Court Opinion

ID: 3990420
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:48:01.387171+00
Date Added: 2024-06-11T12:17:10.569768
License: Public Domain

The following statement will disclose the reasons which force me to dissent from the majority opinion in this case: *Page 639 
 What are Consequential Damages?
They are indirect damages, as distinguished from direct damages. 1 Sutherland on Dam. (3rd ed.), secs. 14, 15; 1 Sedgwick on Dam. (9th ed.), sec. 111; Anderson's Dict. Law, p. 307; Black's Law Dict. (2nd ed.), p. 314; 5 Am.  Eng. Ency. Law, p. 6; Hale on Dam. (1896), p. 39.
Direct damages are the result of losses which proceed immediately (not necessarily in time, but causatively) from wrongful conduct, without the intervention of any intermediate cause. (We shall presently inquire more concretely, What are direct damages upon the breach of a contract?) Hale on Dam., p. 36; Sedgwick on Dam., sec 111.
Indirect (consequential) damages are the result of losses which do not proceed immediately (causatively) from wrongful conduct, but from such conduct setting in operation an intermediate cause or causes (which, of course, is, or are, not independent), from which latter the losses directly result. Hale on Dam., p. 39.
Both direct and indirect (consequential) damages are recoverable if they are proximate. Hale on Dam., p. 36; Sedg. Dam., sec. 111;Louiseau v. Arp, 21 S. D. 566, 114 N. W. 701, 14 L.R.A. (N.S.) 855-8,130 Am. St. Rep. 741.
Direct damages are always proximate and are recoverable whether they were in fact within the contemplation of the parties or not. (In actions of contract the loss of the thing contracted for is almost necessarily contemplated by the parties, but in some cases the extent of the damage, although direct, is unexpected, and "whether the parties to the contract had in mind the damages which might result from a breach does not in the least affect their liability for a loss resulting from a breach. * * * Compensation is recoverable * * * if the loss is direct," — and also if indirect [consequential] if proximate, as we shall presently see.) Hale on Dam., pp. 38-9; Sedg. Dam., sec. 111, 121-b. *Page 640 
Indirect (consequential) damages are sometimes proxi and sometimes remote. The former are always recoverable in actions of tort; and are recoverable in actions of contract unless the contract exempts from liability therefor. The latter are never recoverable, either in actions of tort or contract. Hale on Dam., p. 42; Sedg. Dam., sec. 111.
Indirect (consequential) damages are proximate when they are the natural (normal) and probable result (sometimes spoken of as thenatural, uncoupled with probable, result), of the wrongful conduct. Hale on Dam., pp. 42, 48; Sedg. Dam., sec. 111.
We come now, in the light of the elementary principles and rules above mentioned, to the inquiry as to —
What are direct damages upon the breach of a contract? and, negatively, what are not indirect (consequential) damages in such case?
`The direct consequences of a breach of contract is a loss of the thing contracted for * * *' (Italics supplied.) Hale on Dam., p. 38.
What is the thing contracted for must depend upon the construction of the contract in question. That construction depends in part upon the surrounding circumstances known to both parties at the time the contract was made. Shenandoah,  c. Co. v. Clarke, 106 Va. 100, 55 S. E. 561;Merriam v. United States, 107 U. S. 437, 2 Sup. Ct. 536, 27 L. Ed. 531;U. S. v. Bethlehem Steel Co., 205 U. S. 105, 27 Sup. Ct. 450,51 L. Ed. 731; 1 Sutherland on Dam. (3d ed.), sec. 50, p. 149; Baldwin v. U. S.Tel. Co., 45 N. Y. 750, 6 Am. Rep. 165; Hydraulic,  c. Co. v.McHaffie, L. R. 4 Q. B. 670; Meyer v. Hamer, 70 App. Div. 529, 535,75 N. Y. Supp. 261; Sutherland on Dam. (3d ed.), sec. 50, pp. 149-150-1; Hale on Dam., pp. 61-2; Richardson V. Chynoweth, 26 Wis. 656; 8 R. C. L., p. 27; Hadley v. Baxendale, cited below; and many other cases on this subject too numerous to cite. *Page 641 
What is known as the third rule in the case of Hadley V.Baxendale (9 Ex. 341, 23 L. J. Ex. 179, 18 Jur. 358, 26 Eng. L.  Eq. 398) decides that if damages result from special circumstances, notice of which is given to a vendor at the time a contract of purchase is made, all damages may be recovered which are the natural and probable consequences of a breach of the contract by the vendor under those circumstances. It does not hold that such damages are indirect (consequential), as counsel for defendant in error, plaintiff in the court below (hereinafter designated plaintiff), contend. Nor does it hold that such damages are direct. In truth, of necessity, in the very nature of the case, and under the elementary rules above mentioned, damages recoverable under the third rule in Hadley v.Baxendale, may be both direct and indirect (consequential) damages. All damages which are the natural (normal) and probable result of a breach of contract under the special circumstances referred to are recoverable under such rule. That is to say, both direct and indirect (consequential) damages. The limitation in this rule is that they must be the natural and probable consequences of a breach of the contract under those circumstances, i. e, the loss and damages must be proximate, which includes both direct and indirect (consequential) damages. Hale on Dam., pp. 58-9. Hence, this case does not hold that the damages recoverable under its third rule are solely indirect (consequential) damages, but the contrary.
Whether in a particular case, the damages recoverable under the third rule in Hadley v. Baxendale are direct or indirect (consequential) must be determined by the result of the inquiry of whether they proceed immediately from the loss of the thing contracted for, without the intervention of any intermediate cause, such as above referred to, or from such loss setting in operation such an intermediate cause or causes from which latter the losses or damages *Page 642 
directly result. In principle this is necessarily true. This inquiry unescapably attends every ascertainment of whether damages in any case are direct or indirect (consequential) — when due to special circumstances, as well as in other cases. All causes from which loss and damage may proceed immediately (directly) are causes which also may set in operation other and intermediate causes from which latter also loss and damage may directly result. The loss of a thing contracted for may in every case cause direct and indirect (consequential) damages; in the former case they are direct; in the latter indirect (consequential) damages.
Accordingly we find that the authorities, in dealing with a situation where there is no intermediate cause between the breach of the contract and the damage resulting from the loss of the thing contracted for (that thing being ascertained from a construction of the contract in the light of the surrounding [special] circumstances, hold:
"If it appear by such circumstances that the contract was entered into, and known by both parties to be entered into, to enable one of them to serve or accomplish a particular purpose, whether to secure a special gain or avoid an anticipated loss, the liability of the other for its violation will be determined and the amount of damages fixed with reference to the effect of the breach in hindering or defeating that object. The proof of such circumstances makes it manifest that such damages are within the contemplation of the parties. Looking alone at a contract of this character, silent as to the circumstances which were in view, such damages are consequential, and sometimes appear to arise very remotely and collaterally to the undertaking violated. But when the contract is considered in connection with the extrinsic facts, there is established a natural and proximate relation of cause and effect between its breach and the injury to be compensated. If all such facts as are admissible to justify the proof of consequential damages were recited *Page 643 
in the contract as the law connects them with it when known, or if the legal obligation which the law imposes by reason of them had been expressed in words by the parties, such damages would be direct and notconsequential." (Italics supplied.) Sutherland on Dam., sec. 50, pp. 149-150.
Discussing the third rule in Hadley v. Baxendale, viz. that "When, at the time of making a contract, notice is given the vendor of the purpose of making it, or of special circumstances affecting the quantum of damages likely to result from a breach, damages may be recovered for all the natural and probable consequences of a breach under those circumstances," Hale on Damages, p. 61, says:
"The reason for it is found in the fundamental principle of compensation underlying the entire law of damages. The amount of benefit which a party to a contract would derive from its performance is the measure of damages for its breach." (Citing Alder v. Keighley, 15 Mees. W. 117.) "When defendant knows that plaintiff contracts for the purpose of securing a special benefit, he must be deemed to have contracted that plaintiff should receive such benefit, and he is liable for a breach accordingly. The intention of the parties must be arrived at by interpreting the contract in the light of the surrounding circumstances known to both parties, and such circumstances form as mucha part of the contract as if they were written into it. If the special circumstances were in fact written into the contract, the damages arising from a breach under these circumstances would be direct and notconsequential." (Italics supplied.)
The same author (Hale on Damages), pp. 61-2, adds:
"If the contract of sale is made to enable the vendee to secure a special benefit and that object is known to defendant, the principle of just compensation requires him to make good the loss arising from his failure to deliver the *Page 644 
goods." (Citing Hammer v. Schoonfelder, 47 Wis. 455, 2 N. W. 1129;Manning v. Fitch, 138 Mass. 275; Beeman v. Benta, 118 N. Y. 538,23 N.E. 887, 16 Am. St. Rep. 779.) "In such case the contract interpreted in the light of the object for which it was made, is more than a mere contract of sale."
Referring to the case of Hammer v. Schoonfelder, supra, where defendant agreed to furnish plaintiff, a butcher, with ice, knowing that it was needed to preserve meat of plaintiff, and there was a failure to supply the ice, in consequence of which plaintiff lost considerable meat, for which recovery was allowed, 1 Sutherland on Dam., p. 151, says:
"This case was not one of simple contract of sale. The special circumstances, known to both parties, made it more than that in its aims and consequences, although the terms in which it was made, considered alone, imported only a contract of sale. The vendor knowing the purpose for which it was wanted, was held, by implication, to undertake to deliver it as agreed in order that the vendee should not suffer loss on his fresh meat from his inability to preserve it for want of ice. Such being the contract, the loss which occurred from its breach was thedirect consequence thereof." (Italics supplied.)
"In such case the special circumstances become an implied element of the contract and of the duty thereby imposed." 8 R.C.L., p. 27.
Indeed, such is the effect of the holding in the Hadley v.Baxendale case itself.
In the case of Swift Run Co. v. Fitchburg Rd. Co., 169 Mass. 326,47 N. E. 1015, 61 Am. St. Rep. 288, cited in the opinion of this court upon the former hearing of the instant case, the defendant had no notice of the special circumstances.
A number of cases decided by the United States Circuit Courts, falling within the third rule in Hadley v. Baxen- *Page 645 dale, and where there was no intervening cause between the loss ofthe thing contracted for and the damage resulting from such loss, hold that the damages in such cases are direct. Iowa Mfg. Co. v. B. F.Sturtevant, 162 Fed. 460, 89 C.C.A. 346, 18 L.R.A. (N.S.) 575;McDonald v. Kansas City,  c. Co., 149 Fed. 360, 79 C.C.A. 298, 8 L.R.A. (N.S.) 1110; Northwestern,  c. Mfg. Co. v. Great Lakes,  c.Works, 181 Fed. 38, 104 C.C.A. 52; and other cases cited in such cases.
To the same effect are also the following cases:
See Richardson v. Chynoweth, 26 Wis. 656.
In Willey V. Fredericks, 10 Gray (Mass.) 357, the action was for damages for breach of contract to build a proper wall. Owing to such breach of contract the owner lost the use of certain land. Held:
"Damages for the loss of the use of the land during such time are not remote, speculative or contingent, but the direct and immediate consequences of the defendants' failure to perform their contract and duty." (Italics supplied.)
Counsel for plaintiff take the position that in "substantive law, the whole realm of damages is divided into two classes, `direct' and (indirect) `consequential.'" This position, as we have seen, is correct. Counsel thereupon with great ability, press forward to and attempt to maintain the further position that as in "pleading and practice the whole realm of damages which can be recovered is divided into `general' and `special' damages * * * and that `special damages' are the same as `consequential damages' which are not so remote that they cannot be recovered." That is to say, that all direct damages are general and all special damages are indirect (consequential) damages. The following authorities are cited and relied on to sustain this position:Loesch v. Koehler, 144 Ind. 278, 41 N. E. 326, 43 N. E. 129,35 L.R.A. 682-4; Thomas v. Dingley, 70 Me. 100, 35 Am. Rep. 310-311, 314;Battley v. Faulkner, 3 Barn. *Page 646 
and Ald. 294, 3 Common Law Rep. 290; Laing v. Calder, 8 Penn. 479,49 Am. Dec. 533-4; Sedg. on Dam. (4th ed.), p. 682; Hale on Dam., pp. 36, 39, 223; Eaton v. Boston,  c. R. R., 51 N. H. 504, 12 Am. Rep. 147;Wallace v. Ah Sam, 71 Cal. 197, 12 Pac. 46, 60 Am. Rep. 534-7; 4 Words and Phrases, p. 3060; Lee v. Hill, 84 Va. 919, 921, 6 S. E. 473;Wood v. American Nat. Bank, 100 Va. 306, 309, 40 S. E. 931; N.  W. R.Co. v. Spears, 110 Va. 110, 113, 65 S. E. 482; Sutherland on Dam. (3d ed.), sec. 14.
An examination of these authorities discloses that they do hold, it is true, that "special damages" must be specially pleaded or alleged to be recovered; but they fall short of holding that all general damages are direct and that all special damages are indirect (consequential) damages. It is manifest from these authorities that indirect (consequential) and special damages are not terms of identical meaning. They do not cover the same ground. It is true that their boundaries interlock. These boundaries cover in part the same territory of the law of damages, but they do not coincide throughout. These authorities do not hold that special damages may not also sometimes be direct damages. We have seen that they may be. Those authorities do not hold that in such case special damages need not be specially pleaded or alleged to be recovered. On the contrary, Sutherland on Dam. (3d ed.), sec. 14, in discussing direct damages, says:
"What these include. These include damages for all such injurious consequences as proceed immediately" (not necessarily in time but causatively) "from the cause which is the basis of the action; not merely the consequences which invariably or necessarily result and are always provable under the general allegations of damages in the declaration, but also other direct effects which in the particular instance naturally resulted and must be alleged specially to be recovered for." (Italics supplied.) *Page 647 *Page 648 
It is, of course, not intended to conclude what the facts really are or might prove to be; but, assuming, as we must, upon the consideration of the admissibility of such evidence, that the statements accompanying the tender of such evidence would have been sustained by the proof, it appears that the items of damages claimed by defendant proceeded directly from a cause or causes of which the plaintiff had notice at the time of the making of the contract. Counsel for plaintiff, in the brief filed February 26, 1915, state: "Each and every one of these items grew out of the fact that the plaintiff in error had leased from the Southern Railway Company the Bluemont division of its road and had covenanted to take over and operate the same on the 1st of July, 1912." The plaintiff in the court below had notice of this lease at the time of the making of the contract in question and of the pertinent provisions of such lease. Such counsel then takes the position that: "When the contract was entered into, it is clear that the possibility of such damages arising was in the minds of the parties, but that the defendant in error was unwilling to enter into the contract which it did and incur a liability for damages growing out of these peculiar circumstances * * * determined to protect itself against such damages by contract * * *" and hence, "It provided in the contract that it should not be held responsible or liable in any event for consequential damages." Counsel for plaintiff add: "But for this provision in the contract it seems unquestioned that the defendant in error would be liable for the off-sets in the bill of particulars, and because of this contract provision it is clear that it is not liable for these consequential damages."
Counsel for plaintiff, it is very true, contend that such damages were not direct, but indirect (consequential) damages; but it is not claimed that they were so because they proceeded from the operation of a cause or causes of which the plaintiff did not have notice at the time of the making *Page 649 *Page 650 
of the contract. This is in effect admitted. (Of course, upon the assumption that the statements accompanying the tender of the evidence in question would have been sustained by the proof.) The position that such damages are consequential and not direct, is based upon the contention that all damages arising from special circumstances are indirect (consequential) although the vendor has notice of such circumstances as aforesaid. This position has been considered above and found untenable, on principle and upon authority, as there set forth.
The conclusion, therefore, seems inevitable from the case as made by the statement accompanying said evidence, that the damages in question did not proceed from the operation of a cause of which the vendor (the plaintiff) did not have notice as aforesaid; but immediately from the said cause of which the debtor had notice.
Hence the further conclusions are inevitable (predicating that the statements accompanying the evidence aforesaid would be sustained by the proof) that the damages in question are direct damages not indirect (consequential) damages; and that the provision in the contract exempting the plaintiff "in any event, from consequential damages" does not protect it from liability for the damages claimed by defendant in this case.
The provision referred to in the contract would operate upon and exempt the plaintiff from liability for all damages arising from intermediate causes set in operation by the said cause of which the plaintiff had notice, from which intermediate causes losses directly result, and from other indirect (consequential) damages such as might result from many other possible occurrences, as indicated above. But the case before us does not present one in which any such indirect (consequential) damages are sought to be recovered. *Page 651 
That is to say, the application of the foregoing authorities to the instant case produces the following resultant conclusion:
The contract in the instant case impliedly contained — and it must be read and construed as if it in fact expressly contained, written into it — the special circumstances referred to in the statement accompanying the tender of the excluded testimony. Hence, all damages which arose from a breach of such contract, which were the result of losses which proceeded immediately (causatively) from such circumstances without any intermediate cause, were the direct result of a breach of this very contract and direct and not consequential (indirect) damages.
The term "consequential" (indirect), used in the exemption clause of the contract referred to, is not broad enough in its meaning to cover direct, as well as indirect, damages arising from delay in delivery of the goods sold — which, indeed, counsel for plaintiff admit; but the exemption which plaintiff now claims it sought for itself by the use of this term in the contract amounts to this in effect. Even plaintiff, it is to be noted, cannot bring itself to make the claim of this exemption except indirectly, by the use of the contention that it is not seeking exemption under such term from direct damages for such breach of its contract. It can but admit that such term was not used with the intention of exempting it from such direct damages. Hence, plaintiff admits, in effect, that it did not even propose to use in the contract the term in question with such meaning, although the effect of giving the construction to the contract for which it now contends would be to give such term that meaning. And, on the side of the defendant, it is manifest, in view of the statement accompanying the tender of the excluded evidence, that if such meaning had been expressed in the drafts of the contract so as to have been so understood by defendant, it would not have been signed by it. *Page 652 
In this situation the court would be making for the parties a contract different from that in fact made by them if it gave to the term "consequential" the effect now sought to be given it by the plaintiff. Aside from all consideration of the accurate technical meaning of the phrase "consequential damages" is this fundamental and unsurmountable difficulty, which lies in the way of the construction of the contract for which counsel for appellee contend, and which is given it in the majority opinion of the court.
 The Measure of the Damages.
Many authorities have been cited and relied on by counsel for defendant and plaintiff with respect to the proper measure of damages in the case at bar; whether the evidence rejected by the trial court was admissible as bearing upon the proper measure of damages in such case.
As we have seen, where the damages are direct, they may always be recovered. In such case they are certain in respect to the cause from which they proceed. But there is another rule as to certitude not laid down in the noted case of Hadley v. Baxendale, which is essential to the recovery, even of direct damages, as well as of proximate indirect damages, namely, they must be proved with reasonable certainty.Burruss v. Hines, 94 Va. 413, 26 S. E. 875; Bristol Ry. Co. v.Bullock,  c. Co., 101 Va. 652, 44 S. E. 892. And "the law adopts that mode of estimating the damages which is most definite and certain" in the particular case. Griffin v. Colver, 16 N. Y. 489, 69 Am. Dec. 718. The party injured "must do the best he can," "what he reasonably can," to avoid the injurious consequences under the circumstances in which he is placed. Hale on Dam., pp. 64-6-8-9. In case of delayed delivery, if there is a market in which the vendee can supply the loss of the thing contracted for, he should avail himself of it, and whether he does so or not, the difference *Page 653 
between the market value and that contracted for, is the measure of damages; but when there is no market value, this rule has no application. Trigg,  c. v. Clay, 86 Va. 330, 13 S. E. 434,29 Am. St. Rep. 723; Sedg. Dam., p. 281; Sutherland Dam., sec. 46. Where there is no such market value and the vendor at time of contract has actual or implied notice of this fact, the vendee may recover lost profits if proved with reasonable certainty. Richardson v. Chynoweth, 26 Wis. 656;Weston v. Boston Railroad, 190 Mass. 298, 76 N. E. 1050,4 L.R.A. (N.S.) 569, 112 Am. St. Rep. 330, 5 Ann. Cas. 825; Greberi-Borguis v.Nugent, L. R. 15 Q. B. 85, 89; Griffin v. Colver, 16 N. Y. 489,69 Am.Dec. 718; Gagnan v. Sperry,  c., 206 Mass. 547, 92 N. E. 761;Consumers Ice Co. v. Jennings, 100 Va. 719, 42 S. E. 879; Perry TieCo. v. Reynolds, 100 Va. 264, 269-70, 40 S. E. 919; Burruss v.Hines, supra. Lost profits or lost gains are as recoverable as any other loss, if proved with reasonable certainty. "While a plaintiff is deprived of use of property valuable for use, and the property is something that can be replaced, his damages are the expenses of hiring property which he is forced to substitute for it." Weston v.Railroad Co., supra. It is true that the holding just quoted was not necessary for the decision of that case, but it is manifestly sound in principle as applicable to a situation where a hiring is the best course which the vendee can "reasonably" pursue, to minimize the loss under the circumstances in which he is placed. There are cases where the "real value" or "true value" is the measure of damages, there being no market value, as in Loesch v. Koehler, 144 Ind. 278, 41 N. E. 326,43 S. E. 129, 35 L.R.A. 682-4, where there was no market value for the plaintiff's horses which were killed, but they had a real or true value for the particular use to which he could have put them. Such a measure of damages is properly resorted to where it is the "most definite and certain" which is applicable to the case *Page 654 
in hand. It could have no proper application in the case at bar.
The evidence rejected by the court below should have been admitted as tending to prove the damages claimed by appellant.
It is not intended to be said that such evidence was sufficient to prove such damages "with reasonable certainty." There are manifestly some elements entering into the question which are absent from the items of the bill of particulars on their face; such as the expense which defendant would have had to bear had it been able to use the motive power intended and it had not been forced to use steam motive power instead. (See Bristol Ry. Co. v. Bullock,  c. Co., supra.) But this and the like matters of fact, affecting the certainty and definiteness of the proof of the damages so as to entitle the defendant to have them allowed as a set-off, are matters which would be developed in a trial of the case on its merits.
I think, therefore, that the evidence excluded by the court below should have been admitted, and for the reasons given above I cannot concur in that part of the opinion of the majority of the court which holds to the contrary.
I concur in the conclusion of that part of the majority opinion which reverses the case on the ruling of the court below on the subject of interest, as the instant case is one "founded on" the contract and is not an action on the contract itself; but not in its affirmance of the judgment of the court below should the plaintiff submit to the terms stipulated in such opinion with respect to relinquishment of interest.
This being a dissenting opinion, it would serve no good purpose to deal therein with question "I" not passed upon in the majority opinion.
 Reversed in part.
 *Page 394