Fairbanks, Morse & Co. v. Austin

• Decision Date: 15 March 1923
• Docket Number: 3941.
• Citation: 288 F. 1
• Parties: FAIRBANKS, MORSE & CO. v. AUSTIN et al.
• Court: U.S. Court of Appeals — Ninth Circuit

288 F. 1

FAIRBANKS, MORSE & CO. v. AUSTIN et al.

No. 3941.

United States Court of Appeals, Ninth Circuit.

March 15, 1923

Rehearing Denied May 14, 1923.

J. D Campbell, of Spokane, Wash., and John B. Van Dyke and Josiah Thomas, both of Seattle, Wash., for plaintiff in error.

Eugene E. Wager, of Ellensburg, Wash., and James Collins Lloyd, of White Bluffs, Wash., for defendants in error.

Before GILBERT, ROSS, and MORROW, Circuit Judges.

GILBERT Circuit Judge.

The defendants in error were engaged in stock raising and general farming, mainly the cultivation of alfalfa. They recovered a judgment for damages against the plaintiff in error for its breach of a contract made on September 25, 1919, whereby it agreed to furnish and deliver to them by December 1, 1919, a certain oil engine pump, with accessories, to be used in irrigating their lands. The jury by a general verdict fixed the damages at $3,088, and by a special verdict apportioned $1,674 of the damages to loss of hay and $840 of the damages to permanent injury to crops. Judgment was rendered upon the general verdict.

The plaintiff in error assigns error to the denial of its motion that the judgment against it be entered for only $574, that being the amount of the general verdict, less the two items of special damages included therein. The contention on the writ of error is that, under the pleadings and the evidence the defendants in error could not recover special damages because such special damages were not within the contemplation of the parties at the time when the contract was entered into, and were too remote and speculative to be considered. The well-established rule announced in Hadley v. Baxendale, 9 Exch. 341, and generally followed in this country in both state and federal courts, is that, in addition to general damages, the injured party to a contract which is breached may recover special damages which arise from circumstances peculiar to the case, provided that those circumstances were communicated to or known by the other party at the time of making the contract, and may reasonably be supposed to have been in the contemplation of both parties. 8 R.C.L. 451, 459, 461, and cases there cited.

In the present case there was evidence that the plaintiff in error had reasonable notice of the conditions which rendered the damages which the defendants in error sustained the probable and natural result of its breach of the contract. Before the execution of the contract, Powell, the agent of the plaintiff in error, went over the lands of the defendants in error and discussed with the their problem of irrigation. He was told that their irrigation must begin by April 1st, and he assured them that there would be no delay in delivering the machinery in due time. It was fully understood that, in order to save the crops of the defendants in error, it would be necessary that the machinery be installed by the time so agreed upon. Relying on the promise of the plaintiff in error, the defendants in error sold to it their old pumping plant, thereby depriving themselves of means of irrigating their land.

During the period of time which followed after the date when the machinery was to have been delivered, the plaintiff in error received several letters from the defendants in error, to which it made no reply. One of the letters, of date March 12, 1920, contained the following:

'The delay and uncertainty upon your part in this matter is costing us a lot of money and leaving us in a position where we do not know what to do.'

On March 30, 1920, the defendants in error wrote:

'We have 60 acres of alfalfa which should be irrigated at once, and in all probability (with all of our efforts in installing an outfit at this late hour) will lose the first cutting, besides some permanent injury to the alfalfa.'

A case in point is Lillard v. Kentucky Distilleries & Warehouse Co., 134 F. 168, 67 C.C.A. 74, in which it was held that, where the obvious purpose of an agreement for the sale of distillery slop was that it might be fed to fatten cattle, the failure of the seller to furnish the slop which he contracted to supply would entitle the buyer to recover damages resulting from additional outlays for food or labor, or any other expense or injury to the cattle, including loss of anticipated profits from the sale of the cattle, provided such profits could be shown with reasonable certainty, and were not purely speculative. In the opinion in that case Judge Lurton said:

'Special circumstances will justify a recovery of special damages when specifically sued for, if they proximately follow from the breach, and are such as might reasonably be within the contemplation of the parties.'

In the leading case of Bixby-Theirson Lumber Co. v. Evans, 167 Ala. 431, 52 So. 843, 29 L.R.A. (N.S.) 194, 140 Am.St.Rep. 47, it was held that, where the special and ulterior purposes of a party in making a contract is disclosed to the adverse party at the time, they become an element of the duty imposed on the adverse party, and afford a substantial basis for special damages. In Lonergan v. Waldo, 179 Mass. 135, 60 N.E. 479, 88 Am.St.Rep. 365, it was held that, where the purchaser of pipe notified the seller that, if it were not delivered at once, there would be danger of the caving in of the ditch, which the former was excavating, and the seller agreed to deliver the pipe at once, without notifying the purchaser that he would not be liable in any event for damages to the ditch, it was an implied agreement to assume the special liability which would render the seller liable for damages to the ditch caused by his negligence in failing to deliver the pipe. The court said:

'When the special circumstances are known to both parties, it is obvious that each may have contracted with reference to them, and that, if such was in fact the case, the party in fault may be held justly to make good to the other whatever damages he has sustained, which were the reasonable and natural consequences of a breach under the circumstances so known, and with reference to which the parties acted.'

Among the federal cases applying the doctrine of Hadley v. Baxendale ^[1] are Boutin v. Rudd, 82 F. 685, 27 C.C.A. 526; Mott v. Chew (C.C.) 137 F. 197; McDonald v. Kansas City Bolt & Nut Co., 149 F. 360, 79 C.C.A. 298, 8 L.R.A. (N.S.) 1110; and it was followed by this court in Port Blakely Mill Co. v. Sharkey, 102 F. 259, 42 C.C.A. 329.

The plaintiff in error relies upon Globe Refining Co. v. Landa Cotton Oil Co., 190 U.S. 540, 23 Sup.Ct. 754, 47 L.Ed. 1171, and Stebbins v. Selig, 257 F. 230, 168 C.C.A. 314. Both were cases in which the sufficiency of the complaint for damages was tested on demurrer, and both were actions upon written contracts. In the first case it was held that in case of breach of contract the defendant can be held responsible only for such consequences as may reasonably be supposed to be in contemplation of the parties at the time of making the contract, and that mere notice to a seller of some interest or probable action of the buyer is not enough necessarily, and as a matter of law, to charge the seller with special damages on his failure to deliver the goods. The court, in disposing of the demurrer, applied the test question, whether from the allegations of the pleadings it appeared that the defendant in entering into the contract contemplated the liability for damages which the plaintiff asserted, and intimated that knowledge 'must be brought home to the party sought to be charged, under such circumstances that he must know that the person he contracts with reasonably believes that he accepts the contract with the special condition attached to it,' quoting from British Columbia Sawmill Co. v. Nettleship, L.R. 3 C.P. 499. We find nothing in the opinion which would lead to reversal in the present case.

In Stebbins v. Selig, in an action for breach of a written contract by defendant to drill an artesian well and install a pump therein for irrigation purposes within 20 days, damages to a rice crop on the land which the well was intended to irrigate, based upon the difference of the rice crop actually raised and the rice crop raised on adjoining land, resulting from breach of the contract, were held not recoverable as special damages, in the absence of a provision in the contract that such damages were contemplated. In that case the complaint alleged that the plaintiff's only means of irrigation would be the said well and pump, and that the defendant well knew that fact.

The present case differs from that in important particulars. Here the contract was entered into six months before the time when the irrigation season was to commence, as the plaintiff in error well knew. It was not a contract to perform labor, or to manufacture machinery, but was a contract of sale and delivery of certain specified machinery, which the plaintiff in error, through its agent, recommended for the needs of the defendants in error. The contract was entered into and signed by the agent after he had gone over the land to be irrigated and discussed the problem of its irrigation. He not only saw the land, but also saw the growing crops, and he knew that the defendants in error were utterly dependent upon the plaintiff in...