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Sirius Star Inc. v. Sturgeon Bay Shipbuilding & Dry Dock Co.

April 18, 1952


Author: Lindley

Before MAJOR, Chief Judge, and DUFFY and LINDLEY, Circuit Judges.

LINDLEY, Circuit Judge.

Plaintiff, engaged in fishing on the Atlantic, contracted on May 22, 1946 with defendant, a shipbuilder at Sturgeon Bay, Wisconsin, to buy, for $269,000, a fishing trawler, which defendant agreed to construct within the "estimated" completion date of December 15, 1946. Plaintiff advanced $75,000. The vessel was not completed until late in the summer of 1947. On December 15, 1948, having failed to make further payments, plaintiff filed suit to recover the moneys advanced, claiming that, because of the deceit of defendant in two respects, as it averred, it was entitled to rescind and to recover what it had paid. At the conclusion of the trial, the court entered judgment in favor of defendant, dismissing plaintiff's suit. This appeal followed.

Plaintiff's theory of recovery, as set forth in its complaint, was that the time of completion was of the essence of the contract; that, in agreeing to attempt to complete construction before the "estimated" delivery date, defendant had made a misrepresentation of fact, in that it then knew that it could not and would not build and equip the trawler within such period; that such misrepresentation was employed in order to obtain, fraudulently, advancement of the $75,000; that defendant failed to complete the work by December 15, 1946 and made no offer to deliver until September 2, 1947, and that, by virtue of these facts, plaintiff was entitled to rescind. It claimed also that it had a right to rescission for the further reason that, as it averred, defendant had fraudulently demanded payment for extras in the amount of $10,000 and a 5% in addition to the agreed price, under what the parties term the escalator clause included in the contract to provide for increased costs of materials and labor,*fn1 whereas in fact defendant had not furnished extras in the amount demanded, and was not entitled to add 5% to the contract price because of increase in costs.

The court found the facts substantially as follows. The contract provided as to completion, that "The time of completion and delivery is estimated, but the Builder agrees to use all reasonable efforts to complete and make delivery of the vessel at the time herewith stated. Delivery is subject to allocation and delivery of materials, government control of materials, effect of war and labor conditions, delays of carriers, Acts of God, force majeur and causes beyond control of the Builder." The document further stipulated that it constituted the entire agreement between the parties and was to be construed according to the laws of Wisconsin.

Plaintiff knew that conditions resulting from World War II existing at the time of the execution of the contract had created scarcity of machinery and equipment necessary in the contruction of the vessel and that this fact rendered the time of completion of the ship uncertain. Because of these conditions, defendant's construction was hampered and delayed in obtaining materials and equipment necessary to complete the ship, such as a generator furnished by the Cooper-Bessemer Corporation, a winch-generator built by the General Electric Corporation and other equipment and machinery, all essential in the construction of the vessel. The impossibility of securing these materials, within the time they had been contracted to be delivered by the suppliers, necessitated the delays incurred. Defendant was also hampered by reason of changes and extra work insisted upon by plaintiff. As a consequence of these facts, the vessel was not completed until about September 2, 1947.

As the work continued, after December 15, 1946, plaintiff made no objection, "for a long period of time," to any delay in the completion of the ship but permitted defendant to proceed with the work and to invest in its construction a sum in excess of $251,000 including the $75,000 advanced by plaintiff. Plaintiff thereby treated the contract as continuing in force. During this time, realizing the unavoidable difficulties encountered by defendant in obtaining material and equipment, plaintiff also undertook, without objection and without complaint on its part, to cooperate with and aid defendant in its efforts to obtain material and equipment and to speed up delivery by the suppliers. By such conduct, it evinced an intention to waive completion and delivery of the vessel on December 15, 1946.

The contractual provision for a loan from the Canal National Bank of Portland, Maine, was for the benefit of plaintiff, and defendant was in no way responsible for the financing of the balance of the purchase price by plaintiff.

The court found expressly that defendant never intended to and did not deceive plaintiff in any respect; that plaintiff did not at any time give defendant notice that it intended to rescind; that it never informed defendant that unless the work was completed within a reasonable tiem, the contract would be rescinded; that plaintiff never advised defendant that it would not accept delivery of the vessel; that, when plaintiff failed to pay the balance due on the contract, defendant notified it that it was in default and that, if the default continued for more than five days, defendant would proceed to sell the vessel at either public or private sale; that plaintiff failed to pay any further sums within said period and that, thereupon, the vessel was sold to the Charlevoix Transit Company for $190,000; that, before completing the sale, defendant afforded plaintiff opportunity to purchase the ship at the same price but that plaintiff did not avail itself of the privilege.

During the progress of the construction defendant furnished work and material in the form of extras in a substantial amount and was entitled to make additional charges against plaintiff based upon increases in costs incurred during the term of the contract. However, the court added, "because of its belief in the inability * * * of the plaintiff to pay such additional charges, it therefore waives the same."

The court ultimately found that the evidence failed to establish any fraud upon the part of defendant in connection with the contract, either at its inception or thereafter; that the plaintiff, by its conduct, waived completion and delivery of the vessel at the estimated completion date and was estopped from asserting any alleged delay as justification for its breach of the contract. It concluded that the estimated time for completion mentioned in the contract was not of its essence; that plaintiff had broken its contract; that plaintiff had failed to rescind it; that it was not entitled to rescind; that the contract represents the entire agreement between the parties; that the plaintiff was not entitled to relief of any kind, and that defendant, having waived its counterclaim, could not recover thereon but was entitled to judgment for costs upon the original complaint.

We have examined carefully all of the evidence, both oral and documentary, contained in the record. There were some sharp conflicts in testimony, but the trial court, endowed with the function of resolving such controversies and determining the credit to be extended to the witnesses, had before it adequate substantial evidence to sustain each of the findings made. Under well known rules, therefore, we have no right to substitute our judgment for that of the District Court or to set aside the latter's findings, in the absence of a showing that they are clearly erroneous. Whether, upon the controverted evidence submitted, we would have adopted the same findings is wholly immaterial. It follows, therefore, that plaintiff's contention that time was of the essence of the contract was not proved and that, even had there been a definite time for completion, the conduct of the plaintiff was such as to waive performance within that time.

It is plaintiff's earnest plea, however, that, in June, 1947, it discovered for the first time that defendant had never intended to attempt to complete the contract within the estimated date. In other words, it claims that, though the date of completion was only estimated and even though it cooperated with defendant to procure, after that date, further deliveries of machinery and equipment, it was deceived by the fact, as it contends, that defendant actually knew at the time of execution of the agreement that it could not deliver within the estimated date and never intended to do so and that, thereby, plaintiff was defrauded into advancing the $75,000. The evidence upon this issue is sharply controverted. The officers of plaintiff testified that the representatives of defendant admitted the averment in a conference in Boston in August, 1947, and in a letter written by defendant to plaintiff in June, 1947. One of defendant's officers died before the trial, and the other, who had nothing to do with the negotiations leading up to the contract, denied that he had any such knowledge or that defendant had any intent to deceive.

The short answer to this controversy lies in the fact that the court expressly found that defendant did not intend to deceive and, indeed, did not deceive plaintiff in any respect. When we remember that the burden of proof is upon the one alleging fraud to prove the same by clear and convincing proof and that the court, in view of the evidence, found that there was no deceptive ...

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