Case Name: LOUIS MANN et al., Respondents, v. EARL A. JACKSON et al., Appellants
Court: District Court of Appeal of the State of California
Jurisdiction: California
Decision Date: 1956-04-23
Citations: 141 Cal. App. 2d 6
Docket Number: Civ. No. 21284
Parties: LOUIS MANN et al., Respondents, v. EARL A. JACKSON et al., Appellants.
Judges: 
Reporter: California Appellate Reports, Second Series
Volume: 141
Pages: 6–17

Head Matter:
[Civ. No. 21284.
Second Dist., Div. One.
Apr. 23, 1956.]
LOUIS MANN et al., Respondents, v. EARL A. JACKSON et al., Appellants.
A. J. O’Connor and George J. Hider for Appellants.
Felix H. McGinnis for Respondents.

Opinion:
FOURT, J.
Plaintiffs, hereafter referred to as respondents, brought an action to recover damages from the defendants, hereafter referred to as appellants, for the breach of a written contract to build a certain wire assembling machine. Appellants answered by generally denying the material allegations of the complaint and pleaded four affirmative defenses. The substance of the affirmative defenses were: (1) that the appellants designed, built and delivered to the respondents a machine in accordance with the written contract, but that the parties modified the contract to provide that the respondents were to construct a certain rack on the machine in question, at their own expense and that the failure of the machine to operate properly was due to the respondents' failure to properly design and install the rack; (2) that the respondents, against the advice and without the consent of the appellants, attempted to change the design and installation of certain "take up" reels on the machine and did so improperly; (3) that the parties entered into an oral agreement wherein the appellants were to make certain alterations and additions to the machine, all at the request of the respondents for an agreed added price of $2,500, and that the alterations were made by the appellants; (4) that an agreement was made by the attorneys for the parties wherein it was agreed that all disputes were settled and terminated, excepting that there was to be an arbitration conducted on the amount of money to be paid to the appellants for later repairs to the machine.
Appellants also filed a cross-complaint for breach of the oral contract for alterations which they made to the machine at respondents' request, and for further damages for the added repairs. Respondents answered the cross-complaint, denying the material allegations thereof.
The ease was tried by the court, without a jury. Judgment was in favor of the respondents for the sum of $17,749.17, plus costs. Defendants have appealed from the judgment.
By the terms of the written contract, which was dated December 6, 1951, the appellants, in substance, agreed to furnish to respondents within five months a wire machine to produce open line TV transmission wire, as per sample, at a minimum rate of 3,000 feet an hour, or more. The machine was to be complete in every detail, mechanically perfect and acceptable to the respondents. The appellants further guaranteed the effective operation of the machine for a six months' period. Respondents were to pay $10,000, for the machine, payable at the rate of substantially one-third of the total purchase price with the purchase order; one-third during the advanced stages of production, and the balance on delivery. The designs and drawings were to be the property of the respondents, and no other wire machine was to be made for anyone other than the respondents.
There was a sharp conflict in the statements of the'witnesses. Taking the testimony most favorable to the respondents, a fair résumé of the evidence is as follows:
For a period of about two years before the contract was entered into, the respondents had been profitably engaged in the manufacture and sale of what was called open line TV wire. Shortly before the execution of the contract, the respondents informed the appellants of their requirements for a machine to produce open line TV wire to the end that their costs would be decreased and their volume increased. Appellants were advised of the nature of respondents' business and the intended ultimate use of the wire. After negotiations and discussions, the form of the contract was dictated and prepared. Apparently, each of the parties was present at the time of the dictating, writing and signing of the contract. The respondents agreed that one of their employees would make a certain rack on the machine for the appellants in accordance with the appellants' specifications. Such a rack was made as agreed.
The machine was delivered to the respondents on April 29, 1952. At that time the machine did not work satisfactorily. It never produced salable wire. Appellants took repossession of the machine on July 4, 1952, to the end that it would be put in good working order. There was some discussion at or about that time with reference as to what should be done. The respondents directed a letter, dated July 14, 1952, to the appellants, to confirm the understanding arrived at between the parties. The substance of the letter was that the appellants were to repair the machine and get it in working-order ; the respondents were to pay an added $2,500, approximately three months after the machine was in good running shape, and to pay the balance due on the original contract, as soon as possible. There were set forth in the letter, in itemized form, several of the difficulties which the respondents had encountered with the machine.
Shortly before the 2d of September, 1952, the respondents brought an action against the appellants to regain possession of the machine, the respondents apparently contending that nothing had been done toward making it workable. While the machine was in the possession of the sheriff, the parties agreed that it should be returned to the appellants for a test run on September 2, 1952, subject to the understanding that appellants would relinquish possession to the respondents following such test. On or about September 2, 1952, the test run was made in appellants' shop. The machine failed to work. On the same day, the respondents paid the final installment of the written contract dated December 6, 1951.
Following the test run, the appellants refused to relinquish possession to the respondents. After some intemperate language between the parties, their attorneys orally agreed to attempt to provide for an arbitration of all claims of the parties. This proposed agreement to arbitrate was to be reduced to writing. Counsel for the appellants thereafter directed a letter to respondents' counsel, stating that it was intended that only the appellants' claims against the respondents would be arbitrated and that respondents were to release appellants of all liability. Respondents' counsel replied to the letter, denying any such understanding and thereupon the proposed arbitration was abandoned.
Shortly after the test run of September 2,1952, the machine was redelivered to the respondents, who desired to see if it could be made to work. They engaged the services of an engineer who inspected it with the view of ascertaining if there was any possibility of making it operate satisfactorily. The machine was then delivered to the Lynn Manufacturing Company for further investigation. It remained at the latter establishment until about December 17, 1952. Extensive work was done on the machine at the manufacturing plant above named; however, it became evident that even if it could be made to operate, its maximum capacity would be about 400 to 500 feet per hour.
The .respondents expended $3,567.56, to others than the appellants, in payment of work and materials in an effort to repair or place the machine in working order. They paid the appellants $10,428.75.
In the period from May 1, 1952, the date the machine was to have been delivered to the respondents, to January 31, 1953, the respondents manufactured 1,875,535 feet of open line TV wire, by use of their existing manual method, at an actual cost of $21,536.80. Respondents could have produced that same quantity of wire during that same period of time with the automatic machine which the appellants agreed to furnish at a cost of $16,078.94. The difference between the actual cost to the respondents of the wire manufactured and sold, and the lessor cost of producing the same quantity of wire by means of an automatic machine was $5,457.86.
The trial court found that the parties had entered into the contract of December 6, 1951; that the respondents had paid appellants the sum of $10,428.75; that the machine was imperfect and incapable of performing as agreed; that the original contract of December 6, 1951, was not modified in any material respect; that from May 1, 1952, to December 31, 1952, the respondents expended $2,612.56, in a reasonable effort to cure the defects of the machine, but to no avail; that the reasonable value of the machine on September 2, 1952, and at the time of trial, was $750; that the respondents, from May 1, 1952, to January 31, 1953, manufactured manually and sold certain wire at a cost of $21,536.80; that said wire could have been manufactured with the automatic machine, if working, for the sum of $16,078.94.
Respondents were .awarded judgment against the appellants for $9,678.75, being the difference between $10,428.75, the amount paid to appellants, minus $750, the value of the machine, plus $2,612.50, paid by the respondents to cure the. defects in the machine, and the sum of $5,475.86, for profits lost, a to.tal judgment .of $17,749.17.
Appellants have set forth, in their brief, their contentions. Under the title "Statement of Facts," appellants have related their view of the evidence, and have largely omitted the evidence which the court found to be true. Thereafter, follows a heading titled, "The Court Erred in Awarding Judgment to Plaintiffs." Under this title, appellants restate some of the conflicting evidence.
There was ample and sufficient testimony in the record which, if believed by the trial court, would suffice to sustain the judgment. As was said in Richter v. Walker, 36 Cal.2d 634, 639 [226 P.2d 593]:
"As to the principles governing appellate courts in considering the adequacy of findings to dispose of issues and support a judgment it is a general rule that 'Even though a finding might have been more clearly phrased, it is sufficient if its language is clear enough to indicate what the court intended; and if there are findings sufficient to support the judgment, they are not vitiated by the unintelligibility of others. ' "
Under the title heretofore indicated, the appellants also contend that the respondents, by their conduct, prevented the performance of an act upon which the appellants' obligations depended, and thereafter used the nonperformance of that act as a basis upon which to seek affirmative relief. There was evidence that the machine not only never did work, but that it was so faulty in the inherent design, that it never could be placed in reasonable working order. As respondents have pointed out, it is difficult to understand how the respondents could be said to have in any way prevented the machine from being placed in a workable condition, when such was inherently impossible.
Appellants' next contention is that the finding that the reasonable value of the machine was only $750, is not supported by the evidence. There was testimony by at least one witness to the effect that the value of the machine was $750, and no more. The trial judge obviously believed such testimony and disbelieved other testimony on the same subject matter. We have heretofore stated the time honored rule in the event of conflicting testimony.
Appellants next assert the court erred in finding that the respondents suffered a loss of profits. The respondents sought damages for the loss of sales because of the respondents' inability to produce sufficient wire to fill the orders, which inability was predicated upon the machine not working. The trial court denied the respondents recovery for such lost profit, if any. The court did grant recovery for the lost profits predicated on the difference between the greater cost of producing by the manual method, the wire which respondents manufactured and sold between May 1, 1952, and January 31, 1953, and what would have been the lesser cost to have produced that same wire with an automatic machine which the appellants agreed to furnish the respondents. The appellants knew, before they started to make the machine, the nature of the respondents' business and of the respondents' desire to have the machine to reduce the cost of manufacturing the wire and to increase the volume. It was contemplated that only one employee would be needed to operate the machine, as opposed to two employees in the manual operations, and further, that the cost of the plastic would be substantially reduced with the machine.
It is well established that damages may be awarded for loss of profits where such profits can be shown with a reasonable degree of certainty, whether the action be for tort or for breach of contract. Loss of profits, either present or future, may be recovered upon a breach of a contract if such loss is the direct and natural consequence of the breach and the amount thereof can be shown with sufficient certainty. (Civ. Code, § 3300 and § 3301; Ross v. Frank W. Dunne Co., 119 Cal.App.2d 690, 700-701 [260 P.2d 104] ; Walpole v. Prefab Mfg. Co., 103 Cal.App.2d 472, 481 [230 P.2d 36].)
When the defendant by breaching a contract renders it impossible for plaintiff to realize profits, the probable profits may be estimated and an award of damages for loss of prospective profits will be sustained if there is a satisfactory basis for estimating the probable earnings that would have been received if the contract had been performed. (Sobelman v. Maier, 203 Cal. 1, 9 [262 P. 1087] ; Hartman v. San Pedro Coml. Co., 66 Cal.App.2d 935, 937 [153 P.2d 212] ; see also Natural Soda Produets Co. v. City of Los Angeles, 23 Cal.2d 193, 199 [143 P.2d 12].) Where there is an established business, damages are recoverable for the loss of prospective profits resulting from breach of contract since the working experience of the business affords a reasonable method of determining the loss and such damages are therefore not speculative and uncertain. Hoag v. Jenan, 86 Cal.App.2d 556, 563 [195 P.2d 451] ; Grupe v. Glick, 26 Cal.2d 680, 692 [160 P.2d 832]; see also note in 104 A.L.R. 157.)
A careful reading of the record in this case indicates that there was abundant evidence from which the trial court could find as it did. There was no prejudicial error committed by the trial judge.
The judgment is affirmed.
Doran, Acting P. J., concurred.