Shelley v. Eccles

COTTERAL, District Judge (after stating the facts as above). The fundamental rules on the subject of damages resulting from a breach of contract are, of course, not in doubt, and do not call for repetition. As frequently occurs, a chief source of controversy lies in their application to a given case, and particularly where a recovery is sought for the loss of anticipated profits. That they may be recovered, although not by general rule, under due circumstances, is settled. 8 R. C. L. p. 501; 17 C. J. p. 785; 1 Sedgwick Damages, § 149; Sutherland, Damages, § 59; Blagen v. Thompson et al., 23 Or. 239, 31 Pac. 647, 18 L. R. A. 315. Decisions have been cited where recovery of profits was sought, supposed to uphold the decree in this case, and among them Howard v. Stillwell & Bierce Mfg. Co., 139 U. S. 199, 11 Sup. Ct. 500, 35 L. Ed. 147; Stebbins v. Selig, 257 Fed. 230, 168 C. C. A. 314; Globe Refining Co. v. Landa Cotton Oil Co., 190 U. S. 540, 23 Sup. Ct. 754, 47 L. Ed. 1171; and Eckington & Soldiers’ Home Ry. Co. v. McDevitt, 191 U. S. 103, 24 Sup. Ct. 36, 48 L. Ed., 112. We are persuaded that the dissimilar circumstances attending the contracts were such as to induce a [363] result different from that which is required in the present case. However, it is to be noted that principles were announced which have application in support of the complaint in this case. In the Howard Case, a loss of profits in flour sales due to the non-completion of a mill was denied. There were various citations, beginning with Hadley v. Baxendale, 7 Exch. 341. The general rule was declared, subject to exceptions, that loss of profits is not recoverable— in substance, because too uncertain, contingent, and remote, and there was no engagement to pay them, and they cannot be implied from the nature and terms of the contract. It was added: “But it is equally well settled that the profits which would have been realized had the contract been performed, and which have been prevented by its breach, are included in the damages to be recovered in every case where such profits are not open to the objection of uncertainty or of remoteness, or where from the express or implied terns of the contract itself, or'the special circumstances under which it was made, it may be reasonably presumed that they were within the intent and mutual understanding of both parties at the time it was entered into.” In Stebbins v. Selig, 257 Fed. 230, 168 C. C. A. 314, decided by this, court, the plaintiff claimed damages for the loss of a rice crop, as the result of a failure to provide a well and pump for irrigation purposes, but did not prevail. It was said in part: “Thus arises the rule, above stated, that parties who break their contracts are to be held responsible for sucb consequences as may be reasonably supposed to be in the contemplation of the parties at the time of making the contract. 0 * 15 It 'has also been decided that mere notice to a seller of some interest or probable action of the buyer is not enough necessarily and as. matter of law to charge the seller with special damage on that account.” A test given was whether the defendant would have agreed, if asked, to be liable, and the answer was in the negative. The case of Globe Refining Co. v. Landa Cotton Oil Co., 190 U. S. 540, 23 Sup. Ct. 754, 47 L. Ed. 1171 was for breach of contract to sell and deliver oil. There were averments in respect of items as to agreement, understanding, and contemplation of breach, not contained in the written contract. Exceptions were sustained, which reduced them below the jurisdictional requirement, and the action was dismissed. We quote from the opinion as follows: “If a contract is broken, the measure of damages generally is the same, whatever the cause of the breach. We have to consider, therefore, what the plaintiff would have been entitled to recover in that case, and that depends on what liability the defendant fairly may be supposed to have assumed consciously, or to have warranted the plaintiff reasonably to suppose that it assumed, when the contract was made.” In Eckington & Soldiers’ Home Ry. Co. v. McDevitt, 191 U. S. 103, 24 Sup. Ct. 36, 48 L. Ed. 112, the claim was for damages in not extending and operating a line of railway through plaintiff’s land. An instruction was held to be erroneous. It was said in part: “The instruction was addressed to differences in market value as affected by the running of the ears, with the element added of expectation of continuance or cessation for all time. As thus put, the supposed difference in market values amounted to anticipated profits, and these were not recoverable if dependent on uncertain and changing contingencies, and not in contemplation of both parties as a probable consequence of breach.” [364] It will be unnecessary to discuss or distinguish the many cases and authorities cited and relied upon by counsel. Those we have noticed suffice to make plain the tests applicable where a loss of profits is claimed as damages. The determining inquiry is whether the damages may be regarded as reasonably certain, and may be reasonably supposed to have been within the contemplation of the contracting parties. The pleading here under consideration is not open to the objection found in the governing principles or their application in the decided cases. It alleges that a definite increase in the land values would have resulted from the factory, as in other instances, that this was plaintiff’s object in promoting it, that the defendant was so informed in advance, and that it was understood at the time of contracting his profit would be due to the factory. Mere notice of his object would have been alone insufficient, but it was competent to allege and rely upon the circumstances, aside from the literal terms of the contract, showing that the damages claimed were presumably contemplated by the parties, as a consequence of a breach of the contract. In our opinion, the fourth amended complaint alleges facts which were amply sufficient to withstand the demurrer. For this reason, the ruling and the judgment upon it should be, and they are, reversed.