Serian Bros. v. Agri-Sun Nursery

Opinion

A commercial grower purchases young peach trees from a nursery and plants them. The trees eventually exhibit symptoms of a disease and are determined to be diseased. The grower sues the nursery. He contends that the trees were already diseased when he purchased them, and that they were not healthy trees as warranted by the seller. If the grower can prove that the trees were diseased when purchased, how are his damages measured? In Posz v. Burchell (1962) 209 Cal.App.2d 324 [ 25 Cal.Rptr. 896 ], this court held that the proper measure of damages was the difference between the value of the land as planted with the trees (or nursery stock) actually delivered and the value the land would have had if it had been planted with nursery stock of the kind warranted. (Id. at p. 341.) In the

The question before us is therefore the same question that was before the trial court: assuming that Agri-Sun breached a contract, breached implied warranties and was negligent, did Serian present any evidence that Serian was damaged? In other words, was Sedan’s showing of $605,323.95 in lost profits and other costs attributable to the presence of crown gall in its peach orchard legally deficient, even if that evidence were to be completely believed by the jury, to demonstrate that Sedan was damaged? Or was Sedan instead required to demonstrate that the land on which the peach orchard was located suffered a diminution in value?

II.

Recovery of Lost Profits and Other Reasonably Incurred Costs

On January 1, 1965, the Uniform Commercial Code took effect in California. (Cal. U. Com. Code, § 1101 et seq.; see also Stats. 1963, ch. 819, and

That a buyer of nonconforming peach trees may recover lost profits was recognized in another Uniform Commercial Code jurisdiction, South Carolina, in Haley Nursery Co., Inc. v. Forrest (1989) 298 S.C. 520 [ 381 S.E.2d 906 ]. In Haley, the buyer ordered “Springcrest” and “Rubired” peach trees from the seller. The seller was “a nursery that supplies fruit trees to farmers.” (381 S.E.2d at p. 907.) The seller sent peach trees that were so labeled. The labeling, however, was incorrect. A shipment labeled “Spring-crest” turned out to be “Springbite” trees, which were “much smaller and more susceptible to bacteriosis than the Springcrest variety.” (Id. at p. 907.) The trees labeled “Rubired” turned out to be “some unknown variety very susceptible to brown rot.” (Id. at p. 908.) It took approximately a year for the buyer to realize that the trees were not the type he ordered. This was because “Mypically, a peach tree will leaf the first year, bloom the second, and fruit the third” and “[t]he only positive means of identifying the tree is to evaluate the fruit it bears” although “leaves and buds give some early indication of variety.” (Id. at p. 907.) The buyer refused to pay an outstanding bill, and the seller sued to collect on the bill. The buyer counterclaimed for breach of contract and breach of express warranty. (See Cal. U. Com. Code, § 2313.) The seller obtained a verdict of $41,405.35 on the outstanding bill, but the buyer recovered $250,000 on his counterclaim. On the seller’s appeal, there was no express contention that the buyer was not entitled to recover lost profits. Rather, the seller contended that the figures used by the buyer’s expert were not valid and that the expert’s calculation of lost profits as being the difference between “the net revenue of the yield if the trees had been as warranted” and “the net revenue of the yield from the trees as delivered, calculated over the fifteen-year life span of the trees” (381 S.E.2d at p. 908), was erroneous because “[the seller] should not be compensated for twelve years of lost revenue, based upon the fifteen-year lifespan of the trees, when he can replant and minimize his losses.” (Ibid.) The Supreme Court of South

Respondent relies on Posz v. Burchett, supra, 209 Cal.App.2d 324 , a pre-Uniform Commercial Code decision of this court. Posz appears to us to be the only California case to hold that a buyer in the position of appellant Serian cannot present evidence of his lost profits, and must instead utilize as the measure of damages the difference between the value of the land as planted and the value the land would have had if the trees had been as warranted. As we shall explain in the next portion of this opinion, it appears to us that the Posz rule was an unwarranted extension of the prior California Supreme Court cases on which it purported to rely. The more important point, however, is that even if we are mistaken in this conclusion and even if Posz was correct when it was decided in 1962, it has now been superseded by California’s adoption of the Uniform Commercial Code. When a seller of fruit trees or berry vines breaches an express or implied warranty made to a buyer, the buyer is no longer restricted to a utilization of the measure of damages prescribed by Posz.

Ill

Posz and Its Predecessors

A. Posz

In Posz, the buyer of boysenberry vines sued the sellers for breach of express and implied warranties and for negligence after three-quarters of the boysenberry plants died. The buyer obtained a judgment of $32,324.61. The trial court had instructed the jury that it could award the buyer damages consisting of “[e]ach item of direct expense . . . ‘attributable to the boysenberry vines that failed to grow’ ” and “[l]oss of profits or income . . .

“Where damage for loss of vines is measured by the amount of depreciation in the value of the land as planted, there is no warrant for allowing further damages for loss of crops which might have been produced in the future because the reduced value of the land necessarily includes the future value of lost crops. [Citation.] Special damages properly pleaded, such as the cost of consolidating the growing vines after the discovery of the extensive death of the plants, may also be recovered. But the cost of the vines and the expense of originally preparing and planting the land are not recoverable as special damages, as these items are covered by the general measure of damages above referred to. Nor would interest on borrowed money be recoverable, as claimed by respondent.” (209 Cal.App.2d at pp. 341-342.)

Posz cited three early California Supreme Court cases to support its contention that the damage instruction given was erroneous. These were Shearer v. Park Nursery Co. (1894) 103 Cal. 415 [ 37 P. 412 ], Germain Fruit Co. v. J.K. Armsby Co. (1908) 153 Cal. 585 [ 96 P. 319 ], and Burge v. Albany Nurseries, Inc. (1917) 176 Cal. 313 [ 168 P. 343 ], The first of these, the Shearer case, cited the New York case of Dwight v. Elmira etc. R.R. Co. (1892) 132 N.Y. 199 [ 30 N.E. 398 ], and we shall begin our review of these older cases with a close look at Dwight.

B. Dwight, Shearer, Germain, and Burge

In Dwight a fire destroyed 21 of the plaintiff’s apple trees. The plaintiff sued the defendant for negligence. At trial the plaintiff presented a witness

“Fruit-trees, like those which are the subject of this controversy, have little if any value after being detached from the soil, as the wood cannot be made use of for any practical purpose; but while connected with the land they have a producing capacity which adds to the value of the realty. Necessarily the testimony adduced tended to show, not the value of the trees severed from the freehold, but their value as bearing trees, connected with and depending on the soil for the nourishment essential to the growth of fruit. How much was the realty, of which the trees formed a part, damaged, was the result aimed at by the questions and attempted to be secured by the answers.” (132 N.Y. at p. 201 [30 N.E. at p. 398].)

The court went on to state the rule as follows:

“[I]n cases of injury to real estate the courts recognize two elements of damage: 1. The value of the tree or other thing taken, after separation from the freehold, if it have [sfc] any.

“2. The damage to the realty, if any, occasioned by the removal. (Ensley v. Mayor, etc., 2 Baxt. 144 ; Striegel v. Moore, 55 Iowa, 88 , 7 N.W. Rep. 413 ; Longfellow v. Quimby, 33 Maine, 457; Foote v. Merrill, 54 N.H. 490 .) A party may be content to accept the market value of the thing taken when he is also entitled to recover for the injury done to the freehold. But if he asserts his right to go beyond the value of the thing taken or destroyed after

severance from the freehold, so as to secure compensation for the damage done to his land because of it, then the measure of damages is the difference in value of the land before and after the injury. In this case the plaintiff was not satisfied with a recovery based on the value of the trees destroyed, after separation from the realty, of which they formed a part,—as indeed he should not have been, as such value was little or nothing,—so he sought to obtain the loss occasioned to the land by reason of the destruction of an orchard of fruit-bearing trees, which added largely to its productive value. This was his right, but the measure of damages in such a case is, as we have observed, the difference in value of the land, before and after the injury; and as this rule was not followed but rejected on the trial, and a method of proving damages adopted not recognized nor permitted by the courts, the judgment should be reversed.” (132 N.Y. at p. 204 [30 N.E. at p. 399].)

Nothing in Dwight expressly mentions how the testifying witness arrived at his conclusion that the apple trees were worth $50 apiece. One would assume, however, that the witness, if asked, would have given an answer which included a consideration that an apple tree’s value was directly proportional to the tree’s fruit-producing capability. The appellate court’s view was simply that because a tree is a part of the realty on which it sits, its “producing capacity . . . adds to the value of the realty” and not to the value of the tree. (132 N.Y. at p. 201 [30 N.E. at p. 398].) It would seem that if the witness had instead testified that the destruction of the 21 apple trees had reduced by $1,050 (i.e., by 21 x $50) the value of the land on which the trees stood, this may well have been considered acceptable testimony at the time of the trial of Mr. Dwight’s case. It seems unlikely that the Dwight court would have deemed the dollar amount which the “producing capacity” of the trees adds to the value of the realty to be anything significantly different than the amount by which the owner could profit by selling the apples grown on those trees.

In Shearer the plaintiff bought nursery peach trees from the defendant and planted them. After “about two years, when they first bore fruit,” the plaintiff realized that 268 of the 500 trees were “of a different and inferior variety” than the specific varieties he had ordered. The plaintiff sought to recover “damages alleged to have been suffered ... in consequence of a breach of the warranty that the trees were of the kinds ordered.” (Shearer v. Park Nursery Co., supra, 103 Cal. at p. 417.) The plaintiff sought to prove his damages by presenting evidence of (1) the value the land would have had at the time the breach of warranty was discovered if the 268 nonconforming

“The sole effect of such evidence was to prove the difference between the value of trees of the kinds ordered by plaintiff and the trees actually delivered by defendant at the time when those delivered first bore fruit, that being the earliest date at which plaintiff discovered, or could have discovered, the breach of the warranty. It was, however, to the mode of proving this difference of values that defendant more specially objected, which was: 1. To prove the value of the land occupied by the trees at the time the breach of warranty was discovered; and 2. The value the land would have had at the same time if trees of the kinds and proportions ordered by plaintiff had been planted and cultivated, instead of the two hundred and sixty-eight trees of a kind not ordered by plaintiff.

“It is strenuously contended that the allowance of any evidence of the value of the land was material error, for which the judgment should be reversed. But since growing fruit-trees are a part of the land, and probably of no value when severed from it [citation], it was proper to prove how much the different kinds of trees added to the value of the land; and the difference between the value thus added by the trees delivered and the value that would have been added if the trees ordered had been planted instead of those seems to be the measure of plaintiff’s damage, according to section 3313 of the Civil Code. ‘It is settled in New York,’ says Mr. Sutherland (Sutherland on Damages, sec. 1019), ‘that where fruit-trees are destroyed or injured, and their owner asserts his right to go beyond their value after severance from the land, so as to obtain compensation for the damage done the latter, his recovery is measured by the difference between the value of the land before and after the injury.’ [Citation.]

“On the assumption that the mode of proof was not materially erroneous, the findings of fact are justified by the evidence.” (103 Cal. at pp. 419-420.) There is no mention in Shearer of what the two land value figures were or how they were arrived at by whomever gave the land value testimony. Nor does the case mention what the defendant contended the proper measure of damages should have been. It is also noteworthy that the method of proving damages approved of by the California Supreme Court in Shearer was the method actually utilized at trial by the plaintiff in that case. To disapprove of the plaintiff’s method of proving damages would presumably have resulted in a reversal. The court’s comment that “the mode of proof was not

materially erroneous” sounds less like a statement that the Posz measure of damages must be used, and more like a statement that use of the Posz measure is permissible.

The Germain case, cited in Posz, is not authority for the proposition that the Posz measure of damages must be used. In Germain the plaintiff bought a lot of dried apricots from the defendant. The plaintiff contended that the apricots delivered were inferior in quality to the samples he had been shown, and that this constituted a breach of warranty. The plaintiff presented evidence that he paid $4,352.25 for the apricots, which were to be delivered to Philadelphia, and that he could have sold them in Philadelphia for $4,974 (a profit of $621.75) if they had been as warranted. Instead, he could sell them in Philadelphia for only $3,225.78, which he did. The trial court awarded him $1,126.47 (the difference between what he paid for the apricots and what he subsequently sold them for) in damages. He contended on appeal that he should have also received his $621.75 lost profit for a total award of $1,748.22. The California Supreme Court agreed that the appropriate measure of damage would include the lost profits, but reversed the judgment because the defendant also appealed and convinced the court that parol evidence of an express warranty of quality had been erroneously admitted and that no such warranty appeared in the written agreement between the parties. Shearer is cited in Germain only with reference to another issue that was decided in Shearer, namely that damages should be measured as of the time the breach of warranty is, or with due diligence might be, discovered by the purchaser, even if the seller has delivered nonconforming goods at an earlier time. (In Shearer the buyer did not discover the breach until the trees first bore fruit, even though he had received the trees about two years prior to his discovery of the breach.) In Germain the court’s only reference to Shearer was the statement that: “The place of delivery being the same as the place of inspection and resale, there was no reason for the application of the rule declared in Shearer v. Park Nursery Co. . . .” (Germain Fruit Co. v. J.K. Armsby Co., supra, 153 Cal. at p. 590.)

Burge, the third of the three cases cited by Posz, is similar to Shearer. The buyer purchased prune trees which were represented by the seller to have been “grafted on myrobalan roots.” (Burge v. Albany Nurseries, Inc., supra, 176 Cal. at p. 315.) The buyer received the trees in December of 1910. In the spring of 1913 “suckers from the roots disclosed the fact that they were grafted on peach roots and not on myrobalan roots.” (Ibid.) The buyer’s farm was unsuitable for the growth of trees grafted on peach roots but was suitable for trees grafted on myrobalan roots. The buyer presented evidence of the value the land would have had in April of 1913 (when the breach was

Other cases have approved of the awarding of damages for injury to fruit-producing trees even though the amount of damage was not measured solely by a reduction in the value of the land. No mention was made in Posz of California O. Co. v. Riverside P.C. Co. (1920) 50 Cal.App. 522 [ 195 P. 694 ]. In California O. Co., cement dust from the defendant’s cement mill settled on the plaintiffs orange trees during the years 1910, 1911, and 1912. In January of 1913 the defendant equipped its mill with a dust-catching apparatus. The action was then filed later in 1913. The plaintiff was awarded a total of $6,300, consisting of $3,500 for loss and injury to the crops for the years 1910, 1911, and 1912, $300 for increased labor and cost in the care of the trees, and another $2,500 for injury to the trees. The award was affirmed on appeal. The court reasoned that the $2,500 award for injury to the trees was for injury that took place in 1913 and 1914 as a result of the continuing effects of the previously emitted cement dust. The dust that “encrusted on the leaves” in 1912 “would remain on those leaves for the period of their life, which is between two and three years, meanwhile seriously interfering with plant respiration and the formation of starch and sugar, thereby tending to tree starvation.” {Id. at p. 531.) The court added that “[t]he injury caused by the dust that settled on the trees in the years 1911 and 1912 would, therefore, naturally tend to decrease the 1913 and 1914 crops.” (Ibid.) The fact that the oranges had not yet been severed from the trees when the cement dust settled on the trees in 1910, 1911 and 1912 did not cause the court to find any error in the awarding of $3,500 for “loss of and injury to the orange crops during the years 1910, 1911 and 1912.” (Id. at p. 530.)

In Andreen v. Escondido Citrus Union (1928) 93 Cal.App. 182 [ 269 P. 556 ], the defendant’s agents negligently fumigated the plaintiffs lemon trees and orange trees. The opinion states that plaintiff’s complaint “alleged that plaintiff had suffered by reason of loss of his crop and in the further respect that his trees had become permanently damaged and set back and, as a consequence, the market value of his orchard had been lessened.” (Id. at p. 185.) The jury returned a general verdict in favor of the plaintiff in the amount of $2,250. On appeal the defendant contended that there was insufficient evidence to support the verdict. The appellate opinion concluded that

In Kolberg v. Sherwin-Williams Co. (1928) 93 Cal.App. 609 [ 269 P. 975 ], the plaintiff’s trees were sprayed with a product manufactured by the defendant. This “resulted in serious injury to the trees sprayed and in loss of a large portion of the crop of oranges.” (Id. at p. 611.) The plaintiff had a court trial. The trial court “allowed the plaintiff $1,900 as loss to his orange crop for the 1924 season and $4,200 as damage to the orchard.” (Id. at p. 613.) The evidence showed that the plaintiff “received from 2,340 boxes of oranges picked from sprayed trees the sum of $1,981 less than the average price which he received for oranges picked from trees which had not been sprayed and which were sold at the same time.” (Id. at pp. 613-614.)

Both appellant and respondent call our attention to Rilovich v. Raymond (1937) 20 Cal.App.2d 630 [ 67 P.2d 1062 ]. In Rilovich, damage to orange trees was alleged to have been caused by the breach of a written agreement to supply water. The tree owner “successfully contended before the trial court that the proper measure of damages to the trees themselves was the cost of restoration of the trees, plus the value of the crops that would have been grown, during the time that was lost, had the trees not been destroyed.” (Id. at p. 645.) The appellate court, after stating that the proper measure of damages was “the amount of depreciation in the value of the land caused by the loss of or damage to the trees” (id. at p. 644), appeared to reject the tree owner’s contention that depreciation in value was one method but not the exclusive method of measuring the damages. The court stated: “The rule of damages in such case is as we have stated it, namely, the depreciation in the value of the land, and this is exclusive of every other kind of damage to the trees themselves. Respondent suggests that both rules are applicable, and that he may rely upon either. We see a vast difference, however, between the restoration of a part of an established crop of alfalfa, which can be accomplished readily and with a fair measure of certainty, and the restoration of such an orange grove as the one involved in the present case.” (Id. at pp. 645-646.) Rilovich does not attempt to explain what the “vast difference” would be between restoring an established alfalfa crop and restoring an established orange orchard. Furthermore, Rilovich states that the reduction in the value of the land is equivalent to, or at least is “based upon,” the value of the lost orange crop. The court stated: “The value which bearing orange trees add to land is based upon the value of crops which they might bear. When the loss of the tree is compensated in damages to the ftill value, the value takes the place of the tree and there will be no future crops to consider.” (20 Cal.App.2d at p. 645.) If computing or estimating the depreciation in the value of the land involves computing or estimating the profits

This court in Baker v. Ramirez (1987) 190 Cal.App.3d 1123 [ 235 Cal.Rptr. 857 ] decided that the measure of damages for the tortious removal of “two rows of orange trees from a twenty-foot wide strip of property” (id. at p. 1129) was not required to be the amount of reduction in the value of the property. We stated:

“The measure of damages for tortious injury to property is ‘the amount which will compensate for all the detriment proximately caused thereby . . . .’ (Civ. Code, § 3333.) There is no fixed rule for the measure of such damages. [Citation.] One measure is the difference between the value of the property before and after the injury. However, an alternative measure is the cost of restoring the property to its condition prior to the injury. [Citation.] Whatever measure is the most appropriate to compensate the injured party for the loss sustained in the particular case is the one which should be adopted. [Citation.]

“Here, there is no impediment to replacing the orange trees and, considering the small portion of the grove which was damaged, it is reasonable to do so. Thus, the cost of restoring the grove is the most appropriate measure of damages in this case. The orange trees are valuable only because they

The trial court’s granting of nonsuit as to the first, second, third, fifth and sixth causes of action is reversed for the reasons stated. Accordingly, the trial court’s award of attorney fees and costs is reversed. In all other respects the judgment is affirmed. Costs on appeal to appellant

Vartabedian, J., and Harris, J., concurred.