Court Opinion

ID: 9529200
Source: CourtListenerOpinion
Date Created: 2023-08-07 03:48:45.493983+00
Date Added: 2024-06-11T13:27:42.423094
License: Public Domain

NOURSE (Paul), J. pro tem.*
I dissent from the majority opinion insofar as it holds that respondents are entitled to damages for loss of profits.
In effect the majority opinion writes into the contract between the parties a warranty that the machine which appellants undertook to manufacture would produce open line wire not only at a cost less than the respondents could produce it under the method they were using and with the machine they were using at the time the contract was entered into, but at a saving of the amount awarded by the trial court as loss of profits.
There is no implied warranty in a contract to manufacture a machine as to what the cost of production by it will be, and the contract here does not contain an express one. The only warranty contained in the contract is one that the machine would produce open line wire at a rate of 3,000 feet an hour or more, and that it would do so for a period of six months.
The damages in question did not arise from the failure of the machine to produce wire at the minimum rate specified in the contract, and in fact the trial court found that respondents did not sustain any damages by reason of its failure so to do.
The damages awarded are based solely upon the difference between plaintiffs’ actual cost of producing the wire manufactured by them over a period of nine months and what their witnesses testified that cost would have been if produced by the machine which defendants agreed to manufacture. In other words, the trial court and the majority opinion write into the contract a warranty as to the cost of production by the machine and then find that warranty breached, and award damages because of that breach and not because of the failure of the machine to produce wire at the rate of 3,000 feet or more per hour.
By the other items of damage awarded plaintiffs by the judgment, they were made whole and placed in the same *14position as they were, in before entering into the contract, for the judgment awards them the entire purchase price paid, less the value of the machine, which the plaintiffs chose to retain, plus the amounts that they expended in attempting to remedy the defects in the machine.
The plaintiffs failed to prove that because of the failure of the machine to produce wire at 3,000 feet per hour, or wire at all, they lost any sales or were prevented from performing any contracts, and the fact that plaintiffs’ cost of operation remained the same as it was before they entered into the contract does not constitute any damage flowing from the breach of the contract. This is illustrated by the fact that if the machine had proven capable of producing 3,000 feet of wire per hour but at a cost per foot equal to or greater than respondents’ cost under their old method, no breach of the contract could have been claimed, and no damages could have been awarded.
It is true that there was evidence that before entering into the contract the plaintiffs made known to the defendants their desire to obtain a more economical method of producing wire, but the contract (which was drawn by the plaintiffs) does not contain any warranty as to cost of operation, and such a warranty could not be proven by parol.
Assuming that there was a breach of warranty, loss of profits is not an item of damage in cases such as this. This is firmly established in this state (see California Press Mfg. Co. v. Stafford Packing Co., 192 Cal. 479 [221 P. 345, 32 A.L.R. 114]; Burrell v. Southern Calif. Canning Co., 35 Cal.App. 162 [169 P. 405] ; Grupe v. Click, 26 Cal.2d 680, 693 [160 P.2d 832] ; see also anno. 32 A.L.R. 120-122).
In California Press Mfg. Co. v. Stafford Packing Co., supra, the plaintiff had agreed to manufacture a fishmeal machine for the defendant, which was to have a specified capacity. The plant, when completed, did not have the capacity specified. In an action in claim and delivery brought by the plaintiff, the defendant filed a cross-complaint alleging breach of warranty to furnish a machine of the agreed capacity, and sought damages for loss of profits which would have been realized had the machine been as warranted. In holding that loss of profits was not recoverable, the Supreme Court said (pp. 485 et seq.) : “The damage to be recovered for not supplying a machine or other article, as agreed, is usually the market value for which another may be procured, and *15is not to be founded upon the uncertain and speculative basis of the profit which might have been made from its use. [Citation.] The great weight of authority seems to be that the recovery of profits is possible only under exceptional circumstances, unless the engagement by its very terms discloses them to have been in effect, in whole or in part, a subject matter of the contract. [Citation.] The grounds upon which rest the general rule of excluding profits in estimating damages are concisely stated in Howard v. Stillwell & Bierce Mfg. Co., 139 U.S. 199 [35 L.Ed. 147, 11 Sup.Ct.Rep. 500, see also Rose’s U.S. Notes], a case almost identical with the one here. Damages were there sought to be recovered for loss of profits due to the failure to construct a flour mill within a certain period and with a given capacity per hour. The court gave three reasons for excluding profits (p. 206)': 1 (1) that in the greater number of cases such expected profits are too dependent upon numerous, uncertain and changing contingencies to constitute a definite and trustworthy measure of actual damages; (2) because such loss of profit is ordinarily remote, and not, as a matter of course, the direct and immediate result of the nonfulfillment of the contract; (3) and because most frequently the engagement to pay such loss of profits, in case of default in the performance, is not a part of the contract itself, nor can it be implied from its nature and terms (citing cases).’ . . . The subject was reviewed by another court in a case involving a sale of flour-mill machinery, the contract'for which warranted the machinery to have a capacity of a certain number of barrels per day, and it failed to measure up to the stipulated capacity. Damages were sought for loss of profits ‘which might have been made.’ The court held it was no part of the contract that the plaintiff should make profits by carrying on a business with the machinery which the defendant agreed to erect. It distinguished the transaction from a sale of chattels or of land in which the possible profit is the very object of the contract and is necessarily in the contemplation of the parties, saying: ‘When a machinist furnishes machinery to a mill owner it is no part of his engagement that a profitable business shall be carried on with the machinery furnished. Of course if it is defective he is responsible for the damage resulting directly from such defect; but that is a very different thing from the uncertain, remote and speculative profits which may or may not be made in the business to be done.’ *16[Citation.] ” (See also cases cited in anno. 32 A.L.R. 120, 121, 122.)
The cases cited by the majority to uphold the proposition that damages may be awarded for loss of profits are entirely distinguishable from the present case upon their facts. (Ross v. Frank W. Dunne Co., 119 Cal.App.2d 690 [260 P.2d 104], and Walpole v. Prefab Mfg. Co., 103 Cal.App.2d 472 [230 P.2d 36], were both cases in which the breach of a contract of distributorship was involved and where the profit to be made from the sale of articles furnished by the defendant was the sole object of the contract insofar as the plaintiff was concerned.
In Grupe v. Glick, supra, 26 Cal.2d 680, the defendant had agreed to sell certain machines to the plaintiff and had expressly warranted that they were suitable for the purpose of refining oil. The contract gave the plaintiff the exclusive selling rights for the device, and it was contemplated by the parties that he would sell them at retail at an increased price over the price which he was obligated to pay to the defendant for them. Here again the object of the contract, so far as the plaintiff was concerned, was the purchase of these machines and the resale of them at a profit.
In Natural Soda Products Co. v. City of Los Angeles, 23 Cal.2d 193 [143 P.2d 12], the court did not have before it any question as to damages for the breach of a contract. There the court only held that the profits that the plaintiff might have made from the use of land, of which use it. had been wrongfully deprived by the defendant, was evidence of the value of that use.
Even if we assume that plaintiffs were entitled to recover damages of the type which we have been discussing, that is, a loss due to their being unable to reduce their cost of manufacture, then still the damages awarded are beyond those to which they were entitled under the contract. By the express terms of the contract the machine was warranted to operate for a period of only six months, but the damages awarded were based upon the so-called loss of profits over a period of nine months. It is impossible for me to see upon what theory the majority can uphold this award.
I would reverse the judgment with directions to the trial court to enter judgment for the plaintiffs for the sum of $12,291.25, this being the sum of the damages awarded by the trial court as the difference between the value of the *17machine delivered and the amount paid by the respondents therefor and the moneys expended by respondents to cure the defects in the machine.
Appellants’ petition for a hearing by the Supreme Court was denied June 20, 1956.

Assigned by Chairman of Judicial Council.