South African Reduction Co. v. Peck

JENKINS, Circuit Judge (after stating the, facts). It is clear that the plaintiff company was formed to exploit in the Transvaal the Peck inventions. It acquired the right to them within that territory, they being then unpatented there. For them it paid all of its capital stock of $1,000,000, except to the amount of $500. It had no other property. It owned no mine or real estate in South Africa, or ores, tailings, or slimes, the product of mines. There is nothing to indicate an intention or ability to purchase or operate mines, or to use the plant to be set up and put in operation, otherwise than as a demonstration of the value of the inventions in the treatment of ores. The contract [91] in some respects is a remarkable one. Its omissions, if casual, indicate neglect upon the part of its writer; if designed, they throw a flood of light upon the subsequent sale of the worthless stock and obligation of the company. It is difficult to say if the obligation for $65,000, payable out of the net earnings of the company, was given as part consideration for the inventions, or for the plant which the defendant agreed to construct. The preamble of the contract would imply the former; the latter may be inferred from the fact that the inventions were purchased from Orrin B. and Charles V. Peck, and the stock was to be and was issued to them jointly, while the defendant alone contracted for the construction and putting in operation of the plant. The obligation for $65,000 was to be made payable to and to be delivered to him individually, and the amount corresponds with the estimate of the cost made by the defendant prior to the contract. And yet the obligation was in fact made payable to both the defendant and to Charles V. Peck. Some curious questions arise upon the face of this contract. Who was to own the plant when constructed? Where in the Transvaal was it to be set up, and who was to determine where? Who was to furnish work for it to do? Who was to operate it, and, if the defendant, how long was it to be operated by him? Any longer than to determine its capacity? Did the contract contemplate that land or a mine was to be purchased that the plant might be operated, and by whom to be purchased, and where was it to be located? If the obligation for $65,000 was for the purchase price of the plant, some of these questions could be solved; if otherwise, the questions remain at large, unsolved upon the face of the contract. In the view we are constrained to take upon the subject of the measure of damages in the light of the evidence, we need not undertake their solution. Damages are awarded for breach of contract in compensation, as an equivalent in money for actual loss suffered from the breach, “the value in money of what is lost or withheld. The vendee is, if possible, to be placed in the same situation with respect to damages as if the contract had been performed, so far as that can be done by pecuniary compensation.” Robinson v. Harman, 1 Exch. 855. Ordinarily the vendee of an article sold and not delivered agreeably to contract, and who has not paid in advance the contract price, has sustained no loss unless the article has risen in value, because he must pay the price, and would therefore gain nothing by its delivery. If he has paid for the article in advance of delivery, the measure of damages may be the price paid, although that is not conclusive (Marsh v. McPherson, 105 U. S. 709, 26 L. Ed. 1139), or the cost of supplying the article if obtainable in the market. With respect of a breach of contract for delivery of articles for special purposes, known to the person or party contracting, compensation may be awarded for such loss as might reasonably be supposed to have been in the contemplation of both parties as the result of nonperformance, if capable of ascertainment. If the article be not procurable in the market, the parties must be presumed to have contracted with reference to the declared purpose for which that article was to have been furnished, [92] and that purpose should he considered in estimating the damages. Manufacturing Co. v. Gray, 129 N. C. 438, 40 S. E. 178, 57 L. R. A. 193. But in all cases there must be adequate proof of the resulting loss. The loss must be one which springs directly from the nonfulfillment of the contract. It must not rest in conjecture. It must be ascertainable and established by evidence to a reasonable degree of certainty. Applying these principles to the case in hand, what loss is shown to have been incurred by the plaintiff? The venture was a purely speculative one, the plant to be constructed being manifestly designed to demonstrate the supposed usefulness of the new method for the centrifugal concentration of ores, tailings, etc., with a view to the selling of rights to be patented in South Africa. Assuming, what would seem to be the most favorable construction of the contract for the plaintiff, that the obligation of, the company for $65,000 was given to the defendant as the price of the plant, the value of that obligation would be the amount paid in advance for the plant to be constructed, and would seem to be, in the absence of proof of other direct injury, a proper measure of damages. That obligation was payable out of the net earnings of the company; its value rested in speculation; it was contingent and uncertain; and there is no evidence here that it is worth anything. The testimony of the purchaser of it is that it is worth nothing. The value of the machine is not proven. We cannot think that the defendant’s estimate of its cost, protested against as extravagant by the interested parties who were to and who did purchase the stock and the obligation, should furnish a criterion of its value. The cost might or might not bear relation to the value of the plant. When transported to and put up in South Africa it might or might not be worth more than old iron. That would be dependent upon many contingencies. It might prove to be valuable if the patents to be obtained should cover desirable inventions, and the mine owners of that country could be induced to believe it; but the cost of the manufacture of the plant and of its transportation and setting up somewhere in the vast territory of the Transvaal, even if we accept the estimate of the defendant, would furnish no proper criterion of the value of the plant at the place of delivery. The difficulty with the case is the utter absence of testimony proving loss. The plaintiff did not upon default of the defendant furnish itself with such a plant. There is no evidence of the value of that' which it is claimed was given for the plant. There is no evidence of loss sustained. The expected profits which were to arise from the sale of the right to the inventions when patents should be issued áre purely speculative, uncertain, and no standard can be furnished by which to measure them. In such a case as the present, where the damages resulting are so purely speculative, it is allowable to the parties contracting to liquidate damages in anticipation of the breach. Failing so to do, it is incumbent upon the party complaining of the breach to prove the resulting loss. There being no such proof here,, we find no error in the ruling of the c'ourt below. The judgment will be affirmed.