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WELDED TUBE CO. OF AMERICA v. PHOENIX STEEL CORP.

April 16, 1974

WELDED TUBE COMPANY OF AMERICA, Plaintiff,
v.
PHOENIX STEEL CORPORATION, Defendant


Ditter, District Judge.


The opinion of the court was delivered by: DITTER

DITTER, District Judge.

 This case, which grows out of a requirements contract to manufacture steel tubing, presents questions concerning the validity of an artisan's common law lien, the basis for the computation of that lien, and the legality of a purported sale to enforce the lien. After considering the evidence, I make the following:

 FINDINGS OF FACT

 1. In September, 1965, Welded Tube Company of America and Phoenix Steel Corporation entered into an agreement under the terms of which Phoenix agreed to provide, at Welded's plant, steel coils suitable for conversion into structural steel tubing, and Welded agreed to fabricate from these coils such structural steel tubing as Phoenix might require for sale to its customers. The agreement of the parties is contained in letters dated September 20, 1965 and September 29, 1965, and signed by their representatives.

 2. The agreement contained a schedule of charges for the work to be performed by Welded in fabricating structural steel tubing upon Phoenix's order. These charges varied from $30. to $60. per ton of finished tubing depending upon the volume fabricated and shipped for Phoenix each month.

 3. Under the terms of the agreement the basis upon which Phoenix was to pay Welded for fabricating the structural steel was "30 days net"; that is, Phoenix was required to pay Welded 30 days after the work had been completed and an invoice therefor rendered to Phoenix. Subsequently, the parties modified their agreement to provide that invoices rendered from the 1st to the 10th of the month would be payable on the 30th; invoices rendered from the 11th to the 20th of the month would be payable on the 10th of the following month; and invoices rendered on the 21st to the 31st of the month would be payable on the 20th of the following month.

 4. Phoenix purchased and caused to be delivered to Welded in accordance with the agreement substantial tonnages of steel coils of 1/4 inch, 5/16 inch and 3/8 inch gauges. Phoenix issued to Welded from time to time thereafter, instructions to fabricate from these coils a designated quantity of structural steel tubing of specified dimensions. Phoenix's orders were scheduled so that production for Phoenix would coincide with Welded's regular production of similar sizes for its own use.

 5. In July, 1968, Phoenix notified Welded that Phoenix was going out of the structural steel tubing business and would not have further steel coils delivered to Welded. As of that time, a substantial tonnage of steel coils belonging to Phoenix were located at Welded's plant.

 6. In August, 1968, a meeting was held between representatives of the parties at which Phoenix confirmed its decision to go out of the tubing business and its intention to liquidate its inventory of steel coils. Phoenix advised Welded that it might do so by selling the steel as such or by instructing Welded to fabricate structural steel tubing from these coils in accordance with the agreement.

 7. Welded offered to purchase the coils from Phoenix as coils but offered a price at which Phoenix was unwilling to sell them.

 8. Thereafter, Phoenix instructed Welded to fabricate additional structural steel tubing in accordance with the agreement and Welded did so utilizing the steel coils located at its plant.

 9. As of June, 1969, there were 2,655 1/2 tons of steel coils, belonging to Phoenix, remaining at Welded's plant: 1,138 1/2 tons were whole coils on which no work had been performed by Welded, and 1,517 tons were portions of coils ("slit coils") remaining after Welded had fabricated structural steel tubing, at Phoenix's request, out of a part of these coils.

 10. On June 30, 1969, Phoenix demanded that Welded give Phoenix possession of the coils. Welded refused, and thereafter Welded continuously refused to give Phoenix possession of the coils asserting a lien thereon.

 11. As of June 30, 1969, there were no outstanding invoices, rendered by Welded to Phoenix for charges in connection with the fabrication by Welded of structural steel tubing, which had not been paid by Phoenix in accordance with the agreement between the parties.

 12. A number of generalized claims, not specific in nature or amount (including claims not pressed by Welded in this action), were made by Welded on June 30, 1969 and thereafter as a purported basis for Welded's refusal to deliver possession of the coils to Phoenix. No notice setting forth the precise nature of Welded's claims, or the specific amount thereof, was rendered to Phoenix by Welded until the filing of the complaint in this action on October 23, 1969.

 13. The 2,655 1/2 tons of Phoenix's coils, whole and slit, which Welded had in its possession on June 30, 1969, were prime hotrolled steel coils of 1/4" gauge and larger of Japanese manufacture. As of June 30, 1969, there was no deterioration in the coils which impaired their value for use in the fabrication of structural steel products, nor did any such deterioration occur subsequent to June 30, 1969.

 14. On June 30, 1969, the published price for prime hotrolled steel coils, 1/4" gauge and larger, of domestic manufacture was $128. per ton. In August, 1969, the published price was increased to $130. per ton. In February, 1970, the published price went to $134. per ton. In June, 1970, it rose to $141. per ton, and in November, 1970, to $147. per ton. Throughout this period the price of prime, hotrolled steel coils, 1/4" gauge and larger, of foreign manufacture was $25. per ton below the published domestic price.

 15. The fair market value of the 2,655 1/2 tons of coils which Welded held was $103. per ton on June 30, 1969.

 16. In August, 1969, Ryerson Steel Company offered to purchase the coils from Phoenix for $104. per ton.

 17. On September 3, 1969, Phoenix notified Welded that Phoenix had received a specific offer for the coils and, once again, demanded their release. At the same time, Phoenix agreed to reimburse Welded a reasonable amount for any work which had been done on the slit coils. Welded did not respond but, as stated in Finding No. 10 above, continued to refuse to give Phoenix possession of any of the coils.

 18. On September 26, 1969, attorneys for Phoenix wrote to the attorneys for Welded stating that Phoenix agreed to pay $50,000. for the work on the slit coils for which Welded claimed reimbursement. This offer was not accepted.

 19. Due to Welded's continued detention of the coils, Phoenix was unable to consummate the sale of the steel to Ryerson Steel Company for $104. per ton.

 21. Phoenix filed an answer to the complaint asserting by way of counterclaim that Welded had wrongfully detained 2,655 1/2 tons of steel coils, having a value of $273,000., which were Phoenix's property and demanding damages in that amount plus interest.

 22. Phoenix admits that it owes Welded $51,013.08. for finished tubing as set forth in invoices rendered to Phoenix by Welded and dated subsequent to June 30, 1969. In September, 1969, Phoenix expressly agreed to pay these invoices, provided that Welded would deliver to Phoenix the 2,655 1/2 tons of steel coils which were Phoenix's property.

 23. Negotiations between the attorneys for Phoenix and Welded following the commencement of this action failed to produce any agreement.

 24. On August 25, 1970, Welded notified Phoenix of its intention, notwithstanding the pendency of this action and Phoenix's counterclaim therein, to sell the steel coils which were Phoenix's property in accordance with provisions of Pennsylvania law, the Act of May 7, 1925, P.L. 557, § 1, 6 P.S. § 11. Notices advertising the sale of the coils were placed by Welded in one issue of the New York Times, two issues of the Baltimore Sun, two issues of the Philadelphia Bulletin and in two issues of the Legal Intelligencer. Notice of the sale was posted at Welded's premises and upon two street corners in Philadelphia. There was no evidence as to the number of handbills posted. On November 23, 1970, a purported "public sale" was held by Welded on its premises at Shunk and Vandalia Streets, Philadelphia. Welded was the only bidder.

 25. There are no major manufacturers of structural steel products east of Pittsburgh which would have been potential purchasers of the Phoenix coils, except Welded. In order to obtain buyers for these coils, it would have been necessary to reach potential purchasers, most of whom are located in the Midwest, through direct solicitation or by advertising in the daily trade newspaper, "American Metal Market," or in the bi-monthly trade magazine, "Iron Age." A competent steel broker would have had a list of potential purchasers and the ability to ...


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