Wentworth Irwin, Inc. v. Sears , 153 Or. 201 ( 1936 )

On July 9, 1930, defendant purchase from plaintiff a GMC truck for the sum of $3,237.40, upon which a credit of $1,073.88 was given, and the balance was incorporated into a conditional sales contract, payable at the rate of $180.29 per month. This truck is designated as truck No. 2.

Plaintiff commenced this action to recover a balance alleged to be owing on the purchase price of the GMC truck. Defendant, by a counter-claim, sought to recover damages sustained through the loss of a contract for hauling highway surfacing material in the performance of which defendant was engaged and under which he was using his truck, when on October 6, 1930, it was seized by the sheriff of Tillamook county, Oregon, in proceedings for foreclosure of a lien, which lien was on the truck and known to the plaintiff at the time it sold the truck to defendant. The truck was released on October 10, 1930. The cause was tried to the court and a jury and a verdict was rendered in favor of defendant in the sum of $1,000. From a resulting judgment, plaintiff appeals.

The truck was sold to defendant on contract as being free of encumbrances. Plaintiff, at the time of the sale, when defendant secured and undertook performance of his contract for hauling the highway surfacing materials and at the time of the seizure of the truck and dispossession of the defendant, knew of the existence of the lien upon the truck. Plaintiff knew that defendant purchased the truck for the purpose of hauling highway surfacing material. The contract of purchase called for monthly payments. Defendant used the truck upon various contracts and was dependent upon such contracts to produce funds with which to pay for the truck. Plaintiff knew this and followed defendant's work quite closely.

Defendant, shortly prior to September 5, 1930, secured a contract from Milne-Dussault Construction Company to furnish two trucks, one of which was truck No. 2, and the other was a truck previously purchased from plaintiff for hauling highway surfacing materials from the crusher to points along the Oregon Coast highway between Neskowin and Otis. Plaintiff knew that defendant had secured the Milne-Dussault Company contract and that defendant was required to furnish two trucks under his contract and that truck No. 2 was one of the trucks that defendant proposed to use, and in fact was using in the performance of said contract. Prior to the seizure of the truck defendant had worked on his contract for about one month. At the time defendant was dispossessed of truck No. 2 he was not in default under his contract to purchase. By the seizure of the truck defendant was dispossessed of it and was unable to furnish the two necessary trucks required under his contract. The contract was terminated by Milne-Dussault Company and defendant lost his job. Later plaintiff repossessed the truck and sold it.

The testimony indicated that the sheriff instructed the state police officer to hold Sears' truck and the police officer understood that both of the trucks were to be held, and truck No. 1, on account of the confusion, was kept off the work for a day or two, but was released and worked about two days before truck No. 2 was released. The testimony tended to show that on account of the seizure of truck No. 2 defendant was unable to proceed with his contract and lost his job.

Plaintiff warranted to defendant that defendant, as buyer, would enjoy quiet use and possession of the truck as against any lawful claims existing at the time of the sale thereof and that the truck was free from any charge or encumbrance in favor of any third person. § 64-313, subds. 2 and 3, Oregon Code 1930;Latture Co. v. Gruendler Co., 133 Or. 421 (289 P. 1067). The provisions of section 64-313, which raised an implied warranty of title, read as follows:

"In a contract to sell or a sale, unless a contrary intention appears, there is: * * * (2) An implied warranty that the buyer shall have and enjoy quiet possession of the goods as against any lawful claims existing at the time of the sale. (3) An implied warranty that the goods shall be free at the time of the sale from any charge or encumbrance in favor of any third person, not declared or known to the buyer before or at the time when the contract or sale is made. * * *"

These warranties, as provided by the statute, became a part of the contract between the parties. Both were breached and violated by plaintiff, and upon such a breach of warranty defendant is entitled to recover the damages he sustained. § 64-707, subds. 1-b and 6, Oregon Code 1930; Hockersmith v. Hanley, 29 Or. 27 (44 P. 497); Feeney Bremer Co. v. Stone, 89 Or. 360 (171 P. 569, 174 P. 152); Gary Coast Agency, Inc. v. Lawrey, 101 Or. 623 (201 P. 214); American Oil P. T. Co. v. Foust, 128 Or. 263 (274 P. 322).

It was incumbent upon defendant to show that the loss was within the contemplation of the plaintiff or that it could be reasonably presumed to have been within the contemplation of plaintiff at the time of the sale of the truck to defendant.Feeney Bremer Co. v. Stone, supra. We think the defendant fairly complied with this rule. In American Oil P. T. Co. v. Foust, supra, the syllabus reads thus:

"Defaulting seller must compensate his buyer with such damages for breach of warranty as may fairly and reasonably be caused, either as arising naturally from the breach or such as may reasonably be supposed to have been in contemplation of the parties when they made the sale as the probable result of its breach."

In Feeney Bremer Co. v. Stone, supra, at page 370, a case in which the warranty of a hoist was involved, we find the following language of Mr. Justice HARRIS:

"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."

In the opinion on rehearing, at page 381, Mr. Justice BURNETT, in discussing the question of the loss occasioned by the hoist not doing the work, said:

"It is not like a contract for services which the complaining party was prevented from performing. Without having parted with the commodity, he is in a situation, so far as damages are concerned, analogous to that of a seller whose buyer refuses to take the goods for which he contracted." See Keystone DrillingCo. v. Stahl, 17 Pa. Co., 498; 55 C.J. 982, Note 95 (a).

If plaintiff knew, as the testimony tended to show that he did, that defendant intended to use the truck for the purpose of hauling highway surfacing material, then the parties contemplated that a breach of warranty would result in a loss to the defendant. If defendant lost the benefit of his contract and lost profits on account of being unable to proceed therewith and deliver material on the highway, the loss would be the proximate consequence of the breach, as the loss can be reasonably 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. Therefore the defendant is entitled to compensation: Feeney Bremer Co.v. Stone, supra.

The testimony of Sears shows that he had an opportunity to obtain a contract for work on the Bend-Burns highway with two trucks. He had one truck and went to see plaintiff to ascertain if "they" had any one that would go with him on the job. Apparently there was no one to do so. "They" suggested that plaintiff buy another truck "and take it up there with me". Sears had purchased the first truck from plaintiff. He states:

"A. * * * Well, I mentioned the fact that I didn't like to do that because that would jeopardize the other truck, especially buying on contract, but they assured me that there wouldn't be anything go wrong with the other truck if I did buy it. * * *

"A. I was there the second day before I finally agreed to buy the other truck. * * *"

This testimony tends to show that defendant thoroughly understood, at the time of the sale of truck No. 2, that Sears was intending to use the two trucks for hauling material on the highway at a considerable distance from the market for trucks and at a place where he could not borrow a truck to replace one for a few days, and that it was in the contemplation of the parties that Sears would use two trucks hauling surfacing material on the highway on any job he could get. Indeed plaintiff states in its brief:

"What did appellant know at the time of this sale? It knew that respondent was going to use this truck for hauling on a Bend-Burns highway job and it could be reasonably presumed to know that respondent would use the truck on any other hauling job he could get. * * *"

The testimony also indicates that plaintiff knew defendant was going to use the two trucks, one the same as the other. Sears testified that after he worked on the Bend-Burns highway, and on another contract, "Then I secured this verbal contract from Mr. Milne to work that winter and as long as he could use me". Mr. Milne, of Milne-Dussault Construction Company, testified:

"Q. Tell the jury how long his work was to last when you hired him?

"A. As far as I recall when we talked over going to work we had approximately two months to finish our job, the surfacing end of it. * * *

"Q. Did you have other contracts at that time?

"A. Yes, I did * * *

"Q. Were Sears' trucks such trucks as were satisfactory for use on such jobs?

"A. Oh, yes, they were practically the same.

* * * * * "Q. Mr. Milne, at the time you employed or hired or gave Mr. Sears this contract for hauling what was said as to how long he might expect to work for you?

"A. I can't recall just how long I told him; it is a long time back and I can't remember, but we had two months work down there on the coast, or approximately that on the job, and I think I told him we could use him somewhere around that time down there."

We quote further from Feeney-Bremer Co. v. Stone, supra:

"His mere expectation that the county and the other party would apply to him for gravel manifestly would not be a basis for damages. He must go further and show that they actually contracted to buy from him a specified quantity of that material at a stated price, or that in good faith they offered to makesuch an agreement and that he was compelled to decline the offer because the hoist in question would not do the work." (Italics ours.)

In the present case Sears had a contract for hauling gravel and was engaged in so doing when the truck was seized.

Again, we read, on page 380 of the Feeney-Bremer case:

"It is not enough that he had prospects of contracting with the parties named. He must have had hold enough upon them to give rise to some degree of certainty within the meaning of the cases cited."

As to the intention to seize only one truck, while the other was seized and taken off the work for about two days, it would be much the same as though a man had a contract for plowing with a team of two horses and one of them should be wrongfully attached and he was hindered from carrying on his work and could not do the plowing with one horse. We think he should obtain compensation for the two for such time as he was prevented from continuing his plowing.

Plaintiff argues that the defendant was under a duty to find other work for the trucks, if possible, in order to mitigate any damage he might claim. The Milne-Dussault Company had other highway work, but the testimony distinctly shows that when Sears asked them if the matter could not be fixed up some way, so he could go on with the work, they plainly told him that they did not want him any longer on account of the truck being seized. They evidently expected it to be a monthly matter. Sears stated that he could not obtain another job until the next summer. The jury had no reason to find that defendant could have obtained other work. It was a crucial time.

Plaintiff contends that the defendant's anticipated profits were too problematical and conjectural. The rule, that damages which are uncertain or conjectural can not be recovered, does not apply to an uncertainty as to the amount of the benefit or gain to be derived from performance, but to an uncertainty or contingency as to whether any such gain or benefit would be derived at all. Bredemeier v. Pacific Supply Co., 64 Or. 576 (131 P. 312); Blagen v. Thompson, 23 Or. 239 (31 P. 647, 18 L.R.A. 315); Smith v. Pallay, 130 Or. 282 (279 P. 279);Shannon v. Shaffer Oil Ref. Co., 51 F.2d 878 (78 A.L.R. 851), and extended notes to same, 858, et seq.

Plaintiff knew that there was a lien on the truck sold to defendant and expected that the truck would be seized, yet took no step to protect the defendant. Plaintiff must have realized at the time that if the truck was seized the defendant would be damaged in the loss of his work on the highway and could not expect that the work on the highway would be stopped or retarded by the loss of the use of the truck without the defendant being damaged. That was certain. The only uncertainty in regard to the matter is as to the amount of damages, and the amount was shown as plainly as could be in any damage case. Damages are usually an estimate.

There is practically no question in regard to the law. The divergence of opinion is in relation to the application thereof, and to hold that defendant was not entitled to damages for loss of profits in the present case would be tantamount to holding that one can not ever recover for loss of profits, which is not the law.

The New York court, in Wakeman v. Wheeler W. Mfg. Co.,101 N.Y. 205 (54 Am.Rep. 676, 4 N.E. 264, 78 A.L.R. 860), which frequently has been referred to as an important authority in the cases on the present subject, said in part:

"But when it is certain that damages have been caused by a breach of contract, and the only uncertainty is as to their amount, there can rarely be good reason for refusing, on account of such uncertainty, any damages whatever for the breach. A person violating his contract should not be permitted entirely to escape liability because the amount of the damages which he has caused is uncertain."

We find in an annotation on the subject in 78 A.L.R. 863:

"Absolute certainty as to damages sustained is, of course, in many cases impossible; all that the law requires is that such damages be allowed as, in the judgment of fair men, directly and naturally resulted from the injury for which suit is brought. Hetzel v. Baltimore O.R. Co. (1898) 169 U.S. 26, 42 L.Ed. 648,18 S.Ct. 255."

In American Oil P. T. Co. v. Foust, supra, Mr. Justice ROSSMAN, at page 272, says:

"But it is to be observed that, in our case, there was substantial evidence to the effect that the plaintiff knew that the defendant expected to use this device in the operation of a business for profit. In such instances, where the loss of profits in the event of a breach, was within the contemplation of the parties, a recovery limited to the rental value of the device may not compensate fairly for the loss sustained during the period while an efficient machine is being substituted for the defective one; the loss profits are sometimes recoverable."

Evidence was introduced by defendant, and practically undenied by plaintiff, to show the profits he had derived from his contract during the period of practically one month when he had performed the same and up to the time when he lost it. Such damages may be proven by demonstration of past transactions under the contract involved. Williams v. Island City M. M. Co.,25 Or. 573 (37 P. 49); Fields v. Western Union, 68 Or. 209 (137 P. 200); American Oil P. T. Co. v. Foust, supra.

It is urged, but not by plaintiff, that the defendant did not allege that the loss was within the contemplation of the seller, or must have been reasonably presumed to have been within the contemplation of the seller at the time of the sale. Defendant alleged in his answer:

"that at the time of such purchase, July 9, 1930, plaintiff knew that defendant proposed to use said truck for hauling under contracts for highway construction and surfacing and knew that defendant would be obliged to have the quiet, uninterrupted use and enjoyment of the possession of said truck in order to perform such truck hauling contracts * * *."

We do not understand that it is necessary for defendant to allege the facts in the exact language of the law, as stated above, but facts and circumstances should be set forth to show that plaintiff had knowledge of the same so that it would be reasonably presumed to have been within its contemplation at the time of the sale. We think that the allegation in regard to damage was sufficient, particularly after verdict and judgment.

The requirement that, in order to charge with liability under special circumstances, the party sought to be charged shall have had notice of such circumstances, should receive reasonable interpretation with reference to the subject to which such notice is applied. As a general rule, knowledge of the special circumstances must be brought clearly home to him at the time when the contract is made, in such a way that he must know that the person with whom he is contracting reasonably believes that he accepts the contract with the special conditions. It is not required that he must have exact knowledge or information in detail as to just what loss will result, nor is it essential that such special conditions be mentioned in the negotiations or included in the contract in express terms. It is sufficient if they are known to the parties or are of such character that they may be fairly supposed to have been in contemplation in the making of the contract. 8 R.C.L. 461, § 28. No hard and fast rule for ascertaining the profits, for the loss of which a recovery may be had, can be laid down. They must be determined according to the circumstances of each particular case and the subject matter of the contract. 8 R.C.L. 504, § 63.

In the present case the testimony indicated that Sears had a contract with the Milne-Dussault Company, which was in existence and being performed when he lost it through plaintiff's breach. Unquestionably the defendant was damaged. He lost something that was in existence, namely, a valid contract, from which he had been deriving profits and which he showed, to the satisfaction of the jury, would have produced further profits.

Plaintiff stresses the fact that truck No. 1 was taken off the work by the sheriff by mistake and contends that if defendant had worked one of his trucks he would probably not have lost his job. The testimony shows that truck No. 1 was back on the work and was used about two days before truck No. 2 was released, and defendant was informed that on account of truck No. 2 being tied up they did not want his services any longer. It all occurred in regard to the foreclosure of the lien upon truck No. 2 purchased by defendant from plaintiff. The jury might well find from the testimony that truck No. 1 cut no particular figure in the transaction, and we think the trial court properly instructed the jury to that effect.

Plaintiff contends that when it made its warranty good and returned the truck to defendant, and defendant accepted the same, the only damages recoverable against plaintiff would be the loss of the use of the truck for the time defendant was out of possession, citing 55 C.J. 784-6; 24 R.C.L. §§ 506, 507; Lee v.Woods, 161 Ky. 806 (171 S.W. 389); Close v. Crossland,47 Minn. 500 (50 N.W. 694); Mauldin v. Milford, 127 S.C. 508 (121 S.E. 547). But the crux of the matter is that during the interim between October 6, 1930, and October 10, 1930, while plaintiff was dispossessed of his truck, he lost his job hauling surfacing material, or, in other words, the egg was broken and the damages were inflicted during that time.

When a man is injured by the breach of a contract which he has made with another party, he is entitled upon principle to recover damages commensurate with the injury he has sustained. The theory of the law is to award compensation for losses sustained. Hockersmith v. Hanley, supra; Feeney Bremer v. Stone, supra. Section 64-707, subd. (6) reads: "The measure of damages for breach of warranty is the loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty." It is said by Mr. Justice Wolverton inHockersmith v. Hanley, supra, page 38:

"A person injured by the breach of a contract to which he has become a party with another is entitled, upon principle, to recover damages commensurate with the injury he has sustained, and this will include gains prevented as well as losses sustained."

The testimony strongly indicated that defendant, by reason of the seizure of the truck, lost his contract, and, as a natural and usual result, was damaged. The testimony also tended to show, as conclusively as possible in a matter of this kind, the amount of the profits that defendant could have made had he retained his job, and that he would have retained it during the continuance of the work in which he was engaged; also, the testimony showed the gross earnings of the trucks, the expenses to run the same, the price received per yard and the usual amount carried.

The question is impliedly raised as to the indefinite time of defendant Sears' contract with the Milne-Dussault Company for work with his trucks. A contract of that nature is discussed in 4 Page on Contracts, §§ 2421 and 2422, on the question of the enforcible character of a contract in connection with interference by one party with a contract between two others. It is there stated, in effect, that in regard to the existing contracts which can be terminated at the option of one party thereto, the question is presented whether interference whereby such person is induced to exercise such option is a tort. The weight of authority is that such conduct amounts to a tort if interference with a contract not voidable at the option of the party would be a tort. The plaintiff, by breaching its contract, interfered with defendant's contract with Milne-Dussault Company for hauling highway surfacing material.

Plaintiff must be presumed to have known that if defendant was not able to have the quiet possession and use of the truck in the performance of a secured contract in his business, hauling highway material, by reason of plaintiff's breach of warranty of the title to the truck, he would lose his contract and sustain damages measured by lost profits under his contract. It was incumbent upon defendant to show that he would have performed under the contract, and we think he sustained this burden of proof.

There was no error in the court overruling the motions of plaintiff for a dismissal of defendant's counterclaim, for a directed verdict and for a new trial.

Finding no error in the record, the judgment of the circuit court should be affirmed.

CAMPBELL, C.J., concurs in this opinion.