Kerr S.S. Co. v. Radio Corp. of America

• Decision Date: 31 May 1927
• Citation: 245 N.Y. 284,157 N.E. 140
• Parties: KERR S. S. CO., Inc., v. RADIO CORPORATION OF AMERICA.
• Court: New York Court of Appeals Court of Appeals

245 N.Y. 284

157 N.E. 140

KERR S. S. CO., Inc.,

v.RADIO CORPORATION OF AMERICA. ^*

Court of Appeals of New York.

May 31, 1927.

Action by the Kerr Steamship Company, Inc., against the Radio Corporation of America. From a judgment of the Appellate Division (216 App. Div. 839, 216 N. Y. S. 856), affirming a judgment of the trial term entered on directed verdict, defendant appeals by permission.

Judgments of the Appellate Division and of the Trial Term reversed, and judgment directed for plaintiff in named amount.

Appeal from Supreme Court, Appellate Division, First Department.

Peter F. McAllister and Vincent R. Impellitteri, both of New York City, for appellant.

Elkan Turk, of New York City, Benjamin Wiener, of Brooklyn, and Herman Goldman, of New York City, for respondent.

CARDOZO, C. J.

On May 15, 1922, the plaintiff, Kerr Steamship Company, Inc., delivered to defendant, the Radio Corporation of America, a telegram consisting of 29 words in cipher to be transmitted to Manila, Philippine Islands. The telegram was written on one of the defendant's blanks, and is prefaced by the printed words:

‘Send the following radiogram via R. C. A., subject to terms on back hereof which are hereby agreed to.’

The defendant had no direct circuit for the transmission of radiograms to the Philippine Islands. A radiogram could have been sent to London, where by transfer to other companies it might have reached its destination. This was expensive for the customer. To reduce the expense and follow a more direct route, the defendant forwarded its Philippine messages over the line of the Commercial Cable Company, which transmitted them by cable. When messages were thus forwarded, the practice was to send them upstairs to be copied. One copy was then handed to the cable company and one kept for the defendant's files. That practice was followed in this instance, except that the copy intended for the cable company was mislaid and not delivered. As a consequence the telegram was never sent.

The telegram on its face is an unintelligible cipher. It is written in Scott's code. Translated into English, it remains at best obscure, though some inkling of the transaction may be conveyed to an ingenious mind. Untranslated, it is jargon. The fact is that one Macondray, to whom the telegram was addressed, had cabled the plaintiff for instructions as to the loading of a ship, the Blossom. The instructions were contained in the undelivered message. As a result of the failure to transmit them, the cargo was not laden and the freight was lost. The trial judge directed a verdict for $6,675.29, the freight that would have been earned if the message had been carried. He held that the cipher, though the defendant could not read it, must have been understood as having relation to some transaction of a business nature, and that from this understanding without more there ensued a liability for the damages that would have been recognized as natural if the transaction had been known. The defendant insists that the tolls which the plaintiff was to pay, $26.78, must be the limit of recovery.

The settled doctrine of this court confines the liability of a telegraph company for failure to transmit a message within the limits of the rule in Hadley v. Baxendale (9 Exch. 341). Where the terms of the telegram disclose the general nature of the transaction which is the subject of the message, the company is answerable for the natural consequences of its neglect in relation to the transaction thus known or foreseen. Leonard v. New York A. & B. Electro Magnetic Tel. Co., 41 N. Y. 544, 1 Am. Rep. 446;Rittenhouse v. Independent Line of Telegraph, 44 N. Y. 263, 4 Am. Rep. 673. On the other hand, where the terms of the message give no hint of the nature of the transaction, the liability is for nominal damages or for the cost of carriage if the tolls have been prepaid. Baldwin v. United States Tel. Co., 45 N. Y. 744, 6 Am. Rep. 165. This is in accord with authority elsewhere. Primrose v. Western Union Tel. Co., 154 U. S. 1, 29, 14 S. Ct. 1098, 38 L. Ed. 883;Wheelock v. Postal Tel. Cable Co. of Massachusetts, 197 Mass. 119, 83 N. E. 313,14 Ann. Cas. 188; Sanders v. Stuart, L. R. 1 C. P. Div. 326; 3 Sutherland on Damages, § 959.

We are now asked to hold that the transaction has been revealed within the meaning of the rule if the length and cost of the telegram or the names of the parties would fairly suggest to a reasonable man that business of moment is the subject of the message. This is very nearly to annihilate the rule in the guise of an exception. The defendant upon receiving from a steamship company a long telegram in cipher to be transmitted to Manila would naturally infer that the message had relation to business of some sort. Beyond that it could infer nothing. The message might relate to the loading of a cargo but equally it might relate to the sale of a vessel or to the employment of an agent or to any one of myriad transactions as divergent as the poles. Notice of the business, if it is to lay the basis for special damages, must be sufficiently informing to be notice of the risk. Primrose v. Western Union Tel. Co., supra; Western Union Tel. Co. v. Sullivan, 82 Ohio St. 14, 91 N. E. 867,137 Am. St. Rep. 754; 3 Sutherland on Damages, §§ 959, 970.

At the root of the problem is the distinction between general and special damage as it has been developed in our law. There is need to keep in mind that the distinction is not absolute, but relative. To put it in other words, damage which is general in relation to a contract of one kind may be classified as special in relation to another. If A. and B. contract for the sale of staple goods, the general damage upon a breach is the difference between the market value and the price. But if A. delivers to X. a telegram to B. in cipher with reference to the same sale, or a letter in a sealed envelope, the general damage upon the default of X. is the cost of carriage and no more. As to him the difference between price and value is damage to be ranked as special, and therefore not recoverable unless the message is disclosed. The argument for a larger liability loses sight of this distinction. It misses a sure foothold in that it shifts from general damage in one relation to general damage in another. The bearer of a message who infers from the surrounding circumstances that what he bears has relation to business of some kind is liable, we are told, for any damages that are natural with reference to the character of the business as to which knowledge is imputed. When we ask, however, to what extent the character of the business will be the subject of imputed knowledge, we are told that it is so much of the business only as will make the damage natural (cf. Western Union Tel. Co. v. Way, 83 Ala. 542, 557, 558, 4 So. 844;Daughtery v. American Union Tel. Co., 75 Ala. 168, 51 Am. Rep. 435. Thus we travel in a circle, what is natural or general being adapted to so much of a putative business as is constructively known, and what is constructively known being adapted to what is general and natural. One cannot build conclusions upon foundations so unstable. The loss of a cipher message to load a vessel in the Philippines may mean to one the loss of freight, to another an idle factory, to another a frustrated bargain for the sale or leasing of the cargo. We cannot say what ventures are collateral till we know the ventures that are primary. Not till we learn the profits that are direct can we know which ones are secondary. There is a contradictio in adjecto when we speak of the general damages appropriate to an indeterminate transaction.

The key to Hadley v. Baxendale is lost if we fail to keep in mind the relativity of causation as a concept of the law. McLaughlin, ‘Proximate Cause,’ 39 Harv. L. R. 149; Edgerton, ‘Legal Cause,’ 72 U. of Pa. L. R. 211, 343; Bohen, Studies in the Law of Torts, p. 503; Haldane, The Reign of Relativity, pp. 125, 126. The argument for the plaintiff mistakenly assumes that the test of what is general damage in a controversy between the sender of a message and the receiver is also the test between the sender and the carrier. To unify the two relations is to adandon Hadley v. Baxendale in its application to contracts for the transmission of a message. If knowledge that a message is concerned with business of some kind is by imputation knowledge of those forms of business, and those only, that are typical or normal, there must be search for a definition of the normal and the typical. The quest is obviously futile. Every effect is natural when there is complete knowledge of the cause. Haldane, supra. Every damage becomes natural when the transaction out of which it arises has been fully comprehended. Imputed knowledge cannot stop with imputed notice of transactions that are standardized by usage. In the complexities of modern life, one does not know where the ordinary ends and the extraordinary begins. Imputed knowledge, if it exists, must rest upon an assumption less timid and uncertain. The assumption cannot be less than this, that whatever a carrier could ascertain by diligent inquiry as to the nature of the undisclosed transaction, this he should be deemed to have ascertained, and charged with damages accordingly. We do not need to consider whether such a rule might wisely have been applied in the beginning, when the law as to carriers of messages was yet in its infancy. Most certainly it is not the rule announced in our decisions. We cannot accept it now without throwing overboard the doctrine that notice is essential. Notice may indeed be adequate though the transaction is indicated in outline only. 3 Sutherland on Damages, § 970, and cases cited; cf. Bailey & Co. v. Western Union Tel. Co., 227 Pa. 522, 76 A. 736,43 L. R. A. (N. S.) 502,19 Ann. Cas. 895;Shawnee Milling Co. v. Postal Telegraph Cable Co., 101 Kan. 307, 166 P. 493, L. R. A. 1917F, 844;Leonard v. New York A. & B. Electro Magnetic...