract. Assuming for present purposes, but without deciding, that the contract was for the sale of a specific article which was manufactured here in America, and that the strikes, lockouts, wars, fires, accidents, and the like, guarded against in the contract, were such as were incident to the manufacture of the article in America, and not to the ingredients, obtained elsewhere, from which such article was manufactured, we think that, in view of the construction given by the acts of both parties, it certainly did not lie in the plaintiff's power to ask the court to hold the contract did not apply to the European war. [1] Without discussing in detail the other assignments of error, we may say they group themselves around the several positions taken by the plaintiff, namely, that it was the duty of the defendant upon the outbreak of the war to secure all the carbonate of potash required to carry out all these contracts the defendant then had, and that as to such carbonate of potash as the defendant could secure it was its duty to apply it to the plaintiff's contract, and not to prorate it with later made contracts. The proofs tended to show that, soon after the war broke out, Germany placed an embargo on the export of potash, but that this was afterwards lifted to an extent which permitted such quantities of potash to come through that it was obtainable on the market. Later the British Order in Council was made which prohibited the exportation of German products made through neutral ports in neutral vessels, and there was proof that this ran the supply of potash to prohibitive prices. There was also proof tending to show that at all times the defendant could have procured carbonate of potash at advanced, but not prohibitive, prices. All of these proofs the court submitted to the jury, charging with reference to the defendant's duty to provide for a sufficient supply of carbonate to carry out the contract, as follows: "Now, where a party enters into a contract providing for the delivery of certain articles of merchandise, he is obliged to use diligence to supply himself with sufficient quantities to carry out the terms of his contracts, if he can do that in the exercise of due diligence. * * So that the questions * for you to consider under all the evidence are whether you are satisfied from the evidence that the defendant did use the diligence which I have stateed, that is, the diligence which a reasonably prudent man, in good faith desiring to carry out the terms of his contract, would exercise, in obtaining supplies necessary to proceed with the manufacture and delivery of the prussiate of potash. * Now, there are different degrees, perhaps, of diligence required of the defendant according to the circumstances at the various times. After the war broke out, it was the duty of the defendant to take notice that there was a condition of war, and after the German embargo was laid, and after the British Order in Council, it was its duty to take notice of those conditions, and at all times during the war, if you find that there was reasonable ground for apprehension on its part that the source of supply of carbonate of potash would be cut off, and that it would be prevented or impeded in manufacturing or delivering under its contract-if you find that there was ground for that reasonable apprehension, then you would be justified in finding that it was its duty to provide itself through some other source with a sufficient supply to carry out the terms of the contract, and, if you find that it failed in the exercise of that diligence and due care, then the plaintiff would be entitled to recover damages for the difference between the market price and the contract price which was named in the contract between the parties." In laying down this measure of a seller's obligation of preparatory preparedness to fill a contract, certainly the buyer had no ground to complain. [2] In regard to the obligation of the defendant to prorate among its contracts the court thus instructed the jury: "If, from the evidence, you determine that the carbonate of potash which came into the defendant's possession, and the prussiate of potash which was bought and sold, should, in the exercise of diligence and reasonable prudence which a reasonably prudent man should exercise, have been apportioned in like manner to the contracts made before the beginning of the war, then as to any quantities of prussiate of potash which should have been devoted to the performance of the contracts with the plaintiff, the plaintiff would be entitled to delivery of his proportionate share of prussiate of potash out of such quantities, and to the extent that he was deprived of those quantities he would be entitled to recover damages for the difference between the contract price which he was to pay for the prussiate of potash, and the market price at the time when such deliveries would have been due." The verdict having been for the defendant, the facts are settled that, in the face of excepted cause of war to which the contract was made subject, the defendant, in providing against the conditions caused by the war, in preparing to fulfill the plaintiff's contract, and in prorating to the plaintiff such partial performance as it could, the defendant, as required by the charge, "did in good faith use all reasonable means to perform." Such being the established facts, we find no injury was done the plaintiff in the trial which warrants a reversal of this judgment. It is therefore affirmed. (242 Fed. 62) SIMON v. NEW ORLEANS, T. & M. R. CO. et al. No. 2973. 1. RAILROADS 192-FORECLOSURE OF MORTGAGES-SALE-PRICE. Where a railroad, having approximately 990 miles of road, failed to pay operating expenses and interest on about $3,500,000 of receivers' certificates during a very careful and well-managed receivership, a bid of $6,000,000 by a reorganization committee was a fair price. [Ed. Note.-For other cases, see Railroads, Cent. Dig. §§ 391, 634–642.] 2. RAILROADS 192-FORECLOSURE OF MORTGAGES OBJECTION TO SALE. On the foreclosure of a mortgage on the N. railroad to secure bonds of the F. railroad company, it was not sufficient ground for refusing to confirm a sale to a bondholders' reorganization committee that such committee, in exchange for certain cash and securities, had agreed to forego any deficiency judgment against the F. company, where the facts did not indicate that, but for this agreement, the F. company, itself in the hands of a receiver, or its reorganization committee, would have been bidders, especially as the agreement could not deprive an objecting bondholder or the trustee of the right to a deficiency judgment. [Ed. Note. For other cases, see Railroads, Cent. Dig. §§ 391, 634–642.] 3. RAILROADS 192-FORECLOSURE OF MORTGAGES OBJECTION TO SALE. Where the owners of 80 per cent. of the bonds secured by a railroad mortgage had joined in a plan of reorganization, and it was still open to an objecting bondholder, who was acting purely in his own interests, and not for other minority bondholders, to join in such plan, a confirmation of a sale to a reorganization committee would not be denied, and a resale ordered, merely for the purpose of coercing the committee, by repeated orders of resale, to pay such bondholder the par value of his bonds. [Ed. Note. For other cases, see Railroads, Cent. Dig. §§ 391, 634-642.] Appeal from District Court of the United States for the Eastern District of Louisiana; Rufus E. Foster, Judge. Suit by the New York Trust Company against the New Orleans, Texas & Mexico Railroad Company. From certain orders denying him For other cases see same topic & KEY-NUMBER in all Key-Numbered Diges's & Indexes leave to intervene, and overruling his objections to confirmation of a sale, Julius Simon appeals. Affirmed. The following is the opinion of the District Court on opposition to sale, etc.: On July 8, 1913, the New York Trust Company, as trustee under a mortgage securing an issue of bonds of the St. Louis & San Francisco Railroad Company, known as "New Orleans, Texas & Mexico Division first mortgage, gold bonds," of which $28,582,000 has been issued, filed its bill for the ap pointment of a receiver for the New Orleans, Texas & Mexico Railroad Company. A receiver was appointed and took over the operation of the property. Later, on July 31, 1914, a decree of foreclosure was entered. Owing to the extraordinary financial condition existing in the United States because of the European war, it was considered impracticable by all parties in interest then before the court, and by me, to order the sale of the road at that time. On September 17, 1915, the order of sale was entered, and the date of sale fixed for November 15, 1915. On October 29, 1915, Julius Simon, a resident of Milwaukee, Wis., and owner of 50 of the said bonds, of the par value of $1,000 each, asked leave to intervene to oppose the sale or to require the fixing of an upset price. On this petition an order to show cause issued and was heard on November 5, 1915, by me, and the relief prayed for was denied, but the petition was ordered filed and petitioner was allowed to intervene for the purpose of opposing the confirmation of the sale, if the price paid be considered inadequate, and his right to so do was reserved. The New York Trust Company then filed a petition, suggesting error in allowing the filing of the petition of Julius Simon, and praying that the order be rescinded and set aside, and on this petition an order was entered on November 11, 1915, requiring Simon to show cause why his petition should not be disallowed and stricken from the files. It was also ordered, pending the determination of the rehearing, that the clerk be directed to refuse for filing any other paper presented by the petitioner. After the entering of the order of November 11th petitioner presented to the clerk what he termed an answer and cross-bill, setting up substantially the same issues as presented by his original pleadings, and asking, in addition to other relief, for the postponement of the sale and the fixing of an upset price, which had already been denied. On the day of sale Simon appeared through his attorney and protested, and his protest was disregarded, and the master proceeded with the sale, and adjudicated the property to Walter F. Taylor and Carl A. De Gersdorff for the price of $6,000,000, and received as a deposit a certified check for 3 per cent. of the bid. The master reported the sale in due course, and his report was received on November 19, 1915. On November 27, 1915, the purchasers appeared through counsel and obtained an order for confirmation unless opposed in eight days. On December 7, 1915, Simon appeared and filed his opposition to the confirmation of the sale, setting up substantially that the sale was really to a reorganization committee of the bondholders, attacking the fairness of the plan of reorganization, alleging the bidding was suppressed, because of an agreement between the reorganization committee and the reorganizers of the Frisco Railroad, whereby, in exchange for certain cash and securities, the reorganization committee agreed to forego any deficiency judgment against the railroad, and also setting up, as he had previously done, that the value of the property sold was upwards of $41,000,000, but without praying that the sale be set aside and the property readvertised, but praying that the sale be not confirmed, except upon condition that the reorganization committee be compelled to pay him par and accrued interest for his bonds. It developed on the argument that this was expected to be done by the refusal of the court to confirm the sale, and the ordering of a new sale, and in turn the refusal to confirm that sale, and so on ad infinitum, until the condition imposed would be complied with. [1] Regarding the value of the property sold, of course, it is utterly ridiculous to say that a railroad having approximately 900 miles of road, which during a very careful and well-managed receivership has failed to pay operat |