
    Atlas Portland Cement Company, Appellant, v. Isaac A. Hopper, Respondent.
    First Department,
    December 28, 1906.
    Damages—breach, of contract to deliver cement — when buyer cannot recover prospective profits of resalé.
    As a general rule damages for the breach' of a. contract of sale are measured by the difference between the contract price and the market price of the article' at the time and place of delivery. This is the only rule applied where the buyer can go into the open market- and purchase the article which the seller has failed to deliver, as it gives full indemnity for the loss sustained,
    
      The purchaser can recover the profit which he would have made had the goods been delivered, only when: (1) The article is o£ á peculiar-make or for a particular purpose and has either no, market value or a. value much greater to the purchaser than to the public generally; (3) where the seller knows that .the goods are the subject' of an agreement under which the purchaser must deliver the goods and for which he is to obtain an advance price.
    A breach of a contract to sell and deliver cement, does not fall within the above exceptions so as to- allow a recovery, of profits which the buyer would have made on sub-contracts, even though the cement was manufactured by a patent process and the seller had knowledge that the buyer had made sub-contracts to deliver the cement, when it does not appear that similar cement could not be Obtained in the -open market and the buyer notified the seller that on failure to complete deliveries. he would purchase-in the open market, and ordered cement in less amount than he was- to sell' to other parties. ■ ,
    Appeal by the plaintiff, the Atks Portland Cement Company, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the fall day of March, 1905, upon the report of á referee.
    
      Henry B. Corey, for the appellant.
    
      Alexander Thain, for the respondent.
   McLaughlin, J.:

This case came before the court upon a. stipulation consolidating two actions — one brought by the plaintiff, a foreign corporation, against a firm known as.Hoagland &' Eobinson, to recover- the purchase price of cement sold and delivered, -and the other by Hénry ■ P. Eobinson, as the assignee of that firaq against the Atlas Cement Company, another foreign corporation, to recover damages for the alleged breach of a contract in failing to deliver cement according to its terms.

. The plaintiff, according to the stipulation, has succeeded to all the rights and liabilities of the Atlas Cement Company, and the defend-, ant has become subrogated to all the rights of the firm of Hoagland & Eobinson and Henry P. Eobinson, its assignee, the purpose of the stipulation evidently being to have the questions raised in both -' actions settled and determined by, one trial. •

'There was-no dispute between the parties at the trial as to the amount which the plaintiff was entitled to recover for cement sold and delivered, the question litigated being the amount of damage, if any, which the defendant was entitled to recover for the breach of the co~tract referred to. The referee found in favor of the plaintiff for the amount claimed by it, with interest from a specified date, and for tile defendant the damage his assignors were alleged to have sustained, with interest thereon, and directed judgment for defendant for ~5,615.65, tile difference between the two claims. This conclusion was based upon a finding that the cement company had broken its contract with Hoagland & Robinson and by reason tii~reof that firm lost the profits which it otherwise would have made under a contract with the defendant. The evidence justified the finding that there ~va~ a breach of contract on the part of tile cement company, but notwithstanding that fact I am of the opinion that the judgment must be reversed because the referee adopted an improper measure of damage.

The facts, so far as material, are as follows: In the spring of 1899 the defendant had a contraç~t to erect a power ~iouse at and he placed an order for 25,000 barrels of c~ment at ~2.25 per barrels to be used in this work, with his own firm, Hoagland & Robinson, composed of himself s~nd Henry P. P~obinson. Some time prior to April 24, 1899, Robinson, the defendant's partner and the manager of his firm, had a conversation with one De Sotolongo, a representative of . the cement company, in which Robinson stated that the firm of Hoagland & Robinsbn had a contract with Hopper to furnish him, at Kingsbridge, 20,000 barrels of cement. On April 24, i~899, an officer of the cement company wrote Hoagland & Robinso~n, referring to the conversation which De Sotolongo had had with Robinson, and offering to deliver 20,000 barrels of Atlas cement at l~ingsbridge in 500 to 1,000 lots, at ~1.82 per barrel, which offer Hoagland & Robiflson a few days later accepted. Under the contract thus made deliveries were made June sixth and twentieth, July fifteenth and thirty-first, and October twenty-sixth, amounting in all to 2,200 barrels,~ and the cement then delivered was paid for,~ but in each instance the payment was delayed until after the sixty days' credit mentioned in each invoice had expired. Further deliveries amounting in all to i,100 barrels were made November fourth, eighth and tenth, making in all 3,300 barrels delivered under the contract. These latter deliveries, however, were not paid for, and plaintiff's recovery was for these shipments and for cement delivered during the moffth of November at pla~s other than Kingsbrid~e. There is ~ome evidence to the effect that complaints were made from time to time by reasoi~of delays in t~arnisliing the cement, and in this ôonnection a letter dated august sixteenth from Rohinso~n elicited areply froi~ t~ie cement company to the effect that the firm had. better j~ay its bills more proir~ptly if they de~ired~ prompt shi~mei~t, as better care was• taken of customers who fol~ iowedt'his course than of those wh~ did not. On September second following, the cement company threatened to discontinue deliveries unless tIle balance then cTue for cement delivered was paid, and Oli the eighteenth o~ October the cement Company wrote a letter stating thatitwould make. deliveries if the unpaid amount for previous deliveries wer& paid.. The ~orrespondence culminated in a letter of November tenth, which was to th~ e~ect that no deliveries would be thereaftei made when invoices were past due and that the firm's credit from that time on was limited to $4,000, and if the account reached that sum, payments on deliveries already made must be anticipated i~i order to secure further deliveries. On November fifteenth, ~Io~gland ~. Eobinson,wrote' the. cement company that unless it furnished ~00 bari~els per day from then on, `~t would he compelled to go into the open market and purchase cement, making the best arrangement it could3 and in that event it wolild look to the cement compa~y for the damages sustained. The only reply which the cement. company made to this letter was a reiteration of the commjmic~tion of November tenth. ~uht prior to the receipt of the 1~st two letters referred to the. defendant had written bag-land & Robiiison ~hat nn~ess it complied more promptly. with his orders for cement, he would go into the. open market and buy cement at the best price he could,, charging any damage that was sustained to the firm. ,The letters which passed between the ~ement compaly and Hoagland & Robinson, forming the con tract., between the parties, did not mentiOn the terms ef payment. , ~ach `invoice, however, stated that credit was, given for sixty days and this,. it may `be assumed, was a part of the contract, "and notwithst~nding it appears that -Hoagland & Robinson had defaulted in their .~.ayments for cement delivered prior to ~oveinber first, it. is' clear, the cement. company conttnned making deliveries when payments were in arrears, even after the conversati~n of August tenth referred. to, when the firm agreed to keep their account-balanced if the cement company would keep making deliveries. The first act of repudiation, therefore, on the part of the cement company occurred on Hovember tenth, when it wrote Hoagland & Robinson limiting their credit to $4,000 ■—a situation apparently never contemplated by the parties and on that date the firm was not in default. There is nothing in the record to show that- all of the cement delivered prior to that time had not been paid for. The evidence, therefore, is sufficient to justify the finding of the referee that the cement company broke its contract by failing to make deliveries according to its terms, and the sole question presented is what is the proper measure, of damage. The referee held that it was the profits which the firm of Hoagland & Robinson would have made out of the contract which it made with one of its own members, Hopper, and in this I think he erred. The general rule by which damages for breach of a contract of sale are measured is the difference between. the contract price and the market price of the article at the time and place of delivery. This rule, however, is subject to exceptions when special damages may be recovered : (1) Where the article purchased is of a peculiar make or for a particular purpose, having either no market value or .a value much greater to the purchaser than to the public generally; and (2) where the contract unfulfilled was to deliver goods which the seller knows'are the subject of an agreement by his purchaser under the terms of which the latter must deliver these goods, for which he is to obtain an advance price. In such cases it is held that the purchaser’s profit is contemplated by the parties in making the contract and that they should measure the damages caused by the breach of it. (Booth v. Spuyten Duyvil Rolling Mill Co., 60 N. Y. 487; Boughton v. Petigny, 72 App. Div. 76 ; Murdock v. Jones, 3 id. 221.) It seems to me clear that this case does not call for. the application of either exception to the general rule. It is true there is some evidence to the effect that the cement was manufactured in part by patented machinery and was of a special quality; nevertheless the witnesses and the defendant himself referred to it as having a certain market value, and the evidence fairly sustains the conclusion that it could be procured from sources other than the cement company.

But it -is Strenuously urged- -tháít as the- cemefi-t company knew the cement was to be delivered under the defendant’s contract with Hoagland & Bóbinson, the profits coming therefrom should constitute- tiie- measure of damage. If the company had agreed to furnish defendant with- the cement according to the terms of Hoagland & Bobinson’s agreement with ' him — being fully informed thereof and practically taking the ■ contract. off Hoagland & Bobi-nson’s hands-^.tlie special rule would'apply and -the measure would be the profits,, whether those profits would have been greater or less than-if measured by the general rule.. -(Messmore v. New York Shot (& Lead Co., 40 N. Y. 422.) Here,, however, the-most that can be said is that the cement -company knew' Hoagland & Bóbinson had a Contract with the defendant and wanted the cement delivered, at Kingsbridge -for that reason ; but. there is no evidence. that the cement company knew how much Hoagland & Bobmson were to receive-from, the defendant for. the cement delivered, and to permit the-rule of special damage to be applied under such circumstances, where the profits are between a contractor, and- a-selling firm, of which he is a member,.would, as it seems to me, be an inducement to seize upon the slightest pretext for claiming a violation of the contract,-if it would not be opening the door for fraud in allowing-., one to. practically measm’e his own damage. '.

Another fact deserving of consideration, which distinguishes--the case from those- allowing contract profits, is the fact -that -the defendant ordered 25^000 barrels of cement from his firm -while the firm contracted with -tlie-cement company for only 20,000 barrels, showing that dependence was .not placed upon the cement company alone for all of the cement required. ■ " ■

. In Booth v. Spuyten Duyvil Rolling Mill Co. (supra), upon - ..which much reliance is placed by the respondent,.if "was held that one was liable on Ms breach óf a contract of sale for the difference-, between -the sub-contract price and the principal contract price, where - he knew the terms of the subcontract, and the-fact -that he did not- know the sub-contract price did not prevent a recovery,'but it was distinctly stated this was because the article,involved did not have a market'value and the intimation, is clearly made- that if -the article had a market price, although a sub-contract was.contemplated, in that case the general rule would be applicable.

All sales of goods to dealers are made with the idea that mutual ■profits will be made, and breaches of contracts therefor should be governed by the general rule whether the purchaser at the time holds a contract for the immediate'sale of the goods or relies upon the ordinary course of business to dispose of them, unless special circumstances arise showing clearly a different understanding. Deviations from the general .rule are based'upon the contemplation of the parties, and there is nothing in this case which shows more clearly the damage contemplated than the letter written by defendant to his firm stating if it did not furnish the cement more promptly he would secure it in the market, holding it for his damage, and the communication immediately thereafter from the firm to the cement company to the same effect. The firm should have purchased the cement required in the open market and the increased cost, if any, would be the damage sustained. (Rochester Lantern Co. v. Stiles & P. P. Co., 135 N. Y. 209.) When a person can • go into the open market and purchase the article which the seller has failed to deliver, the general rule that the damage is the difference between the contract price and the market price is the only rule to be applied as it offers to the buyer full indemnity for any and all loss sustained. (Saxe v. Penokee Lumber Co., 159 N. Y. 371; Parsons v. Sutton, 66 id. 92.)

It follows for the reasons given that the judgment appealed from must be reversed and a new trial ordered before another referee, with costs to appellant to abide event.

Patterson, P. J., Clarke and Hotjghton, JJ., concurred.

Ingraham, J. (concurring):

I concur with'Mr. Justice McLaughlin. I think the proper measure of damages in this case was the difference between the contract price and the price at which the defendant’s assignor could have purchased 'this cement or other cement of equal quality in the market at the time of the breach. There is evidence that this particular kind of cement was only manufactured by the plaintiff and could only bé obtained from it, and that the plaintiff had refused to deliver any more cement to the defendant’s assignor. It was then the duty of the defendant’s assignor to procure cement of the same brand in the market, and, if that was impossible, to procure cement of the same quality, and the measure of damages would he the difference between the price of such other cement and the price.which the defendant’s assignor was to pay under the contract.. ;

• Judgment'reversed, new trial ordered before another referee, costs to appellant to abide event. Order filed.  