Gresham v. Tecumseh Oil Cotton , 211 S.W. 458 ( 1919 )

We think the trial court was not warranted in instructing a verdict in appellee's favor on either of the grounds specified in the motion set out in the statement above.

As justifying the action of the court in sustaining the motion on the first of the two grounds, appellee invokes a rule stated in 2 Mechem on Sales, § 1763, as follows:

"If, at the time the contract is made, the seller had such notice or knowledge that the goods are being purchased for resale in a particular market, or to be supplied in pursuance of a particular contract, that he may fairly and reasonably be deemed to have made his contract in contemplation of that purpose, and to have assumed the risks thereby entailed, then, if he breaks his contract damages for losses caused thereby, if not uncertain or remote, may be recovered."

We think the rule cannot be invoked by a seller who has breached his contract to prevent a recovery against him by the buyer of the difference between the contract price and the market price. The rule is based on the theory of compensation to the party not in fault for losses caused by the default of the other party which it was contemplated at the time the contract was made might follow such default If at the time the seller entered into the contract he knew the buyer meant to apply the property purchased to the satisfaction of his obligation to another person, the seller might very well be held to have contemplated that, if he failed to comply with his undertaking, the loss to the buyer would be the difference between the price he was to pay for the property and the price, if it was greater than the market price, he was to receive therefor from the third person. On the other hand, the seller might very well be held to have contemplated, if the price the buyer was to receive from the third person was less than the market price, that the buyer would have to go on the market and buy at the price there controlling the property necessary to enable him to comply with his contract with the third person, and therefore would lose the difference between the price he was to pay him (the seller) and the price he had to pay on the market.

If, however, the rule was not inapplicable to the case for the reason stated, it was for other reasons now to be stated:

1. At the time, to wit, August 28, 1915, it sold the oil to the produce company, appellee could not have had notice or knowledge that the produce company was buying same to apply on a contract it had with Peet Bros. Manufacturing Company, because at that time the produce company had not contracted (and until November 1, 1915, did not contract) with said manufacturing company to sell it the oil. Madill Oil Cotton Co. v. Sanger, 95 S.W. 36, is cited by appellee as holding the rule to be applicable if the seller has such notice when he breaches his contract. The ruling made in that case was that it was error to refuse to instruct that Sanger was not entitled to recover for profits which he would have made by reason of a special contract of sale between him and another party, unless the oil and cotton company "had notice of the existence of such contract of sale before it breached its contract." If the court in so ruling meant to hold that the oil and cotton company was liable for such profits, notwithstanding it had no notice or knowledge when it agreed to sell cotton seed cake to Sanger that he was buying same to fill a contract he had with another party, it did so in face of the fact that the contrary of such a view of the law was well established. Hamilton v. Schumacher, 15 S.W. 715; Johnson v. Miller, 163 S.W. 592; Penn v. Smith,104 Ala. 445, 18 So. 38; 8 R.C.L. pp. 505, 506; 35 Cyc. pp. 643, 644.

2. It did not appear from the testimony as a matter of law that appellant was not damaged by appellee's failure to comply with its contract. The assertion in the motion that it so appeared was based on the assumption that the oil would have gone to Peet Bros. Manufacturing Company at 34 1/2 cents a gallon on its contract with the provision company. With reference to this appellant as a witness testified he would not have let the oil go to said manufacturing company on that contract.

In support of the other ground of the motion appellee insists that the remedy provided by section 3 of rule 28, set out in the statement above, in the event of a breach by the seller of the contract, was exclusive of any other remedy. It further insists that it appeared that appellant was not entitled to assert a right to the remedy provided by said rule, for that it appeared that appellee had not given notice to the produce company as provided for in said rule, and further appeared that neither the produce company nor appellant had wired appellee for instructions as to tanks, nor given to appellee notice 48 hours in advance of appellant's purchase of the oil on the market or an intention to do so, as it was required by said rule to do. A similar contention based on a similar rule was made in Planters' Oil Co. v. Gresham, 202 S.W. 145, and was overruled (rightly so, we think) by the Court of Civil Appeals for the Seventh District. We do not think it necessary to add anything to what was said by the court in that case in overruling the contention.

The judgment is reversed and the cause is remanded for new trial.