GRUPE v. GLICK ET AL

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District Court of Appeal, Second District, Division 3, California.

GRUPE v. GLICK ET AL.

Civ. 14152.

Decided: May 15, 1944

Ben Gould, of Los Angeles, for appellants. Turner & Wald, of Santa Ana, for respondent.

The plaintiff purchased from the defendant three machines, paying the sum of $1500 for the three. It turned out that the greatest value the machines had was as junk, their value for that purpose being $75. In his complaint the plaintiff sought not only the $1425 which he had obviously lost, but enough more to total $31,993.94. The trial court did not award the plaintiff all that he asked, but did give him a judgment for $6,872.84, which we find to be more than was justified by the evidence.

There is no controversy as to most of the facts which form the setting of this case, and in the main the principles of law to be applied are familiar. The machines were designed to re–refine oil, and were manufactured by the defendant. Plaintiff purchased the machines to resell, and this the defendant knew. Plaintiff sold each machine for three times the $500 he had paid for it, under a conditional sales contract, receiving a down payment of $500. In addition to the down payment, one of plaintiff's purchasers paid $125 and another paid $100, but no further payments were made, the possibility of getting the machines to work satisfactorily being given up. When the defendant sold the machines to the plaintiff, and when the latter sold them to the would–be–users, each in turn warranted that the machines were fit for the task they were designed to perform, that is, to “laundry” oil. The failure of the machines to function satisfactorily constituted a breach of defendants' warranty to the plaintiff and of plaintiff's warranty to those who purchased from him. The measure of damages for a breach of warranty is prescribed by subdivisions (6) and (7) of section 1789, Civil Code, in these words: “(6) The measure of damages for breach of warranty is the loss directly and naturally resulting in the ordinary course of events from the breach of warranty. (7) In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate damage of a greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty.” These provisions of our Uniform Sales Act (see Civil Code, sec. 1800) correspond to those found in subdivisions 6 and 7 of section 69 of the Uniform Sales Act (1 Uniform Laws Annotated, p. 396), so that the cases applying the latter have authoritative value.

The amount awarded by the judgment is the total of these items: $4425, $321.34, $526.50, $600 and $1000. It is the first and last of these items of which we are particularly critical. At first glance it would appear that the $4425 item finds support, in the findings, on two theories: First, that the figure represents “the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty”; second, that that sum is made up of two amounts: (1) the $1425 loss suffered when the plaintiff received $75 worth of junk for his outlay of $1500; and (2) $3000 profits lost when plaintiff's resales failed. A more careful reading of the findings, however, discloses that there is none which corresponds to subdivision (7) of section 1789, for while there is a finding that at the time the machines were delivered to the plaintiff each was worth only $25, the correlative finding is that if the machines “had been fit and suitable for the purpose of rerefining oil,” that is, “if they had answered to the warranty,” they would have been worth “to plaintiff” $1500 each. The emphasis is ours, but the words belong to the findings, and do not belong to subdivision (7) of section 1789. “Value,” and “value to the plaintiff” on occasion may be, but they do not mean, and so may not be the same thing. Hurd v. Barnhart, 1878, 53 Cal. 97, 99; Shurtleff v. Marcus Land & Investment Co., 1922, 59 Cal.App. 520, 211 P. 244, 245. The two theories of the findings, then, merge into one; the value of the machines to the plaintiff, had they worked, would have been the price for which he had sold them, and their failure to work lost him the profits of the sales.

This theory of damages is sound; it gives us the loss directly and naturally resulting to the plaintiff, a dealer, in the ordinary course of events, when those to whom he sells finds the machines to be useless for the purpose for which they were designed and purchased. Parker v. S. G. Shaghalian & Co., 1923, 244 Mass. 19, 138 N.E. 236, 238; Hubshman v. Louis Keer Shoe Co., 7 Cir., 1942, 129 F.2d 137, 142. See also Germain Fruit Co. v. J. K. Armsby Co., 1908, 153 Cal. 585, 590, 96 P. 319. Obviously, even if there were machines of other makes on the market, designed to do the work for which defendants' machines were made, they could not be substituted, as one sack of sugar could be for another, to enable the plaintiff to save himself from the loss of profits on the sales he had made. However, in arriving at plaintiff's loss of profits one item that should have been taken into consideration was overlooked. It was the expense of drumming up business for the purchasers, which the plaintiff had agreed to do, probably in part to help him in making further sales, but nevertheless as a part of the sales already made. When asked: “You mean that when you sold this machine you also agreed to go out and get business for the purchaser of the machine?” plaintiff answered: “Absolutely,” and in response to further questions stated that the expense to him of this service would be somewhere between $300 and $500 and that there was no extra charge for this service; it was included in the $1500. The plaintiff himself points out in his brief: “Nowhere in the record is there any evidence that respondent rendered this service to the purchasers of the machines sold by him” and “it would have been an idle gesture for respondent to spend any time or money in an effort to obtain business for a purchaser of a machine that would not work successfully.” Plaintiff's anticipated net profit on the three machines appears, therefore, to be somewhere between $900 and $1500 less than the $3000 allowed him.

The fourth item which goes to make up the total awarded as damages, the sum of $1000, we find to be entirely without warrant. As a part of his complaint plaintiff alleged that after the delivery of the first machine and before the delivery of the other two, he and the defendant entered into a contract by which the defendant agreed to sell, for exclusive distribution “in all territory excepting the territory of Hawaii,” and plaintiff agreed to purchase at least one a month of defendant's Model R–20 rerefining machines. With this as a basis, plaintiff complained that “as a proximate result of defendants' breaches of warranty” he “was forced to abandon” the sale of five additional machines at a sales price of $1800, which sales were “in the process of negotiation and would have been certainly consummated” but for the breaches of warranty. With reference to this claim of the complaint the trial court found: “that as a direct and proximate result of the defective design and construction of said oil rerefining machines * * * and the noncompliance with the warranties of defendants * * * plaintiff has been unable to make any other or additional sales of said oil rerefining machines and has been required to discontinue the effort, and has thereby suffered a loss of profits, to his further damage in the sum of one thousand ($1000.00) dollars.”

Loss of prospective profits on future sales cannot be charged, as damages, against the breach of warranty involved in the sales which have been made. If plaintiff has a cause of action against the defendant because the latter had contracted, but was unable, to construct and deliver machines which would work, that cause of action is not before us and is not to be confused with the one which is, that is, an action for the breaches of warranty involved in the sales which were already made. The blight which wilted the sales–to–be, was caused by the knowledge, or fear, that none of defendant's machines would work; and the result would have been the same had the defendant sold the first three machines with the express understanding that they were not warranted to work. Plaintiff's inability to make future sales doubtless resulted from the poor showing made by the machines, but the breach of warranty incident to those sales that had taken place was not a proximate cause of the failure of other sales to take place. That prospective purchasers from plaintiff have had their ardor cooled by the poor showing made by the machines already in use results in a loss too speculative to be recovered as damages. Van Deren Hardware Co. v. John H. Preston & Son, 1928, 224 Ky. 170, 5 S.W.2d 1052, 64 A.L.R. 881; Krone Die Casting Co. v. Do–Ray Lamp Co., 1938, 297 Ill.App. 602, 18 N.E.2d 100, 106; Henry Porter & Co. v. Lacy, 1937, 268 Ky. 666, 105 S.W.2d 818, 820.

The three items of damage not yet discussed were the amounts incurred by the plaintiff and by two of those who purchased machines from him in an endeavor to make the machines function. Plaintiff was entitled to recover for the expenditure of time and money he had made in a reasonable attempt to make the machines function (Dahl Imp. & Lumber Co. v. Campbell, 1920, 45 N.D. 239, 178 N.W. 197; People's State Bank v. Randby, 1924, 158 Minn. 309, 197 N.W. 265; Plumbers Supply Co. v. Lanter, 1939, 280 Ky. 523, 133 S.W.2d 739, 741), and he may recover, too, for the liability he had incurred for the like expenditures made by those who had relied on his warranty. Fred Wolstenholme, Inc., v. Jos. Randall & Bro., 1929, 295 Pa. 131, 144 A. 909; and see Aldridge Motors v. Alexander, 1940, 217 N.C. 750, 9 S.E.2d 469, 472, 473. As the transactions took place in 1939, the extent of plaintiff's liability should now be known, and should be shown with greater certainty on retrial than seemed possible at the first trial.

The judgment is reversed. The appeal from the nonappealable order, which denied the defendants leave to introduce testimony in support of their motion for a new trial, is dismissed.

BISHOP, Justice pro tem.

DESMOND, P. J., and PARKER WOOD, J., concur.