Goodsell v. Western Union Telegraph Co. — 53 N.Y. Super. Ct. 46

Majority

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JAMES H. GOODSELL, Respondent, v. THE WESTERN UNION TELEGRAPH Co., Appellant.

Headnote

Future damages for breach of contract—Rebate of interest—Deduction for time and labor-—Allowance for uncertainty.—Two causes of action, affirmance as to one—reversal and new trial as to the other—Costs of appeal to abide event of new tn'ial.

Where, in an action for damages for breach of a contract, there is a recovery for future profits anticipated to bo made, during a number of years succeeding the date of the recovery, based on the average yearly profits made under the contract for the period preceding its breach, there should be a rebate at six per cent, on each of such year’s profits included in the recovery from the date of the recovery, to the time to which the profits for each year are calculated.

There should also, in cases where the plaintiff’s time and labor constitute an element in producing the profits, be a deduction for the value of such time and labor, from the time when he ceased to act under the contract up to the time to which the calculation of profits is carried, or by the amount which he could reasonably be expected to earn during that time.

There should also be an allowance for uncertainty in future profits.

In the case at bar, no such rebate of interest was allowed, no such deduction was made, either for the value of plaintiff’s time and labor, or for which he might be reasonably he expected to earn, and the allowance for uncertainty was estimated to be no more than would equal certain claims made by plaintiff, which claims were not sustained by the evidence, so that, in fact, there was no deduction for such uncertainty.

Meld, that for this error, and because on all the evidence it was not shown with reasonable certainty that the loss of plaintiff for future profits amounted to the sum that he recovered, the judgment on the second cause of action should be reversed and a new trial ordered; and as there was no error with respect to the first cause of action, judgment as to that should be affirmed, and the costs of appeal should abide the event of the new trial ordered.

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Before Sedgwick, Oh. J., Van Vorst and Freedman, JJ.

Decided January 27, 1886.

Appeal by defendant from judgment entered upon report of referee in favor of plaintiff.

The action was, among other things, for the recovery of damages from the breach of a contract, causing loss of future profits.

The plaintiff, being engaged in the general busines of collecting telegraphic news and supplying the same to various companies in the United States and Canada on January 28, 1881, entered into a contract with the Atlantic & Pacific Telegraph' Company, whereby, after reciting the above facts, that company agreed during the term of ten years from February 1, 1881, to transmit over the lines formed, operated, leased, or controlled by it, upon the terms, conditions, within the territory and to the points specified in the contract, all news reports or portions thereof gathered by the plaintiff, as agreements then or thereafter to be made by him with newspapers and subscribers taking said news reports should require. The agreement contained the following clause :

“ The collection of all moneys due or to accrue from papers or subscribers coming under the operation of this contract, for news reports transmitted by said telegraph company, shall be made by said telegraph company, for the account of said National Associated Press, and a full and detailed account of all such collections, shall be duly kept at all times by said telegraph company, which account shall always be open to the inspection of the said party of the second part, and the same shall be furnished and rendered in due form by said telegraph company to said National Associated Press monthly. And payments of balances, if any, due said National Associated Press, by the telegraph company shall be made on or before the fifteenth day of each and every month. It is understood, however, while the telegraph company is bound to make and use all reasonable efforts to promptly

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collect, as the same fall due and payable, the amounts due from said papers and subscribers respectively furnished with news reports under this agreement, that the telegraph company shall not be held or considered responsible in case the said telegraph company is unable by such efforts to collect the same.”

The Atlantic & Pacific Telegraph Company, on February 3, 1881, sold, assigned and transferred to the Western Union Telegraph Company, the defendant in this action, all the telegraph lines and appurtenances, its business and property rights, privileges and franchises, excepting the right and franchise to be a corporation ; and the said defendant, under and by virtue of the terms of said assignment and transfer, agreed, and duly undertook and assumed the performance of all valid contracts of the said Atlantic & Pacific Telegraph Company, including the said contract between it and the plaintiff. Defendant broke the contract; and thereafter the plaintiff abandoned further work or service under the. said contract, or in the fulfillment of the terms and conditions thereof, and discontinued the business that he had been conducting and carrying on thereunder.

This action was brought to recover' on two causes of action : 1st,, to recover the amount collected by defendant under the above contract; and 2nd, to recover damages for the breach of the contract.

It was commenced in July, 1882, and the issues were tried before a referee, who, on July 20, 1885, reported in favor of plaintiff on the first cause of action for $16,777.42, and on the second cause of action for $220,306, as damages for the breach of the contract. 0

From the judgment entered on the report, defendant appeals.

Dillon & Swayne, attorneys, and Wager Swayne and Melville Egleston, of counsel for appellant.^[1]

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Miller & Savage,. attorneys, and George W. Miller, of counsel for respondent.

By the Court.

I am of opinion that the determination below as to the existence and validity of the contract, and of the plaintiff’s interest in it, as to the breach by defendant, and as to the amount of damages assessed in the first cause of action, was correct. The assessment as to the second cause of action was incorrect, in my judgment. The plaintiff was entitled to recover the amount of profits that he sufficiently showed he would lose in the future from the breach. Like any other fact in a case to be established by testimony, this must be shown with reasonable certainty as distinguished from probability merely. In Curtis v. Rochester & Syracuse R. R. Co. ( 18 N. Y. 542 ), the question related to the mode of ascertaining a compensation for future pain and suffering. It was there said, “ damages are to be proved, and none can be allowed, except such as are shown by the proof to be, at least to a reasonable degree, certain.”

. An instruction that “future damages could only be awarded when it is rendered reasonably certain from the evidence that such damages will inevitably and necessarily result from the original injury ” was approved. If there was any distinction on this point between cases of tort and of contract, there would be a relaxation of stringency in the former class.

The charge of Judge Sandford to the jury in Bagley v. Smith was approved when the appeal in it was decided ( 16 N. Y. 490 ). To prove the loss of profits-in the future, proof of actual profits was allowed. The- charge was that the evidence was admitted, not as furnishing a rule of damages, but as furnishing to the jury- one means of arriving at the amount the plaintiff ought to receive for damages, and that profits are contingent and fluctuating, and past profits are no sure indication that there will be the same in the future. In making the estimate, the jury were to allow for the fluctuation of trade, the danger of

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Losses, and the effects of competition. It was further said, that the amount thus ascertained was subject to a further deduction in determining what were the plaintiff’s actual damages. He was not at liberty to fold his arms, and remain idle during the three months succeeding the dissolution, and whatever he actually made by reasonable diligence, or could have made, is to be deducted. The court of appeals, said as to this last, that the plaintiff might perhaps have disputed the competency of such testimony. This could not mean more than that if the objection was to be considered at all, it must come from the plaintiff. Certainly, when the profits are to be estimated for eight future years, there must be a deduction for the value of the time which before has been given, and in the future will not be given to the business.

The assessment of damages for loss in the future is $220,305. As this is in part for loss to occur yearly, and as late as 1891, interest on that part, say one half of it, for five years after the judgment, should be added, to state correctly the amount of the recovery. The whole would be over $250,000. The learned counsel for plaintiff to maintain the result, assumes, or rather argues from the figures in the case, that there were profits for thirteen months, from $31,000 a year, to $37,000 a year. And then, the profit for twelve months on this basis is multiplied 8-j-£ times, to ascertain the profits that would accrue in eight years and ten months in the future. Certainly this is erroneous in one respect. For each year after the referee’s report there should be a rebate at six per cent, for each year’s profit from the date of the report to the time the profit is calculated.

Moreover, justice requires that, from any calculation of profit for the future, should be deducted the value of the plaintiff’s time for.eight years and ten months, or the amount it could reasonably be expected he would earn in that time. This would certainly be at the lowest $10,000, but more probably would greatly exceed that sum.

The yearly sum referred to was not fixed by counsel

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for respondent, without having made an allowance for uncertainty in future profits, from fluctuations in business, &c. This allowance was made by estimating it to be no more than would equal certain claims made by plaintiff, for damages from the defendant’s refusing to transmit news to certain newspapers, as the plaintiff requested. I am of opinion that there is no sufficient evidence to sustain these claims for damages, and that in the calculation for plaintiff, there should be a deduction that has not been made for future losses.

On all the evidence, I am satisfied that it was not shown with reasonable certainty, that the loss of plaintiff of future profits amounted to the sum that he recovered. The enterprise was peculiar in its character. It was an exceptional, not an ordinary business. It was not of that kind that deals in staple articles demanded by the people in general. The plaintiff had no hold upon his customers, and the value given by them severally was the result of special bargaining. They could combine among themselves, and, through an agent, such as the plaintiff was, make a contract with the defendant. The testimony disclosed a tendency in the customers to complain, and desire new arrangements. It is not usual for a business to maintain through a long time the large profits, like the present, with which it may start. It would not be an unreasonable anticipation that other telegraph companies might compete with defendant, and make such low rates that they would draw customers from the plaintiff. There were chances connected with plaintiff’s expectation of life, and of continued skill in gathering news. There were considerations pertinent to a presumption that an organization dependent for its continuance upon whim and opinion of individuals acting independently, would in reality continue in fully profitable operation for eight years. It would be necessary to perceive if casual and transitory conditions had not favored the plaintiff in the past, with no certainty that they would be repeated in the future. The result reached below exempts the plaintiff

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from the consequence of mistake or misfortune or disability, which experience shows are more to be expected than perfect prosperity. Then, as has already been said, the important deduction should be made for the value of plaintiff’s time or work in the future.

The judgment, should be affirmed as to the first cause of action, and reversed as to the second cause of action, and the costs of the appeal should abide the event of the new trial which is hereby directed, and the order of reference to be vacated.

Van Vorst and Freedman, JJ., concurred.