provision as follows: 'The right of the Contractor to use the Facilities shall include the right to use them in the performance of work other than Government work; Provided, however, that the Contractor shall at all times, give such priority to Government work as the Department shall from time to time require.'
Under these circumstances there was no reason for Asbestos to pay tribute to Quigley on the orders it received from the Navy.
The priority orders stand in a somewhat different footing. The defendant contended that the national emergency declared by the President of the United States in his proclamation of September 8, 1939, followed by our entry into active hostilities on December 7, 1941, created a situation which prevented it from dealing freely with its products as would have been the case under normal conditions. It asserted the series of acts, commencing with that of June 28, 1940, 54 Stat. 675, c. 440, amended by the Act of May 31, 1941, 55 Stat. 236, c. 157, and the Act of March 27, 1942, 56 Stat. 177, c. 199, Title III, 50 U.S.C.A.Appendix, § 1152, providing for Presidential authority to establish a system of priority regulations governing materials necessary for the national defense altered private contractual relationships. Pursuant to these acts, executive orders and Regulations of the War Production Board were promulgated which controlled the disposition of asbestos products. Compliance with the paramount authority of the government in preference to existing private contracts, the defendant urged, exculpated it from any breach of contract. It further argued that no distinction existed between orders submitted by the United States Navy and priority sales to private concerns, since priority regulations required the defendant to honor such orders regardless of any commitment to the plaintiff.
The plaintiff, however, argued, that the system of priorities did not alter the basic relationships between producer, dealer, distributor and jobber, and that the fundamental concern of the government during the recent war was to preclude the diversion of critical materials to ultimate consumption not essential to the war effort. Commercial activities which were merely steps or stages in bringing such essential materials from the original producer to an essential fabricator were not violative of or inconsistent with the government's aims, since in many cases, the traditional distributive channels served to expedite movement of such materials. It alleged that distributors were not intended to be put out of business by government control and argued that exclusive sales contracts such as existed between it and the defendant were not basically altered by the priority system and that there was no conflict between faithful performance of the contract in question and government controls. It further pointed out that the testimony showed the defendant to have sold almost half of its products to 'regular' or non-priority sales during the controlled period while at the same time contending that it, the defendant, was unable to supply the plaintiff's assignor. It insisted the only effect of the priority regulations was to require that a purchaser present the applicable certification.
The plaintiff attempted to buttress its argument by reference to a departmental interpretation of Section 944.2 of the Regulations of the War Production Board, which was in effect as follows: 'However, if a manufacturer or wholesaler has an exclusive distributor, either for all sales or for a particular territory, he may reject orders from other purchasers provided the exclusive distributor is in a position to fill the orders promptly. ( Int. 3, June 30, 1943, 8 P.R. 8994).' 32 CFR, 1943 Supp. § 944.2, p. 1423.
Quigley kept no appreciable inventory on hand. It submitted its orders to Asbestos to be filled and shipped in nearly all cases directly to the customer. There apparently was no difficulty in filling the requirements of the Navy and the orders with priority certificates, and some material was left for the filling of regular orders. The last mentioned interpretation has reference to a situation unlike the one in question here, but the objections of Asbestos are likewise not in point, since Quigley was the exclusive distributor for Asbestos and since there was no inability to fill rated orders both by Quigley and Asbestos, Quigley was entitled to whatever profits it could have made upon the rated orders received by Asbestos in the same manner as upon regular orders. To the extent that it was not permitted to take such profit it was damaged by the fulfillment by Asbestos of the priority rated orders. Therefore the plaintiff is entitled to recover damages where Asbestos sold to regular customers or on priority rating at prices which were susceptible of a profit being made by Quigley having in mind that it was restricted to a discount of 60%.
The proportion of sales made by Asbestos to the Navy, under priority ratings and regular orders for the period during which the material was produced was as follows:
To the Navy By Priority By Regular
$ 194,496.30 $ 575,511.53 $ 160,625.33
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