Opinion ID: 2364862
Heading Depth: 1
Heading Rank: 6

Heading: Chrysler's final contentions relate to the question of damages.

Text: Quimby claimed three items of damages: (1) The sum of $60,000 for himself individually, representing damages for loss of his investment in the stock bought from Mrs. Randall; (2) The sum of $19,000, as assignee of Randall Motors, representing loss of profits for 90 days; (3) The sum of $33,000 as assignee, representing Randall Motors' loss on the sale of Chrysler and Plymouth parts and accessories. Item (3) will be first considered, because it is not based upon the promissory estoppel, but upon an alleged breach of the 1944 dealer's contract between Chrysler and Randall Motors. Paragraph 8 of the 1944 contract provides for the termination of the contract by Chrysler on 90 days' notice, and by the dealer on 15 days' notice. The contract was terminated by Chrysler effective May 13, 1951. Paragraph 8 also provides that upon termination Chrysler agrees to buy and Direct Dealer agrees to sell within thirty (30) days after the effective date of termination: certain Chrysler and Plymouth motor vehicles, parts and signs, subject to certain qualifications and conditions. Also, upon termination by Chrysler, Chrysler also agrees to buy within thirty (30) days after the effective date of termination on written request of Direct Dealer: certain Chrysler and Plymouth accessories, subject to certain qualifications and conditions. We are concerned here only with parts and accessories. As to both parts and accessories the dealer is required, prior to such purchases, to deliver them FOB Factory or at any other point designated by Chrysler. At the time of the expiration of the 1944 contract and of the failure of Chrysler to grant the new franchise, Randall Motors had on hand a very large number of parts and accessories. As of June 30, 1951 the book value of these was $44,399.98. It is admitted that Randall Motors did not within thirty days after termination of the contract deliver to the factory either parts or accessories, and did not within that period request in writing that Chrysler buy the accessories. Quimby, however, contended that after the franchise was given to Capitol Garage (July 3) he called Neely and asked him what was to be done about the parts. Neely said he would have DiBrodi (Regional Parts Manager at Philadelphia) communicate with Quimby about it. On July 27 DiBrodi called Quimby. DiBrodi said that before Chrysler would take them back Randall Motors would have to package the parts and ship them to Philadelphia, and also would have to accompany each package with the original invoices. The first condition, Quimby testified, was prohibitive because of expense, and the second impossible of performance. The contract itself does not impose such conditions. Quimby thereafter attempted to sell the parts and accessories and finally realized from them only about $10,800, resulting in a loss to Randall Motors of about $33,600. Quimby contended that Chrysler had imposed unwarranted conditions upon the performance of its obligations, and hence had breached the contract. As assignee of Randall Motors he sought to recover from Chrysler his loss on these articles. DiBrodi denied imposing the additional conditions. Chrysler also contended that as a matter of law Randall Motors' failure to deliver and make written request within the period of thirty days from the expiration of the contract precluded any recovery for loss resulting from the subsequent sale of the parts and accessories, and asked the court so to instruct the jury. The court submitted to the jury issues arising out of Quimby's contentions, and thus permitted the jury, if it accepted Quimby's testimony, to award damages for Randall Motors' loss. We think that this was clearly error. At-the time of Quimby's conversation with DiBrodi, Chrysler had been discharged from its obligations under the provisions of Paragraph 8 referred to. The trial court, in its opinion denying a motion for a new trial, referred to DiBrodi's imposition of additional conditions on the purchase of parts and accessories as an anticipatory breach by Chrysler, and Quimby here attempts to justify this holding. This cannot be correct, since the imposition of such conditions occurred after, not during the thirty-day period. There can obviously be no anticipatory breach on July 27 of a clause in a contract that had ceased to be operative on June 13. Quimby also urges that Chrysler never asked the court to charge on the 30-day period. Chrysler did ask for a charge that no recovery could be had for the loss because Randall Motors had never made any delivery or made any written request. This was sufficient. It follows that Quimby, as assignee of Randall Motors was entitled to no recovery in respect of losses on parts and accessories, and item (3) must be eliminated from the case. Items of damage (1) and (2) may be conveniently considered together. Were they properly recoverable, and if so, to what extent? There appears to be considerable uncertainty in the decisions respecting the correct rule of damages in promissory estoppel cases. The doctrine, at bottom, embodies the fundamental idea of the prevention of injustice. See Restatement, Contracts, § 90; Boyer, Promissory Estoppel, 98 U. of P.Law Rev. 459. Various views have been announced as to the rule of damages. Courts have, in fact, done at least four different things about promises which have given rise to unbargained-for reliance: (1) nothing, (2) granted restitution, (3) reimbursed the promisee's losses through reliance, (4) secured for the promisee the expectancy or its value. All these possibilities are recognized in the Restatement except the third. Section 90 itself leaves the court a discretion to refuse relief altogether. Section 347(1) (b) provides for a restitution of benefits. Fuller and Perdue, The Reliance Interest in Contract Damages, 46 Yale L.J., 373, 405. Under the facts of this case we think that Quimby was entitled first, to be made whole in respect of his investment of $38,000 in Mrs. Randall's stock, and second (as assignee), to recover Randall Motors' expectancy in respect of profits that might reasonably have been expected during a period of 90 days, at the end of which the contract was terminable by Chrysler. With respect to net profits there was evidence to support the claim in the net earnings of Randall Motors for the three months of February, March and April. Chrysler cites Goodman v. Dicker, 83 U. S.App.D.C. 353, 169 F.2d 684, in which expected profits were eliminated from a recovery of damages in a promissory estoppel case. This seems to us to be an unjustifiable restriction as applied to the facts before us. Loss of three months' profits is a direct result of the breach. Chrysler argues that Chrysler's promise, on which Quimby relied, was made to Quimby, not to Randall Motors. It is clear that Quimby negotiated on behalf of Randall Motors, which, as the court below held, was to be regarded as a beneficiary of the contract. Both Quimby and Randall Motors suffered loss from the breach. Chrysler finally urges that there could be no recovery of such profits because under the dealer's contract Chrysler was under no obligation to deliver motor vehicles on the dealer's order. The contract provides: All orders are subject to approval and acceptance by Chrysler at its principal place of business. This provision must be read in the light of the 90-day termination clause and reconciled with that clause. So construed, it is merely a clause enabling Chrysler to refuse delivery for reasonable cause. To construe it as Chrysler now contends would result in making the agreement one terminable at will and thus rendering the 90-day termination clause meaningless. The contract is by its terms governed by Michigan law. Our conclusion finds support in the decision of the Supreme Court of Michigan in J. R. Watkins Co. v. Rich, 254 Mich. 82, 235 N.W. 845, to the effect that the right of termination must be exercised in good faith. The case of F. H. McClintock Co. v. Truxell Sales & Service, 297 Mich. 284, 297 N.W. 493, cited by Chrysler, is not in point. It was a contract between a direct dealer and a retail dealer engaged in selling and servicing automobiles. It contained a clause specifically exonerating the direct dealer from any damage for failure to ship cars. We find no error in respect of the claim to recover expected net profits for the 90-day period. Item of damage (2) is based on a claim that Chrysler's refusal to award Randall Motors the dealer's contract rendered Quimby's stock worthless. The court charged the jury as follows: If your verdict should be for the plaintiff, Quimby, his measure of damages in his own right would be the difference between the amount that you should find that Quimby paid to Mrs. Randall for the 250 shares of Randall representing stock owned by her, together with that owned by the estate of Tom Randall on May 9th and the value of those shares immediately after the breach of the contract on May 13, 1951. On the other hand if you should conclude that Quimby suffered no loss by reason of purchasing the shares aforesaid then Quimby could not be entitled to any damages in this respect. As a general statement of the measure of damages in respect of the loss resulting from the purchase of the 250 shares, this instruction was correct, although we think it would have been preferable to specify Quimby's outlay as $38,000. (We deal with this point later.) But, as we shall show, the error, in permitting the recovery of loss on parts and accessories entered into the claim for loss in respect of the stock. Since the case must go back for a new trial, we should, for the guidance of the trial judge, examine the evidence offered to support Quimby's claim, that is, to show the value of the shares on May 13, and indicate our views on its admissibility. How is that value to be determined? Since there is no evidence that the shares had any market value, and since their earning power after the termination of the franchise was highly uncertain, asset value would be the basis for determining their worth. In determining such value it was proper to consider that the corporation no longer had a going business. Quimby adopted this approach. He claimed that on May 13 the stock was worthless  that the corporation was under water, and that if he had liquidated it he would have recovered nothing. He arrived at this conclusion on the basis of the June 30 balance sheet. (The May 31 balance sheet would seem to be a more appropriate one to use, but we shall take the June 30 statement.) The June balance sheet showed net assets of about $113,000. From this should be eliminated a $20,000 loan to Quimby, since as sole stockholder it was of no value to him in realizing on the assets. From the balance of $93,000 Quimby eliminated or reduced seven items totalling about $66,000, and added a contingent liability of $30,000 (not carried on the balance sheet) representing one year's rent due under the existing lease. This left a net deficit of about $3,000. As to the addition to liabilities of the $30,000, it seems an appropriate charge in evaluating the worth of the realizable assets, since on liquidation the corporation would have remained liable for this rent. Chrysler, of course, was entitled to show, if it could, that there was a market for the assignment of the lease, or for sub-letting. But the figure of $66,000 included a loss of $33,600 in respect of parts and accessories. The deduction of this item was clearly erroneous. Not only would its allowance have resulted in double damages, since Randall Motors had an independent claim with respect to it, but also it was on May 13, the date of the breach, a recoverable asset, less expenses of transportation and any other possible deductions. As we have shown, Quimby simply failed to take steps to recover it. It must therefore be restored to the asset side of the balance sheet. (Quimby is, of course, at liberty to adduce any evidence tending to show that the book value should be reduced.) The realizable assets were accordingly, under Quimby's own testimony, about $30,600. Quimby's loss, therefore, would (using these figures) be limited to the difference between $38,000 and 25/26 of $30,600, or about $8500. (He already owned 10 shares.) This gives effect to Quimby's remaining six eliminations or deductions, which, on the face of his testimony, seem proper, although manifestly most of them were only estimates, and might be challenged. We have examined the point at some length, first, because of the error in respect of the claim relating to parts and accessories, and second, because we wish to give the court below, on retrial, such help as we can upon the admissibility of the evidence respecting asset value. We do not of course suggest that the computations we have made are to be used at the trial. They illustrate what we think is the correct method of computing these damages. It will be for the jury to determine, upon all the evidence before them, whether Quimby suffered any loss of value in the 250 shares, and if so the amount. If the case comes on again for trial, the jury should be charged, with respect to Quimby's claim for loss of value of his shares, that the measure of damages is the difference between $38,000 and any lesser amount representing 25/26 of the realizable value of the assets of Randall Motors on May 13. A word must be said about counsel's claim that Quimby's investment was $60,000, not $38,000, because he paid that amount to Mrs. Randall. Of the total price $22,000 was borrowed from Randall Motors. If this debt had represented an obligation to a third person, there would be basis for the claim. But upon the acquisition of Mrs. Randall's stock Quimby became the sole stockholder of Randall Motors and owed the money (in effect) to himself. The situation, for the present purpose (Quimby's loss), is exactly as if the $22,000 had been charged to surplus, as in the case of the purchase of the New York stock. At the trial Quimby claimed a $74,000 loss to the corporation from those purchases, but the trial court rejected the claim, and we think properly. Quimby's expenditure in reliance on the promise was $38,000, plus (if claimed) any possible out-of-pocket expenses incident to the various purchases of stock. The foregoing discussion and conclusion make it unnecessary to discuss Chrysler's contention that the trial court erred in refusing a charge on double damages, or the contention that Quimby's losses from his operation of the Nash agency might have entered into the verdict. It follows from the foregoing discussion that the verdict of the jury in respect of damages cannot be upheld. There remains the question: what proceedings should be taken on remand? Should an unlimited new trial be granted, or has this Court inherent authority, in its discretion, to limit the retrial to the issue of damages, and if so should the retrial in this case be so limited? This is, so far as we know, a novel point in this State. Naturally enough, it is not discussed in the briefs. We therefore desire to give counsel an opportunity to exchange and submit to the Court, within fifteen days, supplemental memoranda on the point. In the meantime, the time allowed for filing petitions for re-argument will be extended until ten days after the Court shall have filed a supplemental opinion in the cause.