Court Opinion

ID: 6549823
Source: CourtListenerOpinion
Date Created: 2022-07-19 22:23:10.901358+00
Date Added: 2024-06-11T15:56:04.708737
License: Public Domain

Smith, J., (after stating the facts). We think there is no foundation for the claim for punitive damages. It is true appellant deliberately broke the contract Sued on, after knowledge of its existence, but it is also true that it had purchased and paid for the controlling interest of the stock of the Tri-State Company before its officers knew of the existence of the contract. Rose, who appears to have been a very shrewd trader, admitted he told appellant nothing of this contract, until after the sale of his own stock had been consummated. The serious question in the case is what damages are recoverable? Appellant admits its liability for nominal damages, but says only nominal damages should be recovered. The record on that question is a very voluminous one, and a great mass of statistics, and many calculations are offered in evidence, in support of the respective theories of the parties. This evidence has been carefully considered by us, but it will not be set out in detail, because this opinion would be protracted to an indefinite length, if we set out these calculations iñ a manner to present with any satisfaction the respective theories of the parties. Under appellee’s view, the contract would have been enormously profitable to it, while the appellant undertook to show that so far from being a source of profits that, on the contrary, the performance of the contract would have entailed considerable loss on appellee. This evidence was offered for the purpose of showing that no profits would have been earned, and for the additional purpose of showing the prospects, of earning profits was too uncertain, speculative and conjectural to form a basis of recovery. We state a summary of appellant’s contentions rather than their details. It says no business had ever been done under the contract, and that there was no criterion for the proof of damages by reason of loss of profits, and that the loss of profits on account of the breach of the contract sued on could not have been, and was not, contemplated by the parties thereto, when it was made. That the business of the contracting parties had to be procured from the public, and that appellee was already in competition in Memphis with a company much older, stronger and better established than it was, and with many more connections, and with a more efficient service than appellee had, and that no one could say over which of the Memphis lines business would originate; that the business might grow, or might diminish, and- that appellee might not continue in business, inasmuch as the proof showed that it had never paid any dividends; that in addition, the business contemplated was interstate business and subject to national regulation, which might so reduce the rates that possible profits might be cut down, and that G-ovemment ownership of all telephone and telegraph lines was being advocated, and was not an improbability; that new methods were being introduced, and that the wireless telephone was a possibility, and if it is ever an accomplished fact, it would render the telephone lines valueless; that there were expenses of operation, and maintenance, and replacement, resulting from storms, floods and freezes, which would be very expensive, and that equipments become obsolete and worthless. Appellant introduced its records and books showing the • actual business, which it had done, since the acquisition of' the Tri-State Company, .which might have been done under the terms of the contract sued upon, and it undertook to show from these figures that in any event the chancellor’s assessment of damages was excessive. Moreover,’ appellant shows that it was contemplating an entry into the territory covered by the Tri-State Company, at the time it began negotiations for the purchase of the property, and that it had already decided to occupy that field with competing lines in the event it failed to purchase the property of the TriState Company. The proof, however, showed that it would have required from two and one-half to three years to have completed its lines through the Tri-State Company’s territory. Upon the other hand, appellee offered proof to the effect that it had an established business, and that it would have continued in business, that the Tri-State Company had an established business in a territory in which it had no competition. It appears from the evidence, with reasonable certainty, that the Tri-State Telephone Company had an established business which was constantly increasing with every prospect of an additional increase, rather than any diminution. It is shown that the Tri-State Company had invested only about $20,-000, and that after payment of dividends it had invested its profits in extensions of its lines, and other improvements to its property, until at the time of the sale its property was worth, and sold for more than seven times the original investment. The right to recover the loss of profits as damages upon the breach of a contract has been several times before this court and has been fully considered in the various opinions which discuss that subject. The rule announced in 13 Cyc. 51-54, reads as follows: “As a general rule, a party is entitled to recover the profits that would have resulted from a breach of a contract into which he had entered, where such breach is the result of the fault or omission of the other party. In such case, however, it must be clearly shown that the profits of which he claims to have been deprived are capable of being definitely ascertained, although it is not necessary that the profits claimed should be “certain” or “probable;” it is sufficient if they are reasonably “certain,” or “reasonably probable.” Where there are no rules of evidence, or no fixed mode of calculation, applicable to the particular state of facts involved, it has been the rule to deny them. The broad general rule in such cases is that the party injured is entitled to recover all his damages, including gains prevented as well as losses sustained, and this rule is subject to but two conditions ; the damages must be such as may fairly be supposed to have entered into the contemplation of the parties when they made the contract, that is, must be such as might naturally be expected to follow its violation; and they must be certain, both in their nature and in respect to the cause from which they proceed. It is against the policy of the law to allow profits as damages where such profits are remotely connected with the breach of contract alleged, or where they are speculative, resting only upon conjectural evidence, or the individual opinion of parties or witnesses.” This statement of the law has been frequently quoted with approval in the decisions of this court. Other cases wMch announce the conditions that must exist before a recovery of profits can be had as damages are as follows: Border Co. v. Adams, 69 Ark. 219; Spencer Co. v. Hall, 78 Ark. 336; Beckman Co. v. Kittrell, 80 Ark. 228; Hurley v. Oliver, 91 Ark. 427; Singer Co. v. Reeves, 95 Ark. 363; Ford Hardwood Lbr. Co. v. Clement, 97 Ark. 522; Harmon v. Frye, 103 Ark. 584. Appellant says no business was done under tMs contract, and cites us to cases wMch announce the rule, recognized in.our own decisions, that damages can not be recovered where the business interfered with was not established, and consequently no showing made as to the profits which were being earned. But this rule is not applicable here, for each of the contracting parties had an established business, and, wMle they depended upon the public for their patronage, the proof shows that the extent of this patronage was not capricious, or speculative, but was reasonably certain. The chancellor found that the appellee had constructed a telephone line at a cost to it of $10,000 in order that it might be in position to comply with its part of the contract, in furnishing telephone connection into the city of Memphis; and he further found that although the line could not be used for that purpose, it still had a value which he fixed at the «urn of $3,000; and he therefore assessed against appellant damages on account of the construction of this line in the sum of $7,000. The court below also found that appellee would have made on an average the sum of $1,100 during each of the twenty-five years for which the contract sued upon would have run, and rendered judgment for that amount. We think the evidence supports his finding on the loss arising out of the line which appellee had constructed; and we also think his finding is not against the preponderance of the evidence that appellee would have earned a net profit of $1,100 per year had the terms of the contract been complied with. But we can not say that the evidence is sufficient to sustain this finding during the entire period covered by the contract. It is somewhat difficult to say just when these profits would cease to be a reasonable certainty and become speculative. It may be true that the profits would not only have continued to be as much as $1,100 per year, but would have increased. A study of-the evidence in this case leads to the conclusion that there is a point of time when the result of this contract ceases to be a reasonable certainty, and becomes conjectural; and when that point is reached, there can be no further recovery of damages, notwithstanding what one’s opinion may be about the probabilities. When the various circumstances in proof are considered, we conclude that a recovery should not be permitted, beyond a period of three years from the date of the completion of the lines contracted to be constructed to make the contract effective. And this is not an arbitrary period which we have fixed upon. A circumstance to which we give much weight, but which does not entirely control our conclusion, is that the proof shows, with reasonable certainty, that appellant was about to enter the territory of the Tri-State Company, and would have done so, as soon as the lines could have been constructed, and that this would have taken approximately three years. The proof shows that the Cumberland Company had about three times more subscribers in the city of Memphis, and in the territory which could have been served by appellee company under the terms of the contract, than appellee had, and the proof shows further that the value of telephone service depends largely upon the number of 'connections given to subscribers. No one may know how the business in the Tri-State Company’s territory would have been divided between the Memphis companies after the entry of the appellant into the territory of the Tri-State Company, nor whether the contract sued upon would have been profitable after that time; but this competition would not have been had before the three years required to build the new line, and upon a consideration of all the facts and circumstances in the proof, we have concluded that these profits should be allowed for three years, but not beyond that period. The decree of the court below will therefore be modified to exclude any allowance of profits, for the last twenty-two years covered by the contract; and, as. so modified, it is affirmed.