Winslow Elevator & MacHine Co. v. Hoffman

The appellees, in August 1904, began the erection upon their lot number 11 East Lexington street, a six-story office building. This building was completed and occupied about the first of April, 1905. On the 7th day of October, 1904, the parties to this appeal entered into a contract by which the appellant the Winslow Elevator and Machine Company, in consideration of the sum of sixteen hundred dollars, agreed to furnish and erect in a workmanlike and substantial manner in said office building one electric combined passenger and freight elevator in accordance with certain specifications set out in the contract. The elevator was to be furnished and in working order according to these specifications by the fifteenth day of January, 1905, subject to limitations of strikes, lock outs, accidents, and other unavoidable causes. Incorporated in this contract was this guarantee: "We guarantee all the labor and material furnished to be of the best grade and free from defects, and will replace defective apparatus within two years, provided an inspection proves such claim; and also that the apparatus will work to its rated capacity and will do its work when kept clean, dry and in good condition, provided you employ competent attendants."

On January 14th, 1907, the appellees sued the appellant in the Superior Court of Baltimore City for a breach of the contract. The declaration contains the six common counts, and one special count, which alleged the breach for which the suit was brought to be that the appellant did not erect the elevator in a good and workmanlike manner in accordance with the proposal and specifications embraced in the contract. The count further averred that as a result of the unsafe and defective construction of the elevator and its unsatisfactory operation and working the plaintiff "lost large sums of money by the loss of tenants in the said building, who removed therefrom, and from others who refused to rent the offices in said building by reason of the general complaint of said elevator due to its improper, defective and dangerous construction, and sustained much other loss and damage."

To the six common counts the appellant pleaded the general issue plea, and traversed the seventh plea. Issue was joined, and the case proceeded to trial before a jury, resulting in a verdict and judgment for the appellee for the sum of seven thousand dollars. From this judgment the appeal now before us was taken.

The testimony appearing in the record is very conflicting. But it is not necessary for us to discuss it at length, or to decide upon which side of the case is found the weight or preponderance of evidence. The defendant insisted that it had performed all its obligations under the contract, and it offered evidence, if the jury had found it to be true, to have justified a verdict in its favor. On the other hand, the evidence adduced by the plaintiffs proved the breach alleged in the declaration. It was exclusively the province of the jury to decide upon the weight and sufficiency in fact of the evidence, and as they accepted the evidence of the plaintiff as to the defective workmanship and construction of the elevator we are bound by their finding upon these questions, and therefore, a minute examination of the evidence, in the absence of any question as to its legal sufficiency, becomes unnecessary.

There is only one question in the case, and that is: Were the plaintiffs entitled to recover for the loss of rents claimed in the declaration? According to the evidence of Mr. Hoffman the direct loss sustained in the purchase of a new elevator, for repairs, c., was $1,565. The jury, therefore, allowed $5,435, for loss of rents. The evidence, some of which was taken subject to exception, showed that the building, was one of the first erected after the fire in February, 1904, and that there was then a great demand for offices, and that rents were high. The building has forty-five office rooms, and one large room on the first floor which was at first rented for $3,000 per year, but was subsequently reduced to $2,000. It is also shown that following the completion of other office buildings rents began to decline, and the plaintiffs were obliged in consequence to make material reductions in the rent. There were forty-five offices in the building, and upon each Mr. Hoffman fixed a certain rental value. According to this schedule of prices the estimated yearly income from these rooms was $10,800, or $900 per month. Before the building was completed seven or eight offices had been rented, and Mr. Hoffman was diligent in his efforts to rent all the rooms. There was evidence tending to show general complaint about the elevator; that in some instances reduction in rents was made on account of the bad elevator service; and that this bad service was a great objection to tenants, and to others who might otherwise have rented offices in the building. Much of the testimony on the question as to what extent the elevator did in fact prevent people, who would have otherwise rented, from becoming tenants is inconclusive and conjectural, and we have been unable to find any reasonably definite evidence upon which the jury could have found such a great loss of rents. This circumstance strikingly demonstrates the necessity of applying the correct rule for the measurement of damages in cases like the present.

In the leading case of Hadley v. Baxendale, 9 Exch. 341, BARON ALDERSON stated the rule of damages in cases for breach of contract to be this: "When two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or, such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made, were communicated by the plaintiff to the defendant, and thus known to both parties, the damage resulting from the breach of such contract which they would reasonably contemplate would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, for such a breach of contract. For had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case, and of this advantage it would be very unjust to deprive them." The Court granted a new trial in that case upon the ground that, "the Judge ought to have told the jury that upon the facts then before them, they ought not to take the loss of profits into consideration at all in estimating the damages." The second branch of this rule, like the famous judgment of CHIEF JUSTICE MARSHALL in Marbury v. Madison, 1 Cranch, 137, which declared that an Act of Congress contrary to the Constitution was void, was an obiter dictum — still it has been consistently followed in later cases, and, as said by JUDGE PEARCE in the Western Union Telegraph Company v. N. Lehman Bro., 105 Md. 44, "remains the law of England, and has been generally approved in this country, and has been too often recognized in this State to be departed from, even if we were so disposed." It was approved in the United States TelegraphCompany v. Gildersleeve, 29 Md. 233; the Maryland IceCompany v. Arctic Machine Manufacturing Company, 77 Md. 103;Webster v. Woolford, 81 Md. 329, and in the recent case ofRussell v. Stoops, 106 Md. 138, decided May 17th, 1907.

In Webster v. Woolford, supra, JUDGE ROBINSON said that "the first part of the rule as thus laid down applies to cases in which the damages are the direct and natural result of the breach of the contract, and which the law presumes to have been in contemplation of both parties. The latter part of the rule applies in cases where special damages are claimed under special circumstances made known by the plaintiff to the defendant at the time the contract was made; and in such cases the plaintiff is entitled to recover such damages as may reasonably be supposed to have been in contemplation of both parties in view of the circumstances thus disclosed."

It must be admitted that the loss of rents cannot be recovered upon the ground of interruption, or destruction of the plaintiff's business, because there was no established business to be injured or destroyed. It is well settled that before a recovery can be had upon this ground it must appear that the business, which is claimed to have been injured, was an established one, and that it had been conducted successfully for such a length of time that the profits thereof could be ascertained with reasonable certainty. But "when a new business, or enterprise is floated, and damages by way of profits are claimed for its interruption, or prevention they will be denied for the reason that such business is an adventure, as distinguished from an established business, and its profits are speculative, and remote, existing only in anticipation." 13Cyc. 59. Damages for losses sustained for injury to business may be recovered in that class of cases to which the cases ofWerner v. Otto, 40 Md. 16, and Lawson v. Price,45 Md. 123, belong.

Nor is it contended that the loss of rents claimed can be recovered under the first part of the rule in Hadley v.Baxendale, because obviously such losses are not the direct and natural result of the breach alleged. They are special, or consequential damages for which recovery is sought under the second part of that rule which is expressly relied upon by the appellees. In the statement of this rule it will be observed that general language is used, and it has been found that its application to the facts of particular cases has given rise to questions of great nicety and difficulty. While the rule has been universally recognized, the instances of its application present some confusion. It is true that in this case the appellant knew at the time he made the contract that the elevator was to be installed in an office building; but it would seem to be clear, both upon reason and authority, that mereknowledge of that fact would not be sufficient to render it liable for the special losses claimed in this suit. To fix such a liability upon it upon that ground alone, and in this case there is no other upon which it can rest, would be a startling and dangerous proposition. Under such a rule the plumber, the gas fitter, the stair builder, or the machinist who defaulted in his contract to do certain work upon any of the great office buildings might be held liable for enormous special damages simply because he knew his contract had reference to such a building. Certainly no support can be found in Hadley v.Baxendale, for such a position, and we have discovered none elsewhere.

Where a recovery is asked under the second part of the rule stated in that case, which constitutes an exception to the general rule upon the measure of damages, the evidence must show that the "special circumstances, being in view of both parties to the contract, constituted its basis." The rule is never applied unless the evidence warrants the conclusion that the contract was, to some extent, based upon the special circumstances out of which the injury arose. To apply this rule the evidence must show that "the knowledge must be brought home to the party sought to be charged under such circumstances that he must know that the person he contracts with reasonably believes that he accepts the contract with the special condition." British Columbia Saw MillCompany v. Nettleship, L.R. 3 C.P. 509.

In the Globe Refining Company v. The Landa Cotton OilCompany, 190 U.S. 540, special damages were sought to be recovered for a breach of contract, in which, upon the facts, there were much stronger reasons than in this case for the application for the rule for which the appellee here contends. In that case the defendant had defaulted in his contract to deliver certain tanks of crude oil to the plaintiff. By the terms of the contract the oil was to be delivered f.o.b. buyer's tanks at seller's mill. The plaintiff sought to recover, as part of his damages, the cost of transporting tanks to the defendant's mill to receive the oil, and also for loss of the use of the tanks, c., upon the ground that these losses were in the contemplation of the parties at the time the contract was made. But it was held that these losses could not be recovered. In the course of its opinion the Court said: "The old law seems to have regarded it as technically in the election of the promisor to perform, or pay damages; Bromage v. Gunning, 1 Rolle, 368; Hulbert v. Hart, 1 Vern. 133. It is true that, as people when contracting contemplate performance, not breach, they commonly say little or nothing at all as to what shall happen in the latter event, and the common rule had been worked out by common sense, which has established what the parties would have said if they had spoken about the matter. But a man can never be absolutely certain of performing any contract when the time of performance arrives, and in many cases, he obviously is taking a risk of an event, which is wholly, or to an appreciable extent beyond his control. The extent of the liability in such cases is likely to be within his contemplation, and whether it is or not should be worked out on terms which fairly may be presumed he would have assented to if they had been presented to his mind."

There is nothing in the contract, or in the evidence, that would make the appellant responsible for these special losses. It would be most unreasonable to presume that he would have assented to the contract upon such a condition, and it does not appear that the plaintiffs believed at the time that the appellant assumed liability for such losses. But assuming ex gratia, that the contract is one which falls within the rule contended for, the losses claimed could not be recovered, because they are too uncertain and contingent. We must apply to damages such as are sued for in this case the same principles which govern in cases where profits are sought to be recovered for a breach of contract. The real thing claimed here is the income, or profit which the owners might have received from the rent of the building had the defendant performed the contract.

There are cases in which such damages have been recovered; and cases in which such a recovery has been denied. The distinction between the two groups, or classes of cases, which is broad and obvious, was clearly stated by CHIEF JUSTICE NELSON inMasterton v. Mayor of Brooklyn, 7 Hill, 61. The principle of that case has been generally approved by the Courts. It was adopted by the Supreme Court of the United States in P.,W.B.R.R. Co. v. Story, 13 Howard, 307, and is the settled rule in this State. Abbott v. Gatch, 13 Md. 334; Lawson v.Price, 45 Md. 123; B. O.R.R. Co. v. Brydon, 65 Md. 198;Shaefer v. Wilson, 44 Md. 268, and many other cases.

In Lanahan v. Heaver, 79 Md. 419, JUDGE McSHERRY states the rule to be that "whenever it is purely problematical whether any profits would be realized at all, by reason of contingencies which might never happen, or where the profits have reference todependent or collateral engagements entered into on the faith ofthe performance of the principal contract, there, without regard for any uncertainty as to mere amounts, probable profits cannot be recovered, because too speculative, indefinite and remote." This principle is in no manner affected by the second part of the rule in Hadley v. Baxendale, supra. In Wolcott v. Mount,36 N.J.L. 269, the Court said: "It must not be supposed that, under the principle of Hadley v. Baxendale, mere speculative profits, such as might be conjectured to have been the probable results of an adventure which was defeated by the breach of the contract sued on, the gains from which are entirely conjectural, with respect to which no means exist of ascertaining, even approximately, the probable results, can, under any circumstances, be brought within the range of damages recoverable. The cardinal principle in relation to the damages to be compensated for on the breach of a contract, that the plaintiff must establish the quantum of his loss by evidence from which the jury will be able to estimate the extent of his injury, will exclude all such elements of injury as incapable of being ascertained by the usual rules of evidence to a reasonable certainty."

When the claim of the plaintiffs for the recovery of lost rent is considered in the light of these rules it certainly must be denied. What rent they might have received from the building was not only dependent upon collateral engagements with persons who might rent the rooms, but upon many other considerations, such as location, desirability of rooms, the amount of rent asked, light and air, competition of other buildings, the number of tenants, the ability of the owners to keep the rooms occupied, and the general character of the management of the building. There are so many elements of uncertainty which enter into and affect the question that any estimate of loss could be little short of a guess. The special damages sued for in this case are so uncertain and incapable of reasonable ascertainment that they cannot be recovered.

It follows that the Court erred in refusing to strike out the testimony referred to in the first and second bills of exception, and in granting the plaintiff's second prayer. The portion of that prayer which allows a recovery for loss of rents is alone objectionable, the other part is conceded to be correct. We find no error in the ruling upon the defendant's prayers. Its fourth and fifth prayers announce correct principles of law, but are inapplicable to the facts of the case. Its sixth and seventh prayers do not express as clearly and accurately the measure of damages, as applied to the facts, as does the earlier part of the plaintiff's second prayer, and that part of the prayer may be taken upon the retrial of the case as expressing the true measure of damages.

Judgment reversed and new trial awarded, the appellees to paythe costs.