Willock v. Crescent Oil Co.

39 A. 77, 184 Pa. 245, 1898 Pa. LEXIS 886

Opinion

Opinion by

Mb. Justice Williams,

The defendant was a dealer in crude petroleum. The plaintiff was a refiner with a refinery known as the Waverly Oil Works, located in Pittsburg, Pa. On August 13,1892, they entered into ■an agreement in writing with each other by the terms of which the plaintiff agreed to buy from the defendant “ all the crude oil that I may need, or use at the Waverly Oil Works near Fifty-fourth street, Pittsburg, Pa. during the coining year, that is, from August 13, 1892, until August 13, 1893.”

The defendant company agreed to sell him the oil that he might need or use at 1ns refinery during the year at the current price in Oil City, and deliver it at the plaintiff’s refinery for 12|- cents per barrel pipeage. The plaintiff was permitted to order the oil in lots not exceeding 20,000 barrels at one time, but such orders were in no case to be made oftener than once in thirty days. The defendant further agreed to hold the oil, so ordered, in its pipe line for thirty days after the date of the ■order without charge for storage, but after the expiration of this time the oil was to be subject, if left in the lines, to the usual storage charges. It was also agreed that the contract might be extended for one more year upon the same terms, if Willock gave written notice to the company of his wish to extend it, before the first year had fully expired. This was a contract for the supply of the plaintiff’s refinery with crude oil in any amount that “he might need or use” for refining during one year from August 13, 1892, not exceeding 20,000 barrels per month. It was not a contract to supply the plaintiff with crude oil for any other purpose than the refining done by him at the Waverly Oil Works; nor for any other time than one year between August 13, 1892, and August 13, 1893. But during the year the defendant was bound to supply the plaintiff with the crude oil of the variety known as “ the Washington District Crude Oil” which he might “need or use” at his refinery. In the first eleven months of the year Willock ordered and the defendant furnished 127,833 barrels of crude oil. He had used, when the year was closing, but 59,472 barrels, and had on hand 68,410 barrels of crude oil waiting to be refined. While this was the state of things at the refinery the plaintiff, two weeks before the year closed, ordered 20,000 barrels more of crude oil. This order was refused on the ground that it could neither be “needed or used” during the year, as more than one half of all the oil delivered during the year was still on hand, and the year was just closing. Nine days later, or on August 8, 1893, Willock elected to continue the contract for another year, and gave notice in writing to that effect. A few days later he gave another order for 20,000 barrels of oil which was also refused upon the same grounds with the order of July 31 previous. This action is brought to recover damages for the refusal to fill the orders of July 31, 1893, and August 30,1893, for 20,000 barrels each.

The learned judge of the court below was right in holding that the original contract was for one year, and was to be so considered in determining the right of the plaintiff to have his order of July 31, 1893, honored by the defendant. He did not “ need or use ” any portion of the oil covered by that order at his refinery during the year and, for that reason, had no right to insist on its delivery to him. The contract gave him no right to order it, and imposed no obligation on the defendant to furnish it, unless it could be “needed or used” at the Waverly Oil Works before the expiration of the year. This is not pretended, and this item in the plaintiff’s claim will require no further consideration. But as we have seen, the plaintiff had the right to renew or extend the contract over one more year upon the same terms and conditions, by giving a written notice of his desire to do so. This notice he gave five days before the year closed. He still had more oil on hand than he had refined during the first year of the contract: but a few days after the notice of renewal he again ordered 20,000 barrels of crude oil from the defendant. Had he the right to do so ? He had a right to a year’s supply for his refinery, and he had a right to order what he expected to “need or use ” at such time in the year as he thought prudent, in view of the condition of the oil market and its apparent tendency. If the market was falling it might seem wise to order no faster than he actually needed the oil for immediate refining. If it was rising it would be good business management to put in his entire jmar’s stock as soon as it could be done. Which course should be taken was for the plaintiff to determine. The defendant was to supply the oil in quantities not exceeding 20,000 barrels at one time, and not oftener than once in thirtr1- days, until the plaintiff was supplied with all the oil he should need or use during the year. The defendant, by refusing to fill the order of August 30, 1893, assumed that the plaintiff would need or use no more crude oil at his refinery during the year than he had in stock at that time. To what extent the plaintiff was injured by the refusal of the defendant company, if he was injured at all, must depend there* fore on whether the event justified the assumption on which the refusal was based, that he was already supplied with a stock of crude oil that would last for tlie balance of the year. If ho should need no more oil for refining than had already been furnished him he would have no right to complain, since the obligation of the defendant would have been already discharged and his contract fulfilled; but if the stock on hand proved insufficient for the needs of his refinery during tlie year, to tlie extent of such insufficiency the order should have been filled, and to that extent, together with the added costs of securing the amount needed, the plaintiff has a good cause of action. The learned master finds the fact to be that the stock on hand on August 80, 1893, was insufficient to supply the needs of the refinery during the second year’s operation, and that it became necessary for the plaintiff to buy 8,624^¡$¡- barrels of crude oil in addition, and at a somewhat advanced price. From this fact the learned master drew a correct legal conclusion when he held that the oil company, having undertaken to furnish the year’s supply of crude oil, was bound to reimburse the plaintiff for tbe increased cost of the supply that he was compelled to buy outside of the contract. This increased cost furnishes the true measure of damages in this ease. The plaintiff had the right to have the oil at the price which it bore on August 30, 1893, the date of his order. He was compelled to pay for it what the defendant company charged him when it furnished him the additional oil needed. The difference was his actual loss. When this difference is restored he has been fully compensated for his loss by the refusal of the company to fully perform its contract. In this class of cases damages are given by way of compensation: Eckel v. Murphey, 15 Pa. 495; Forsyth v. Palmer, 14 Pa. 96. Sedgwick states the rule applicable to cases arising from the failure of the seller to perform his agreement thus, in his treatise on the Measure of Damages, page 260: “ It seems to be well settled both in England and the United States that the measure of damages is the difference between the contract price and the market value of the article when it should have been delivered; upon the ground that this is the plaintiff’s real loss, and that with this sum he can go into the market and supply himself with the same article from another vendor.” In this case the plaintiff did not go into the market and supply himself from another vendor. He had no access, on account of the manner in which crude oil is stored and transported to the general market. His refinery was connected with the defendant’s system of transportation and storage, and when the need to use additional oil came he bought it of the defendant by whom he was required to pay the then current prices for both the oil and pipage upon it. His loss is determined therefore by the difference between what he finally paid the defendant for the additional oil required by him to meet the needs of his refinery during the second year, and the price under the contract at the time the order was made and refused. True, the plaintiff might have gone into the market and bought the needed oil and charged up his loss as damages, but he did not. On the other hand he waited to see if he would need more oil than he already had. When he found that he would, he bought of the defendant so much, and at such times as his business required, and paid such price as was demanded. His loss is thus capable of exact ascertainment. The controversy over the question whether the breach of the contract was at one date or another becomes unimportant in this view of the case, so far as fixing tiie price of the oil with which the plaintiff might have supplied himself at the cost of the defendant. He did not buy at either of the dates set out. He bought when he came to need the oil, and what he paid is involved in no uncertainty. The defendant must return what he received more than the plaintiff should have been required to pay under the contract, with interest thereon. The assignments of error relating to the measure of damages are sustained.

The judgment is reversed and a venire facias de novo is awarded.