Feeney & Bremer Co. v. Stone

171 P. 569, 89 Or. 360, 1918 Ore. LEXIS 132

• Court: Oregon Supreme Court
• Decided: March 19, 1918
• Status: Published

Opinions

HARRIS, J. —

Briefly stated, the defendant-contends that he is entitled to have the price of the machine reduced to $100 and that he is also entitled to special damages: (1) For the expense of the donkey-engine; (2) for profits which he lost by reason of his inability to furnish gravel in the month of August to the Arenz Construction Company and to Tillamook County. There is no claim of any loss of profits except for the month of August.

The plaintiff contends that the judgment should be reversed because: (1) The answer does not contain an affirmative allegation that the defendant relied upon the warranty pleaded by him; (2) the warranty is limited to and extends no further than the stipulation that the “plaintiff would charge the defendant nothing” if the hoist did not work; (3) partial failure of consideration was the only defense available to the defendant; and (4) the damages mentioned in the counterclaim were not within the contemplation of the parties and are too remote and speculative and therefore not recoverable.

1, 2. In order to maintain an action for a breach of warranty it must be shown that the warranty was relied upon; and although the warranty need not have been the sole inducement it must have been an operative cause: 35 Cyc. 376; 2 Mechem on Sales, §§1234, 1235; and, therefore, in an action fór a breach of warranty the purchaser of personal property must allege that he relied upon the warranty and was thereby deceived: Abilene Nat. Bank v. Nodine, 26 Or. 53, 55 (37 Pac. 47); 35 Cyc. 450. The defendant insists that this rule of pleading is satisfied by the following allegation appearing in the answer:

“In consideration of the representation and guarantee of the plaintiff as aforesaid, the defendant agreed to purchase from plaintiff the drum hoist referred to, at the agreed price of $450, but in consideration of the said representations, agreement and warranty of the plaintiff in regard thereto as aforesaid * # .”

It is intimated in Lincoln v. Ragsdale, 7 Ind. App. 354, 356 (31 N. E. 581), that the quoted allegation would be sufficient. While the averment lacks directness and positiveness nevertheless it might possibly be adequate after a verdict and judgment, since, so far as the record discloses, the objection was not made in the lower court but is made here for the first time. The judgment should be reversed for other reasons, however, and all doubts concerning the sufficiency of the pleading may be removed by the filing of an amended answer.

3-5. The” answer avers that the plaintiff “expressly guaranteed” that if the hoist “would not stand up to the work and accomplish the purposes of the defendant” and that if the hoist did not work “plaintiff would make the same do so, and if the machine would not work the plaintiff would charge the defendant nothing therefor.” The plaintiff argues that the parties have by the agreement, alleged in the answer, limited the defendant’s remedy for a breach of the warranty to the right to decline to pay for the machine, and that, therefore, Stone is not entitled to recover damages for a breach of the warranty. If by the stipulation “the plaintiff would charge the defendant nothing therefor” is meant that the defendant could refuse to accept the hoist, then the stipulation added nothing to the rights of the defendant since the law gave him the right to rescind the contract and return the machine within a reasonable time after delivery, for it must be remembered that the parties contracted for a machine which was not yet in existence when they made the agreement: Steiger v. Fronhofer, 43 Or. 178, 183 (72 Pac. 693); Lenz v. Blake, 44 Or. 569 (76 Pac. 356). If, on the other hand, the parties intended to agree that the defendant could keep the hoist without paying for it if it did not work, it constituted an additional rather than an exclusive remedy.' Generally speaking, the parties to a contract for the sale of personal property have a right to agree that a defined remedy shall be exclusive; but in the absence of language evidencing an intention to make a given remedy, like the one in .question here, exclusive of all others, it is treated as cumulative and permissive rather than exclusive and mandatory; and hence the buyer is usually permitted to avail himself of the special remedy; or, if he chooses, he may accept the property and recover damages for a breach of the warranty. There is' nothing to indicate that the parties intended that the right not to pay should be the exclusive remedy. It is not necessary to determine whether Stone could have returned the property and also recover damages for a breach of the warranty, for the reason that he elected to keep the hoist, and as ruled in Douglass Axe Mfg. Co. v. Gardner, 10 Cush. (64 Mass.) 88:

“The buyer has, if not a double remedy, at least a choice of remedies, and may either return the property within a reasonable time, or keep it and maintain an action for breach of the warranty.”

The warranty was not rescinded, violated or destroyed by the stipulation not to charge, especially when the defendant waives, as he has done, any right arising out of the promise not to charge and sues on the warranty: Sanford v. Brown Bros. Co., 208 N. Y. 90 (101 N. E. 797, 50 L. R. A. (N. S.) 778); Nave v. Powell, 52 Ind. App. 496 (96 N. E. 395); McGill v. Hall (Tex. Civ.), 26 S. W. 132; Fitzpatrick v. D. M. Osborne & Co., 50 Minn. 261 (52 N. W. 861); Aultman M. & Co. v. Theirer, 34 Iowa, 272; Gaar, Scott & Co. v. Patterson, 65 Minn. 449 (68 N. W. 69); Obenchain v. Roff, 29 Okl. 211 (116 Pac. 782); Battey v. Lunt M. & Co., 30 R. I. 1 (73 Atl. 353, 136 Am. St. Rep. 926); 2 Mechem on Sales, § 1801; 35 Cyc. 438.

The remaining assignments of error relate to the measure of damages. The rule for measuring damages for the breach of a contract is found in the celebrated English case of Hadley v. Baxendale, 9 Exch. 341, and in the subsequent but equally noted American case of Griffin v. Colver, 16 N. Y. 489 (69 Am. Dec. 718). In the former case the court states the rule in the following language:

“Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be'considered either arising naturally, i. e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.”

Continuing further, the reasons are given thus:

“Now, if the special circumstances under which the contract was actually made were communicated by the plaintiff to the defendant, and thus actually known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily flow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances from such a breach of contract. For, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case; and of this advantage it would be very unjust to deprive them.”

Although employing different language, the American case announces the same rule, for we find the doctrine stated thus in Griffin v. Colver, 16 N. Y. 489, 494 (69 Am. Dec. 718):

“The broad general rule in such cases is, that the party injured is entitled to recover all his damages, including gains prevented as well as losses sustained; and this rule is subject to but two conditions: The damages must be such as may fairly be supposed to have entered into the contemplation of the parties when they made the contract; that is, must be such as might naturally be expected to follow its violation; and they must be certain, both in their nature and in respect to the cause from which they proceed.”

In 2 Mechem on Sales, Section 1757, the author restates the rule established by Hadley v. Baxendale and Griffin v. Colver, in this manner:

“The party who has broten his contract is liable to make compensation to the other for all such losses resulting from that breach as are either (1) The ordinary, the usual, the commonly to be expected consequences of such a breach of such a contract; or (2) the peculiar or unusual consequences of the breach of the particular contract in question, if, under the circumstances, it can fairly be said that both parties had those consequences in their contemplation, at the time the contract was made, as a probable result of its breach; and if those unusual consequences are neither uncertain in their nature nor remote as to their cause.”

6-8. "When the seller of personal property has breached his express warranty to furnish an article of a specified kind, quality or condition, he is liable, as in the case of any other kind of a contract, for both general and special damages: 2 Mechem on Sales, §§ 1817, 1821; 35 Cyc. 451, 465; 30 Am. & Eng. Ency, Law (2 ed.), 209, 214. The acceptance of the property does not of itself preclude the buyer from recovering damages : Cassidy v. Le Fevre, 45 N. Y. 562. As in other contracts, the buyer owes an active duty to exercise ordinary care to keep the damages as low as possible; 80 Am. & Eng. Ency. Law (2 ed.), 223; Wright v. Computing Scale Co., 47 Wash. 107 (91 Pac. 571).

9, If the defendant was obliged to rent the donkey-engine in order to prevent loss to himself then, to the extent that snch expense was extra in character and re'asonable in amount, the defendant is entitled to reimbursement: Drake v. Sears, 8 Or. 210, 213; Hoskins v. Scott, 52 Or. 271, 279 (96 Pac. 1112); People’s Savings Bank v. Waterloo & Cedar Falls R. T. Co., 118 Iowa, 740 (92 N. W. 691); Optenberg v. Skelton, 109 Wis. 241 (85 N. W. 356); Carroll-Porter Boiler & Tank Co. v. Columbus Mach. Co., 55 Fed. 451 (5 C. C. A. 190).

10,11. The theory of the law is to award compensation for gains prevented and for losses sustained. The party who is damaged by the breach of a contract is not prevented from recovering anticipated profits merely because they are such. If it is reasonably certain that the breach of a contract has deprived the complaining party of a profit which was contemplated or can reasonably be presumed to have been contemplated by the parties at the time the contract was made then the party committing the breach is liable for the loss of the profit: Drake v. Sears, 8 Or. 209, 214; Hoskins v. Scott, 52 Or. 271, 276 (96 Pac. 1112); Fields v. Western Union Tel. Co., 68 Or. 209 (137 Pac. 200); McGinnis v. Studebaker Corp., 75 Or. 519, 522 (146 Pac. 825, 147 Pac. 525, Ann. Cas. 1917B, 1190, L. R. A. 1916B, 868). The rule is illustrated in the following cases where the complaining party was not permitted to recover profits claimed to have been lost on account of a breach of warranty: Weybrick & Co. v. Harris, 31 Kan. 92 (1 Pac. 271); Puget Sound Iron & Steel Works v. Clemmons, 32 Wash. 36 (72 Pac. 465); Wright v. Computing Scale Co., 47 Wash. 107 (91 Pac. ); Blymer Ice Machine Co. v. McDonald, 48 La. Ann. 439, 449 (19 South. 459); Moulthrop v. Hyett, 105 Ala. 493 (17 South. 32, 53 Am. St. Rep. 139). The following are examples of cases where the buyer was permitted to recover profits which he lost by reason of the breach of the seller’s warranty: The Crompton & Knowles Loom Works v. Hoffman, 5 Ont. L. Rep. 554; Murray Co. v. Putman, 61 Tex. Civ. App. 517 (130 S. W. 631); Alamo Mills Co. v. Hercules Iron Works, 1 Tex. Civ. App. 683, 688 (22 S. W. 1097). Some of the language employed in Alamo Mills Co. v. Hercules Iron Works, supra, is so apropos that we here quote from the opinion of the court:

“The right, or not, to recover profits for a breach of a contract, does not depend upon an arbitrary rule to be adopted by a court, but upon the principles that should control the right. The law does not condemn profits, as such, as a measure of damages. The question is, would the loss of profits be the direct result of the breach, and would such loss ‘reasonably be supposed to have entered into the contemplation of the parties, at the time of making the contract?’ Conjectural profits would not be allowed, not for the reason that profits are proscribed, but because they are uncertain. If they become sufficiently certain, are the direct result of the breach, and the parties were in possession of' such facts as would charge them, as reasonably intelligent men, with the probable consequences of the breach, then profits fall within the rule, and may be recoverable as damages.”

In order to recover special damages for a breach of warranty the buyer must allege and prove that the special damages claimed by him are such as were contemplated or may reasonably be said to have been contemplated by the parties at the time they made the contract: 35 Cyc. 451. It -will be necessary now to direct attention to the evidence.

The bill of exceptions contains a narrative of the testimony given by the defendant, and instead of saying that the defendant testified to this or to that we shall, for the purposes of the appeal, give an affirmative statement of the facts on the assumption that the facts are exactly as testified to by the defendant. However, it must be understood that we do not attempt to decide any question of fact. The plaintiff learned that Stone wished to purchase a hoist to be used in raising gravel into bunkers, and inquired of Stone “what the chance was for building that double drum-winch. ’ ’ The plaintiff ‘ ‘ was warned how this winch had to be built” and was told that “on account of the high speed of the machine necessary to do the work that he [the plaintiff] had to put bronze brass bushings in the bearings in order to do the work.” The parties “discussed that it [the machine] was to be used with overhead lines and bucket; yard and a half bucket was to be used.” The plaintiff “agreed to build a hoist there that would do — that would work perfectly —for $450”; and “if it did not do the work he [the plaintiff] would make it do the work or it would not cost us [the defendant] anything.”

The plaintiff constructed a machine; it was delivered to Stone in July but he “did not start to use it until August 1st.” The defendant “commenced raising gravel” but he “never could raise over half a bucket.” “The bolts were not big enough”; the frictions were made of green spruce when they should have been “good oak or hickory”; the thrust-bearings were small “where they should be large”; Stone asked the plaintiff “time and time again to come down and overhaul it and put in thrust-bearings”; but the plaintiff “ never did come down. ’ ’ Finally on August 24th ‘ ‘ the pullback drum froze right on the shaft” because of defects- in the machine. Stone immediately notified the plaintiff. Feeney & Bremer Company had the machine “down here in the shop” bnt delayed making the necessary repairs. “The Arenz Construction Company was on the connty work and needed rock and gravel bad”; the county “needed gravel bad”; Stone told the plaintiff that he was going to hire a donkey-engine if the plaintiff did not repair the damaged hoist; and finally on or about August 29th the plaintiff commenced to work on the machine. The plaintiff did not redeliver the hoist until June or July, 1916. Stone rented and installed a donkey-engine. While the record does not disclose the exact date it may be inferred that the donkey-engine was ready for operation possibly on August 30th, and Stone continued to use it for about six weeks. “If the hoist had worked according to contract” Stone would “not have been out a nickel on any” of the expense incurred for the donkey-engine.

“Along about the 25th of August” the road supervisor came to Stone and stated that he was going to build a certain road and that he would take gravel from the defendant at thirty-five cents per yard. The Arenz Construction Company was building a pavement “and the county was furnishing the crushed rock” and the defendant “was to put in the gravel.” The defendant “could put in half gravel and possibly a little more if the county could not furnish crushed rock.” The defendant “was getting $1.65 for the gravel from the Arenz Construction Company” and was realizing “about 70 cents a yard profit” when using the electric hoist while the profit was only 60 or 65 cents a yard after the installation of the donkey-engine. The county road supervisor “came there on August 28th and got 8 yards ’ ’; the donkey-engine was not yet ready for use although it was being installed and hence the defendant could not furnish any more gravel and lie told the road supervisor “to go in on the bar and get it, and they went in on the bar and loaded 337 yards, which I could have furnished them if the donkey had been working.”

If the defendant is entitled to recover for a loss of profits his right is limited to the loss of profits which he could and would have made on the deliveries to the county and the Arenz Construction Company. There is nothing in the testimony of the defendant to show that he lost any profits, so far as the Arenz Construction Company is concerned, between the 1st and 24th of August and he could not have lost any profits during that time so far ás the county is concerned because the road supervisor did not speak to him about gravel until August 25th, and the county did not call for gravel until August 28th. While the evidence does not disclose the exact date when the donkey-engine was ready for installation, it is fair to presume that it could have been operated possibly as early as August 30th and probably not later than September 1st. According to the testimony of the defendant himself the donkey-engine “did the work excellently all the time we had it,” and, therefore, the fair inference is that the defendant was able to work the bucket to full capacity. It does not affirmatively appear from the testimony of the defendant whether any of the 337 yards of gravel taken by the county was taken after the donkey-engine was ready for operation; but if the county took any of that gravel after the donkey' engine was ready for operation the defendant is not entitled to claim a loss of profits on the gravel so taken. The same rule applies to the Arenz Construction Company. The defendant does not say affirmatively that he did not deliver any gravel after August 24th to the Arenz Construction Company. The defendant cannot claim damages for alleged lost profits on gravel delivered to the Arenz Construction Company after the donkey-engine was installed.

The answer speaks of a contract for electric power; and the defendant testified about the same subject. However, the defendant did not say that he did in fact make a contract for electric power binding himself to pay for electricity whether he used it or not. He cannot charge for electricity unless he became liable for it.

12. If the defendant lost profits on account of the breach of warranty then it may be conceded that such a loss was the proximate consequence of the breach of warranty; and yet it is not enough for the complaining-party merely to prove that the loss was the proximate consequence of the breach, for he must also allege and prove that the loss was within the contemplation of the parties or that it can reasonably be said to have been within the contemplation of the parties at the time they made the contract for the hoist. It is true that the evidence shows that the plaintiff agreed to build an electric hoist that would do the work of running a yard and a half bucket which was to be operated with overhead lines; but the evidence does not sufficiently show that the plaintiff knew that the buyer intended to use it in supplying gravel to the public. If the seller did not know that the buyer intended to use the hoist for the purposes of selling gravel, it could not be said that the parties contemplated the loss which the buyer claims he sustained: Puget Sound Iron & Steel Works v. Clemmons, 32 Wash. 36 (72 Pac. 465). If the plaintiff knew that the defendant intended to use the hoist for the purpose of delivering gravel to the public then the parties contemplated that a breach of warranty would result in a loss to the defendant.

If the defendant lost profits on account of being unable to deliver gravel to the county and to the Arenz Construction Company the loss would be the proximate consequence of the breach and since the loss can reasonably be said to have been within the contemplation of the parties at the time they made the contract and the profits are not conjectural but are capable of being ascertained, the defendant is entitled to compensation: Fields v. Western Union Tel. Co., 68 Or. 209 (137 Pac. 200). A careful examination of the record presented here leads us to the conclusion that justice requires a reversal of the judgment; and it is therefore ordered that the cause be remanded for a new trial. Reversed and Remanded.

McBride, C. J., Burnett and Benson, JJ., concur.