POLITZ, Circuit Judge:
Invoking diversity jurisdiction and alleging breach of contract, Mississippi River Grain Elevator, Inc. (MRGE) and Inter Financing Exchange, S.A. (IFE) sued Bartlett & Company, Grain (Bartlett). Bartlett answered and counterclaimed. Subsequently Bartlett amended its counterclaim to add Giovanni Rametta, Ferruzzi & Co., S.A.,
Default judgments were entered against Financing, Storken, Societe, and Ocean Grain. MRGE voluntarily dismissed its complaint against Bartlett. IFE's claim against Bartlett and Bartlett's counterclaim against the Ferruzzi Group were presented in a bench trial before Judge Blake West. Judge West died shortly after the trial and the case was assigned to another judge who gave the parties the option of retrial or submission on the record. The decision of the parties is reflected in the order assigning the case to a magistrate: "The parties have agreed to submit to Magistrate James Carriere the captioned matter for decision on the basis of the trial transcript, record and memoranda. The parties have agreed to accept the decision of the Magistrate as the decision of the Court." The district court adopted, with minor modifications, the findings and recommendations of the magistrate. IFE was awarded judgment against Bartlett for $21,637.17. Bartlett was successful in its counterclaim against the Ferruzzi Group for shortweighing losses and expenses incidental to contract breaches; its claims for lost profits and for loan grain discrepancy were denied.
In 1968 Bartlett, a trader in grain, began contracting with MRGE for the sale of grain. In January 1973 Bartlett began exporting grain through MRGE pursuant to a "total ship loan service" contract. Under that agreement Giovanni Rametta, the chief operating officer of MRGE, selected a member of the Ferruzzi Group to purchase grain from Bartlett. The grain would be shipped through MRGE's elevator, loaded on ocean-going vessels, and repurchased by Bartlett.
In September, 1973 the parties negotiated three changes in their standard agreement which were confirmed by a telex from Bartlett to Rametta. It was agreed that Bartlett's per bushel cost would be fixed at 8½ cents, that Bartlett would commit to use MRGE's services for eight months and would "put through" 20,000 long tons of grain each month. Bartlett reserved the right to "put through" an additional 10,000 long tons of grain per month. Almost immediately after this contract became effective, a dispute arose as to which party was responsible for incidental expenses, such as inspection and demurrage. This disagreement, combined with Bartlett's dissatisfaction with what it viewed as MRGE's unjustifiable delays in handling the grain, finally resulted, in 1974, in Bartlett's termination of trading.
Standard of Review
The Ferruzzi Group challenges the factual findings of the special master as being based, in part, on credibility evaluations
In Calderon the claimant alleged that he lost his job because of his Mexican-American descent. The matter was referred to a magistrate for trial under 28 U.S.C. § 636(b)(3). The district court adopted the magistrate's recommendations over objection by the appellant. We reversed, holding that the district judge must make a de novo determination of all contested portions of the magistrate's findings. Calderon is not dispositive of the issue now before us for two reasons.
First, the referral in the case at bar was under 28 U.S.C. § 636(b)(2), and not section 636(b)(3). Although the text of both sections are similar, we discerned a difference in Calderon.
Second, and equally persuasive, is the fact that the parties before us were offered alternatives and elected to submit the matter for decision by a magistrate as a special master. It was agreed that the decision would be based on the "trial transcript, record and memoranda," and that the parties would "accept the decision of the Magistrate as the decision of the Court." Finally, the court specially noted that the "matter will be treated by the court as a reference to a special master pursuant to Rule 53(e)(4) of the Federal Rules of Civil Procedure." Under these circumstances we find both the language and the rationale of Rule 53(e)(4) of the Federal Rules of Civil Procedure applicable: "when the parties stipulate that a master's findings of fact shall be final, only questions of law arising upon the report shall thereafter be considered." The reference to the special master and the treatment accorded his findings and recommendations are consistent with the law and the agreement of the parties. We find no merit in MRGE's contention that the case should be remanded to the district court for a de novo examination of the facts.
Assignments of Error
The parties, both appearing as appellants, assign six errors: (1) the determination that MRGE was an alter ego of the Ferruzzi Group; (2) the determination that the September 1973 agreement was a continuation of earlier buy/sell contracts; (3) application of the wrong legal standard in assessing fraud in the shortweighing of Bartlett's grain; (4) improper admission of weight certificates offered by Bartlett to prove shortweighing; (5) the refusal to bar Bartlett's claims by operation of the Louisiana law on prescription (limitations); and (6) the rejection of Bartlett's prayer for lost profits and the awarding of a money judgment to IFE.
1. MRGE as Ferruzzi's Alter Ego
While MRGE, IFE, and the other members of the Ferruzzi Group are discrete corporations, they were found to be so centrally managed and interrelated that they functioned, at all pertinent times, as mere instrumentalities of each other. Viewing the record in light of applicable Louisiana law, see, e. g., Keller v. Haas, 202 La. 486, 12 So.2d 238 (1943); National Surety Corp. v. Pope, 147 So.2d 239 (La.App.1962), satisfies us that this categorization should not be disturbed. We find no error in the conclusion that each member of the Ferruzzi Group is liable in solido to Bartlett, as the alter ego of the others.
2. The 1973 Agreement
The September 1973 telex from Bartlett to MRGE did not specify the allocation of responsibility for the expenses incidental to the grain shipments. Bartlett, having paid charges for demurrage, inspection and storage totaling $138,190.18, contends that the telex served only to modify the existing buy/sell agreements under which MRGE was responsible for these costs. The district
Reviewing this record under the lamp of Louisiana law,
3. Proof of Fraud
The district court concluded Bartlett proved, by a preponderance of the evidence, that the Ferruzzi Group carried out a fraudulent shortweighing scheme. MRGE contends the court erred by using the preponderance of the evidence standard, insisting that under Louisiana law fraud must be proved by clear and convincing proof.
The essential issue is not fraud but breach of contract. Shortweighing could be the product of negligence or design; Bartlett maintained that it was by design, i. e., by fraud. The allegation may be inartfully drafted, but the legal question is clear — was there a performance or a breach of performance of the contractual obligation due Bartlett? The district court, applying the usual preponderance of the evidence test, attributed responsibility for the shrinkage in grain to the Ferruzzi Group. See Circle Food Stores, Inc. v. Gabriel, 331 So.2d 57 (La.App.1976). No error was committed in the assessment of this burden of proof.
4. Certificates of Weight
In support of its claim of systematic shortweighing, Bartlett tendered origin weight certificates prepared by the Kansas State Grain Inspection Department, Nebraska City Chamber of Commerce, and the St. Joseph Grain Elevator. The certificates were admitted, over objection, to prove the truth of their contents.
MRGE argues that the district court erred because the weight certificates
5. Time Limitations
MRGE contends that Bartlett's right to recover for the alleged shortweighing has been extinguished by the operation of the Louisiana provisions governing prescription liberandi causa. See La.Civ.Code art. 2130. MRGE claims the applicable limitations period is one year under Civil Code articles 3536
The district court rejected the defense of prescription, noting that Bartlett's action was premised on unjust enrichment which admits of a ten year period in which to commence suit. La.Civ.Code art. 3544; Minyard v. Curtis Products, Inc., 251 La. 624, 205 So.2d 422 (1967).
6. Lost Profits
Bartlett sought recovery for lost profits resulting from the breach of the telex supplemented agreement. The trial court found that the conditions of which Bartlett complained (delays in handling grain and dispute over responsibility for various expenses)
Under Louisiana law, damages such as lost profits are recoverable from the time the debtor has been "put in default." La.Civ.Code art. 1933. This rule prevails, with several exceptions not presently relevant, when the contractual breach is only passive. See, e. g., Andrew Dev. Corp. v. West Esplanade Corp., 347 So.2d 210 (La. 1977). A putting in default requires notice to the other party of the alleged contractual breach and the allowance of a reasonable opportunity to perform. We find no evidence of either in this record. We perceive inherent in the trial court's recitation that Bartlett was not prevented from "putting through" the grain, a finding of a passive breach only by MRGE. Since Bartlett did not place MRGE in default, see La.Civ.Code arts. 1911 & 1933, it may not claim lost profits under these circumstances. The trial judge did not err in denying this claim.
A final issue presented for our consideration is the district court's award to IFE of $21,637.27 due it from a grain "swap" with Bartlett. Bartlett argues that the trial court erred either by labeling the arrangement as an open account or in not charging IFE's acceptance of inferior quality grain an "expense," payable by the Ferruzzi Group under then existing contractual arrangements. We find no error in the district court's conclusion that this matter was a separate undertaking and that IFE was entitled to judgment for this amount.
The decision of the district court is in all respects AFFIRMED.
See, e. g., W. A. McMichael Constr. Co. v. D & W Prop., Inc., 356 So.2d 1115 (La.App.1978).