Morrow v. First Nat. Bank of Hot Springs

• Decision Date: 16 May 1977
• Docket Number: No. 1,No. 76-417,76-417,1
• Citation: Morrow v. First Nat. Bank of Hot Springs, 550 S.W.2d 429, 261 Ark. 568 (Ark. 1977)
• Parties: , 21 UCC Rep.Serv. 1060 Bill MORROW and Charles R. Goslee, Appellants, v. FIRST NATIONAL BANK OF HOT SPRINGS, Appellee
• Court: Arkansas Supreme Court

Page 429

550 S.W.2d 429

261 Ark. 568, 21 UCC Rep.Serv. 1060

Bill MORROW and Charles R. Goslee, Appellants, v. FIRST NATIONAL BANK OF HOT SPRINGS, Appellee.

No. 76-417.

Supreme Court of Arkansas, Division No. 1.

May 16, 1977.

Gary R. Gibbs, of Gibbs & Henry, Hot Springs, for appellants.

Wootton, Land & Matthews, Hot Springs, for appellee.

GEORGE ROSE SMITH, Justice.

For a number of years before 1971 the two plaintiffs, Morrow and Goslee, collected coins, individually and as partners. In 1971 a substantial part of the collection was kept at Morrow's home in Hot Springs. On September 4 of that year someone broke into the house and stole coins valued at $32,155.17. Almost three years later the plaintiffs brought this action against the defendant bank to recover the value of the stolen coins. The complaint alleges a breach of contract, in that the bank failed to notify the plaintiffs of the availability, on August 30, 1971, of safety-deposit boxes in a new bank building. This appeal is from a summary judgment in favor of the bank.

We state the facts most favorably to the plaintiffs. Morrow collected coins for many years. In about 1964 he had metal cabinets built in a closet in his house, so arranged that a burglar would have to go through eleven sets of locks to reach the coins. In about 1969, as insurance rates were becoming prohibitive, the two plaintiffs began to look for large safety-deposit boxes in which to keep their coins. No boxes were available in Hot Springs. From time to time Morrow discussed the problem with one or more employees of the defendant bank, where he was a regular customer.

In the summer of 1971 the bank was planning to move into its new building. Safety-deposit boxes were advertised. On June 25 the plaintiffs reserved three large boxes in the new building, paying $25 for each box. It was expected that the boxes would be available in from 30 to 60 days. Morrow explained his need for the boxes, adding that he particularly wanted them by September 1, when his husky teenage son would leave for college. The bank was perhaps on notice, through a loan application to a different department, that the coins were worth at least $12,000.

One or two employees of the bank promised to notify Morrow as soon as the boxes were available. The burglary occurred on the evening of Saturday, September 4, while Morrow and his wife were out to dinner. When Morrow inquired about the safety-deposit boxes on the following Tuesday, after Labor Day, he learned that the boxes had become available on August 30. An employee of the bank explained that "we just didn't have time" to notify Morrow that the boxes were ready. The plaintiffs immediately moved the rest of their coins into the safety-deposit boxes. We do not reach the bank's argument that the plaintiffs' acceptance of the rental contract was a waiver of their right to claim a breach.

We consider this case to be controlled by our holding in Hooks Smelting Co. v. Planters' Compress Co., 72 Ark. 275, 79 S.W. 1052 (1904). There we adopted what is now known as the "tacit agreement test" for the recovery of consequential damages for a breach of contract. By that test the plaintiff must prove more than the defendant's mere knowledge that a breach of contract will entail special damages to the plaintiff. It must also appear that the defendant at least tacitly agreed to assume responsibility. Justice Riddick's entire opinion in Hooks is enlightening, but we emphasize this particular language:

It seems then that mere notice is not always sufficient to impose on the party who breaks a contract damages arising by reason of special circumstances, and the reason why this is so was referred to in a recent decision by the supreme court of the United States. In that case Mr. Justice Holmes, who delivered the opinion of the court, after remarking that one who makes a contract usually contemplates performance, not a breach, of his contract, said: "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." Globe Refining Co. v. Landa Oil Co., 190 U.S. 540, 23 S.Ct. 754, 47 L.Ed. 1171.

Now, where the damages arise from special circumstances, and are so large as to be out of proportion to the consideration agreed to be paid for the services to be rendered under the contract, it raises a doubt at once as to whether the party would have assented to such a liability had it been called to his attention at the making of the contract unless the consideration to be paid was also raised so as to correspond in some respect to the liability assumed. To make him liable for the special damages in such a case, there must not only be knowledge of the special circumstances, but such 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." In other words, where there is no express contract to pay such special damages, the facts and circumstances in proof must be such as to make it reasonable for the judge or jury trying the case to believe that the party at the time of the contract tacitly consented...