No. 812 | 5th Cir. | Jan 9, 1900
(after stating the facts as above). The rulings of the trial court, and the errors assigned thereon, present substantially two questions: (1) Can the plaintiff join in one action for damages for breach of the contract a claim for the loss of anticipated profits with the claim to recover his losses for actual outlay and expenditures? (2). Are the anticipated profits for the loss of which he claims damages in this case too remote to sustain an action? Conforming to the practice and pleadings in the state of Texas, the plaintiff’s case is presented by a petition setting up fully all the facts on which he bases his claims for damage.
The first of the questions above stated seems to us to be answered by the reasoning and review of authorities in the opinion of the court in the case of U. S. v. Behan, lift U. S. 338, 4 Sup. Ct. 81, 28 L. Ed. 168" court="SCOTUS" date_filed="1884-02-04" href="https://app.midpage.ai/document/united-states-v-behan-91040?utm_source=webapp" opinion_id="91040">28 L. Ed. 168. Adopting substantially the language of the very learned judge who delivered that opinion, without quoting with literal accuracy, we observe that he therein says:
When a party injured by the stoppage of a contract elects to go for damages for the breach thereof, the first and most obvious damage to be shown is the amount which he has been induced to expend on the faith of the contract, including a fair allowance for his own time and services. “Unless there is some artificial rule of law which has taken the place of natural justice in relation to the measure of damages, it would seem to be quite clear that the claimant ought at least to be made whole for losses and expenditures. If he chooses to go further, and claim for the loss of anticipated profits, he may do so, subject to the rules of law as to the character of profits which may be thus claimed. It does not lie, however, in the mouth of the party who has voluntarily and wrongfully put an end to the contract, to say that the party injured has not been damaged, at least to the amount of what he has been induced fairly and in good faith to lay out and expend, including his own services. * * * At least, it does not lie in the mouth of the party in fault to say this unless he can show that the expenses of the party injured have been extravagant and unnecessary for the purpose of carrying out the contract. ♦ * * The claim for profits, if not sustained by proof, ought not to preclude a recovery for the claim for losses sustained by outlay and expenses. In a proceeding like the present, in which the claimant sets up by way of petition a plain statement of the facts, without technical formality, and prays relief either in a general manner, or in an alternative or cumulative form, thé court ought not to hold the claimant to strict technical rules of pleading, but should give to his statement a liberal interpretation, and afford him sueh relief as he may show himself substantially entitled to, if within the fair scope of the claim as exhibited by the facts set forth in the petition.”
In tbe case of Dennis v. Maxfield, 10 Allen, 138, wbicb presented a question closely analogous to tbe one we are now discussing, it is '. said in tbe opinion by tbe chief justice:
“The breach of-the contract by the defendants has created only one cause of . action in favor of . the plaintiff. His compensation for this breach necessarily . embraces all thát-.hé is entitled to recover under the contract Indeed, his right*229 to recover anything — as well that which was earned before as that. which would have been earned if he had not been discharged — depends on the question whether he has performed his part of the contract. A party cannot sever a claim for damages arising under one contract so as to make two distinct and substantive causes of action.”
The second question presents more difficulty. We quote again from U. S. v. Behan, supra:
“The claimant was not hound to go for profits, even though he counted for . them in his petition. He might stop upon a showing of losses. The two heads of damage are distinct, though closely related. When profits are sought, a recovery for outlay is included, and something more. That something more is the profits. If the outlay equals or exceeds the amount to be received, of course th-re can be no profits.”
it is clear that the plaintiff and the defendant, in entering into the contract which is made the basis of this action, each had in contemplation not only the outlay of expenses and personal service to be contributed by the plaintiff, but, and equally, the earning of profits from the per cent, on the premiums to be allowed the plaintiff as his sole compensation for his expenditures and service. As was said in the case of Dennis v. Maxfiold, supra:
“These earnings or profits were therefore within the direct contemplation of the parties when the contract was entered into. They are undoubtedly in their nature contingent and speculative, and difficult of ascertainment; but, being made by express agreement of tbe parties of the essence of the contract, we do not see how they can be excluded in ascertaining the compensation to which the plaintiff is entitled. Would it be a good bar to a claim for damages for breach of articles of co-partnership that the profits of the contemplated business were uncertain, contingent, and difficult of proof, and could it be held for this reason that no recovery could be had in case of a breach of such a com tract? Or, in an action on a policy of insurance on profits, would it be a valid defense, in the event of loss, to say that no damages could he claimed or proved, because the subject of insurance was merely speculative, and the data on which the profits must be calculated were necessarily inadequate and insufficient to constitute a safe basis on which to rest a claim for indemnity? The answer is that in such cases the parties, having by their contract adopted a contingent, uncertain, and speculative measure of damages, must abide by it, and courts and juries must approximate as nearly as possible to the truth in endeavoring- to ascertain the amount which a party may be eniitled to recover on such a contract in the event of a breach. If this is not the rule of law, we do not see that there is any alternative short of declaring- that where parties negotiate for compensation or indemnity in the form of an agreement for profits, or a share of them, no recovery can be had on such a contract in a court of law,- — a proposition which is manifestly absurd.”
In the case of Bagley v. Smith, 10 N.Y. 489" court="NY" date_filed="1853-06-05" href="https://app.midpage.ai/document/bagley-v--smith-3589653?utm_source=webapp" opinion_id="3589653">10 N. Y. 489, in which claim for damages for loss of profits by the wrongful dissolution of a partnership was sought, the judge who delivered the opinion of the court said: ’
‘‘The object of commercial partnership is profit.. This is the motive upon which men enter into the relation. The only legitimate beneficial consequence of continuing a partnership is the making of profits. Tbe most direct and legitimate injurious consequence which can follow upon an unauthorized dissolution of a partnership is the loss of profits. Unless that loss can be made up to the injured party, it is idle to say that any obligation is imposed by a contract to continue a partnership for a fixed period. The loss of profits is one of the common grounds, and the amount of profits lost one of the common measures of the damages to he given upon a breach of contract.” . '
In Hitchcock v. Knights of Maccabees (Mich.) 58 N.W. 640" court="Mich." date_filed="1894-04-10" href="https://app.midpage.ai/document/hitchcock-v-supreme-tent-of-knights-of-the-maccabees-of-the-world-7937001?utm_source=webapp" opinion_id="7937001">58 N. W. 640, on a trial of an action against a mutual benefit society for breach of contract, the plaintiff showed that he was employed by the defendant to establish lodges in an exclusive territory, at his own expense, and what his proportion of the membership fees and per capita dues would have been, had he established the lodges established by defendant in his territory during the unexpired term for which he was employed, and the cost of like work he had already done. Held, that the question of his damages should have been submitted to the jury. In the opinion the court say:
“In ease of a breach by plaintiff, defendant could perform the work, and recover as damages the difference between the price agreed upon and the cost of completion. In case of a breach by defendant, the profits lost constitute the legitimate measure of damages. The law is not so blind to justice as not to require the defendant to respond in damages, if there is any reasonable basis for their ascertainment. There is no presumption, legal or otherwise, that the plaintiff could not have completed the work. The defendant was satisfied with the success of the plaintiff. It is a fair presumption that he would have succeeded. It is a fair inference from the evidence that the defendant’s officers broke the contract because of the success, and the belief that they could secure the accomplishment of the work cheaper, which they in fact did. The defendant took charge of the work which the plaintiff had done, and completed it. The defendant may not now say, ‘It is true. I completed the work, but there is no certainty you could.’ * * * It has been demonstrated not only that the work could be, but that it has been, done. It is a fair inference that ft could have been done as well by the plaintiff as by the defendant. One element of damage is established by the contract, and the evidence from the defendant’s own books, namely, the amount agreed to be paid, and the benefits reaped by it. The-only other element is the cost of doing the work, which, deducted from the amount to be paid, would establish the profits. The expense of what plaintiff did is some evidence upon which to base -a judgment of the expense of doing the rest of the work. If that be the only evidence as to the cost, and plaintiff can establish by experience that it is more difficult and expensive to accomplish the first part of the work than the last part, defendant cannot complain if the jury take that as a basis to determine the cost. On the contrary, such a basis would be favorable to the defendant: and, if this were the only basis, we think, under the circumstances of this case, it was sufficient to justify a submission of the case to the jury. He who breaks his contract may not deny to the injured party the fair inferences to be drawn from the part performed.”
In Lewis v. Insurance Co., 61 Mo. 534" court="Mo." date_filed="1876-01-15" href="https://app.midpage.ai/document/lewis-v-atlas-mutual-life-insurance-8005225?utm_source=webapp" opinion_id="8005225">61 Mo. 534, the action was to recover damages for breach of a contract by the provisions of which the plaintiff agreed to work exclusively for the insurance company for the term of five years, and also bound himself to work the territory with a full corps of energetic and reliable agents. He had all the authority of a general agent in soliciting insurance and collecting premiums. As a compensation for his services and expenditures, he was to have a certain per cent, on premiums, as specified in the con
“A custom or usage lias sprung up and exists with insurance companies hy which adjustments are made as to the value and renewals of policies for any given length of time. By the use of statistical tables and comparisons, a remarkable degree of accuracy obtains; and, where a connection ceases between an agent and the company, it is the only mode of ascei'taining or adjusting the agent’s interest. The calculation by tlie actuary has been reduced to scientific principles, and it must be resorted to, else there would be a failure of justice, on one hand, or, on the other, the damages would be purely speculative.”
Touching a further feature in the case, we find this language in the opinion:
‘■The plaintiff was permitted to show the amount of his collections from time to time from July 1, 1889, to March 1, 1872, and tlie amount of his commissions during that time, both in the aggregate and per month, on the average. These commissions were all paid, and it is evident from the amount of the verdict that the jury must have considered the commission on premiums for the above-named period as a fair criterion of what plaintiff would have earned in tlie future had the contract not been broken. Without some other evidence of the probable amount of the business, these damages would be too much of a speculative character. The new business might depend on various circumstances, and be affected by numerous contingencies; and these should be shown, as entering Into the computation of damages.”
In Mueller v. Spring Co. (Mich.) 50 N.W. 319" court="Mich." date_filed="1891-11-20" href="https://app.midpage.ai/document/mueller-v-bethesda-mineral-spring-co-7935520?utm_source=webapp" opinion_id="7935520">50 N. W. 319, it was held that where the plaintiff had been constituted the defendant’s sole agent for the sale of its mineral water for the period of one year, within a defined territory, and before the year expired the agency was transferred to another, the plaintiff’s measure of damages was the profits he might have realized if defendant had not breached its contract, and that, in arriving at' the amount of plaintiff’s damage, proof of the actual sales of water hy the new agent during the plaintiff’s nnexpired term would not he speculative. In this connection it is said in the opinion:
“While it may be true that Mueller could not have disposed of as much of the article as this firm did, yet the amount of ilieir sales, while not conclusive upon defendant, was competent evidence to go to the jury upon the question of plaintiffs damages. It would have been proper to draw out upon cross-examination what special effort had been made by this firm to introduce and push this commodity, but tlie sales for the season named may have been greater than for the previous season, because of a demand created by what Mueller did, rather than by any special effort by this firm. Here was a commodity of which defendant was the sole proprietor, and for which Mueller was made sole agent. All of this commodity reaching the territory named*232 came from the defendant directly to Mueller, and through his agency. The agency- of the firm of Bassett & L’Hommedieu succeeded that of Mueller. They took it up where he left off, and continued it for the five months for which he was to enjoy those fruits. Proof as to the amount actually sold by them for that five months cannot be said to be speculative.”
■ The case of Wakeman v. Manufacturing Co., 101 N. Y. 205, 4 N. E. 264, bears so close an analogy to the case at bar, and the authority of .that court is so high, as to justify our quoting from the opinion at considerable length:
“This action was brought to recover, damages for the breach of an agreement made in the city of New York in February, 1878, which is set forth in the complaint as follows: ‘That if the plaintiffs shall succeed in placing (that is to say, selling) fifty of the defendant’s sewing machines to one firm or party in the republic of Mexico during the next trip of their agent to that country, then about to be made, they (the plaintiffs), for every fifty machines sa sold, ¡Shall have the sole agency for the sale of the defendant’s sewing machines in that locality and its vicinity in that republic; and the defendant should furnish to the plaintiffs machines at the lowest net gold prices.’ The defendant denied the agreement, but the jury found it substantially as" alleged, and it is conceded that we must assume here that such an agreement was made. The plaintiffs at once entered upon the performance of the agreement, purchased a sample machine of the defendant, caused their agent to be instructed in its mechanism and management, and then sent him to Mexico. After reaching there he sold fifty machines to one Mead, of San Luis Potosí, on his promise to Mead that he should be the general agent of the defendant for that locality and its vicinity. The order for the fifty machines was sent to the defendant and filled by it, and those machines were' forwarded to Mexico and paid for. Shortly thereafter plaintiffs’ agent made another sale of fifty machines for another locality in Mexico, and an order for those machines was sent to the defendant, which it absolutely refused to fill. Plaintiffs’ agent procured another order for one machine, and sent that to the defendant, which it also refused to fill; and then it refused to fill any further orders from the plaintiffs or their agents, and absolutely refused to perform and repudiated its agreement. Upon the trial of the action the plaintiffs made various offers of evidence to show the value of their contract with the defendant, the most of which were excluded. In his charge to the jury the judge held, as matter of law, that the plaintiffs coifid recover damages only for the refusal of the defendant to fill the orders actually given; and, the plaintiffs’ profits having been shown to be $4 on a machine, their recovery was thus limited to $204. They excepted to the rule of damages thus laid down, and the sole question for our determination is what, upon the facts of this case, was the proper rule of damages? Were the plaintiffs confined to the damages suffered by them in consequence of the refusal of the defendant to fill the two orders for fifty-one machines, or were they entitled also to recover the damages which they sustained by a total breach- of the agreement on the part of the defendant? The judge limited the damages, as stated in his charge, because any further allowance of damages for -fhe breach of. the agreement would, as he claimed, be merely speculative and ■imaginary. It is frequently difficult to apply the rules of damages, and to determine how far and when opinion evidence may be received to prove the amount of damages, and the difficulty is encountered in a marked degree in this case. One who violates his contract with another is liable for all the direct and proximate damages which result from the violation. The damages iriust be not merely speculative, possible, and imaginary, but they must be reasonably certain, and such only as actually follow or may follow from tbe breach of the contract. They may be so remote as not to be directly traceable to the breach, or they may be the result of other intervening causes, and then’ they cannot be allowed. They are nearly always involved in some uncertainty and contingency. Usually they are to be worked out in the future, and' they can be determined only approximately upon reasonable conjectures and probable estimates. They may be so uncertain, contingent, and imaginary as''to ‘bé incapable 'of adequate proof; and then they cannot be recovered,*233 because they cannot be proved. But when it is certain, that damages have been caused by a breach of contract, and the only uncertainty is as to their amount, there can rarely be good reason for refusing, on account of such uncertainty, any damages whatever for the breach. A person violating his contract should not be permitted entirely to escape liability because the amount of the damages which he has caused is uncertain. It is not true that loss of profits cannot be allowed as damages for a breach of contract., Losses sustained and gains prevented are proper elements of damage. Most contracts are entered into with the view to future profits, and such profits are in the contemplation of the parties, and, so far as they can be properly proved, they may form the measure of damage. ' As they are prospective, they must, to some extent, be uncertain and problematical, and yet on that account a person complaining of breach of contract is not to be deprived of ail remedy. It is usually Ms right to prove the nature of his contract, the circumstances surrounding and following its breach, and the consequences naturally and plainly traceable to it; and then it is for the jury, under proper instructions asi to the rules of damages, to determine the compensation to be awarded for the' breach. When a contract is repudiated, the compensation of the party complaining of its repudiation should be the value of the contract. He has been deprived of his contract, and he should have in lieu thereof its value, to be ascertained by the application of rules of law which have been laid down for the guidance of courts and jurors. [The judge then reviews and cites a number of reported cases, and thereafter proceeds with his opinion.] It is quite clear that the rules of damages having the sanction of these authorities were violated upon the trial of this action. The plaintiffs had the ’ right, under their agreement, to establish agencies for the sale of defendant’s machines anywhere in Mexico where they could sell fifty machines. An agency, when thus established, was to be exclusive, and was to have some permanency. It could not be broken up at the will of the defendant, without some default on the part of the plaintiffs. That the agreement had some value to the plaintiffs is very clear, and of that value, whatever it was, they were deprived by the act of the defendant. It is quite true that that value, or, in other words, the damages caused to the plaintiffs by the total breach of the agreement by the defendant, is quite uncertain and difficult to be estimated. But the difficulty is not greater than it -was in several of the cases above cited. There are some facts upon which a jury could base a judgment, not certain nor strictly accurate, but sufficiently so for the administration of justice in such a case. The agent whom plaintiffs sent to Mexico was apparently intelligent, capable, and well acquainted with Mexico. Machines could be delivered there for about 830 per machine, and could then be sold at retail for about $125. The profit of the plaintiffs on each machine was about $4. Plaintiffs’ agents readily made sales of one hundred and one machines, and were about to make other sales. One of defendant’s agents subsequently sold in a single city twenty machines in six months, at $125 each. The plaintiffs had established two agencies, and to the value of such agencies, at least, they were entitled. Mead, who had one of the agencies, testified that he had made arrangements with several parties to sell the machines; that he had all the facilities for carrying on an extensive and profitable business, and was well acquainted with the country. The population of several of the Mexican cities in which plaintiffs’ agent was engaged in establishing agencies was shown. From all these and other facts proved, it cannot be doubted that the plaintiffs suffered damages to at least several hundred dollars, and they should not have been deprived of the damages which they made to appear because they could not make clear the full amount of their damages. All the facts should have been submitted to the jury, with proper instructions; and their verdict, not based upon mere speculation and possibilities, but upon the facts and circumstances proved, would have approached as near the proper measure of justice as the nature of the case and the infirmity which attaches to the administration of the law will admit.”
From the nature of the ease, the language of the contract, and all the dealings of the parties, it is clear that the provision naming 10 years from the date of the original contract, and afterwards extend
This inquiry in this case has two branches: First, to find the amount of profit which the plaintiff, under the stipulations of the contract, is entitled to receive on all premiums subsequent to the premium for the first year on the policies actually written through the agency of the plaintiff and his employés prior to the date of the breach of the contract by the defendant. It is evident that all the schemes of insurance referred to in the contract to be offered to the public contemplated the keeping of the policies alive by payments made from time to time subsequent to the first year’s premium. Between the parties to the contract, the presumption is that the policies would be kept alive, and these subsequent payments — “renewal premiums,” as they are called — would be received by the defendant company. The conduct of that company in breaching the contract entitles the plaintiff to this presumption, and puts upon the defendant the burden of showing the contrary, if it exists, and the extent to which it does exist. So all uncertainty is eliminated from this branch of the plaintiff’s claim for loss of profits. As to the other branch, assuming, as we must for the present do, that the defendant breached the contract as alleged in the petition, entered the territory allotted to the plaintiff, and has through other agents and agencies since the date of the breach written a large amount of other insurance, such as the contract between the parties contemplated would be obtained by and through the action of the plaintiff and his sub-agents, the amount of such insurance so taken and carried by the defendant up to the time of the trial may be exactly shown by the testimony of the managing agents of the defendant, or by its books, or by both, which at this day the plaintiff has a right to call for and demand as well in an action at law as formerly in a suit in equity. There can be, therefore, no substantial difficulty in arriving at this amount, at least with substantial accuracy; and, the amount having been found, the terms of the contract between the parties fix the standard for measuring the interest which the plaintiff would have had therein, had he been permitted to do the work as his contract contemplated. Whether he could, and with reasonable probability would, have done all or a definite portion of this work, had the defendant not breached the contract, is a proper subject for the finding of a jury on the proof that may be offered as to the means which the plaintiff had organized and was using for the efficient prosecution of this work, compared with the means and effort which the defendant has used in its accomplishment of the work so done by it in the territory allotted to the plaintiff. He is not necessarily or even probably entitled to receive the full specified rate of per cent, on the first year’s and subsequent premiums paid and to be paid on policies so issued by the defendant through its other agents and agencies; for some de-" duction must necessarily be made on account of the fact that he could incur no current expenses, nor render any personal service, in the procurement of this insurance thus obtained by the defendant through
We are of opinion that the views we have here expressed are supported by the cases of high authority which we have partially reviewed in the foregoing opinion, and the many citations of other precedents to which the cases we have reviewed refer, many of which we have carefully examined. Our decision is, therefore, that the judgment of the circuit court is reversed, and the cause remanded to that court, with directions to it to award the plaintiff a new trial, and thereafter to proceed according to law, and in conformity to the views expressed in this opinion.