Globe Woolen Co. v. Utica Gas & Electric Co.

121 N.E. 378 (1918)

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Nature of the Case

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Facts

Globe (P) owns two mills in Utica. Utica Gas (D) generates and sells electricity for light and power. Maynard is P’s chief stockholder, president, and board member. Maynard is also a director of D and chairman of its executive committee. He had a single share of D’s stock to get the position but returned the share and has never owned stock in D since. P was considering switching over to electrical power from steam power. P wanted to ensure that the cost of electricity and the switchover would be cost-effective. Eventually, the parties agreed to a contract for the worsted mill. D proposed to supply electricity at a rate of $.0104 per kilowatt hour and guaranteed that the cost of heat, light, and power would produce a savings of $300 per month from the cost of using steam power. A trial period was to run until July 1, 1907, and then at P’s option the contract was to run for five years with an option for P to renew for another five years. D made preparations to install new equipment. The contract was then presented to D’s executive committee. Maynard was silent on all issues, and the other members were told the rate and that it would be profitable. The contract was ratified. Maynard was excused from voting. The parties next addressed the woolen mill. The same general agreement was reached, but a new provision was added; the contract was to apply to current used for extensions or additions to the mills and that in the event of a shortage of electricity, P would be a preferred customer except the city of Utica. The contract was ratified by D’s executive committee. Nothing was said of the new provisions. Maynard did not vote again. P made the changes at his mills at a cost of $21,000. It became apparent immediately that D had made a losing contract. Miscalculations had been made, and P began to dye more yarn, and that required more power. Eventually, in 1911, D gave notice of rescission. D had supplied $60,000-69,500.75 in electricity depending on its normal billing rates and had gotten nothing from P and even owed P $11,721,41. If allowed to continued it was estimated that losses would exceed $300,000. P sued D for performance, and the referee below annulled the contracts. P appealed.