Central Trust Co. of New York v. Clark, 1,147.

• Decision Date: 20 February 1899
• Docket Number: 1,147.
• Citation: 92 F. 293
• Parties: CENTRAL TRUST CO. OF NEW YORK et al. v. CLARK.
• Court: U.S. Court of Appeals — Eighth Circuit

92 F. 293

CENTRAL TRUST CO. OF NEW YORK et al. v. CLARK.

No. 1,147.

United States Court of Appeals, Eighth Circuit.

February 20, 1899

William W. Field (Edward O. Wolcott and Joel F. Vaile, on the brief) for appellants.

Charles H. Toll and D. V. Burns (C. W. Bangs, on the brief), for appellee.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

SANBORN Circuit Judge.

This case involves the right of the intervener and appellee Walter L. Clark, to payment for the purchase price of a gear wheel and pinion which was sold by his assignor, the Midvale Steel Company, to the Denver City Cable-Railway Company in 1892, out of the property of the latter company notwithstanding a prior mortgage upon it, represented by the Central Trust Company, as trustee for the bondholders secured thereby. Clark intervened in the foreclosure suit brought by the trust company against the railway company, and insisted that his claim was entitled to a preference in payment over the bonds secured by the mortgage. The trust company contested this claim for a preference, and also pleaded that the Midvale Steel Company, by its delay in delivering the gear wheel and pinion, had inflicted damages upon the cable company in excess of the purchase price of the machinery. The circuit court sustained the position of the intervener, and refused to hear the claim of the trust company to offset the damages caused to the cable company by the steel company's delay against the amount owing for the purchase price of the machinery. Upon an appeal from a decree based upon that ruling, this court decided that the claim of Clark was a preferential debt, but that the trust company was entitled to a reduction of the claim of the appellee by the amount of any damages caused to the cable company by the failure of the steel company to perform the contract in the stipulated time, and remanded the case to the trial court, with directions to cause an investigation of this question to be made, and to deduct from the amount of the intervener's claim such damages as the cable company sustained on account of the failure of the steel company to deliver the gear wheel and pinion within the contract period. Trust Co. v. Clark, 26 C.C.A. 397, 81 F. 269, 273, and 49 U.S.App. 453. Thereupon the circuit court tried this question before a jury, instructed them that no damages were proved, that they must return a verdict against Clark for only $1, and entered a decree accordingly. The trust company, the Denver City Cable-Railway Company, the Denver City Railroad Company, which was the ultimate purchaser of the railroad at the foreclosure sale, and Edward C. Baggs, the receiver of this purchase, have appealed from the decree. They have made various assignments of error, but the answer to one question effectually disposes of them all. That question is: Did appellants produce, or offer to produce, upon the trial, such evidence as would have entitled the cable company to substantial damages from the steel company on account of its delay in delivering the wheel and pinion in an original action between the cable company and the steel company? If this question is answered in the negative, there was no substantial error in the trial below, and, if in the affirmative, the case must be retried. We proceed to its consideration.

The appellants proved these facts: The cable company was a corporation operating a cable railway in the city of Denver, in the state of Colorado, and the steel company was a corporation engaged in manufacturing machinery in or near the city of Philadelphia, in the state of Pennsylvania. By means of telegrams and letters sent to each other between September 1, 1892, and October 4, 1892, these parties made a contract on October 3, 1892, to the effect that the steel company would make and deliver to the cable company a gear wheel and pinion suitable to operate its railway on January 3, 1893, in consideration of a stipulated price to be paid for it by the cable company. The delivery was not made until May 14, 1893. There was no provision in the contract that time was of its essence, and there was nothing in the correspondence which led to the contract to indicate that haste was required, or that delay would probably cause unusual loss. On January 3, 1893, and from that time until May 14, 1893, the old gears which the cable company was using were cracked and patched, so that its engineers considered it unsafe to move its care at a greater speed than seven miles an hour, although their normal speed was ten miles an hour. During this time these gears were in such a worn and weak condition that occasional breakages and stoppages occurred, and the reduction of speed increased the spaces between the cars 25 per cent. After this evidence had been introduced, the appellants offered to prove that early in December, 1892, these old gear wheels, to replace which the contract in question was made, entirely broke down; that thereafter the condition of the machinery was such as to require a reduction of the speed of the cars until the new machinery was delivered; that at several times between the first breakdown, in December, and May 14, 1893, the old machinery collapsed; that the steel company was at all times constantly advised of all these matters; that between January 3, 1893, and May 14, 1893, the earnings of the road fell off between $22,000 and $25,000, as compared with its earnings in 1891 and 1892, while all the conditions except the diminished speed and the greater spaces between the cars were the same as in those years; that it was impracticable to operate the road at this diminished speed with the normal spaces between the cars, and that on account of the reduced speed at which the cable company was compelled to operate its road by reason of the failure of the steel company to deliver the gear wheel and pinion as agreed the mileage of the cable company was so reduced that it lost $33,000. The appellee objected to this testimony on the grounds (1) that the intervener was not liable under the contract for the damages which the appellant sought to prove, under any circumstances; and (2) that these damages were remote, speculative, dependent upon a great many contingencies, and related solely to the question of profits. The court sustained these objections, and directed a verdict for nominal damages.

In the arguments and briefs in this case our attention is sharply and repeatedly called to the fact that the damages sought consist entirely of losses of anticipated profits. The mere fact, however, that damages claimed as a result of the breach of a contract consist of anticipated profits, neither establishes the right nor bars the claim to their recovery. Some profits may be and others may not be allowed. The rules which govern their recovery do not differ materially from those which measure the recovery of expenses incurred or other losses sustained through the breach of an agreement. One who breaks a contract of sale of merchandise is liable in damages for the difference between the contract price and the market value of the goods at the time and place of delivery although this difference is in fact nothing but the profit which the purchaser would have made if the contract had been performed, and which he necessarily lost by its breach. One who prevents his contractor from performing his agreement is liable in damages for the profits which he would have made if he had performed it, because such profits are the...