Globe Refining Company v. Landa Cotton Oil Company

• Citation: 23 S.Ct. 754,47 L.Ed. 1171,190 U.S. 540
• Decision Date: 01 June 1903
• Docket Number: No. 241,241
• Parties: GLOBE REFINING COMPANY, Plff. in Err. , v. LANDA COTTON OIL COMPANY
• Court: U.S. Supreme Court

190 U.S. 540

23 S.Ct. 754

47 L.Ed. 1171

GLOBE REFINING COMPANY, Plff. in Err.,

v LANDA COTTON OIL COMPANY.

No. 241.

Submitted April 16, 1903.

Decided June 1, 1903.

Messrs. C. W. Ogden and J. D. Guinn for plaintiff in error.

No counsel for defendant in error.

Mr. Justice Holmes delivered the opinion of the court:

This is an action of contract brought by the plaintiff in error a Kentucky corporation, against the defendant in error, a Texas corporation, for breach of a contract to sell and deliver crude oil. The defendant excepted to certain allegations of damage, and pleaded that the damages had been claimed and magnified fraudulently for the purpose of giving the United States circuit court jurisdiction, when in truth they were less than $2,000. The judge sustained the exceptions. He also tried the question of jurisdiction before hearing the merits, refused the plaintiff a jury, found that the plea was sustained, and dismissed the cause. The plaintiff excepted to all the rulings and action of the court, and brings the case here by writ of error. If the rulings and findings were right, there is no question that the judge was right in dismissing the suit (North American Transp. & Trading Co. v. Morrison, 178 U. S. 262, 267, 44 L. ed. 1061, 1064, 20 Sup. Ct. Rep. 869); but the grounds upon which he went are re-examinable here. Wetmore v. Rymer, 169 U. S. 115, 42 L. ed. 682, 18 Sup. Ct. Rep. 293.

The contract was made through a broker, it would seem by writing, and, at all events, was admitted to be correctly stated in the following letter:

Dallas, Texas, 7/30/97.

Landa Oil Company,

New Braunfels, Texas.

Gentlemen:——

Referring to the exchange of our telegrams to-day, we have sold for your account to the Globe Refining Company, Louisville Kentucky, ten (10) tanks prime crude C/S oil at the price of 15 3/4 cents per gallon of 7 1/2 pounds, f. o. b. buyers' tank at your mill. Weights and quality guaranteed.

Terms: Sight draft without exchange b/ldg. attached. Sellers paying commission.

Shipment: Part last half August and balance first half September. Shipping instructions to be furnished by the Globe Refining Company. Yours truly,

Thomas & Green, as Broker.

Having this contract before us, we proceed to consider the allegations of special damage over and above the difference between the contract price of the oil and the price at the time of the breach, which was the measure adopted by the judge. These allegations must be read with care, for it is obvious that the pleader has gone as far as he dared to go, and to the verge of anything that could be justified under the contract, if not beyond.

It is alleged that it was agreed and understood that the plaintiff would send its tank cars to the defendant's mills, and that the defendant promptly would fill them with oil (so far, simply following the contract), and that the plaintiff sent tanks. 'In order to do this, the plaintiff was under the necessity of obligating itself unconditionally to the railroad company (and of which the defendant had notice) to pay to it for the transportation of the cars from said Louisville to said New Braunfels in the sum of $900,' which sum plaintiff had to pay, 'and was incurred as an advancement on said oil contract.' This is the first item. The last words quoted mean only that the sum paid would have been allowed by the railroad as part payment of the return charges had the tanks been filled and sent back over the same road.

Next it is alleged that the defendant, contemplating a breach of the contract, caused the plaintiff to send its cars a thousand miles, at a cost of $1,000; that defendant canceled its contract on the 2d of September, but did not notify the plaintiff until the 14th, when, if the plaintiff had known of the cancelation, it would have been supplying itself from other sources; that plaintiff (no doubt defendant is meant) did so wilfully and maliciously, causing an unnecessary loss of $2,000.

Next it is alleged that, by reason of the breach of contract and want of notice, plaintiff lost the use of its tanks for thirty days,—a loss estimated at $700 more. Next it is alleged that the plaintiff had arranged with its own customers to furnish the oil in question within a certain time, which contemplated sharp compliance with the contract by the defendant; 'all of which facts, as above stated, were well known to the defendant, and defendant had contracted to that end with the plaintiff.' This item is put at $740, with $1,000 more for loss of customers, credit, and reputation. Finally, at the end of the petition, it is alleged generally that it was known to defendant, and in contemplation of the con- tract, that plaintiff would have to send tanks at great expense from distant points, and that plaintiff 'was required to pay additional freight in order to rearrange the destination of the various tanks and other points.' Then it is alleged that by reason of the defendant's breach, the plaintiff had to pay $350 additional freight.

Whatever may be the scope of the allegations which we have quoted, it will be seen that none of the items was contemplated expressly by the words of the bargain. Those words are before us in writing, and go no further than to contemplate that when the deliveries were to take place the buyer's tanks should be at the defendant's mill. Under such circumstances the question is suggested how far the express terms of a writing, admitted to be complete, can be enlarged by averment and oral evidence; and, if they can be enlarged in that way, what averments are sufficient. When a man commits a tort, he incurs, by force of the law, a liability to damages, measured by certain rules. When a man makes a contract, he incurs, by force of the law, a liability to damages, unless a certain promised event comes to pass. But, unlike the case of torts, as the contract is by mutual consent, the parties themselves, expressly or by implication, fix the rule by which the damages are to be measured. The old law seems to have regarded it as technically in the election of the promisor to perform or to pay damages. Bromage v. Genning, 1 Rolle, 368; Hulbert v. Hart, 1 Vern. 133. It is true that, as people when contracting contemplate performance, not breach, they commonly say little or nothing as to what shall happen in the latter event, and the common rules have been worked out by common sense, which has established what the parties probably would have said if they had spoken about the matter. But a man never can be absolutely certain of performing any contract when the time of performance arrives, and, in many cases, he obviously is taking the risk of an event which is wholly, or to an appreciable extent, beyond his control. The extent of liability in such cases is likely to be within his contemplation, and, whether it is or not, should be worked out on terms which it fairly may be presumed he would have assented to if they had been presented to his mind. For instance in the present case, the defendant's mill and all its oil might have been burned before the time came for delivery. Such a misfortune would not have been an excuse, although probably it would have prevented performance of the contract. 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.

This point of view is taken by implication in the rule that 'a person can only be held to be responsible for such consequences as may be reasonably supposed to be in the contemplation of the parties at the time of making the contract.' Grebert-Borgnis v. Nugent, L. R. 15 Q. B. Div. 85, 92; Horne v. Midland R. Co. L. R. 7 C. P. 583, 591; Hadley v. Baxendale, 9 Exch. 341, 354; Western U. Teleg. Co. v. Hall, 124 U. S. 444, 456, 31 L. ed. 479, 483, 8 Sup. Ct. Rep. 577; Howard v. Stillwell & B....