Accumulator Co. v. Dubuque St. Ry. Co.

64 F. 70, 12 C.C.A. 37, 1894 U.S. App. LEXIS 2476

• Court: Court of Appeals for the Eighth Circuit
• Decided: September 24, 1894
• Docket: No. 391
• Status: Published

Opinion

BAXBORX. Circuit Judge,

after stating the facts as above, delivered the opinion.

In answer to this action for the purchase price of machinery and supplies the defendant pleaded and recovered as a counterclaim the damages which resulted to it from the failure of the plaintiff to furnish an electric equipment: of the character described in the contract of sale. The subject-matier of the contract was the necessary machinery'and supplies to operate the Dubuque Street Railway by electricity through the use of the storage-battery system. In the operation of this system batteries charged with electricity are placed upon tlie cars, and used to propel them until the electricity is exhausted, when they are removed, recharged, and replaced upon ¡.be cars to propel them again. The use of the batteries gradually disintegrates their positive plates until it becomes necessary to renew them. The cost of each renewal was about $2.50 per cell, and the commercial value of such an electric equipment: as was described in this contract depends largely upon the durability of the plates and the amount of power the batteries will supply from a single charge. June 30. 1.890, the vendor submitted to the defendant a proposal to furnish the equipment in question, which, together with a letter of the same date, contained the terms of the contract subsequently concluded between them. In that letter the vendor wrote as follows:

“In connection with our proposal of even date herewith, which has been duly accepted by you, we hereby agree that, in the event of the electric ear equipments therein referred to being supplied to you by this company, we will guaranty for a period of four years from the date of installation thereof that the cost of renewals of batteries for the service proposed shall not exceed an average of two dollars and fifty cents ($2.50) per cell per annum f. o. b. cars at our factory, Newarlc, N. J. (the old piles being returned to us, freight and charges paid).”

It is assigned as error that the court below held that this was.a warranty of the durability of the batteries, and charged the jury in effect that if the batteries furnished required renewals so frequently that the average cost for the four years would exceed $2.50 per cell per annum, there was a breach of the contract, and the vendee might recover the difference between the value of the machinery had it met the requirements of the contract and its value in the condition in which it was actually delivered to the vendee. The contention of the plaintiff is that this letter “is not in any sense a warranty of the character of the equipment, but is an independent collateral undertaking in the nature of a contract of indemnity against loss arising to the intending purchaser from the cost or renewals exceeding the figure therein named, which indemnity, however, shall not be paid for a period exceeding four years from the date of the contract.”

There are no rules for the construction of contracts more salutary in their operation or more universal in their application than that (1) the court may put itself in the place of the contracting parties, and then, in view of all the facts and circumstances surrounding them at the time of the execution of the instrument, consider what they intended by the terms of their contract; and (2) that when the intention is manifest it will control in the interpretation of the instrument, regardless of inapt expressions and technical rules of construction. Let us apply these rules to this contract. When it was made — in 1890 — the vendor was a corporation engaged in promoting the business of propelling street cars by electricity supplied by storage batteries, and in furnishing the necessary machinery and electric equipments for that purpose. The vendee was a street-railway company engaged in operating its railroad by animal power. The vendor desired the railway company to purchase its machinery and supplies, and to substitute the storage-battery system for its animals. The use of that system was an experiment. It had not been sufficiently tested to ascertain its commercial value. The vendor doubtless had all the knowledge and experience of its character and practicability that had then been attained, and had complete confidence in its success. The railway company knew little or nothing about it, save the statements of the vendor; but it was anxious to buy the necessary machinery and supplies to substitute for its animals a power that would prove the leasts expensive in the operation of its railroad, and yet was unwilling to take upon itself the risk of any experiments. Under these circumstances the vendor proposed to sell to the railway company carefully specified machinery and supjdies to operate its railway by the vendor’s system for a certain price. About this price there seems to have been no question, but the railway company was evidently determined to be assured how much power the plant the vendor proposed to furnish would supply, and how expensive its operation would be before it closed the contract. It was evident to the vendee that the durability of the batteries and the amount of power they would supply from a single charge conditioned the expense of pperation and measured the value of the equipment. To assure the defendant that the operation of the plant would be inexpensive, and the machinery valuable, the vendor declared in its proposal that it would send a trial car and an expert to Dubuque, and would there operate this car for 150 days, and that if during this time'it ('ailed in any important particular to fulfill the terms of the proposal submitted, the defendant could then exercise its option to conclude the contract or reject the proposal. In this proposal it declared that the character of the plant it proposed to furnish was such that a street car supplied with 50 cells would run 12 miles an hour on a straight, level track, and carry 50 passengers, or 6,000 pounds; that if provided with additional cells it would draw a trailer weighing, loaded, 6,000 pounds, and that the batteries it proposed to supply to each car would, when charged, propel it on a practically level track a distance of 25 miles without being recharged. This was well. This was a proposal to warrant the quantity and efficiency of the power a single charge would supply to the batteries, but it was evidently insufficient to induce the defendant to purchase. It left in doubt and unguarded the crucial test of the value and availability of the equipment, — the durability of the batteries. If they would endure but a month', the plant was worse than worthless, if a year, it was well worth the price. To assure the defendant of the durability of these batteries, and to induce it to conclude the contract, the vendor, on the same day that it made the proposal, wrote the letter of June 30th, and there agreed that If it furnished the equipment proposed it would guaranty that the cost of the renewals of the batteries should not exceed an average of ?2.50 per cell per annum during the term of four years. It is said that this was an independent collateral undertaking. But how can that be? It was written and delivered on the same day as was the proposal. The proposal expressly provided that the contract of purchase should not be concluded until the trial ear had been sent to Dubuque, and operated for 60 days, and that it should then be at the option of the defendant to close or reject it in case ¡lie car failed in any important particular. The trial car was sent to Dubuque, and was operated for the 60 days. No complaint was made of its operation, and the contract of purchase was (hen closed according to the terms of the proposal by the silence of the defendant. The proposal and the letter together awaited for at least 60 days the acceptance or rejection of the offer to the defendant they contained, and at the end of that time together they became the terms of the contract of purchase it accepted. Neither was independent of nor collateral to the other. Each contained some of the terms of a single offer to sell and of a single contract of sale.

Nor are we able to persuade ourselves that this was a mere guaranty of indemnity against loss from the cost of the renewals that required the defendant to operate this system four years before an action could be maintained for its breach. That these parties used the word “guaranty,” and not the word “warrant” in this contract is entitled to slight, if any, consideration in view of the facts and circumstances surrounding the parties and their manifest intent in making the contract. Their officers were doubtless business men, not lawyers, and the somewhat technical distinction in the significance of the two words ought not to be permitted to defeat the plain intention of the parties. If it had been their intention to make a contract that the vendor would renew these batteries as required for four years ' at an average expense of $2.50 per cell per annum, it would have been easy and natural that they should have so written the agreement. They did not do so. Evidently that was not their intention; that was not the contract in the minds of the parties. In the sixth paragraph of the proposal the vendor covenanted that when the parts of the batteries were renewed as required they would remain in efficient condition. Evidently this was not a sufficient warranty of efficiency to induce the railway company to purchase. The parties knew the cost of the renewals, but the question was how often would renewals be required, — how durable would the batteries be? And that was the crucial question that determined the practicability and value of the plant. The guaranty that the. cost of the renewals would not exceed $2.50 per cell per annum on an average during four years was an answer to this question. It was but the practical method the vendor adopted to express its manifest intention to warrant the batteries to be furnished to be so durable that they would require renewal on an average of about once a year. It certainly was not the intention of the defendant to pay nearly $50,000 for the privilege of. making an experiment for four years under the guaranty of another corporation. It was not experiments or guaranties of corporations, but an efficient and practical electric equipment that would be comparatively inexpensive in operation, that this defendant evidently insisted upon purchasing, and that every line of the contract and all the surrounding circumstances show the vendor was anxious to sell and willing to warrant, and that it did warrant, that the defendant should receive. It is incredible that either party intended that this vendee should pay more than $48,000 for the privilege of being compelled to operate this experimental equipment for four years, regardless of expense, before it could avail itself of this provision of the contract relative to the durability of the batteries, relative to the one characteristic of this plant which more than any other conditioned the value or worthlessness of the equipment. In our opinion, the court below committed no error in its ruling here, but construed this provision of the contract in accordance with the manifest intention of the parties when it held it to be a warranty of the character and durability of the batteries.

It is also assigned as error that the court below held that the provisions of the contract that each car should run 12 miles an hour over a suitable track when carrying 50 passengers or 6,000 pounds; that with additional cells it should draw a trailer weighing, loaded, not exceeding 6,000 pounds; that a set of batteries, when fully charged, should be capable of proponin'»' a loaded car oyer a distance of 25 miles without being recharged, and that the batteries, when properly treated and renewed, should remain in an efficient condition, — which are found in the original proposal among' the “conditions” following the clause that “the plant wall be considered satisfactory if it fulfills the following conditions,” — were warranties that the equipment would comply with these conditions, for the breach of which the defendant could recover its damages. It is contended that these provisions simply specified the conditions under which the vendor might compel the acceptance of the equipment, and that an acceptance and use of it by the vendee waived these conditions, and left the purchaser remediless for the breach of them. An interpretation so narrow and technical would prevent the accomplishment of the plain intention of these parties. The only description or affirmation of the quality and efficiency of the equipment sold is found in these conditions and in the letter we have already considered. The same considerations which led to the inference that the agreement in that letter was a warranty of the durability of the batteries compel the conclusion here that these provisions in the proposal were affirmations of the character and efficiency of the plant offered, and when the proposal was accepted' they became warranties of its quality. The statement that the plant would be considered satisfactory if it fulfilled the specified conditions was but a convenient method of stating that the plant proposed to be furnished would possess the qualities and efficiency there described. These affirmations were clearly intended to induce, and undoubtedly they did induce, the purchaser to buy the plant; and affirmations of the essential qualities of goods sold made by the vendor and relied upon by the vendee in the purchase constitute warranties. English v. Commission Co., 6 C. C. A. 416, 57 Fed. 451; Hastings v. Lovering, 2 Pick. 214; Henshaw v. Robins, 9 Metc. (Mass.) 83; Latham v. Shipley (Iowa) 53 N. W. 342; Richards v. Grandy, 49 Vt. 22; Beals v. Olmstead, 24 Vt. 114; Bryant v. Crosby, 40 Me. 9; Thorne v. McVeagh, 75 Ill. 81; Polhemus v. Heiman, 45 Cal. 573; Callanan v. Brown, 31 Iowa, 333.

Complaint is made that the circuit court refused to permit the plaintiff to prove that the trial car failed in quality and efficiency in the same particulars in which those failed which were operated under the equipments subsequently furnished, and withdrew from the jury the consideration of the acts and omissions of the parties relative to that car. The trial car was furnished and operated for GO days, under the supervision of the vendor, to demonstrate to the defendant the practicability of the system, and to induce it to make the contract of purchase. It was not operated to inform the vendor regarding the equipment it proposed to sell. The vendor was already fully informed. In its proposal it declares:

“Our experience with this trial car renders us certain that the guaranty will he performed to your satisfaction, and if at the end of the sixty days * * * WQ <30 110t receive proof to the contrary, then the balance of this contract, covering purchase of six (6) car equipments, * * * shall go into full effect.”

The warranties in tire contract of purchase, then, did not go into full effect until the trial car had performed its function. Then the silence of the defendant accepted the proposal and closed the contract. It was certainly no defense to the breaches -of the warranties in that contract that the trial car did not comply with their terms before the contract that contains them took effect, and the ruling of the court below upon this subject was right.

It is assigned as error that the circuit court allowed the defendant to prove that a car equipped with 80 cells would not draw a loaded trailer weighing not more than 6,000 pounds, on the ground that the vendor covenanted that it would draw such a trailer only when provided with additional cells. It is a conclusive answer to this assignment that when the contract was made it warranted that a ear supplied with 50 cells would, when provided with additional cells, draw a loaded trailer, and each of the cars that the evidence tended to show was incapable of drawing a trailer had been provided with 30 additional cells, so that it carried 80.

Another supposed error assigned is that the court charged the jury that if the plant furnished failed to such a degree that the defendant was justified in abandoning the use of it, and, in order to set the storage-battery system at work, the defendant was required in the first instance to furnish a transfer table and a charging table, and to prepare another room for the purpose of having the cells washed, and if, when it abandoned the system, these articles ceased to be of any further use or value to it, they might allow to the defendant as damages the difference between the cost of furnishing these articles and their value after the abandonment of the storage-battery system, in addition to the difference between the value of the electric equipment actually furnished and that agreed to be furnished, which the judge had authorized them to allow as general damages for the breaches of the warranties. The proof was plenary that the defendant had necessarily incurred an expense of several thousand dollars in constructing these shifting devices in order to install the plant the vendor furnished, that the plant failed so utterly that the defendant was compelled to abandon it, and that the shifting devices then became worthless and useless. The vendor was aware when this contract was made that it would be necessary for the defendant to construct these devices. Indeed, it expressly provided in its proposal that the defendant should erect them from the vendor’s own drawings, and should furnish all the labor necessary for the installation of the plant. If the vendor had furnished an electric equipment of the character it contracted to furnish, the shifting devices would have been useful and valuable, and the cost of constructing them would not have been lost to thé defendant. The railway company’s loss of this cost was the direct, natural, and inevitable result of the vendor’s disastrous failure to comply with its contract, and it was a loss in addition to the difference between the equipment furnished and that which the vendor agreed to furnish, hfo sound reason occurs to us why the defendant should not be permitted to recover it. Compensation for pecuniary loss that is the direct, natural, and immediate consequence of a breach, of warranty is both the just and legal measure of a purchaser’s damages. The rule is well settled that the damages recoverable of a manufacturer for the breach of a warranty of machinery which he contracts to furnish and place in operation for a known purpose are not confined to the difference between the machinery as warranted and as it proves to be, but include such consequential damages as are the direct, immediate, and probable result of the breach. The charge of the court was in accordance with this rule. It was just and clear. It commends itself to the judgment, and is amply sustained by the authorities. 3 Pars. Cont. (7th Ed.) p. 212; 2 Suth. Dam. § 672; Mining Syndicate v. Fraser, 130 U. S. 611, 622, 9 Sup. Ct. 665; Poland v. Miller, 95 Ind. 387; Sinker v. Kidder, 123 Ind. 528, 530, 24 N. E. 341; Swain v. Schieffelin, 134 N. Y. 471, 31 N. E. 1025; Passenger v. Thorburn, 34 N. Y. 634; Ferris v. Comstock, Ferre & Co., 33 Conn. 513.

One hundred and eighteen supposed errors are assigned in the record of this case. We have carefully considered them all, and are of the opinion that they disclose no substantial emu- in the trial below. We have discussed the more important questions they present, and indicated the reasons for the conclusions we have reached upon them. Most of these supposed errors relate to the questions we have considered, and no good purpose would be served by extended notice of the remainder. The judgment below must be affirmed, with costs, and it is so ordered.