
    Walter I. Kelso, as Receiver of The Monarch Cigarette Company, Appellant, v. Morgan Marshall, Respondent.
    
      Breach of a contract for the purchase of goods to he manufactured—measure of damages where the goods have no market value in large quantities and deteriorate if kept on hand.
    
    The measure of damages in an action brought to recover for the breach of a contract to receive and pay for 50,000 cigarettes on the fourth Monday of each month from June, 1895, to April, 1896, inclusive, would ordinarily be the difference between the contract price and the market value of the goods; but where it appears that no market could be found for such cigarettes in such large quantities, and that they would deteriorate after being kept a few months, the vendor is entitled'to recover the difference between the contract price and the cost of production.
    Appeal by the plaintiff, Walter I. Kelso, as receiver of The Monarch Cigarette Company, from so much of a judgment of the Supreme Court, entered in the office of the clerk of the county of Hew York on the 26th day of May, 1897, upon the report of a referee, as awards nominal damages to plaintiff and costs to defendant.
    
      F. E. Parker, for the appellant.
    
      G. M. Leventritt, for the respondent.
   Patterson, J.:

This action was brought to recover damages for the breach of a contract originally made in April, 1895, between the defendant and the plaintiff, by which the defendant agreed to purchase and pay for cigarettes to be manufactured by the plaintiff. The agreement was subsequently modified, and by that modification the defendant stipulated to receive and pay for 50,000 cigarettes on the fourth Monday of each month, from June, 1895, to April, 1896, inclusive. On the 17th of October, 1895, the defendant refused to accept any further deliveries under the contract, and placed his refusal so to do upon the allegation that certain representations made by the plaintiff at the time the contract was originally entered into were untrue. The referee found that no false representations were made by the plaintiff and that there was a breach of the contract by the defendant, but that the plaintiff was entitled only to nominal damages.

The sole question presented for consideration here relates to the correctness of the referee’s decision respecting such damages. The general rule is not controverted that, in an action for the breach of a contract of the character of that made between these parties, the measure of damages ordinarily is the difference between the contract price and the market value, if there were a market value. The referee held that rule to be applicable and found that upon the evidence it appeared there was a market value for these goods and that the plaintiff could have sold the 25,000 cigarettes tendered in October at a price equal to or exceeding the contract price.

The act of the defendant in refusing to take any further deliveries upon the ground above stated put an end to any obligation on the part of the plaintiff to make any tenders after October. The cause of action was for a breach of the whole contract, and the plaintiff would be entitled to recover whatever damages that breach occasioned. The question of value did not necessarily relate merely to the installment deliverable in October; but even confining its consideration to the goods deliverable in that month, the referee’s determination upon the question now before us was incorrect. The evidence shows that there was no market for cigarettes of the plaintiff’s manufacture in large quantities. There is some evidence to show that the plaintiff by peddling out cigarettes at clubs and hotels and to small dealers might have received for some quantities prices equivalent to those the defendant agreed to pay; but there is nothing to show that all of the cigarettes to be manufactured under this contract could have been sold even in the way indicated. The condition of the proof brought the case within the decision in Todd v. Gamble (148 N. Y. 382), where, under somewhat similar circumstances, it was held that the proper measure of damages was the difference between the contract price and the cost of production. In a case like this the price at which a small portion of a large quantity of goods manufactured expressly to fill a contract could be sold is no criterion of market value of the whole. The reasoning of the court in the case cited is quite applicable to this. It is not shown that a market could have been found for the large quantities of cigarettes provided for in this contract; it was not shown that the manufacturer could place all that were to be manufactured under the contract on the market, and there was evidence to show that the goods would deteriorate after being kept for a few months. The -only measure of damages that would furnish proper indemnity to the plaintiff in this case for the breach of the contract was the one established in the case cited.

The rilling of the referee was wrong, and the judgment must be reversed and a new trial ordered before another referee, with costs to appellant to abide the event.

Van Brunt, B. J., Williams, O’Brien and Ingraham, JJ., concurred.

Judgment reversed and new trial ordered before another referee, with costs to appellant to abide event.  