Wilson v. Wernwag

• Decision Date: 25 February 1907
• Docket Number: 96
• Citation: 217 Pa. 82,66 A. 242
• Parties: Wilson v. Wernwag, Appellant
• Court: Pennsylvania Supreme Court

66 A. 242

217 Pa. 82

Wilson v. Wernwag, Appellant

No. 96

Supreme Court of Pennsylvania

February 25, 1907

Argued January 8, 1907

Appeal, No. 96, Jan. T., 1906, by defendants, from order of C.P. No. 4, Phila. Co., Dec. T., 1895, No. 900, dismissing exceptions to report of referee in case of Thomas H. Wilson v. Theodore Wernwag and T. Russell Dawson, trading as Wernwag & Dawson. Affirmed.

Assumpsit for breach of contract.

The case was referred to Charles E. Morgan, Jr., Esq., as referee under act of May 14, 1874. The referee filed a report in favor of plaintiff for $7,389.44.

The facts are stated in the opinion of the Supreme Court.

Errors assigned were in dismissing exceptions to referee's report, and in entering judgment for plaintiff.

The judgment is affirmed.

Peter Boyd, for appellant. -- Neither under the facts nor the decisions ought the agreement made by Thomas H. Wilson, dated November 10, 1891, to be construed as an agreement binding upon Wernwag & Dawson to remain in business during the entire year 1892, or to make any given amount of sales: Lummis &amp Co. v. Devine, 9 Pa. Superior Ct. 349; Aspdin v Austin, 5 Ad. & Ellis (N.S.), 671; Ex parte Maclure, L.R. 5 Chan. App. 737; Coffin v. Landis, 46 Pa. 426; Blackstone v. Buttemore, 53 Pa. 266; Rightmire v. Hirner, 188 Pa. 325.

Even if by any possibility the agreement should be construed as binding upon Wernwag & Dawson to remain in business during the entire year of 1892, yet the plaintiff ought not to be awarded as damages the prospective profits that he might have earned from the time of the breach of contract: Rightmire v. Hirner, 188 Pa. 325; Stern v. Rosenheim, 67 Md. 503 (10 A. Repr. 221); Washburn v. Hubbard, 6 N.Y. Superior Ct. 11; Rogers v. Davidson, 142 Pa. 436; Reiter v. Morton, 96 Pa. 229; Stern v. Rosenheim, 67 Md. 503 (10 A. Repr. 221); Washburn v. Hubbard, 6 N.Y. Superior Ct. 11; Hair v. Barnes, 26 Ill.App.Ct. 580; Pennypacker v. Jones, 106 Pa. 237; Kinports v. Breon, 193 Pa. 309; McKnight v. Ratcliff, 44 Pa. 156; Rightmire v. Hirner, 188 Pa. 325.

The loss of profits can only be compensated for in damages when they are direct and immediate fruits of the contract, and must have been in contemplation of the parties when the contract was made: Kinports v. Breon, 193 Pa. 309; McConaghy v. Pemberton, 168 Pa. 121; Hutchinson v. Snider, 137 Pa. 1; Billmeyer v. Wagner, 91 Pa. 92; Coal Co. v. Foster, 59 Pa. 365; Fleming v. Beck, 48 Pa. 309; Fessler v. Love, 48 Pa. 407; Cincinnati, etc., Gas Co. v. Western Co., 152 U.S. 200 (14 S.Ct. Repr. 523).

Henry Budd, with him William C. Stoever, for appellee. -- The measure of damages applied by the referee was proper: Bagley v. Smith, 10 N.Y. 489; Devlin v. Mayor, etc., of New York, 63 N.Y. 8; National Filtering Oil Co. v. Ins. Co., 106 N.Y. 535 (13 N.E. Repr. 337); Wakeman v. Wheeler & Wilson Mfg. Co., 101 N.Y. 205 (4 N.E. Repr. 264); Fox v. Harding, 61 Mass. 516; Hubbard v. Rowell, 51 Conn. 423; Hoy v. Gronoble, 34 Pa. 9; Imperial Coal Co. v. Port Royal Coal Co., 138 Pa. 45; Simmons v. Brown, 5 R.I. 299; U.S. v. Speed, 75 U.S. 77; U.S. v. Behan, 110 U.S. 338 (4 S.Ct. Repr. 81); Kendall Bank Note Co. v. Commissioners, 79 Va. 563.

Before MITCHELL, C.J., FELL, BROWN, MESTREZAT, POTTER, ELKIN and STEWART, JJ.

OPINION

MR. JUSTICE MESTREZAT:

This is an action of assumpsit to recover damages for an alleged breach of contract. The plaintiff was a manufacturer of woolen goods, in the city of Philadelphia. The defendants were commission merchants and carried on the business in Philadelphia and New York. For a few years prior to 1890, they were the sole consignees and agents of the plaintiff in selling his goods, for which they received a fixed percentage of the amount of sales made as compensation for their services. On December 12, 1890, the plaintiff submitted certain propositions to the defendants in writing which they accepted, among which were the following: "In consequence of the great loss which would be incurred by the sudden changing of his commission house, Thomas H. Wilson, makes to Wernwag & Dawson, the following propositions: '(a) That on and after January 1, 1891 to July 1, 1891, that he will allow Wernwag & Dawson, 7 1/2% commissions on all goods sold and entered for his account; (b) That for and in consideration of 1 1/2% on the total sales of Wernwag & Dawson, he will guarantee all accounts sold by them between January 1 and July 1, 1891, this to include goods sold before July 1, 1891, and not entered until after that date; (c) If Wernwag & Dawson will agree to remain in business for one year from January 1, 1891, he will guarantee the entire business against losses by bad debts for one per cent; (d) On or before July 1, 1891, Wernwag & Dawson will decide whether they will remain in business for the balance of the year, say from July 1, 1891 to December 31, 1891. Should they decide to continue in business till December 31, 1891, then they are to pay Thomas H. Wilson one per cent only for guaranteeing the entire year's business.'"

The defendants continued in business during the year 1891. In October, 1891, the plaintiff requested the defendants to advise him by November 1 whether they intended remaining in business during the year 1892, and said that he was willing to guarantee them against losses for the year of 1892 at one per cent of the net amount of their sales, and would pay them seven and one-half per cent commission, but would not pay $1,500 expenses as he had done during the year 1891. In November, 1891, the plaintiff signed and delivered to defendants the following writing, written and witnessed by Samuel White, the credit man and head bookkeeper of defendants:

"PHILADELPHIA, November 10, 1891.

"Mr. Thomas H. Wilson hereby agrees to guarantee Wernwag & Dawson against all losses from failures, for and in consideration of the sum of one per cent upon the net amount of their sales for the year 1892."

The defendants accepted this offer orally. They continued in business and continued to sell the plaintiff's goods until April 1, 1892, when their firm was dissolved, and they refused thereafter to sell his goods or longer to carry on the commission business.

This action was brought by the plaintiff to recover damages, which he alleges he sustained by reason of the defendants having discontinued their commission business and having declined to continue it during the entire year of 1892, which he claims was a breach of the contract of November 10, 1891. He claims that under the contract between the parties the defendants were to continue the business during the whole of 1892, and that by failing to do so he is injured to the extent of one per cent of the sales which the defendants would have made from April 1, 1892, the date of the dissolution of their partnership, to December 31, 1892, less the losses which they would have sustained during that period. The defendants, on the other hand, deny that the contract between the parties contemplated that they should continue the business during the whole of the year 1892, or obligated them to do so, and contend that if such is the correct interpretation of the contract, the proper measure of damages for its breach is not one per cent of the sales which they would have made had they continued in business for the whole year, less the losses; that such profits are too remote and too uncertain as a measure of damages for the alleged default. These are the important and controlling questions in the case, and the only questions which we deem it necessary to consider on this appeal.

The case was referred to a referee under the act of May 14, 1874. He found against the contention of the defendants on both propositions, and his report was confirmed by the court. He has found and stated at length the facts in the case, and we think his findings are supported by the evidence.

The referee found that "it was understood by both parties to said agreement of November 10, 1891, that an important inducement to the plaintiff to enter into it was the continuance of the defendants in their said business during the whole of the year 1892, and it was the intent and understanding of both parties that defendants should remain in said business during that period." He, therefore, held that the contract of November 10, 1891, required the defendants to continue their commission business, and to accept and sell the plaintiff's goods during the entire year of 1892. We are clear that this is a proper interpretation of the contract. In Lacy v. Green, 84 Pa. 514, WOODWARD, J., delivering the opinion, says (p. 518): "Where the meaning of an agreement is doubtful, its terms are to be considered in the light thrown on them by approved or admitted illustrative facts. The situation in which the parties stand, the necessities for which they would naturally provide, the conveniences they would probably seek to secure, and the circumstances and relations of the property in regard to which they have negotiated, are all elements in the interpretation of an ambiguous contract." We think the language of the proposition of November 10, 1891, made by Wilson to the defendants, discloses clearly an intention that the business should be continued for the whole of the ensuing year. His guaranty, as therein expressed, is against all losses from failures, and the consideration which he is to receive is a percentage "upon the net amount of their (defendants') sales for the year 1892." The percentage, therefore, was not to be computed upon such sales as they might make in 1892, or until the dissolution of their partnership, or until they discontinued their business, but was stated clearly and distinctly to be upon the "net amount of their sales for the year 1892." When we consider all the...