Court Opinion

ID: 3608206
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:53:05.932911+00
Date Added: 2024-06-11T14:07:30.050678
License: Public Domain

A brief restatement of some of the facts may explain why I have taken a different view of this case.
Federal knew that the sugar which it was refining to sell to Czarnikow was upon delivery to be immediately resold in the domestic trade to Czarnikow's customers. The details of the transactions are stated in Judge KELLOGG'S opinion. In fact, Czarnikow never had any opportunity to examine the sugar, as the agreement was to deliver it in 100-pound bags, properly marked, and shipped by the refinery according to its own routing to Czarnikow's customers. Federal had the name of the *Page 51 
various persons and corporations to whom the sugar was consigned. The market conditions were known as well to Federal as to Czarnikow, and perhaps better, as the refinery had been in the domestic trade and was responsible for market information circulated to the trade. The fluctuation in the price of sugar apparently followed the rise and fall in the price of other commodities. However, the price at which sugar was selling during all the time of these transactions was known to Federal. No reason can be suggested why the refinery would not or could not appreciate that the delivery of bad sugar would damage Czarnikow. To say that such a result was not within the contemplation of the parties would be contrary to the facts and their subsequent action. The rise in price does not indicate excessive profits until we know what Czarnikow had to pay for the raw material.
Federal agreed and undertook to deliver to Czarnikow's customers "fine granulated sugar." It delivered, instead, discolored sugar of inferior quality. The evidence was overwhelming that it recognized its mistake and its obligation under its contract with Czarnikow. The authority of its agent and representative, Lowry, to meet the conditions is abundantly proved. He was authorized to deal with Czarnikow's customers, to take back the sugar or to pay damages. Deliveries were to be made in July and August. Upon receiving the sugar the customers immediately complained to Czarnikow, whereupon Lowry undertook to meet and settle with them. The customers came on from the West and saw Lowry, who settled with some of them, and promised to make arrangements with the others, either to replace the sugar or to sell it at the best price possible. Some of his settlements were carried out by the refinery, and not until the return to New York of Claus Spreckels were Lowry's acts repudiated. Even then, Spreckels, according to the plaintiff's witnesses, admitted Lowry's authority to make substitution or give back money paid for sugar not up to standard. *Page 52 
In fact, on August 27, 1920, Czarnikow-Rionda Company wrote the Federal Sugar Refining Company at its office, 91 Wall street:
"DEAR SIRS: We are in receipt of your favor of August 27 and, in accordance with same, we are enclosing herewith a list of the different buyers and the number of bags of poor quality sugar which each buyer is complaining about, so that you will be able to replace said sugars before September 1st."
Twenty-five items of shipment are then specified.
Under such circumstances, when the plaintiff, acting upon the suggestion of Federal, sent a list of the defective shipments to be replaced with good sugar, how can it be claimed that the plaintiff should immediately have gone into the market and bought "fine granulated sugar" for its customers, and thus reduced or lessened the damage?
The action of the defendant, through Lowry and its other officers, amounted to two things: First, it was a recognition of the nature of its contract with Czarnikow, and an interpretation of its meaning as Federal understood it. It recognized that it was under obligation to deliver good sugar to these customers of Czarnikow, and that these sales were within the contemplation of the parties at the time Federal contracted to make deliveries. It further recognized that according to the contract it was obliged to meet the damages. At least these actions constituted evidence by which the trial justice was justified in finding the fact of contract as alleged by the plaintiff. The action of the parties and the interpretation which they put upon their own contract was for the trial judge a very safe guide. (Brooklyn Insurance Co. v. Dutcher, 95 U.S. 269;Woolsey v. Funke, 121 N.Y. 87, 92.) Second, the action of Federal through Lowry and its officers in dealing with the plaintiff's customers and in requesting a list of defective shipments for replacement estops it from claiming that the plaintiff *Page 53 
should have bought "fine granulated sugar" in the open market to fill its contracts. The plaintiff passed the matter over to the defendant, not only as requested, but in accordance with the very nature of the situation. The defendant had bagged the sugar at the refinery and shipped it directly to Czarnikow's customers. Who knew whether or not it was defective and below standard? The complaints were coming in to Czarnikow, which was not justified in dealing with the defendant's product without notification to it. Claus Spreckels subsequently claimed that the sugar did not come from his refinery; that his product was never defective. Subsequent litigation showed him to be wrong. The plaintiff's story and the actions of Lowry are consistent with the things we would expect to happen under such conditions — Lowry has authority from the refinery to clean up the mess; he undertakes to do so and partially succeeds until stopped by Claus Spreckels.
I do not see how we can say as matter of law under these circumstances that there is no evidence to sustain the finding that the plaintiff's dealings with its customers were in the contemplation and expectancy of the defendant. Neither do I see how we can further hold, as matter of law, that it was the duty of the plaintiff to purchase other sugar in the general market to meet its subcontracts.
I do agree that the questions raised by the appellant are here for our decision. The attitude of trial counsel may have stressed other points in the case, but it is equally open to counsel on appeal to press any objection which has been fairly raised during the course of the trial. All these questions which we are here discussing were embodied in the objections raised by Mr. Bigelow, representing the defendant.
I do not understand the law to be that before a seller is liable for loss of profits, he must have known the terms and conditions of the subcontracts made on resale by his purchaser. That Federal did not know the price or the *Page 54 
terms of the contracts which Czarnikow had made with its consignees of the sugar was for the purpose of this action immaterial. What was within the contemplation of the parties when Federal agreed with Czarnikow to deliver "fine granulated sugar" to Czarnikow's customers is of course a question of fact to be proved like any other fact, by the circumstances of the case. Federal knew, as I have already stated, that Czarnikow was a dealer in sugar and was not to store or keep it for any future market; that it had no warehouses or storage facilities; that all deliveries were to be made from the refinery to Czarnikow's customers. It was a case of immediate resale, where delivery was to be made by the first seller to the second purchaser. If all of this was within the contemplation of the parties at the time Federal agreed with Czarnikow to deliver sugar to its customers in the domestic trade, Federal is liable for the losses sustained by Czarnikow because of the former's breach of contract. (Delafield v. Armsby Co., 131 App. Div. 572, 585; affd.,199 N.Y. 518; Booth v. Spuyten Duyvil Rolling Mill Co., 60 N.Y. 487,494; Carleton v. Lombard, Ayres  Co., 19 App. Div. 297; affd., 162 N.Y. 628; Burdick Sales [2d ed.], ch. V, § 10, p. 210;Trigg v. Clay, 88 Va. 330, 334; Hammond  Co. v. Bussey,
20 Q.B.D. 79.) (See, also, section 321 of the Restatement of the Law of Contracts, Tentative Draft No. 8 [The American Law Institute], which says: "In awarding damages, compensation is given for only those injuries that the defendant had reason to foresee as a probable result of his breach when the contract was made.") In the comment to this section the reporter states: "If the contract for the resale of the goods is at a price that will net an extraordinary profit, or if the terms of that contract are such that there will be extraordinary losses in case of nonperformance, the seller or carrier of the goods does not have reason to foresee that these extraordinary injuries will be caused by his breach, unless he knows or has reason *Page 55 
to know the terms of the contract of resale." This case comes both within the rule and this exception stated in the comment. The defendant had reason to foresee the result of shipping inferior sugar to the plaintiff's customers. There could only be one result — loss to the plaintiff. As to the extraordinary profits, we do not know what the plaintiff paid for the sugar, the cost of refining being only the price of manufacture. The raw materials were purchased by it, but the price is not given. Even if we assume that the rise of the market to twenty-seven cents a pound was an extraordinary and exceptional price, the defendant had reason to know the prices at which the plaintiff would or could resell its sugar. It was the source of information for the sugar market as to the conditions in trade and the prices demanded and to be procured. When it agreed to deliver the sugar to the plaintiff's customers, it knew the price sugar was bringing, and that the market was and had been a fluctuating one. The price of sugar goes up and down like everything else which has a speculative value. Even this becomes a question of fact which has been dealt with by the trial court.
Exact rulings and a perfect fit of the law to the facts, andvice versa, are almost impossible in every breach of contract case involving large transactions; an approximation is as near as we can get to the right thing to be done. Under all the circumstances of this case, I feel that the trial court was justified in its conclusions, and that the judgment below should be affirmed.
CARDOZO, Ch. J., POUND, LEHMAN and O'BRIEN, JJ., concur with KELLOGG, J.; CRANE, J., in opinion, and HUBBS, J., dissent.
Judgments reversed, etc. *Page 56