Williams v. Island City Milling Co.

Opinion by Me. Justice Bean. 1. One of the most vexed and difficult questions of the law is to determine when the right exists to recover expected or anticipated profits in an action for a breach — 588 — of a contract, and we shall not attempt to enter upon any-extended discussion of the question at this time, but shall rather content ourselves with indicating the conclusions to which we have arrived in the case, after due and careful consideration, materially aided as we have been by the exhaustive and comprehensive briefs, as well as the able and learned argument, of counsel on either side. The object of damages is, primarily, compensation to an injured party for a loss sustained, and the rule is, primarily, that only such damages can be recovered as are the natural and proximate result of a breach, and that damages which are purely speculative or conjectural are not recoverable. But the application of this rule varies as much as the facts of the adjudged cases in which it has been applied. There is nothing in the term “profits” which of itself excludes their being given in evidence, and used as the measure of damages; and when excluded it is because they are either unnatural or remote, or there are no criteria by which to estimate them with that certainty which the law requires. Indeed, in many cases, profits are the only certain or reliable measure of damages; but as a general rule the expected or anticipated profits of a business enterprise cannot be proven with any degree of certainty, and therefore cannot be recovered. They can only be computed or ascertained by guess or speculation, because they depend on so many contingencies, such as competition in business, supply and demand, the condition of the money market, availability of labor, and like uncertain conditions. There may be future profits in any business, or there may be losses, “ hence, in such cases, the measure of damages is,” says Mr. Sedgwick, “not expected profits, but the average value of the use of the business; and to ascertain this, evidence of actual past profits must be admissible ”: 1 Sedgwick on Damages, § 174. There is in the books a — 589 — well-grounded distinction between the interruption of an established business, and the prevention of the establishment of a new business. In the latter case the rule of damages is necessarily kept within prescribed limits, because there is nothing by which the anticipated value of the proposed business can be proven. But, as said by Mr. Sedgwick, “when it clearly appears that the defendant has interrupted an established business, from which plaintiff expected to realize profits, the plaintiff should recover compensation for whatever profits he makes it reasonably certain he would have received Id. § 182. But such loss of profits is not to be estimated by expected or anticipated specific profits, because the earning of such profits is but conjectural, and depends upon too many contingencies, but should be based upon the value of the use of the business to the plaintiff, as ascertained and determined from actual past experience: 1 Sedgwick on Damages, §§ 174,189; 1 Sutherland on Damages, § 70; Geobel v. Hough, 26 Minn. 252, 2 N. W. 847; Crawford v. Parsons, 63 N. H. 438; White v. Moseley, 8 Pick. 356; Simmons v. Brown, 5 R. I. 299; City of Terre Haute v. Hudnut, 112 Ind. 542, 13 N. E. 686; Gibson v. Fischer, 68 Iowa, 29, 25 N. W. 914; Allison v. Chandler, 11 Mich. 542; Woodin v. Wentworth, 57 Mich. 278, 23 N. W. 13; City of Cincinnati v. Evans, 5 Ohio St. 594. And this, we think, is the proper measure of damages in this case. The,.defendant had been operating its mill for several years before the breach of plaintiff’s contract, and it can show what its average profits had actually been, and so ascertain with reasonable certainty what the value of the use of the mill would have been to it during the time it was prevented from operating it on account of plaintiff’s breach of the contract, the effect of the change from the “burr” to the “roller” process, as contracted for, being of course .taken into account. Por this purpose, — 590 — proof of past profits, if any, were admissible in evidence. While it is true the evidence showed, or tended to show, that the mill had no rental value, within the sense that a business house in a populous city has a rental value, yet its actual value to the defendant could have been ascertained with reasonable certainty by reference to the business which it had previously done. Under the rule adopted by the trial court, however, the damages were to be determined on an' estimate of the future profits the defendant might have realized from a sale of the mill products, had the mill been operated to its full guaranteed capacity, basing the same upon a net profit of seventy-five cents per barrel of flour, without regard to what the past experience of the defendant had shown the actual value of the use of the property to be, and was, we think, therefore, too speculative and uncertain to form a basis for estimating damages, when other and more certain data were at hand: 1 Suth. on Dam. § 60; Pennypacker v. Jones, 106 Pa. St. 237; Allis v. McLean, 48 Mich. 428, 12 N. W. 640; Anderson v. Sloane, 72 Wis. 566, 40 N. W. 214; Brigham v. Carlisle, 72 Ala. 243; Frazer v. Smith, 60 Ill. 145; The C. F. Mfg. Co. v. Rogers, 19 Ga. 417; Water Lot Co. v. Leonard, 30 Ga. 560; Jones v. Nathrop, 7 Col. 1, 1 Pac. 435; Shank v. Shoemaker, 18 N. Y. 489. We are aware the authorities are not uniform on this question, but it seems to us the rule we have indicated is more likely to do justice between the parties to this record than the one adopted by the trial court. The anticipated or expected profits from the operation of a flouring-mill are proverbially uncertain and contingent, and to allow them, as such, to be recovered as damages in an action for a breach of contract to furnish machinery and appliances for such mill, is to allow the jury to enter into the realm of speculation and uncertainty. As said by Mr. Justice Cooley, in Allis v. McLean, 48 Mich. 428, 12 N. W. 640, a case — 591 — similar to the one at bar: “Estimates of profits seldom take all contingencies into the account, and are therefore seldom realized; and if damages for breach of contract were to be determined on estimates of probable profits, no man could know in advance the extent of his responsibility. It is therefore very properly held, in cases like the present, that the party complaining of a breach of contract must point out elements of damage more certain, and more directly traceable to the injury, than prospective profits can be.” Citing Fleming v. Beck, 48 Pa. St. 309; Pittsburg Coal Co. v. Foster, 59 Pa. St. 365; Strawn v. Cogswell, 28 Ill. 457; Frazer v. Smith, 60 Ill. 145; Howe Machine Co. v. Bryson, 44 Iowa, 159. We are of the opinion, therefore, that the true measure of damages for the failure to complete the contract within the time stipulated, and for the loss of time occasioned by the attempts of the plaintiffs, after September twentieth, to comply with the terms of their contract, is the reasonable value of the use of the mill during such time, as ascertained from the past experience of the defendant. For the time it would have been necessary to have shut the mill down after plaintiffs abandoned their contract, in order to make the repairs and additions necessary to bring it up to plaintiffs’ contract, we think the defendant is not entitled to recover damages, for the very good and sufficient reason that the mill was never so shut down, and such repairs or additions were never made, and consequently there was no loss on that account. It is true, some two or three years afterwards, defendant awarded a contract to some other parties to remodel and reconstruct the mill, but not for the purpose of making it conform to the terms of plaintiffs’ contract. For the loss of time in making such repairs plaintiffs are clearly not liable. The defendant was given, on the trial, the benefit of what it would have cost to remedy the defect in the mill, and — 592 — make it what it should be under the contract, but it cannot recover damages for the loss of the use of the mill during the time necessary to make such repairs, when no such time was lost or damage sustained. The ruling announced by the court as to the measure of damages for the difference between the actual and guaranteed capacity of the mill was, we think, correct, because it was based upon the past transaction, and it is a mere matter of mathematical calculation to determine the difference between the actual output of a forty-ñve-barrel capacity mill and what the output would have been during the same time had the mill been up to the guaranteed capacity; but it seems to us such loss should have been confined to the time plaintiffs’ were engaged in endeavoring to comply with their contract, and.not extended to a reasonable time thereafter in which to enable defendant to secure the services of some person to complete plaintiffs’ contract, for the reason suggested, that no such time was lost or repairs made. It follows that the judgment of the court below must be reversed and this cause remanded for a new trial. Reversed.