Court Opinion

ID: 6871554
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:01:53.181469+00
Date Added: 2024-06-11T16:05:25.068816
License: Public Domain

SWAN, Circuit Judge
(dissenting in part).
I agree that the claim in suit is not entitled to a priority classification; but I am unable to agree that the proper way to liquidate the claim is to award the *432claimant the cost of purchasing an annuity from an insurance company. It is conceded that in general the measure of damages for repudiation of a contract to pay money in the future is the present value of such future payment or series of payments. If we knew the exact number of future payments which the railroad company would have to make to perform its promise to pay $700 per month during the prom-isee’s life, the present value of all such payments would concededly be the legal measure of damages now recoverable from the promisor. The promisee is unable to prove the exact number of installments which will fall due during her life. Instead of saying she must approximate such proof as best she can by mortality tables, the majority hold that she may prove something different; namely, what an insurance company would charge for contracting to pay her an annuity for the rest of her life. This compels the railroad to do for her more than it ever promised to do; it awards her the measure of damages to which she would have been entitled if the railroad had repudiated a promise to purchase for her an annuity from an insurance company. But that was not the promise it made in settlement of her tort claim. A promise to make future payments of money is not the same as a promise to procure them to be made by another. No one would suggest that repudiation of a promise to pay $10,000 in ten annual installments would entitle the prom-isee to recover what an insurance company might charge «for agreeing to make similar payments. If the payments be conditioned upon the promisee’s life, I cannot believe that this should increase the promisor’s duties or the promisee’s rights. Upon breach of a contract by anticipatory repudiation, the promisee may treat the repudiation as a complete breach and sue at once, or he may wait to sue for each installment as it comes due under the contract. Am.L.Inst.Contracts, § 318 (d). In a suit based on the repudiation as a complete breach he has the burden of proving what his damages will be. If payment is conditioned on his life, he should have to prove as best he may that he will be alive when the future installment will fall due. True, mortality tables do not supply exact prophecies, but they are accepted as proof of probabilities. The plaintiff promisee must prove the probability of the happening of the condition which entitles him to damages. If he cannot make that proof with absolute accuracy, he may recover less than his actual damages turn out to be. This is a risk inherent in litigation whenever the plaintiff has the burden of proving a future event incapable of exact prediction. There is nothing peculiar to an annuity which makes it unjust to put upon the claimant the risk of outliving her probable span of life and finding that the damages she was able to prove were not as great as those she actually sustained. Indeed, aside from the prom-isor’s bankruptcy, there is no necessity for an annuitant to act upon the promisor’s repudiation; as already stated, he may wait and sue for each installment as it falls due, thus avoiding the risk of making too small a recovery. Such option is illusory when the promisor is bankrupt, but I do not understand that the rule of damages which the court is laying down is applicable only to insolvent railroads; and certainly it would be strange if the insolvency of a promisor should increase the measure of damages for his breach of a contract.
From the standpoint of the promisor the rule adopted by the majority seems to me decidedly unfair. In agreeing that it would itself make the annuity payments instead of agreeing to purchase an annuity for the claimant, the railroad made a settlement which reserved to itself the benefit that would accrue if the plaintiff should die sooner than the expectancy forecast 'for her by mortality tables. Because of her serious injuries it no doubt believed that she would do so. Under the rule adopted by the majority not only is- that possibility eliminated but it is assumed that she will live longer than the average member of the community of the same present age, because the Combined Annuity Table, upon which the rates are prepared, is based upon experience that the probabilities of death applicable to annuitants are lower than among general insurance policyholders or among the general population as a whole. Moreover, the rates are fixed without regard to the health of an annuitant and- no reduction is made if the applicant has a disability. Again, the rates are “loaded” to assure the company a profit. An actuary testified that the value of an annuity of $700 per month for a person of the claimant’s age at the date of the breach of contract was $152,782, calculated on the Combined Annuity Table at a rate of 3 per cent, return, or $135,101 at •a 4‘per cent, return; yet the cost of an annuity purchased from *433a standard insurance company would be $161,577. The railroad never agreed to pay an insurer to provide an annuity for the claimant. To award her the cost of purchasing an annuity seems to me to saddle the railroad with a promise it never made and to give her an advantage she never bargained for. ,She gets a sum of money which she need not apply to the purchase of an annuity and which in all probability will not be entirely used up during her life by depleting the fund and its earnings at the rate of $700 per month. With so little authority in favor of the rule adopted by the majority of the court and much which tacitly assumes that commuted valué of future payments is the proper measure, in my opinion we are free to decide the question on principle. For the reasons given I think commuted value accords with the general principles of damages for breach of contract.