Nephi Processing Plant v. Talbott, 5558.

Decision Date03 September 1957
Docket NumberNo. 5558.,5558.
Citation247 F.2d 771
PartiesNEPHI PROCESSING PLANT, Inc., a corporation, Appellant, v. H. A. TALBOTT and Margaret Talbott, Appellees.
CourtU.S. Court of Appeals — Tenth Circuit

Edward W. Clyde (of Clyde & Mecham), Salt Lake City, Utah, for appellant.

Richard M. Taylor, Spanish Fork, Utah, and Arthur H. Nielsen, Salt Lake City, Utah, for appellees.

Before PHILLIPS, PICKETT and LEWIS, Circuit Judges.

PICKETT, Circuit Judge.

In February 1954, H. A. Talbott and his wife Margaret, residents of Palisade, Colorado, purchased approximately 20,000 turkey poults from the defendant, Nephi Processing Plant, Inc., a Utah corporation. They brought this action to recover damages for breach of express or implied warranty of the poults, for conversion of the turkeys after they were delivered to and processed by the defendant, and for other specific items of damage. Western Cooperative Hatcheries, a corporation, was brought into the action by third-party proceedings instituted by Nephi, alleging that if Nephi was responsible in damages to the plaintiffs, Western Hatcheries was responsible to Nephi. The trial court dismissed the third-party proceedings on the ground that the issues therein had been determined in an earlier proceeding between the parties.1 The trial court separated plaintiffs' claims into three categories and submitted the claims to a jury, which returned a verdict totaling $41,920.00. This is an appeal from the judgment entered upon this verdict.

After the case had been submitted to this court, Nephi and Western Hatcheries settled their differences and the appeal, insofar as it affected Western Hatcheries, was dismissed. The questions remaining to be determined arise out of instructions given to the jury relating to the measure of damages for breach of warranty and conversion. It is also contended that the court erred in submitting to the jury a claim made by the Talbotts for the cost of the delivery of the turkeys to Nephi.

Nephi was engaged in the business of processing live turkeys for market. Its representatives induced the Talbotts to purchase the turkey poults for the purpose of growing them for delivery to Nephi approximately six months after they were received. Nephi had full knowledge of the purpose for which the poults were purchased. The Talbotts had had very little experience in raising turkeys for market and relied upon the judgment of Nephi. Within a few days after the poults were received by the Talbotts, it became apparent that they were afflicted with infectious sinusitis, a disease common to turkey poults, which required special medication and care. It is conceded that the disease may cause substantial death loss of turkey poults and that those which survive will not gain the weight that normally healthy turkeys do. The court instructed the jury that if it found that the plaintiffs were entitled to recover for a breach of either an express or implied warranty of quality in the sale of the turkeys, it should assess such damages as were found to have been sustained by reason of the breach of the warranty, including any cost incurred by plaintiffs in reducing such loss and including loss of profit. Nephi excepted to this instruction on the ground "* * * that the measure of damages for breach of warranty should be measured as of the time of the breach and should be the reasonable difference in value between what was sold and what was delivered at the time the warranty was breached * * *". The question here is limited to that raised by the exception. Rule 51, F.R. Crim.P. 18 U.S.C.A. Nephi relies on § 60-5-7(7), Utah Code Anno., which provides that "In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate damage of a greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty". Subsection 7 is applicable to warranties of quality in the absence of special circumstances, and there were special circumstances in this case. The primary purpose of the purchase was to raise the turkeys for market. This was known to Nephi. The warranty was breached when the diseased poults were delivered. Nephi was notified of the diseased condition of the poults and it advised their retention by the Talbotts and prescribed medical treatment for them. Under the existing conditions no other course was left to the Talbotts but to keep the poults and do the best they could with them. To allow as damages only the difference between the value of the poults when delivered and their value in the diseased condition would not fully compensate the Talbotts for the actual damages suffered. This was not the only damage that naturally resulted from this breach of warranty.

Following the Utah statute, the court, without objection, instructed the jury that where a buyer expressly or by implication makes known to the seller the particular purpose for which an article is to be used and the buyer relies upon the skill and judgment of the seller, there is an implied warranty that the article is reasonably fit for the purpose for which it was purchased. § 60-1-15, Utah Code Anno. This presented a factual question for the jury which was resolved in favor of the Talbotts. When a breach of an express or implied warranty occurs, the measure of damages is the loss directly and naturally resulting, in the ordinary course of events, from the breach. § 60-5-7(6),2 Utah Code Anno.; Williston on Sales, Rev.Ed., Vol. 3, § 614; Jorgensen v. Gessell Pressed Brick Co., 45 Utah 31, 141 P. 460; Schlottman v. Pressey, 10 Cir., 195 F.2d 343, certiorari denied 344 U.S. 817, 73 S.Ct. 12, 97 L.Ed. 636. See also Smith v. Onyx Oil & Chemical Co., 3 Cir., 218 F.2d 104.

The measure of damages for breach of warranty is to be determined by the general rules that govern damages for breach of contract. In Schlottman v. Pressey, supra 195 F.2d 345, we said:

"The fundamental basis for an award of damages for a breach of contract is just compensation for those losses which necessarily flow from the breach. Blair v. United States, 8 Cir., 150 F.2d 676. Generally, the injured party is entitled to recover those damages which may fairly and reasonably be considered as arising naturally according to the usual course of things or as may reasonably be supposed to have been in the contemplation of the parties at the time the contract was made, as the probable result of its breach. Gulf States Creosoting Co. v. Loving, 4 Cir., 120 F.2d 195; Twachtman v. Connelly, 6 Cir., 106 F.2d 501; Detroit & I. R. Co. v. A. Guthrie & Co., Inc., 6 Cir., 72 F.2d 126; Kaercher v. Citizens\' Nat. Bank of Ortonville, Minn., 8 Cir., 57 F.2d 58; Atlantic Oil Producing Co. v. Masterson, 5 Cir., 30 F.2d 481; Aetna Casualty & Surety Co. v. North Sterling Irr. District, 75 Colo. 185, 225 P. 261."

See also Wasatch Chemical Co. v. Leon, Utah, 259 P.2d 301; Park v. Moorman Mfg. Co., 121 Utah 339, 241 P.2d 914, 40 A.L.R.2d 273; Jorgensen v. Gessell Pressed Brick Co., supra. The cost of minimizing damages and loss of profits, if found to be within the contemplation of the parties when the contract was made and a direct consequence of a breach of warranty, are recoverable as damages. Restatement, Law of Contracts, § 330; Dally v. Isaacson, 40 Wash.2d 574, 245 P.2d 200; Wasatch Chemical Co. v. Leon, supra; Park v. Moorman Mfg. Co., supra; Tuttle v. Bootes Hatcheries & Packing Co., D.C.D. Minn.1953, 112 F.Supp. 705.

Pursuant to a processing agreement which the Talbotts executed, the turkeys were delivered to Nephi for processing during the fall of 1954. Nephi was instructed in writing to sell the processed...

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    ...Co., 34 F.Supp. 585 (E.D.Tenn.1940); Annot., 95 A.L.R. 615 (1935); 89 C.J.S. Trover & Conversion § 41. Cf. Nephi Processing Plant, Inc. v. Talbott, 247 F.2d 771 (10 Cir. 1957). The federal courts have historically approved a rule of damages for conversion of stock measured by the price at t......
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