author: CELEBREZZE, Circuit Judge.

text:
    SHATTERPROOF GLASS CORPORATION, Plaintiff-Appellant, v. LIBBEY-OWENS-FORD COMPANY, Defendant-Appellee.
    No. 72-1717.
    United States Court of Appeals, Sixth Circuit.
    Argued April 2, 1973.
    Decided July 31, 1973.

      William C. McCoy, Jr., Bosworth, Sessions '& McCoy, Cleveland, Ohio, on brief, for plaintiff-appellant.
    John B. Spitzer, Toledo, Ohio, for defendant-appellee; William A. Belt, Toledo, Ohio, of counsel; Marshall, Mel-horn, Bloch & Belt, Toledo, Ohio, on brief.
    Before PHILLIPS, Chief Judge, and WEICK and CELEBREZZE, Circuit Judges.
   CELEBREZZE, Circuit Judge.

We consider an appeal from a judgment of the District Court for the Northern District of Ohio, Western Division, 350 F.Supp. 60, finding that Ap-pellee, Libbey-Owens-Ford Company (LOF), had not breached a “favored nations” clause in its patent license agreement with Appellant, Shatterproof Glass Corporation (Shatterproof). The clause, included in the parties' 1955 license agreement, provided that LOF would give Appellant the benefit of any more favorable “terms or rates of royalty” that it might grant to any other licensee. Appellant contends that this clause was breached by LOF on two occasions :

1. When LOF failed to notify Shatterproof of a 1931 license agreement between LOF and Ford Motor Company (Ford) which Shatterproof maintains granted Ford a license for certain patents under more favorable terms than those granted to Shatterproof for the patents.

2. When LOF in 1962 entered into an agreement with Ford in which LOF released Ford from past infringement of certain patents and granted to Ford a license for patents licensed to Shatterproof.

The 1955 agreement between LOF and Shatterproof was made pursuant to and in accordance with a 1948 consent decree in an anti-trust action against LOF and other glass-manufacturing companies. That decree required LOF to grant a license to any applicant and provided that “a reasonable non-discriminatory royalty may be charged.” LOF and Shatterproof began negotiations in 1952, culminating in 1955 in the license agreement which is the subject of this litigation. The agreement granted to Shatterproof a non-exclusive license for more than thirty patents owned by LOF and involving the manufacture of flat glass. Under the terms of the agreement, Shatterproof was granted a royalty-free license for some of the patents and was to pay a royalty for certain other patents.

At about the same time that the LOF-Shatterproof license negotiations began, LOF began negotiating with Ford and in 1962 LOF and Ford executed a license agreement, effective as of January 1, 1961. In accordance with that agreement Ford paid LOF $400,-000 for' a release for infringement pri- or to January 1, 1961 of certain listed patents, $60,000 for a release for infringement of claim 8 of patent 2,551,607, and $40,000 for a paid-up license under claim 8 of patent 2,551,607. Ford also took a license from January 1, 1961 under three patents (Pearse et al. patent 2,450,298; Jendrisak patent 2,551,607 (except claim 8); and Bam-ford et al. patent 2,646,647) at a royalty rate of y2 cent per square foot of glass processed. Shatterproof’s license under those patents called for royalty rates of 2 cents per square foot under Pearse, 1 cent per square foot under Jendrisak and 2 cents per square foot under Barn-ford.

After it had entered into its agreement with Ford, LOF acknowledged that it owed Shatterproof $80,436.62, the amount Shatterproof paid in royalties between January 1, 1961 and April 13, 1962 in excess of the more favorable rates granted to Ford. LOF tendered this amount on condition that it be accepted as full payment for any claims Shatterproof had against LOF. Shatterproof would not accept payment on this condition, and was not paid the money until the District Court ordered payment in 1971.

LOF and Ford had entered into an agreement in 1931 in which a license to use patents owned by LOF was granted to Ford. This agreement included patents filed by LOF before the cancellation of the agreement in 1950. The interpretation of this agreement was an item included in the negotiations of the present license agreement between Ford and LOF. Ford maintained a strong claim under the 1931 agreement during the negotiations. The final agreement acknowledged that four patents were within the scope of the 1931 agreement. The District Court found that, even if construed as a royalty-free license for patents on which Shatterproof was paying a royalty, the 1931 agreement contained other considerations — the granting of a cross-license by Ford and the consent by Ford to the acquisition of other patents by LOF.

In short, Shatterproof’s contention is that, by reason of the equal treatment or favored nations clause in its license agreement with LOF, it must be given the benefit of terms given to Ford. Shatterproof contends, first, that it is entitled to pay at the same rates that Ford did for the period between J anuary 1, 1954 and January 1, 1961; second, that LOF gave Ford a royalty-free license in 1931, concerning which it never informed Shatterproof, and that Shatterproof is entitled to a similar license, effective January 1, 1954; and third, that LOF’s failure to notify it of the 1931 Ford license and the full terms of the 1962 Ford license, in breach of the LOF-Shatterproof license, entitles it to a refund of all royalties paid in ignorance of its rights.

We first turn our attention to the release of Ford from past patent infringement.

Shatterproof contends that the nature of the document between LOF and Ford, and not its label, is controlling and that properly construed the document is a retroactive license. LOF, on the other hand, counters with the argument that a release operates to compensate a party for damages arising from the tortious use of its patent and that it cannot be construed as a license which implies a consent to the use of the patent.

As the District Court held, a release can, in certain circumstances, have the effect of and be construed as a license. In De Forest Radio Telephone Co. v. United States, 273 U.S. 236, 47 S.Ct. 366, 71 L.Ed. 625 (1927), the Supreme Court discussed the circumstances which would result in the application of such a construction:

No formal granting of a license is necessary in order to give it effect. Any language used by the owner of the patent, or any conduct on his part exhibited to another from which that other may properly infer that the owner consents to his use of the patent in making or using it, or selling it, upon which the other acts, constitutes a license and a defense to an action for a tort. Whether this constitutes a gratuitous license, or one for a reasonable compensation, must of course depend upon the circumstances; but the relation between the parties thereafter, in respect of any suit brought must be held to be contractual and not based on unlawful invasion of the right of the owner. Concede that if the owner had said, “If you go on and infringe my patent, I shall not attempt to enjoin you, but I shall subsequently sue you for infringement,” the tort would not be waived — that is not this case. Here the circumstances show clearly that what the Company was doing was not only fully consenting to the making and using by the United States of the patent, but was aiding such making and using and, in doing so, was licensing it, only postponing to subsequent settlement what reasonable compensation, if any, it might claim for its license. The case of Henry v. Dick, 224 U.S. 1, [32 S.Ct. 364, 56 L.Ed. 645] in its main point was overruled in the Motion Picture Patents Company v. Universal Film Company, 243 U.S. 502; [37 S.Ct. 416, 61 L.Ed. 871] but that does not shake the authority of the language of the Court in the following passage (p. 24 [32 S.Ct. 370]):
“If a licensee be sued, he can escape liability to the patentee for the use of his invention by showing that the use is within his license. But if his use be one prohibited by the license, the latter is of no avail as a defense. As a license passes no interest in the monopoly, it has been described as a mere waiver of the right to sue by the patentee” citing Robinson on Patents, §§ 806 and 808.
In this case the language used certainly indicated the purpose of the Telephone Company not to seek an injunction against infringement, and not to sue for damages therefore, but only to sue or seek for an amicable settlement by payment of just compensation. Such action by the Telephone Company was a license, and constituted a complete defense against a suit for infringement by the De Forest Company. 273 U.S. at 241-242, 47 S.Ct. at 367-368.

The release given with regard to the Jendrisak patent No. 2,551,607, fits the De Forest rule and has the effect of a license. The release of Ford from any claims of infringement of that patent was in effect a settlement by payment of just compensation for previous use of the patent. The total compensation included a portion of the $400,000 paid for the release from any claims of infringement of that patent (except claim 8) and the $60,000 paid for the release from any claims dealing with claim 8 of the patent. We are not persuaded by the argument that the release cannot be considered a license because the consideration cannot be allocated to the various patents included in the release. Such a result would be contra to our interpretation of De Forest and would also be contra to the intent of the 1948 consent decree that no licensee is to pay at more favorable royalty rates. Such a determination would also make evasion of a “favored nations” clause possible.

However, the remaining patents do not exactly fit De Forest. It is true that Ford could have obtained a license at any time after the 1948 consent decree and that LOF and Ford were negotiating for the license over a nine-year period. But the difficulty in negotiation stemmed from the interpretation of the parties’ 1931 agreement. Ford maintained that it was entitled to a license under that agreement and understandably did not want to pay for another license. As the District Court found, “Ford vigorously resisted any claims of infringement or any concessions in respect thereto.” LOF contended, as it does here, that the 1931 agreement did not grant to Ford a license to use patents on which Shatterproof was paying a royalty. There was no language or conduct on the part of LOF from which it could be inferred that it had consented to an unlicensed use of its patents by Ford. The District Court found no action by LOF that could be construed as secret or fraudulent and Shatterproof does not assert any such actions on the part of LOF. Under the circumstances, the avoidance of lengthy litigation may have been a significant factor in the eventual agreement between Ford and LOF.

LOF further argues that the LOF-Ford agreement is not significantly different in form from the LOF-Shatterproof agreement. Negotiations with the two companies began at approximately the same time, although Shatterproof entered into an agreement much earlier than Ford. In its agreement with Shatterproof, LOF waived “all claims for damages or royalties due for infringement by [Shatterproof] of the licensed patents” prior to the effective date of the agreement. The release executed between LOF and Ford provided for a payment of $400,000 for all claims of infringement of LOF’s patents by Ford. Thus, both licensees were released from prior infringement. This did not take into consideration, however, Ford’s prior license and its agreement to pay a much lower royalty rate. We find that the terms of the release and license between Ford and LOF were affected in large part by their agreement as to what rights were contained in the 1931 license. Shatterproof’s rights must be determined from viewing both the 1931 license and the 1962 release-license.

We turn then, to the 1931 LOF-Ford license agreement. This agreement does, if it includes some of the same patents licensed to Shatterproof, fall within the most favored nations clause which relates to any licenses “heretofore or hereafter granted.” The District Court determined that the agreement was limited to a license to manufacture laminated glass, and that none of the patents licensed in 1955 to Shatterproof were included in the agreement. We disagree with this interpretation of the agreement. The contract expressly licensed Ford to “make, use and sell . . . laminated glass or articles of such glass, and to make and use equipment or apparatus for the manufacture of the same.” (Emphasis added). This language does not limit the license to the use of patents related only to the process of lamination. It specifically licenses Ford to make articles of laminated glass. LOF raises the argument that at the time the agreement was entered into, glass-bending processes were unknown. However, the agreement was not limited to patents existing at that time. It also included “any patents and/or applications therefor in respect of inventions which Libbey-Ow-ens-Ford Company may develop prior to the date of the cancellation of this agreement.” The agreement was can-celled in 1950 but Ford retained a license for the patents applied for prior to the date of cancellation.

We do not find the wording of the agreement ambiguous. Patents or processes developed before 1950 which dealt with the manufacture of laminated glass or articles of laminated glass were included in the license clause. The Ryan patent No. 2,392,770 (applied for February 2, 1942, granted January 8, 1946), relates to a “process for producing bent laminated safety glass.” The claims specifically refer to the simultaneous bending of two sheets of glass, with at least one of the sheets coated with a water-soluble material to facilitate the cleaning of the sheets after bending and just prior to lamination. The Pearse Patent No. 2,450,297 (applied for December 19, 1941, granted September 28, 1948), relates to an “apparatus for bending glass.” The claims relate to methods of shielding portions of the glass during the bending process. The apparatus is used in the manufacture of glass which is then laminated as well as glass used for other purposes. The license agreement was not limited to processes used exclusively in the manufacture of articles of laminated glass. We find, therefore, that this patent was also included in the license, to the extent that it was to be used for making articles of laminated glass.

Ford and LOF, in negotiating their 1962 license agreement, made certain concessions with respect to the 1931 document. LOF agreed that the 1931 license “grants [Ford] the right and license to make (but not have made), use and sell glass under [U.S. Patents Nos. 2,593,525 (Beckham), 2,593,405 (Beck-ham), 2,636,420 (Ryan).” These three patents, relating to the manufacture of a shaded, laminated windshield, had been licensed to Shatterproof. One other patent was agreed to be within the 1931 license, but it was not licensed to Shatterproof. Ford agreed not to assert under the 1931 agreement any right or license to use any patents included in the 1962 license. Thus, there is an agreement between Ford and LOF as to which patents will be covered by the 1931 license. This is not the same as an actual interpretation of the license, but a settlement between the parties to avoid litigation. We find, however, that the three patents (2,593,525; 2,593,405; 2,636,420) were licensed under the 1931 agreement. Thus, under the 1931 agreement, Ford was licensed to use a total of five patents that had been licensed to Shatterproof in 1955.

A determination that five patents licensed to Shatterproof were within the Ford-LOF agreement does not end the inquiry. It must be determined whether Ford’s license was at “more favorable terms or rates of royalty” than Shatterproof had paid. Looking solely at rates of royalty, we have the following comparison of royalty per square foot for finished product:

1955 L0F-1931 Ford-LOF Shatterproof Patent royalty rate royalty rate
2,392,770 (Ryan) Royalty-free Vi cent
2,450,297 (Pearse) 2 cents
2,593,405 (Beckham) 2Vz cents
2,593,525 (Beckham) 2 cents
2,636,420 (Ryan) " 1 cent

The rate to be paid on the Pearse patent has been reduced, effective January 1, 1961, to % cent per square foot, pursuant to the 1962 Ford-LOF license. The District Court found that the 1931 license contained no more favorable terms or rates of royalty because “the terms of such license included the grant by Ford of a cross-license to L-O-F and the consent by Ford to the acquisition by L-O-F of the Triplex patents.” In Prestole Corp. v. Tinnerman Products, Inc., 271 F.2d 146 (6th Cir. 1959), we held that the value of technical assistance given should be included in determining whether a new licensee had been given more favorable rates. We adopted certain definitions of a royalty:

“ * * * A royalty is a payment proportionate to the use of a patented device. Western Union Telegraph Co. v. American Bell Telephone Co., [1 Cir.] 125 F. 342, 348.” Tesra Co. v. Holland Furnace Co., 6 Cir., 73 F.2d 553, 554.
“* * * ‘Royalty’ when used in connection with a license under a patent, means the compensation paid by the licensee to the licensor for the use of the licensor’s patented invention * * * ” Hazeltine Corp. v. Zenith Radio Corp., 7 Cir., 100 F.2d 10, 16.
We think that adopting these definitions of royalty and considering a royalty as the cost, consideration, compensation, or price paid or incurred for a license, the specified rate should not be the sole criterion by which to determine what was in fact the price paid for the license. By furnishing as its own expense the assistance given, Tinnerman certainly was reducing the amount it was receiving, or charging, for the use of its patents, and was likewise reducing the cost, or price paid by Illinois for such use. Royalties, being the price or compensation to be paid were, therefore, reduced and Illinois was given more favorable royalty terms than the recited six percent. 271 F.2d at 152.

In determining, then, whether Shatterproof is entitled to any more favorable “terms or rates of royalty,” the full consideration paid by each licensee must be considered. Shatterproof’s consideration was a specified rate of royalty. Ford’s consideration was the granting of a royalty-free license to use certain patents it owned. In addition, a portion of the $400,000 paid for the release must be considered as compensation for the license. Thus, the consideration in each case was certainly different. But the question to be determined is whether one was more favorable than the other. Only by a comparison of the value of the consideration given in each instance can it be determined whether Shatterproof is entitled to more favorable rates. We are unable from the record to determine how the District Court arrived at its conclusion that the “1931 license to Ford did not contain any more favorable terms or rates of royalty than were granted by L-O-F to Shatterproof.” Nor can we accept the finding that the amounts allocable to the various patents included in the release are incalculable. These findings are not supported by the record and the matter must be remanded to the District Court for a determination in this regard.

At this point a question arises concerning where the burden of proof lies. Under the general rule, Shatterproof, as plaintiff, had the burden of proving that LOF had breached its contract. Shatterproof has shown .that LOF failed to notify it concerning the 1931 license to Ford and that the 1931 license included patents which had been licensed to it. See St. Joseph Iron Works v. Farmers Mfg. Co., 106 F.2d 294 (4th Cir. 1939). The remaining element of proof relates to whether the license to Ford was at more favorable terms or royalty rates. The evaluation of the considerations paid and the allocations of the payments to the various patents can be done much more readily by LOF. We find that it would be placing an “unfair and unrealistic burden” on Shatterproof to require it to prove that other licensees were given more favorable royalty terms. Erving Paper Mills v. Hudson Sharp Machine Co., 332 F.2d 674, 677 (7th Cir. 1964), cert. denied, 379 U.S. 946, 85 S.Ct. 440, 13 L.Ed.2d 544 (1964). “The ordinary rule, based on considerations of fairness, does not place the burden upon a litigant of establishing facts peculiarly within the knowledge of his adversary.” United States v. New York, New Haven & Hartford R.R., 355 U.S. 253, 256 n. 5, 78 S.Ct. 212, 214, 2 L.Ed.2d 247 (1957); United States v. Hayes, 369 F.2d 671, 676 (9th Cir. 1966); Erving Paper Mills v. Hudson Sharp Machine Co., 332 F.2d 674, 678 (7th Cir. 1964), cert. denied, 379 U.S. 946, 85 S.Ct. 440, 13 L.Ed.2d 544 (1964). On remand, therefore, LOF will have the burden of proving that Ford was not given a license to use any of the patents licensed to Shatterproof under more favorable terms or royalty rates. If it is found that Ford’s terms were more favorable, Shatterproof will be entitled to a refund of excess royalties paid for its license.

Shatterproof also contends that it is entitled to interest from April 13, 1962 on the judgment of $80,436.61. Pre-judgment interest is generally within the discretion of the District Court, Abell v. Anderson, 148 F.2d 372 (6th Cir. 1945). However, we find that the District Court abused its discretion in not granting interest on its judgment. The amount due was acknowledged by LOF on July 20, 1962 and it wrongfully withheld payment of the money when it demanded that Shatterproof accept it as payment in full for any debt owed, thereby causing the delay. LOF has had use of the money and payment of interest from the date due should be part of the damages. See Royal Indemnity Co. v. United States, 313 U.S. 289, 296-297, 61 S.Ct. 995, 85 L.Ed. 1361 (1941); United States v. Eastern Air Lines, Inc., 366 F.2d 316, 321 (2d Cir. 1966). LOF did make a tender of the amount due but this tender was conditioned on Shatterproof’s acceptance of it as full compensation. Rejection of an inadequate tender does not discharge the debtor of his liability on the debt. United States v. Eastern Air Lines, Inc., supra, 366 F.2d at 321. We have previously held that a tender in the proper amount does not discharge subsequent liability if it is conditioned on a demand that the payment be accepted as full satisfaction for the debt. Caine v. John Hancock Life Insurance Co., 313 F.2d 297, 302 (6th Cir. 1963). We find, therefore, that Shatterproof is entitled to interest on $80,436.61 from April 13, 1962. The decision of the District Court is reversed and the case is remanded for the purpose of determining whether under the 1931 license and the 1962 release Ford obtained more favorable terms of rates of royalty than Shatterproof did under its 1955 agreement.

        . Paragraph 11 of the license agreement provided:
      “LIBBEY-OWENS-FORD agrees that if any license heretofore or hereafter granted by it under any one or more claims of the licensed patents contains any more favorable terms or rates of royalty than granted to LICENSEE hereunder, then LICENSEE shall thereupon have the benefit of such more favorable terms or rates for the same claim or claims, but under no other claims of any of the licensed patents. LIBBY-OWENS-FORD shall promptly notify LICENSEE of each license granted by it to others that includes any patent or patent claims licensed under this agreement and shall upon request, make available to counsel for LICENSEE, a complete copy of such agreement for inspection.”

      . The effective date of the license agreement was January 1, 1954.

      . The license clause of the agreement provided:
      “Libbey-Owens-Ford Company does hereby give and grant to Ford Company, its successors, subsidiaries, and associated companies, to the full extent of Libbey-Owens-Ford Company’s right, title and ability so to do, and subject to the terms, conditions and provisions hereof, a non-exclusive right and license, both in the United States of America and foreign countries, except Canada, free from the payment of any royalty, to make, use and sell, but only for use in vehicles of Ford Company’s manufacture or for replacement therein, laminated glass or articles of such glass, and to make and use equipment or apparatus for the manufacture of the same, and/or compositions relating to such glass, and the manufacture thereof, and/or a similar license to practice any processes used in the manufacture of the same, under any and all existing letters patent of the United States and foreign countries except Canada, and under any patents granted on present applications for letters patent, now owned or controlled by Libbey-Owens-Ford Company and its subsidiaries, and under any patents and/or applications therefor in respect of inventions which Libbey-Owens-Ford Company may develop prior to the date of the cancellation of this agreement.”

      . Although no definition was contained in the 1931 agreement, in the 1948 antitrust decree, the Court defined laminated glass as follows: “ ‘Laminated’ or ‘safety glass’ means a clear transparent glass which is made of two or more pieces of flat glass bonded to plastic material interposed between them, or any size, quality or thickness thereof, whether substantially flat or bent.” In the period between 1931 and 1948, the process of glass bending had been developed.

      . The District Court determined that the 1962 release applied only to three claims of the Pearse patent, whereas Shatterproof had a license to use all fifteen claims of the patent. This determination is supported by a letter from LOF to Ford dated April 13, 1972, in which LOF referred to its observation of Ford’s windshield operations in 1958. The letter stated LOF’s position that three claims of the patent were being infringed. If we were dealing only with the release, we could not accept Shatterproof’s contention that it is of no consequence whether three or all fifteen claims were infringed. Infringement of one claim of a patent does not constitute infringement of all the claims. Each claim of a patent is an independent invention. “One may be infringed, others not, and the redress of the patentee is limited to the injury he suffers.” Leeds and Catlin Co. v. Victor Talking Machine Co., 213 U.S. 301, 319, 29 S.Ct. 495, 501, 53 L.Ed. 805 (1909). If an infringer could obtain a right to use another’s patent by infringing on part of it, the necessity of obtaining a license would be meaningless. The fact that the agreement released Ford from all claims of eighteen patents is not controlling. Ford, however, was asserting that no infringement had taken place because under the 1931 license it had a right to use all the claims of the patent.

      . Shatterproof does not assert that the Jendrisak patent, No. 2,551,607, was included in the 1931 agreement. Of the five patents found to be within that agreement, Shatterproof actually used and paid royalties on only two — patents 2,392,770 (Ryan) and 2,450,297 (Pearse). Since no royalties were paid on the other three patents, the fact Ford had a license at more favorable rates did not result in any damages to Shatterproof.

      . The rate on the Ryan patent was not reduced since Ford did not take a license on that patent in the 1962 agreement. Also, Shatterproof’s royalty rate on patent No. 2,551,607 (Jendrisak) was reduced, effective January 1, 1961, from 1 cent per square foot to % cent per square foot.


source: Caselaw Access Project

author: PER CURIAM: JOHN R. BROWN, Chief Judge

license: Public Domain

text:
    CHEMICAL SPECIALTIES MANUFACTURERS ASSOCIATION, INC., Plaintiff-Appellant, v. Stephen P. CLARK et al., Defendants-Appellees.
    No. 72-1791.
    United States Court of Appeals, Fifth Circuit.
    July 12, 1973.

      Francis W. Sams, Miami, Fla., Robert L. Ackerly, Washington, D. C., for plaintiff-appellant.
    Stuart Simon, County Atty., Alan T. Dimond, Asst. County Atty., Miami, Fla., for defendants-appellees.
    Before JOHN R. BROWN, Chief Judge, and THORNBERRY and MORGAN, Circuit Judges.

      . Sec. 24-44. Detergents

      (a) It shall be unlawful for any person to sell, offer or expose for sale, give or furnish any synthetic detergent or detergent, whether in the form of crystals, powders, flakes, bars, liquids, sprays, or any other form, from and after August 20, 1972, unless the container, wrapper, or other packaging, shall from and after-August 20, 1972, clearly and legibly list all ingredients contained in said synthetic detergent or detergents in descending order of predominance as determined by percentage of each ingredient by weight.
      Should any one or more of such ingredients be harmful to any machine dishwasher, machine clotheswasher, or items laundered in either machine, the container, wrapper or other packaging shall clearly and legibly state, in a conspicuous place thereon, in black letters, each letter being no less than one-half CY2) inch in height, the following:
      “Warning: This product may cause harm to your______”
      The dashes represent the words “machine dishwasher”; “machine clothes-washer” ; “dishes and utensils”; and “laundry,” whichever is applicable, and the manufacturer shall insert the appropriate words depending upon which will be harmed by the ingredients. Should more than one of the items be subject to harm the warning shall list each item.

   PER CURIAM:

On March 30, 1971, the Board of County Commissioners of Dade County, Florida adopted an ordinance amending its Municipal Code by adding Section 24-44. That ordinance, as now modified, required that every product within the definition of detergent or synthetic detergent must bear a label showing the ingredients of the product, listed in descending order of their presence by weight. CSMA consists of manufacturers and marketers of products falling within the scope of the ordinance. Their basic premise is that Congress preempted this field of regulation through the 1966 Amendments to the Federal Hazardous Substances Act (FHSA), 15 U.S.C.A. § 1261. Thus, they seek a declaratory judgment that the Dade County ordinance is invalid.

In analyzing the question of federal preemption of an area admittedly the legitimate subject of state regulation, it is first necessary to determine in what possible contexts the question may arise. In so doing we implicitly acknowledge the supremacy of federal law wherever conflict is actually found, U.S.C.A. Const. Art. VI, Clause 2. Ordinarily, there are three possible events which occur when a state regulation (or local ordinance as the case is here) stands side-by-side with a federal law on the same topic: (i) the local ordinance may be in direct conflict with the federal law, in which case the state law must yield, (ii) the local rule may coincide or substantially imitate the federal law, a situation which may be desirable if concurrent enforcement is the congressional policy, or (iii) the ordinance may supplement the federal law and thereby extend or increase the degree of regulation.

Any cleaning compound which is available for household use, laundry use or industrial use, which is composed of organic and inorganic compounds including soaps, water softeners, surface active agents, dispersing agents, foaming-agents, buffering agents, builders, fillers, dyes, enzymes, and fabric softeners, whether in the forms of crystals, powders, flakes, bars, liquids, sprays or any other form. [Municipal Code of Metropolitan Dade County § 24-44(1) (a)]

It is this final category which has traditionally presented the most difficulty. For where Congress has chosen to “occupy” a field, but has not undertaken to regulate every aspect of that area, the states have the implied reservation of power to fill out the scheme. Florida Lime & Avocado Growers, Inc. v. Paul, 1963, 373 U.S. 132, 142, 83 S.Ct. 1210, 1217, 10 L.Ed.2d 248, 257.

Of course, Congress may anticipate this logic and attach an express preemption clause to the regulatory legislation, thereby prohibiting any further action of a supplemental nature by the states or their political subdivisions, Florida Lime & Avocado Growers, Inc. v. Paul, supra. In this instance, preemption applies even though there is no direct conflict between the federal law and the state/loeal ordinance. Congress has done so in the 1966 amendments to FHSA as the legislative history expressly reflects.

Given this clear expression of congressional intent to create some form of preemption, the only thing left for us is to determine whether the meaning of the term “precautionary labeling” is sufficiently broad to encompass the words of the ordinance. If so, the ordinance must yield.

In Chemical Specialties Manufacturers Association v. Lowery, 2 Cir., 1971, 452 F.2d 431, 437-438, the Court was concerned with the effects of New York City Fire Department regulations governing the distribution and labeling of aerosol or pressurized containers. It said:

Any restricted reading of “precautionary labeling” not to include such additional labeling as is required under the City Regulations would implicitly suggest that Congress was not concerned with the burdening of interstate commerce, a position clearly refuted by this legislative history; the flow of commerce in products within the FHSA free of differing labeling requirements was clearly of foremost concern to Congress in enacting the preemption provision. Such a concern would not be served by restricting the express preemption provision to cautionary labeling and sanctioning a proliferation of local requirements with respect to identification labeling. Compare Campbell v. Hussey, 368 U.S. 297, 82 S.Ct. 327, 7 L.Ed.2d 299 (1961). In sum, the evidence is strong that Congress used the phrase “precautionary labeling” in the preemption provision in the broad sense of all labeling of hazardous substances covered by the FHSA.

We agree.

Finding no conflict between the Dade County ordinance and FHSA the trial Judge upheld the ordinance. We reverse.

Reading the plain words of the 1966 Amendment to FHSA in light of their legislative history, H.R.Rep.No. 2166, 89 Cong.2d Sess. 6 (1966), and the obvious desirability of a uniform Federal standard, we hold that the Dade County regulation must give way to the supremacy of Federal law. See Chemical Specialties Manufacturers Association, Inc. v. Lowery, supra.

Reversed and remanded.

JOHN R. BROWN, Chief Judge

(concurring) :

As soap, now displaced by latter day detergents is the grist of Madison Avenue, I add these few comments in the style of that street to indicate my full agreement with the opinion of the Court and to keep the legal waters clear and phosphate-free.

As Proctor of this dispute between the representative of many manufacturers of household detergents and the Board of Commissioners of Metropolitan 'Dade Gounty, Florida, who have promulgated regulations which seek to control the labeling of such products sold within their jurisdiction (largely to discourage use which pollutes their waters), the Court holds that Congress has specifically preempted regulatory action by Dade County. Clearly, the decision represents a Gamble since we risk a Cascade of criticism from an increasing Tide of ecology-minded citizens. Yet, a contrary decision would most likely have precipitated a Niagara of complaints from an industry which justifiably seeks uniformity in the laws with which it must comply. Inspired by the legendary valor of Ajax, who withstood Hector’s lance, we have Boldly chosen the course of uniformity in reversing the lower Court’s decision upholding Dade County’s local labeling laws. And, having done so, we are Cheered by the thought that striking down the regulation by the local jurisdiction does not create a void which is detrimental to consumers, but rather merely acknowledges that federal legislation has preempted this field with adequate labeling rules.

Congress, of course, has the Cold Power to preempt. Of the three situations discussed by the Court, the first (direct conflict) is easy, for it is Crystal Clear that the state law must yield. The third, in which the ordinance may supplement the federal law and thereby extend or increase the degree of regulation, is more troublesome. For where Congress has chosen to fashion a regulatory scheme that is only the Head and Shoulders, but has not opted to regulate every aspect of the area, the states have implied power to flesh out the body. It is where Congress fails to clearly signify, with an appropriate preemption clause, its intent to fully occupy the area regulated that the problem arises. With some Joy, the Court finds there is such a clause.

Concerning the precautionary labeling aspect, this is SOS to consumers. If we Dash to the heart of the question, it is apparent, as the Court points out, that the 1966 Amendments to FHSA (see note 4, supra) indicate an explicit congressional purpose to preempt state regulation of the labeling of these substances. Undoubtedly, this unequivocal congressional Salvo was directed at such already existing regulations as those of the Fire Department of New York City relating to pressurized containers. See Chemical Specialties Manufacturers Association v. Lowery, supra. Indeed, Congress intended to wield its Arm and Hammer to Wish away such local regulations and further, to preclude the growing Trend toward this proliferation of individual community supervision. Its purpose was at least two-fold: (i) to put day-to-day responsibility in the hands of local government, but (ii) at the same time to impose detailed identical standards to eliminate confusion or overlapping.

With this clear expression of congressional intent to create some form of preemption, the only thing remaining was whether the meaning of the term “precautionary labeling” is sufficiently broad to embrace the words of the Dade County ordinance, Vel non. In making this determination, the Court is furnished with a Lever by our Brothers of the Second Circuit. Chemical Specialties Manufacturers Association v. Lowery, supra. And so we hold. This is all that need be said. It is as plain as Mr. Clean the proper Action is that the Dade County Ordinance must be superseded, as All comes out in the wash.

      . The ordinance defines “detergent and synthetic detergent as follows :

      . A preliminary question of standing of the CSMA to represent its members has been raised by the association’s own brief. However, Dade County does not challenge the right of CSMA to conduct the suit or this appeal. We agree that CSMA has a sufficient stake in the outcome of this case to assure a spirited, adversarial presentation of the issues. See National Automatic Laundry and Cleaning Council v. Shultz, 1971, 143 U.S.App.D.C. 274, 443 F.2d 689, 693-694.

      . In the 1966 Amendment to the Act Congress specifically spelled out the effect that the Federal law was to have on incongruous state regulations:

        Effect Upon Federal & State Law It is hereby expressly declared that it is the intent of the Congress to supersede any and all laws of the States and political subdivisions thereof insofar as they may now or hereafter provide for the precautionary labeling of any substance or article intended or suitable for household use (except for those substances defined in sections 2(f) (2) and (3) of this Act) which differs from the requirements or exemptions of this Act or the regulations or interpretations promulgated pursuant thereto. Any law, regulation, or ordinance purporting to establish such a labeling requirement shall be null and void.
      Child Protection Act of 1966, Pub.L. No. 89-756 (November 3, 1966), Section 4, 89 Stat. 1303, 1305, (Emphasis supplied).
      Preemption is also claimed on the basis of the provisions of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), 7 U.S.C.A. § 135. But at oral argument it was conceded by Dade County that the portion of the ordinance which restricted substances controlled by FIFRA were invalid, due to revisions by Congress of that statute. These new provisions became effective October 21, 1972.
      A scheme of regulation has been adopted under the authority of these acts. The Food and Drug Administration has promulgated regulations under FHSA, found in 21 O.F.R. § 191. The Environmental Protection Agency administers FIFRA through regulations found in 40 O.F.R. § 162.

      . This purpose is clearly expressed in the legislative history of the Amendments.
      This Section would add a limited preemption amendment to the act. The amendment would supersede any State or local- precautionary labeling laws which differ from the requirements of the Federal act. This would free marketers of products sold interstate from the impractical and unnecessary burden of labeling each such product specially to comply with the requirements developed by States and cities during the years when there was no applicable Federal law, but at the same time it would permit and encourage States to adopt requirements identical with the Federal requirements and to enforce them to complement Federal enforcement.
      H.R.Rep.No.2166, 89th Cong., 2d Sess. 6, U.S.Code Cong. & Admin.News 1966, pp. 4095, 4100 (1966).


author: CLARK, Circuit Judge:

text:
    Charles A. TOSH et al., Plaintiffs-Appellants, v. BUDDIES SUPERMARKETS, INC., et al., Defendants-Appellees.
    No. 72-3017.
    United States Court of Appeals, Fifth Circuit.
    June 22, 1973.

      Marvin Menaker, Dallas, Tex., George H. Cohen, Carl L. Taylor, Retail Clerks International Assoc., Washington, D. C., for plaintiffs-appellants.
    J. A. Gooch, Edward L. Kemble, S. G. Johndroe, Jr., City Atty., Fort Worth, Tex., Stanley E. Wilkes, Jr., Arlington, Tex., for defendants-appellees.
    Before WISDOM, GEWIN and CLARK, Circuit Judges.
   CLARK, Circuit Judge:

This action sought damages and in-junctive relief under 42 U.S.C. § 1983 and damages under a pendent state law libel and slander claim: After a non-jury trial the district .court rendered judgment in favor of the defendants. Finding that the case turns on its singular facts, we affirm. Ex facto jus ori-tur.

The claims asserted arise out of an unsuccessful attempt by the Retail Clerks International Association to unionize the employees of Buddies Supermarkets. As the defendants aptly pointed out in their brief, “the election campaign was, to say the least, a rough and tumble affair.” Some five months before the scheduled election, several union organizers were arrested at a Buddies store where, according to the defendants, they engaged in such conduct as blocking customer aisles, using obscene language, and physically assaulting employees of Buddies. Shortly after this incident, the company attempted to obtain background information about these individuals to enable them to deal effectively with any similar future incidents. The chief of security for Buddies sought information from a personal friend, Detective LeFils of the Fort Worth Police Department, now deceased. LeFils subsequently supplied the security chief with copies of official police department records or “rap sheets” of six individuals, purportedly showing their arrests and convictions, together with their police photographs or “mug shots.” Some two months later, in response to a union claim that their organizers had always behaved as gentlemen in its stores, Buddies printed and distributed 14 x 20 inch posters bearing facsimiles of the six rap sheets and photographs with this caption:

WANTED ? ?

DO YOU REALLY WANT THESE RETAIL CLERK UNION LEADERS TO REPRESENT YOU ?

VOTE NO NEXT THURSDAY!

The posters were exhibited in the nonpublic areas of the Buddies stores and were referred to by Buddies management during pre-election speeches to Buddies employees. As it turned out, two of the rap sheets published were not those of any of the union organizers but of two persons who bore similar but not identical names. All six union organizers brought this action, including the four whose rap sheets were accurately reproduced on the poster as well as the two with names similar to those of the individuals whose rap sheets were published. The union and various locals were also joined as plaintiffs.

The Federal Claim

Section 1983, that recently rejuvenated old timer which is enjoying new, wide-ranging and ever-increasing popularity as a basis for federal jurisdiction under 28 U.S.C. § 1343(3), has two essentials. The defendant must act under color of state law and the action complained of must deprive the plaintiff of some right, privilege or immunity secured by the Constitution or Laws of the United States.

Under Color — The plaintiffs assert that Detective LeFils’ involvement in the circulation of the arrest and conviction records constituted the requisite action under color of state law to meet their burden of establishing this element of § 1983. In further support of their claim of state action, the plaintiffs contend that the “complicity” of the Chief of the Fort Worth Police Department also supplied state action. They predicate the liability of the other defendants under § 1983 on the allegation that they conspired with LeFils.

Even if widespread publication of the information by the Police Department itself would have afforded the plaintiffs a § 1983 cause of action (a question we do not decide), it is clear that Buddies’ limited publication in this case was wholly attenuated from the initial action of the police department. Since Buddies’ publication plan was not formulated until months after the information was obtained from Detective LeFils, the Police Department had no way of knowing that the information would subsequently be published. These facts simply will not stretch far enough to constitute the minimal state involvement in the subsequent publication requisite to support a § 1983 claim.

Deprivation of Rights — Alternatively, we hold plaintiffs’ contention that Detective LeFils’ release of the records to Buddies, without regard to the later publication by Buddies, did not constitute a deprivation of rights actionable under § 1983. For the purpose of deciding this issue we assume that the release of the records by Detective LeFils supplied the prerequisite action under color of state law.

To demonstrate a deprivation of federal rights, the plaintiffs contend that the actions of the defendants deprived them of liberty and property without due process of law in that the release of the records damaged their reputations and interfered with their ability to engage in their occupation. In addition, the plaintiffs argue that the release of arrest records “necessarily. meant that the Retail Clerks International Association would be reluctant to assign any of the plaintiffs to organizing campaigns in other states,” thus depriving the organizers of their constitutional right to travel. Without intimating whether either of these alleged deprivations would provide the required basis for an action founded on § 1983, and reiterating that our assumption that plaintiffs established the necessary action .under color of state law is made arguendo only, the record is devoid of any evidence whatsoever to support a conclusion that plaintiffs were in fact deprived of these asserted rights.

The main argument which plaintiffs advance is that the dissemination of the arrest records to non-law enforcement persons or for non-law enforcement purposes violates their constitutional right to privacy. The right to privacy is not expressed in the Constitution. However, Roe v. Wade, 410 U.S. 113, 93 S.Ct. 705, 35 L.Ed.2d 147 (1973), has now made its existence explicit, although leaving its scope undefined. Whether this yet embryonic constitutional right restricts the indiscriminate release of arrest records to the merely curious is a question we need not and do not decide in this case. All we say here is that the Constitution does not bar a state agency from furnishing such information to those who present a legitimate need for and interest in the material. The evidence discloses without contradiction that the security officer for Buddies sought to secure the material for what Detective LeFils could properly consider a wholly legitimate purpose — to enable a local merchant to inform itself as to the background of unknown men who had created incidents in its stores in order that it might be better prepared to deal with any repetition of such physically threatening conduct with minimum risk of harm to customers and store personnel. In these particular circumstances, the action of the police department in making this limited release of the information may not be characterized as an invasion of the plaintiffs’ right to privacy.

Injunctive Relief

In addition to finding that the plaintiffs suffered no § 1983 deprivation of rights, we likewise affirm the district court’s finding that the plaintiffs made an insufficient showing upon which to predicate injunctive relief. This record will not support a determination by this court that the district court abused its discretion in refusing to grant injunctive relief requiring that the Fort Worth Police Department enact regulations prohibiting the release of arrest records except to law enforcement personnel for law enforcement purposes. The proof shows that a present written policy of this Department requires in part that:

All such records [criminal records and photographs] shall be kept in the archives of the department and shall not be accessible to any person who is not an accredited police officer seeking such information in line of duty.

This regulation substantially sets out the rule which the plaintiffs urge us to require. Assuming, for the sake of consistency with LeFils’ actions, that the department would practice an unwritten exception to this rule allowing the release of arrest records to non-officers who have a reasonable need for the information, nevertheless the regulation with such an assumed exception would be sufficient to prevent indiscriminate circulation of the material. Thus, even were we to adopt the plaintiffs’ argument that arrest records can be distributed only on a need-to-know basis, in-junctive relief was not shown to be required.

The Pendent State Claim

A pendent cause of action for damages is asserted based on the Texas law of libel and slander. The district court specifically found that none of the defendants acted with the requisite malice to support this claim, and the plaintiffs have not demonstrated this finding to be clearly erroneous. Nor is there any merit in the plaintiffs’ contention that the district court misinterpreted the law so as to require proof of the actual knowledge of the falsity of the materials being circulated. The district court’s reliance upon and partially emphasized quotation from Linn v. United Plant Guards, 383 U.S. 53, 86 S.Ct. 657, 15 L.Ed.2d 582 (1966), makes it clear that the court was aware of the proper “knew or should have known” test to be applied.

The judgment of the district court is Affirmed.

      . The employees voted against union representation by a better than two-to-one ratio. The election was thereafter set aside by the National Labor Relations Board, 192 NLRB 143.

      . It was stipulated tliat the police chief did not participate in or know of LeFils’ release of the records. The alleged “complicity” is based on his failure to promulgate written directives governing release of arrest information such as plaintiffs here seek to have this Court to require.

      . The district court found that when the management of Buddies requested Dyson to secure the background information on the men arrested in its stores, there was no thought of publishing any part of it.

      . The court italicized Linn’s description of the malice test to include publication with knowledge of falsity or with reckless disregard of whether the published matter was true or false.


author: McWilliams, circuit judge.

text:
    In the Matter of SIERRA TRADING CORPORATION, Debtor. BUTTES GAS & OIL COMPANY et al., Petitioners-Appellants, v. L. W. WINKLER, Jr., Trustee in Bankruptcy, Trustee-Appellee.
    No. 72-1582.
    United States Court of Appeals, Tenth Circuit.
    July 12, 1973.

      Raymond J. Gengler, Denver, Colo., for petitioners-appellants.
    James A. Clark, Denver, Colo., for trustee-appellee.
    Before PHILLIPS, SETH, and MC-WILLIAMS, Circuit Judges.
   McWilliams, circuit judge.

This is an appeal from the district coui't’s order and judgment upholding the referee in bankruptcy’s order which in turn disallowed claim No. 221 filed by Buttes Gas & Oil Company and others, hereinafter referred to as the claimant, against Sierra Trading Corporation, the debtor corporation, in a Chapter X Reorganization. This particular claim was based on a letter agreement entered into by the parties on September 3, 1969, and the narrow issue here to be resolved is whether the payment called for by that letter agreement is a “penalty” or “liquidated damages.”

The parties to this proceeding are in apparent agreement that if the payment called for by the letter agreement be truly one for liquidated damages, then the claim should be allowed; but that if the payment provision be not truly one for liquidated damages, but one in the nature of a penalty, then the claim should be disallowed. As indicated, the referee concluded that the claim was not truly one for liquidated damages, but was instead in the nature of a penalty, and accordingly disallowed the claim. On review, the district court affirmed the order of the referee. The claimant now appeals. We affirm.

The claimant and the debtor corporation, along with others, were interested in the oil and gas drilling operations being conducted on certain lands located in Weston County, Wyoming, the particular area being described as the Mush Creek Extension Unit. The total daily production from all leases in the field prior to unitization was approximately 80 barrels a day and was said to be continually diminishing. Studies showed that the area had possibilities as a secondary water recovery program and that with the injection of controlled amounts of water into the oil bearing formation and proper operation of the related facilities the recovery of oil might be increased on a daily basis, as well as with respect to the total ultimate recovery.

It was in this setting that on September 25, 1968, claimant and the debtor corporation, along with other parties not here concerned, entered into a Unit Agreement for the development and operation of the Mush Creek Extension Unit by secondary water recovery methods and contemporaneously therewith entered into a so-called Unit Operating Agreement. Pursuant to the applicable terms of these agreements, each owner agreed to pay its designated share of the costs attendant to the unit operations, which in the case of the debtor corporation was approximately 54%. In addition, the agreements provided that in the event of a default by any working interest owner with respect to the obligation to pay his share of the total cost of unit operations, the nondefaulting owners should have the right to the interest in the lease and runs of the defaulter “up to the amount owing.”

Approximately one year later this latter provision was amended by a so-called “letter agreement” dated September 3, 1969. This letter agreement provided that in the event of a default in payment by a working interest owner, the defaulter, after notice, should relinquish his interest in the lease and runs until the nondefaulters had been paid 200% of the costs and expenses which they had themselves paid on behalf of the defaulter.

The debtor corporation became in arrears in the payment of its share of the unit operation expense, and the claimant paid $127,851.87 on behalf of the debtor corporation. A petition was later filed by the debtor corporation for a Chapter X Reorganization, and the claimant filed two separate claims in that proceeding. Claim No. 220 was for the $127,851.87 actually advanced by the claimant in behalf of the debtor corporation. Claim No. 221 was also for $127,851.87, representing the additional 100% assessment sum called for by the letter agreement of September 3, 1969, in the event of a default.

Claim No. 220, representing the actual outlay of money made by the claimant on behalf of the debtor corporation, was allowed in full and, it being a lien on the debtor corporation’s runs, will be paid in full. However, as indicated, the referee, after hearing, denied Claim No. 221, and in so doing found and concluded that the “100% liquidated damages provision in the letter agreement dated September 3, 1969, is disproportionate to the risk and actual damages that might have been contemplated at the time the letter was signed and accordingly, the amount of damages should be limited to the actual damages which is the amount in Claim No. 220.”

The district court in its review of the matter stated that the “decision in any case [of this nature] will depend upon the facts of that case” and went on to conclude that the facts of the instant case, “including the specific contractual provisions, the project being undertaken and the damages which could have been anticipated, give more than ample support to the conclusion of the referee.” It was on this general basis that the district court affirmed the order of the referee.

The Restatement of Contracts, § 339(1) (1932) reads as follows:

“An agreement, made in advance of breach, fixing the damages therefor, is not enforceable as a contract and does not affect the damages recoverable for the breach, unless
(a) the amount so fixed is a reasonable forecast of just compensation for the harm that is caused by the breach, and
(b) the harm that is caused by the breach is one that is incapable or very difficult of accurate estimation.”

In general accord with the foregoing is our case of Jones v. Dickens, 394 F.2d 233 (10th Cir. 1968). Therein appears the following pertinent comment:

“* * * [B]efore an agreement [for liquidated damages] may be enforced * * * it must appear that the damages to be anticipated were uncertain in amount or difficult to be proved; that the parties intended to liquidate them in advance, and that the amount stated is a reasonable one not greatly disproportionate to the presumed loss or injury. * * *”

The claimant’s position in this court is that under the circumstances the referee, as a matter of law, was compelled to find that the 200% provision was a liquidated damage provision. We do not regard the issue before us to present a question of law. Rather, it is a fact issue, or, perhaps, a mixed question of fact and law. Though the evidence before the referee was not in dispute, and was largely documentary in nature, certainly the inferences to be drawn from the evidence were matters upon which reasonable minds could well differ. In such instance the referee’s findings may not be overturned on review, by either the district court or us, unless such be clearly erroneous. Moran Bros., Inc. v. Yinger, 323 F.2d 699 (10th Cir. 1963); Washington v. Houston Lumber Company, 310 F.2d 881 (10th Cir. 1962). We agree with the district court that the referee’s order finds support in the record and is not clearly erroneous and should therefore be affirmed.

The main thrust of the claimant’s argument is that the courts in general have been more prone than they might otherwise be to find liquidated damages in contracts involving oil and gas leases because of the inherent difficulty or impossibility of establishing resultant damage from the “failure to drill and develop an oil and gas lease.” Claimant asserts that both the referee and the district court ignored this aspect of the case. We do not believe that this line of argument really stands up when the several contracts between the parties are closely scrutinized, and in any event would in nowise be binding on the referee.

As we read the unit agreements and particularly the letter agreement of September 3, 1969, a nondefaulting owner would recover nothing from a defaulting owner unless the former in one form or another made an actual advance on behalf of the defaulter. And then his recovery would apparently be from the actual runs which would otherwise belong to the defaulting party. Such suggests to us that the parties contemplated that the secondary water program would be completed one way or the other, i. e., if one owner defaulted, the other owners would advance the defaulter’s share of the expense.

In this same vein, in the letter agreement of September 3, 1969, there was the declaration that the “undersigned, being all or part of the owners of the Working Interests, * * * fully realize that it would be to their advantage if the operator, if he sees fit, proceeds with the operations even if the advancements have not been made.” While it is true that the operator could, if he saw fit, discontinue secondary recovery operations, it nevertheless appears to us that it was the clear intent of the parties that the secondary recovery program would be completed, even if certain parties did not pay their share of the costs as represented by periodic billings from the operator. And, as we understand it, the secondary recovery program was in fact never abandoned because of the default of the debtor corporation. So, the difficulty of determining resultant damage should the secondary recovery program have been abandoned because of the failure of an owner to pay his share of the expense is not really in the case, because the parties contemplated that the secondary recovery program would in fact be completed even though one party might be in default. It was in this setting that the referee found that the double recovery was “disproportionate to the risk.”

In this regard, the referee also noted that we are not here concerned with the initial drilling of an oil well in a field of undetermined potential, but rather with a secondary recovery program in a field where the prior amount of production was a known factor.

Although we do not attach great significance to it, we note, as did the district court, that the claimant in its billings to the debtor corporation referred to the 200% provision as a “penalty.” Such characterization is of course not binding on the claimant. It may only have been a layman’s incorrect use of a legal word of art. On the other hand, it may coincidentally have been a correct choice of words. In any event, the weight to be given such evidence is not a matter for a reviewing court.

All of the aforementioned factors illustrate why we are of the firm view that the issues here presented are not those involving questions of law, but are issues of fact. True, as indicated above, the evidence before the referee was essentially documentary in nature, i. e., the several contracts between the parties, written correspondence, and the like. However, the inferences to be drawn from such documentary evidence were ones upon which reasonable minds could well differ. Nevertheless, the inferences drawn by the referee were in our view reasonable and find logical support in the record and under the circumstances his findings should not be disturbed by us on appeal.

Therefore, the judgment is affirmed.


author: CLARK, Circuit Judge: PER CURIAM:

text:
    Ed F. VANSTON, Plaintiff-Appellee, v. CONNECTICUT GENERAL LIFE INSURANCE COMPANY, Defendant-Appellant.
    No. 72-2670.
    United States Court of Appeals, Fifth Circuit.
    May 17, 1973.
    Rehearing Denied July 3, 1973.

      Larry M. Lesh, Dallas, Tex., for defendant-appellant.
    Ivan Irwin, Jr., Dallas, Tex., for plaintiff-appellee.
    Before AINSWORTH, GODBOLD and CLARK, Circuit Judges.
   CLARK, Circuit Judge:

Ed F. Vanston brought this action for damages against Connecticut General Life Insurance Company (Connecticut General), alleging breach of contract as well as wrongful interference with and improper competition against Vanston’s efforts to promote and sell insurance-related retirement programs to various companies and associations in the moving industry. In response to special issues submitted, the jury found that Connecticut General and Puritan Life Insurance Company, an almost wholly-owned subsidiary of Connecticut General, agreed with Vanston that neither would compete for- group insurance business in the mass markets developed by Vanston. The jury further found Connecticut General did interfere and compete in such a market and that but for this interference Vanston would have in reasonable probability secured a sponsorship of his retirement program from Allied Van Lines, Inc. In addition, the jury concluded Connecticut General, which did underwrite this account, would not have obtained Allied Van Lines’ group pension business independently of the efforts made by Van-ston. The jury found four separate money verdicts for Vanston in the total sum of 915,000 dollars. The judge rendered judgment notwithstanding the verdict in favor of Connecticut General on one of these damage issues, and awarded Vanston a total of 315,000 dollars in actual damages plus 500,000 dollars as exemplary damages. This appeal ensued. We find that the trial court erred in admitting into evidence crucial out-of-court statements of a deposed witness and vacate and remand for further proceedings. In addition, it is appropriate to dispose of other issues presented on the instant appeal which are likely to recur on remand.

The Parol Evidence Rule

The first defense asserted by Connecticut General was that the Texas parol evidence rule precluded a finding that any oral agreement between Connecticut General, Puritan, and Vanston provided that the insurance companies would not compete in the markets developed by Vanston. The company points to a written agreement between the parties which provides in part:

AGENCY FORCE. The General Agent may organize, train, and maintain an agency force in the territory in which he is authorized from time to time to represent the Puritan Life, which territory shall not be assigned exclusively to the General Agent ■ . . . [Emphasis added by Connecticut General.]

In addition, the agreement contains the following integration clause:

PRIOR AGREEMENTS. This Agreement shall supersede any prior Agreement between the Puritan Life and the General Agent in relation to policies issued through the General Agent after this Agreement becomes effective. .

This argument, however, falls under the weight of testimony by Connecticut General’s own employees that the Puritan general agency contract was not intended to integrate the tripartite agreement relative to market development. According to the testimony, Vanston, in the terminology customarily used by Connecticut General, was a “business partner” who did considerably more than a normal general agent. Connecticut General’s agreements with such business partners ordinarily were not in written form, and the written contract with Puritan “cover [ed] only that portion of the relationship which could be called the general agency relationship.” The agreement not to enter into competition with Vanston in the mass markets which .he undertook to develop, and more specifically as to the accounts or sponsorships which he sought to secure, is not inconsistent with the provisions of the written agency contract providing that no exclusive territory, i.e., geographical region, would be assigned to him.

The result we reach is not precluded by the “prior agreements” language of the contract, set out supra. The principle was stated in Ragland v. Curtis Mathes Sales Co., 446 S.W.2d 577 (Tex.Civ.App.1969):

The parol or extrinsic evidence rule “is particularly applicable where the writing contains a recital that it contains the entire agreement between the parties” .... 30 Am.Jur. 2d, Evidence, Sec. 1019, p. 155.

This sound principle, however, does not reach beyond the scope of the integration clause contained in the contract. For example, an integration clause providing that “this writing contains the full agreement of the parties as to A” does not preclude the proof of additional consistent terms relating to B. The language in this contract does not purport to integrate into the written contract all agreements between the parties, but only those agreements concerning the issuance of policies by Vanston as a general agent. As Connecticut General’s own witnesses testified, the duties of a general agent were not the same as those which Vanston undertook in developing the moving industry market. Moreover, if the question be deemed a close one, we think it significant to note that the form agreement signed by Vanston was prepared by Connecticut General and thus any ambiguities should be resolved against it. In these circumstances the parol evidence rule does not prevent Vanston from proving additional contract terms which were not inconsistent with those embodied in the written agreement. See, e.g., Aboussie v. Aboussie, 441 F.2d 150 (5th Cir. 1971); Hubacek v. Ennis State Bank, 159 Tex. 166, 317 S.W.2d 30 (1958); Don Drum Real Estate Co. v. Hudson, 465 S.W.2d 409 (Tex.Civ.App.1971); Conner v. May, 444 S.W.2d 948 (Tex.Civ.App. 1969), error ref. n.r.e.

The Statute of Frauds

Connecticut General next raised the argument that the contract found by the jury was unenforceable because it was not to be performed within one year, and thus was within the Texas Statute of Frauds. Vanston argued in reply that, since the contracts specified no definite period of duration, under Texas law it was outside the ambit of the Statute. This point is well taken with respect to Vanston’s obligations under the contract, since there was no proof that he could not have performed within one year even though the parties may have anticipated a more substantial period of business accord. See Bratcher v. Dozier, 162 Tex. 319, 346 S.W.2d 795 (1961); Eisenbeck v. Buttgen, 450 S.W.2d 696 (Tex.Civ.App.1970); Irwin v. Prestressed Structures, Inc., 442 S.W.2d 406 (Tex.Civ.App.1969), error ref. n.r.e.; Sapphire Royalty Co. v. Davenport, 306 S.W.2d 202 (Tex.Civ.App.1957) error ref. n.r.e. This explanation, however, looks only to one-half of the contractual equation. Connecticut General contends that under Vanston’s interpretation of its agreement it was obligated to refrain from competition in the protected markets even after the termination of its business relationship with Vanston and certainly for a period of more than one year. Vanston testified, however, that the non-competition agreement would survive only so long as the business relationship continued. Connecticut General points to no persuasive evidence that the term of the non-competition agreement was to be any more extended or any less indeterminate than the underlying business relationship between the parties. Thus, at least this portion of Connecticut General’s contractual obligation falls within the general rule of Texas law that where no period of performance is stated the statute is inapplicable.

Connecticut General relies upon Hall v. Hall, 158 Tex. 95, 308 S.W.2d 12 (1957), but that ease is inapposite here because it stands for the rule that a contract which could not possibly be fully performed within the period of one year is within the Statute even though no period of time is specified by the contract. See Bratcher v. Dozier, supra. Moreover, in Hall the plaintiff attempted to adopt the inconsistent positions (1) that the absence of any stated time for performance placed the contract without the Statute, and (2) that his damages should be computed on the basis that the contemplated complete performance would necessarily require several years.

It appears that at least one of the obligations of Connecticut General as found by the jury (i.e., the agreement not to use the information obtained from Vanston to compete with him) would extend beyond the life of the joint venture and thus could not have been performed within one year. That fact is immaterial in this action predicated solely upon breach of obligations which could have been performed within one year. If the contract is severable — that is, susceptible of division and apportionment, having two or more parts not necessarily dependent on each other — the fact that one obligation is unenforceable does not prevent a recovery as to the other. Upson v. Fitzgerald, 129 Tex. 211, 103 S.W.2d 147 (1937). Here the obligation sued upon, the agreement not to compete so long as the business venture continued, is clearly severable from Connecticut General’s promise not to use Vanston’s trade secrets. Since Vanston fully performed his obligation, he is entitled to recover for breach of this divisible and enforceable contractual obligation. See 3 S. Williston, Law of Contracts § 532, at 766 (3d ed. Jaeger 1960). Thus, the Statute of Frauds is no bar to Vanston’s recovery.

Actual Damages

In response to the special issues submitted, the jury made three separate findings as to Vanston’s actual damages, totalling 415,000 dollars. The court granted Connecticut General a judgment notwithstanding the verdict of the jury on Special Issue No. 11, and rendered judgment for Vanston on Special Issues Nos. 12 and 16. Special Issue No. 12 required the jury to determine the amount of money which would compensate Vanston for the commissions he would have earned from the Allied Van Lines account. In answer to Special Issue No. 16, the jury fixed the reasonable value of the services rendered by Vanston in connection with his development of the American Movers Conference account and, the solicitation of the Allied Van Lines account. A side-by-side comparison makes it apparent that the damages awarded under Special Issue No. 16 for the value of Vanston’s services in developing the Allied Van Lines account were to that extent duplicitous of the damages awarded under Special Issue No. 12. Vanston is not entitled to recover the reasonable value of his business development services in addition to the commissions he contracted to receive from that account. Since under the agency agreement Vanston was to bear his expenses without reimbursement from the company, Vanston would be made whole by recovery of the jury-determined value of the commissions he would have received. It may be that some of the damages awarded under Special Issue No. 16 were intended to compensate Vanston for the reasonable value of his services in connection with the development of the American Movers Conference account. If this theory of recovery of damages is to be submitted to the jury on retrial, its presentation should be clearly segregated from any recovery for lost commissions on the Allied account.

Exemplary Damages

Connecticut General next contends that the award of 500,000 dollars in exemplary damages was improper. We agree. Though Vanston would characterize his action as one based at least partially on Connecticut General’s malicious and wrongful interference with his business relationship with Allied, his claim is necessarily founded upon Connecticut General’s contractual agreement not to compete in the markets developed by Vanston. But for this non-competition agreement Connecticut General’s interference would be no more than permissible competition. The law of Texas is well-settled that exemplary damages may not be awarded for a mere breach of a contract. In Barrett v. Curtis, 407 S.W.2d 359 (Tex.Civ.App.1966), the court found it unnecessary to reach the contention that there was an exception to the general rule for cases involving breach of non-competition agreements, but stated that it had found no Texas authority to support the proposition. See also Price v. Miller, 112 S.W.2d 761 (Tex.Civ.App.1937). We conclude that under the law of Texas exemplary damages cannot be awarded in this case.

H ear say — Impeachment

In its attack on trial procedures below, Connecticut General argues that the district court erred in admitting a transcript of a telephone conversation between Vanston and one Frank, an employee of Allied Van Lines, into evidence for all purposes and not just for the limited purpose of impeachment. Vanston counters that the transcript of the tape was adopted by Frank during the taking of his deposition and as a result of that adoption is not to be considered hearsay. During the deposition, Frank at first denied making any statement that Van-ston had almost received the contract with Allied Van Lines and that he had run a close second to Connecticut General. When his recollection was refreshed by examination of the written transcript of the taped conversation, he modified his testimony to state that he could not deny having had such a conversation. The critical factor, however, insofar as whether this taped conversation is to be deemed hearsay is that at no time did Frank affirm that his prior statements were true. Instead, he contended that the statements were made to Vanston merely “to get rid of the guy.”

The Advisory Committee’s Note to Rule 801 of the proposed Federal Rules of Evidence epitomizes the legal issue thus:

Prior statement by witness. Considerable controversy has attended the question whether a prior out-of-court statement by a person now available for cross-examination concerning it, under oath and in the presence of the trier of fact, should be classed as hearsay. If the witness admits on the stand that he made the statement and that it was true, he adopts the statement and there is no hearsay problem. The hearsay problem arises when the witness on the stand denies having made the statement or admits having made it but denies its truth. The argument in favor of treating these latter statements as hearsay is based upon the ground that the conditions of oath, cross-examination, and demeanor observation did not prevail at the time the statement was made and cannot adequately be supplied by the later examination. The logic of the situation is troublesome. So far as concerns the oath, its mere presence has never been regarded as sufficient to remove a statement from the hearsay category, and it receives must less emphasis than cross-examination as a truth-compelling device. . . . Nor is it satisfactorily explained why cross-examination cannot be conducted subsequently with success. The decisions contending most vigorously for its inadequacy in fact demonstrate quite thorough exploration of the weaknesses and doubts attending the earlier statement. . . . The bulk of the case law nevertheless has been against allowing prior statements of witnesses to be used generally as substantive evidence. Most of the writers and Uniform Rule 63(1) have taken the opposite position. [Emphasis added.]

In spite of the wide-spread criticism of the rule noted by the Advisory Committee, see also C. McCormick, Evidence § 39 (1954), it is well established as the law of this circuit. See United States v. Gregory, 472 F.2d 484 (5th Cir. 1973); McIntyre v. Reynolds Metals Company, 468 F.2d 1092 (5th Cir. 1972); Eisenberg v. United States, 273 F.2d 127 (5th Cir. 1959); Slade v. United States, 267 F.2d 834 (5th Cir. 1959); Feutralle v. United States, 209 F.2d 159 (5th Cir. 1954). See also Harman v. United States, 199 F.2d 34 (4th Cir. 1952); Ellis v. United States, 138 F.2d 612 (8th Cir. 1943). Thus, though the acknowledged but unaffirmed prior statement could have been introduced for impeachment purposes (subject to the rule discussed in the next paragraph infra), the court erred in admitting it for all purposes.

Moreover, because the recording was available for impeachment only, Vanston ran afoul of the well-settled rule that a litigant may not offer a witness whose testimony he knows in advance will be adverse in order to get before the jury evidence admissible only for impeachment and which would otherwise be inadmissible hearsay. Mississippi for Use of Derrow v. Durham, 444 F.2d 152 (5th Cir. 1971). See also United States v. Johnson, 427 F.2d 957 (5th Cir. 1970); Young v. United States, 97 F.2d 200 (5th Cir. 1938). The Texas courts have uniformly adhered to the same rule. See Zanders v. State, 480 S.W.2d 708 (Tex.Cr.App. 1972); City of San Antonio v. Poulos, 403 S.W.2d 168 (Tex.Civ.App.), aff’d on other issues, 422 S.W.2d 140 (Tex.1966). It could hardly be contended that the introduction of Frank’s deposition and the telephone transcript satisfied the requirements of this rule.

Finally, the extrajudicial statements involved in this case cannot be brought within the scope of res gestae exception to the hearsay rule. The telephone conversation took place some five months after Allied had made its decision to sponsor Connecticut General’s proposal rather than Vanston’s. Nor is there any merit in the contention that these statements can be proved as operative facts and hence are without the hearsay rule. These out-of-court statements were introduced for the sole purpose of proving the truth of the facts asserted in them.

Materiality of the Evidentiary Error

These improperly admitted statements were by no means cumulative but were for all practical purposes the only evidence adduced to satisfy Vanston’s burden of demonstrating, under his tortious interference claim, that in reasonable probability he would have been awarded the Allied account but for Connecticut General’s interference. The transcription of the telephone conversation contained the following colloquy:

ED [Vanston]: Tom, let me ask you this. Was I the No. 2 choice?
TOM [Frank]: Yes.
ED: Well, that’s what I thought. I had always thought that I was your No. 1 choice—
TOM: Ed, it was very close as to 1 and 2. I will say that. I ruled out, now, I’d be talking out of turn if I go any further, but Southland was ruled out on a couple of bases, not of which should be discussed—
ED: Oh, yeah, that’s right, sure. Well, you know, when you lose something you’ve fought as hard for as I fought for this one, you want to know just where you stood because that’s the only way you learn.
TOM: You stood second and believe me it was a close race between 1 and 2.

If the jury gave any credence to these erroneously-admitted statements of Allied’s Insurance Manager it was bound to have affected its determination of the “but for” question. It is clear that this cannot be classified as harmless error.

Failure to Prove Contractual Damages

Vanston asserts an alternative contention. While he may have been required to carry the “but for” proof burden to recover on the basis of tort, no such element of proof was requisite to recovery on his claim predicated on Connecticut General’s breach of its contractual obligation not to compete. He argues that as a result of his exclusive right to sell in the moving industry market he is entitled to a commission whether or not he was the procuring cause of the sale. While the general rule upon which this argument is grounded is irrefutable, it cannot be applied here to uphold that portion of the judgment rendered by the court below on the special verdict which awarded him the commissions he would have earned. The special verdict on which the damage award was predicated inquired only as to the value of the commissions Vanston would have earned on the sale of his proposal. For whatever reason, no sale of Vanston’s product was ever made.

Nowhere does the evidence purport to show that the amount of commissions which would have been contractually due to Vanston was equivalent to the commissions due to one who sold Connecticut General’s program to Allied, nor was there any jury finding to that effect. Rather, the record is replete with evidence that the two products were substantially dissimilar. According to the testimony, the Connecticut General’s plan accepted by Allied differed from Vanston’s product in that it was not life insurance oriented, emphasized group rather than individual benefits, stressed investment return rather than death benefits, and could produce a cash value at retirement age of more than twice that promised under Van-ston’s proposal. Thus, from all that is apparent from the record, the commissions under the two plans were based on entirely different measures and standards. This record will not permit us to conclude that the jury’s estimate of the value of the commissions which might have been earned on the sale of Van-ston’s product would be indicative of the commissions he would have received on the sale of Connecticut General’s markedly different product. Of course, our decision does not preclude a submission of this issue to the jury on remand assuming competent evidence is adduced as to the value of the commissions which would have been earned on the sale of the Connecticut General proposal.

This evidentiary error requires that we vacate the judgment entered and remand this ease for further proceedings not inconsistent herewith.

Vacated and remanded.

ON PETITION FOR REHEARING

Before AINSWORTH, GODBOLD and CLARK, Circuit Judges.

PER CURIAM:

On rehearing Vanston challenges the correctness of that portion of our original opinion which held that he had failed to establish damages under his contractual theory of recovery. He contends that Connecticut General’s breach of the exclusive agency contract prevented his performance and that Texas law entitles him to recover the reasonable profit he would have made on the sale of his product. He now points out that Texas would allow as a prima facie measure of that reasonable profit the amount represented by the stipulated commission, citing Park v. Swartz, 110 Tex. 564, 222 S.W. 156 (1920); McDonald v. Davis, 389 S.W.2d 494 (Tex.Civ.App.1965). See also Pickett v. Bishop, 148 Tex. 207, 223 S.W.2d 222 (1949). Thus, he asserts, he may still recover in contract without further proof of damages.

The rule enunciated in these cases is of no aid to Vanston on this appeal. Such a measure of damages for breach of contract is based on a presumption that the agent would have made the sale but for the interference of the principal and places the burden on the principal to prove that the agent could not or would not have made the sale. In the ease at bar, substantial evidence was introduced to show that Vanston would not have earned the commissions even if Connecticut General had not competed for the Allied account. The jury resolution of this Factual dispute — -whether Vanston would have sold his product to Allied — -was marred by the erroneous introduction into evidence of the transcript of the taped conversation, as discussed in the original opinion. Just as this renders the jury’s determination improper as a basis for tort recovery, it also forecloses any award of contractual damages premised on the jury finding.

In addition, Vanston contends that the original opinion misapprehended the effect of a trial stipulation that Frank was called as “a neutral witness.” Vanston argues that this agreement of counsel removes this case from the realm of the rule that a party may not prostitute the exception to the hearsay rule permitting the use of prior inconsistent statements for the purpose of impeachment by intentionally offering a witness whose testimony he knows in advance will be adverse. We reject this contention.

Though the rule enunciated by Mississippi Derrow v. Durham, 444 F.2d 152 (5th Cir. 1971), had its origin in the common law notion that a party vouched for the credibility of the witnesses he called and was morally bound by their testimony, see 3A Wigmore on Evidence § 897-98 (Chadbourn Rev. 1970), it also serves to prevent the introduction of hearsay evidence with no more valid purpose than the hope that the jury may consider it as substantive evidence despite the judge’s contrary instructions. It remains transparent in this case that the exposure (of Frank’s hearsay statements) to the jury was Van-ston’s only purpose in offering the deposition and transcript of the 'telephone conversation.

Even assuming that a witness stipulated to be neutral is to be treated as a hostile witness for the purpose of allowing impeachment through hearsay, here there can be no contention that the transcript was introduced to repair the damage caused by surprise testimony. See, e.g., United States v. Gregory, 472 F.2d 484 (5th Cir. 1973); United States v. Dobbs, 448 F.2d 1262 (5th Cir. 1971); Mississippi for Use of Derrow v. Durham, supra. Any harm to Vanston’s cause which resulted from the reading of Frank’s deposition was intentionally self-inflicted. See Culwell v. United States, 194 F.2d 808 (5th Cir. 1952). On these facts the transcript of Frank’s telephone conversation was not properly admissible for any purpose.

The petition for rehearing is denied.

      . The parol evidence rule is a substantive matter as to which state law controls in this diversity case. Ilarville Rose Service v. Kellogg Co., 448 F.2d 1346 (5th Cir. 1971), cert. denied, 405 U.S. 987, 92 S.Ct. 1248, 31 L.Ed.2d 453 (1972).

      . Tex.Bus. & Com.Code § 26.01 (1958), V.T.C.A.

      . Under Texas law even full performance by one party will not necessarily allow the performing party to sue for breach of a promise which is within the Statute, Chevalier v. Lane’s, Inc., 147 Tex. 106, 213 S.W.2d 530, 6 A.L.R.2d 1045 (1948).

      . Special Issue No. 11:
      What sum of money, if any, if paid now in cash, do you find from a preponderance of the evidence would reasonably compensate Ed P. Vanston for being the efficient and producing cause of such decision?
      Answer in “DOLLARS”, if any, and “CENTS,” if any.
      Answer: $100,000.00
      Special Issue No. 12:
      What amount of money, if any, if paid now in cash, do you find from a preponderance of the evidence would compensate Ed E. Vanston for the commissions, if any you find, he would have earned from the Allied Van Lines, Inc., account?
      You are hereby instructed that you may take into consideration the length of time that you reasonably believe, from a preponderance of the evidence, that Ed P. Vanston would, in all reasonable probability, have continued to write the retirement coverage of Allied Van Lines, Inc.
      You are further instructed that you may take into consideration expenses incurred by Ed P. Vanston, if any, in the development of his mass marketing operation.
      You are further instructed that damages are not rendered uncertain because they cannot be calculated with absolute exactness. It is sufficient if a reasonable basis of computation is afforded, although the result be only approximate.
      You are further instructed that in determining damages, if any, you shall take into consideration the cost to Ed P. Vanston of expenditures that would necessarily be made in servicing the Allied Van Lines, Inc., account, but you shall not take into consideration remote costs, overhead expenses or fixed expenses which would neither increase nor decrease in servicing the Allied Van Lines, Inc., account.
      Answer in “DOLLARS,” if any, and “CENTS,” if any.
      Answer: $165,000.00
      Special Issue No. 16:
      What amount of money, if any, if paid now in cash, do you find from a preponderance of the evidence would compensate Ed P. Vanston for the reasonable value of his services in connection with his development of the American Movers Conference account and solicitation of the Allied Van Lines, Inc., account?
      Answer in “DOLLARS,” if any, and “CENTS,” if any.
      Answer: $150,000.00

      . This is true regardless of how the ambiguous third paragraph of Special Issue No. 12 is interpreted.

      . This issue was isolated for discussion on appeal for the first time in Connecticut General’s reply brief, where it is asserted that any such theory of recovery is outside the pleadings and unsupported by the proof. In light of the remand we require, it is appropriate that the parties submit this issue to the trial court for its initial determination. We intimate no opinion here as to whether Vanston is entitled to have this theory of recovery submitted to the jury on retrial.

      . This was the theory on which this phase of the case was submitted to the jury. Vanston took no exception below and does not contest the correctness of this legal theory here.

      . See, e.g., Metal Structures Corp. v. Bigham, 347 S.W.2d 270 (Tex.Civ.App. 1961), error ref. n.r.e.; Holmes v. Holik, 238 S.W.2d 260 (Tex.Civ.App. 1951); see generally Annot., 12 A.L.R.2d 1360 (1950).