John D. Copanos & Sons, Inc. v. McDade Rigging and Steel Erection Co., Inc.

• Decision Date: 13 July 1979
• Docket Number: No. 1390,1390
• Citation: 43 Md.App. 204,403 A.2d 402
• Parties: JOHN D. COPANOS & SONS, INC. v. McDADE RIGGING AND STEEL ERECTION COMPANY, INC., et al.
• Court: Court of Special Appeals of Maryland

Page 204

43 Md.App. 204

403 A.2d 402

JOHN D. COPANOS & SONS, INC. v. McDADE RIGGING AND STEEL ERECTION COMPANY, INC., et al.

No. 1390.

Court of Special Appeals of Maryland.

July 13, 1979.

Jerald J. Oppel and Pamela J. White, Baltimore, with whom were Ober, Grimes & Shriver, Baltimore, on the brief, for appellant.

Emanuel H. Horn and John E. Mudd, Baltimore, with whom were Gary C. Duvall and Miles & Stockbridge, Baltimore, on the brief, for appellees.

Argued before THOMPSON, LISS and COUCH, JJ.

COUCH, Judge.

This appeal requires us to decide when a business concern may recover lost profits in an action based on negligence, breach of contract, breach of warranty, and strict liability. On the one hand, John D. Copanos & Sons, Inc., the business concern and appellant, urges that any lost profits which can be shown with reasonable certainty may be recovered. On the other hand, McDade Rigging and Steel Erection Company, Inc., and Rental Tools and Equipment Company, Inc., appellees, contend that lost profits allegedly suffered by a "new" business may not be recovered. It is their position that appellant's venture in this case was new, hence it may not recover any such lost profits. The trial court agreed with appellees and from that ruling this appeal flows.

The Facts

Appellant has been a manufacturer of pharmaceuticals since 1963, and has apparently enjoyed steadily increasing profits on the manufacture and sale of pharmaceuticals in liquid, tablet, and powder form. Included among the pharmaceuticals appellant produces are various types of penicillin. In 1972 appellant purchased a Zanasi capsule machine to be used in the production of capsuled pharmaceuticals, specifically ampicillin, a form of penicillin. Having decided to move certain of the equipment within its plant, appellant contracted with appellee McDade to move the equipment, which included moving the Zanasi machine from the first floor to the second floor. While on the first floor, the machine had been operated, tested, finely tuned, and made ready to begin commercial production of ampicillin capsules immediately upon its placement on the second floor. On October 2, 1973, McDade prepared the capsule machine for removal to the second floor by positioning it on a forklift rented to McDade by appellee Rental. The machine was raised to a height of five to eight feet; the forklift then pitched forward against a wall of the plant destroying the capsule machine and causing other damage, not pertinent here. Search for a replacement machine was instituted but because of its foreign manufacture and the limited number of Zanasi machines in existence, it was not until December 31, 1973 that another machine could be purchased, installed, tested, and made fully operational. Appellant proffered that during this period certain customers cancelled their firm orders and did not fulfill their intentions to order large quantities of ampicillin capsules. Suit was filed in the Superior Court of Baltimore City where, prior to trial, appellee Rental moved the court to restrict appellant's evidence of consequential damages by eliminating evidence of lost profits from the case. After a hearing, during which appellant made a proffer as to the evidence it was prepared to offer with regard to lost profits, the trial court granted appellee Rental's motion. Following the receipt of evidence, a jury awarded appellant the amount of $50,019.49 against both appellees. This amount, of course, does not encompass any "lost profits" award.

The Contentions

Appellant contends that lost profits which can be shown with reasonable certainty, and are not speculative or conjectural, should be recoverable if they were foreseeable. Appellees urge that lost profits from a new business or venture simply are not recoverable under Maryland law and that, in any event, lost profits in this case were not foreseeable and are thus not recoverable.

The Law

It seems well settled in this State that there may be a recovery for unrealized profits providing (1) plaintiff shows that a breach by a defendant was the cause of the loss; (2) it is shown that defendant could have reasonably foreseen that a loss of profits would be a probable result of a breach; and (3) the lost profits are proved with reasonable certainty. See Impala Platinum v. Impala Sales, 283 Md. 296, 339, 389 A.2d 887 (1978), and M & R Builders v. Michael, 215 Md. 340, 345-46, 138 A.2d 350 (1958). There appears to be a caveat to this rule in the case of new business, however, which appellees and the trial court felt was dispositive. This caveat was examined in detail by the Court of Appeals in Evergreen Amusement Corp. v. Milstead, 206 Md. 610, 112 A.2d 901 (1955), where it was said:

"We think the court did not err in refusing the proffered evidence. Under the great weight of authority, the general rule clearly is that loss of profit is a definite element of damages in an action for breach of contract or in an action for harming an established business which has been operating for a sufficient length of time to afford a basis of estimation with some degree of certainty as to the probable loss of profits, but that, on the other hand, loss of profits from a business which has not gone into operation may not be recovered because they are merely speculative and incapable of being ascertained with the requisite degree of certainty. Restatement, Contracts, Sec. 331, states the law to be that damages are recoverable for profits prevented by breach of contract 'only to the extent that the evidence affords a sufficient basis for estimating their amount in money with reasonable certainty', and that where the evidence does not afford a sufficient basis, 'damages may be measured by the rental value of the property.' Comment 'd' says this: 'If the defendant's breach has prevented the plaintiff from carrying on A well-established business, the amount of profits thereby prevented is often capable of proof with reasonable certainty. On the basis of its past history, a reasonable prediction can be made as to its future.' (Italics supplied) That damages for profits anticipated from a business which has not started may not be recovered, is laid down in 25 C.J.S., Damages, § 42, and 15 Am.Jur., Damages, § 157; 5 Corbin, Contracts, §§ 1022, 1023; Cramer v. Grand Rapids Show Case Co., 223 N.Y. 63, 119 N.E. 227, 1 A.L.R. 156; Sinclair Ref. Co. v. Hamilton &...