IN THE COURTS OF EXCHEQUER

The first count of the declaration stated, that, before and at the time of the making by the defendants of the promises hereinafter mentioned, the plaintiffs carried on the business of millers and mealmen in copartnership, and were proprietors and occupiers of the City Steam-Mills, in the city of Gloucester, and were possessed of a steam-engine, by means of which they worked the said mills, and therein cleaned corn, and ground the same into meal, and dressed the same into flour, sharps, and bran, and a certain portion of the said steam-engine, to wit, the crank shaft of the said steam-engine, was broken and out of repair, whereby the said steam-engine was prevented from working, and the plaintiffs were desirous of having a new crank shaft made for the said mill, and had ordered the same of certain persons trading under the name of W. Joyce & Co., at Greenwich, in the country of Kent, who had contracted to make the said new shaft for the plaintiffs; but before they could complete the said new shaft it was necessary that the said broken shaft should be forwarded to their works at Greenwich, in order that the said new shaft might be made so as to fit the other parts of the said engine which were not injured, and so that it might be substituted for the said broken shaft; and the plaintiffs were desirous of sending the said broken shaft to the said W. Joyce & Co. for the purpose aforesaid; and the defendants, before and at the time of the making of the said promises, were common carriers of business of common carriers, under the name of "Pickford & Co."; and the plaintiffs, at the request of the defendants, delivered to them as such carriers the said broken shaft, to be conveyed by the defendants as such carriers from Gloucester to the said W. Joyce & Co., at Greenwich, and there to be delivered for the plaintiffs on the second day after the day of such delivery, for reward to the defendants; and in consideration thereof the defendants then promised the plaintiffs to convey the said broken shaft from Gloucester to Greenwich, and there on the said second day to deliver the same to the said W. Joyce & Co. for the plaintiffs. And although such second day elapsed before the commencement of this suit, yet the defendants did not nor would deliver the said broken shaft at Greenwich on the said second day, but wholly neglected and refused so to do for the space of seven days after the said shaft was so delivered to them as aforesaid.

The second count stated, that, the defendants being such carriers as aforesaid, the plaintiffs, at the request of the defendants, caused to be delivered to them as such carriers the said broken shaft, to be conveyed by the defendants from Gloucester aforesaid to the said W. Joyce & Co., at Greenwich, and there to be delivered by the defendants for the plaintiffs, within a reasonable time in that behalf, for reward to the defendants; and in consideration of the premises in this count mentioned, the defendants promised the plaintiffs to use due and proper care and diligence in and about the carrying and conveying the said broken shaft from Gloucester aforesaid to the said W. Joyce & Co., at Greenwich, and there delivering the same for the plaintiffs in a reasonable time then following for the carriage, conveyance, and delivery of the said broken shaft as aforesaid; and although such reasonable time elapsed long before the commencement of this suit, yet the defendants did not nor would use due or proper care or diligence in or about the carrying or conveying or delivering the said broken shaft as aforesaid, within such reasonable time as aforesaid, but wholly neglected and refused so to do; and by reason of the carelessness, negligence, and improper conduct of the defendants, the said broken shaft was not delivered for the plaintiffs to the said W. Joyce & Co., or at Greenwich, until the expiration of a long and unreasonable time after the defendants received the same as aforesaid, and after the time when the same should have been delivered for the plaintiffs; and by reason of the several premises, the completing of the said new shaft was delayed for five days, and the plaintiffs were prevented form working their said steam-mills, and from cleaning corn, and grinding the same into meal, and dressing the meal into flour, sharps, or bran, and from carrying on their said business as millers and mealmen for the space of five days beyond the time that they otherwise would have been prevented from so doing, and they thereby were unable to supply many of their customers with flour, sharps, and bran during that period, and were obliged to buy flour to supply some of their other customers, and lost the mans and opportunity of selling flour, sharps, and bran, and were deprived of gains and profits which otherwise would have accrued to them, and were unable to employ their workmen, to whom they were compelled to pay wages during that period, and were otherwise injured, and the plaintiffs claim 300l.

The defendants pleaded non assumpserunt to the first count; and to the second payment of 25l. into Court in satisfaction of the plaintiffs' claim under that count. The plaintiffs entered a nolle prosequi as to the first count; and as to the second plea, they replied that the sum paid into the Court was not enough to satisfy the plaintiffs' claim in respect thereof; upon which replication issue was joined.

At the trial before Crompton, J., at the last Gloucester Assizes, it appeared that the plaintiffs carried on an extensive business as millers at Gloucester; and that, on the 11^th of May, their mill was stopped by a breakage of the crank shaft by which the mill was worked. The steam-engine was manufactured by Messrs. Joyce & Co., the engineers, at Greenwich, and it became necessary to send the shaft as a pattern for a new one to Greenwich. The fracture was discovered on the 12^th, and on the 13^ththe plaintiffs sent one of their servants to the office of the defendants, who are the well-known carriers trading under the name of Pickford & Co., for the purpose of having the shaft carried to Greenwich. The plaintiffs' servant told the clerk that the mill was stopped, and that the shaft must be sent immediately; and in answer to the inquiry when the shaft would be taken, the answer was, that if it was sent up by twelve o'clock an day, it would be delivered at Greenwich on the following day. On the following day the shaft was taken by the defendants, before noon, for the purpose of being conveyed to Greenwich, and the sum of 2l. 4s. was paid for its carriage for the whole distance; at the same time the defendants' clerk was told that a special entry, if required, should e made to hasten its delivery. The delivery of the shaft at Greenwich was delayed by some neglect; and the consequence was, that the plaintiffs did not receive the new shaft for several days after they would otherwise have done, and the working of their mill was thereby delayed, and they thereby lost the profits they would otherwise have received.

On the part of the defendants, it was objected that these damages were too remote, and that the defendants were not liable with respect to them. The learned Judge left the case generally to the jury, who found a verdict with 25l. damages beyond the amount paid into Court.

Whateley, in last Michaelmas Term, obtained a rule nisi for a new trial, on the ground of misdirection.

Keating and Dowdeswell (Feb. 1) shewed cause. The plaintiffs are entitled to the amount awarded by the jury as damages. These damages are not too remote, for they are not only the natural and necessary consequence of the defendants' default, but they are the only loss which the plaintiffs have actually sustained. The principle upon which damages are assessed is founded upon that of rendering compensation to the injured party. The important subject is ably treated in Sedgwick on the Measure of Damages. And this particular branch of it is discussed in the third chapter, where, after pointing out the distinction between the civil and the French law, he says (page 64), "It is sometimes said, in regard to contracts, that the defendant shall be held liable for those damages only which both parties may fairly be supposed to have at the time contemplated as likely to result from the nature of the agreement, and this appears to be the rule adopted by the writers upon the civil law." In a subsequent passage he says, "In cases of fraud the civil law made a broad distinction" (page 66); and he adds, that "in such cases the debtor was liable for all consequences." It is difficult, however, to see what the ground of such principle is, and how the ingredient of fraud can affect the question. For instance, if the defendants had maliciously and fraudulently kept the shaft, it is not easy to see why they should have been liable for these damages, if they are not to be held so where the delay is occasioned by their negligence only. In speaking of the rule respecting the breach of a contract to transport goods to a particular place, and in actions brought on agreements for the sale and delivery of chattels, the learned author lays it down, that, "In the former case, the difference in value between the price at the point where the goods are and the place where they were to be delivered, is taken as the measure of damages, which, in fact, amounts to an allowance of profits; and in the latter case, a similar result is had by the application of the rule, which gives the vendee the benefit of the rise of the market price" (page 80). The several cases, English as well as American, are there collected and reviewed. If that rule is to be adopted, there was ample evidence in the present case of the defendants' knowledge of such a state of things as would necessarily result in the damage the plaintiffs suffered through the defendants' default. The authorities are in the plaintiffs' favour upon the general ground. In Nurse v. Barns (1 Sir T. Raym. 77) which was an action for breach of an agreement for the letting of certain iron mills, the plaintiff was held entitled to a sum of 500l., awarded by reason of loss of stock laid in, although he had only paid 10l. by way of consideration. InBorradaile v. Brunton (8 Taunt. 535, 2 B. Moo. 582), which was an action for the breach of the warranty of a chain cable that it should last two years as a substitute for a rope cable of sixteen inches, the plaintiff was held entitled to recover for the loss of the anchor, which was occasioned by the breaking of the cable within the specified time. These extreme cases, and the difficulty which consequently exists in the estimation of the true amount of damages, supports the view for which the plaintiffs contend, that the question is properly for the decision of a jury, and therefore that this matter could not properly have been withdrawn from their consideration. In Ingram v. Lawson (6 Bing. N.C. 212) the true principle was acted upon. That was an action for a libel upon the plaintiff, who was the owner and master of a ship, which he advertised to take passengers to the East Indies; and the libel imputed that the vessel was not seaworthy, and that Jews had purchased her to take out convicts. The Court held, that evidence shewing that the plaintiff's profits after the publication of the libel were 1500l below the usual average, was admissible, to enable the jury to form an opinion as to the nature of the plaintiff's business, and of his general rate of profit. Here, also, the plaintiffs have not sustained any loss beyond that which was submitted to the jury. Bodley v. Reynolds (8 Q. B. 779) and Kettle v. Hunt (Bull. N. P. 77) are similar in principle. In the latter, it was held that the loss of the benefit of trade, which a man suffers by the detention of his tools, is recoverable as special damage. The loss they had sustained during the time they were so deprived of their shaft, or until they could have obtained a new one. In Black v. Baxendale (1 Exch. 410), by reason of the defendant's omission to deliver the goods within a reasonable time at Bedford, the plaintiff's agent, who had been sent there to meet the goods, was put to certain additional expenses, and this Court held that such expenses might be given by the jury as damages. In Brandt v. Bowlby (2 B. & Ald. 932), which was an action of assumpsit against the defendants, as owners of a certain vessel, for not delivering a cargo of wheat shipped to the plaintiffs, the cargo reached the port of destination was held to be the true rule of damages." As between the parties in this cause," said Parke, J., "the plaintiffs are entitled to be put in the same situation as they would have been in, if the cargo had been delivered to their order at the time when it was delivered to the wrong party; and the sum it would have fetched at the time is the amount of the loss sustained by the non-performance of the defendants' contract." The recent decision of this Court, in Waters v. Towers (8 Ex. 401), seems to be strongly in the plaintiffs' favour. The defendants there had agreed to fit up the plaintiffs' mill within a reasonable time, but had not completed their contract within such time; and it was held that the plaintiffs were entitled to recover, by way of damages, the loss of profit upon a contract they had entered into with third parties, and which they were unable to fulfil by reason of the defendants' breach of contract. There was ample evidence that the defendants knew the purpose for which this shaft was sent, and that the result of its nondelivery in due time would be the stoppage of the mill; for the defendants' agent, at their place of business, was told that the mill was then stopped, that the shaft must be delivered immediately, and that if a special entry was necessary and natural result of their wrongful act. They also cited Ward v. Smith (11 Price, 19); and Parke, B., referred to Levy v. Langridge (4 M. & W. 337).

Whateley, Willes, and Phipson, in support of the rule (Feb. 2). It has been contended, on the part of the plaintiffs, that the damages found by the jury are a matter fit for their consideration; but still the question remains, in what way ought the jury to have been directed? It has been also urged, that, in awarding damages, the law gives compensation to the injured individual. But it is clear that complete compensation is not to be awarded; for instance, the non-payment of a bill of exchange might lead to the utter ruin of the holder, and yet such damage could not be considered as necessarily resulting from the breach of contract, so as to entitle the party aggrieved to recover in respect of it. Take the case of the breach of a contract to supply a rick-cloth, whereby and in consequence of bad weather the hay, being unprotected, is spoiled, that damage could not be recoverable. Many similar cases might be added. The true principle to be deduced form the authorities upon this subject is that which is embodied in the maxim: "In jure non remota cause sed proxima spectatur." Sedgwick says (page 38), "In regard to the quantum of damages, instead of adhering to the term compensation, it would be far more accurate to say, in the language of Domat, which we have cited above, 'that the object is discriminate between that portion of the loss which must be borne by the offending party and that which must be borne by the sufferer'. The law in fact aims not at the satisfaction but at a division of the loss." And the learned author also cites the following passage from Broom's Legal Maxims: "Every defendant," says Mr. Broom, "against whom an action is brought experiences some injury or inconvenience beyond what the costs will compensate him for."^[1] Again, at page 78, after referring to the case of Flureau v. Thornhill (2 W. Blac. 1078), he says, "Both the English and American Courts have generally adhered to this denial of profits as any part of the damages to be compensated and that whether in cases of contract or of tort. So, in a case of illegal capture, Mr. Justice Story rejected the item of profits on the voyage, and held this general language: 'Independent, however, of all authority, I am satisfied upon principle, that an allowance of damages upon the basis of a calculation of profits is inadmissible. The rule would be in the highest degree unfavourable to the interests of the community. The subject would be involved in utter uncertainty. The calculation would proceed upon contingencies, and would require acknowledge of foreign markets to an exactness, in point of time and value, which would sometimes present embarrassing obstacles; much would depend upon the length of the voyage, and the season of arrival, much upon the vigilance and activity of the master, and much upon the momentary demand. After all, it would be a calculation upon conjectures, and not upon facts; such a rule therefore has been rejected by Courts of law in ordinary cases, and instead of deciding upon the gains or losses of parties in particular cases, a uniform interest has been applied as the measure of damages for the detention of property." There is much force in that admirably constructed passage. We ought to pay all due homage in this country to the decisions of the American Courts upon this important subject, to which they appear to have given much careful consideration. The damages here are too remote. Several of the cases which were principally relied upon by the plaintiffs are distinguishable. In Waters v. Towers (1 Exch. 401) there was a special contract to do the work in a particular time, and the damage occasioned by the non-completion of the contract was that to which the plaintiffs were held to be entitled. In Borradale v. Brunton (8 Taunt. 535) there was a direct engagement that the cable should hold the anchor. So, in the case of taking away a workman's tools, the natural and necessary consequence is the loss of employment: Bodley v. Reynolds (8 Q. B. 779). The following cases may be referred to as decisions upon the principle within which the defendants contend that the present case falls: Jones v. Gooday (8 M. & W. 146), Walton v. Fothergill (7 Car. & P. 392), Boyce v. Bayliffe (1 Camp. 58) and Archer v. Williams (2. C. & K. 26). The rule, therefore, that the immediate cause is to be regarded in considering the loss, is applicable here. There was no special contract between these parties. A carrier has a certain duty cast upon him by law, and that duty is not to be enlarged to an indefinite extent in the absence of a special contract, or of fraud or malice. The maxim "dolus circuitu non purgatur", does not apply. The question as to how far liability may be affected by reason of malice forming one of the elements to be taken into consideration, was treated of by the Court of Queen's Bench in Lumley v. Gye (2 E. & B. 216). Here the declaration is founded upon the defendants' duty as common carriers, and indeed there is no pretence for saying that they entered into a special contract to bear all the consequences of the non-delivery of the article in question. They were merely bound to carry it safely, and to deliver it within a reasonable time. The duty of the clerk, who was in attendance at the defendants' office, was to enter the article, and to take the amount of the carriage; but a mere notice to him, such as was here given, could not make the defendants, as carriers, liable as upon a special contract. Such matters, therefore, must be rejected from the consideration of the question. If carriers are to be liable in such a case as this, the exercise of a sound judgment would not suffice, but they ought to be gifted also with a spirit of prophecy. "I have always understood," said Patterson, J., in Kelly v. Partington (5 B. & Ad. 651), "that the special damage must be the natural result of the thing done." That sentence presents the true test. The Court of Queen's Bench acted upon that rule in Foxall v. Barnett (2 E. & B. 928). This therefore is a question of law, and the jury ought to have been told that these damages were too remote; and that, in the absence of the proof of any other damage, the plaintiffs were entitled to nominal damages only: Tindall v. Bell (11 M. & W. 232). Siordet v. Hall (4 Bing. 607) and De Vaux v. Salvador (4 A. & E. 420) are instances of cases where the Courts appear to have gone into the opposite extremes: in the one case of unduly favouring the carrier, in the other of holding them liable for results which would appear too remote. If the defendants should be held responsible for the damages awarded by the jury, they would be in a better position if they confined their business to the conveyance of gold. They cannot be responsible for results which, at the time the goods are delivered for carriage, and beyond all human foresight. Suppose a manufacturer were to contract with a coal merchant or min owner for the delivery of a boat load of coals, no intimation being given that the coals were required for immediate use, the vendor in that case would not be liable for the stoppage of the vendee's business for want of the article which he had failed to deliver: for the vendor has no knowledge that the goods are not to go to the vendee's general stock. Where the contracting party is shewn to be acquainted with all the consequences that must of necessity follow from a breach on his part of the contract, it may be reasonable to say that he takes the risk of such consequences. If, as between vendor and vendee, this species of liability has no existence, a fortiori, the carrier is not to be burthened with it. In cases of personal injury to passengers, the damage to which the sufferer has been held entitled is the direct and immediate consequence of the wrongful act.

Cur. adv. vult.

The judgment of the Court was now delivered by

ALDERSON, B. We think that there ought to be a new trial in this case; but, in so doing, we deem it to be expedient and necessary to state explicitly the rule which the Judge, at the next trial, ought, in our opinion, to direct the jury to be governed by when they estimate the damages.

It is. Indeed, of the last importance that we should do this; for, if the jury are left without any definite rule to guide them, it will, in such cases as these, manifestly lead to the greatest injustice. The Courts have done this on several occasions; and in Blake v. Midland Railway Company (18 Q. B. 93), the Court granted a new trial on this very ground, that the rule had not been definitely laid down to the jury by the learned Judge at Nisi Prius.

"There are certain establishing rules", this Court says, in Alder v. Keighley (15 M. & W. 117), "according to which the jury ought to find". And the Court, in that case, adds: "and here there is a clear rule, that the amount which would have been received if the contract had been kept, is the measure of damages if the contract is broken."

Now we think the proper rule in such a case as the present is this:-- Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract.  For, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case; and of this advantage it would be very unjust to deprive them. Now the above principles are those by which we think the jury ought to be guided in estimating the damages arising out of any breach of contract. It is said, that other cases such as breaches of contract in the nonpayment of money, or in the not making a good title of land, are to be treated as exceptions from this, and as governed by a conventional rule. But as, in such cases, both parties must be supposed to be cognizant of that well-known rule, these cases may, we think, be more properly classed under the rule above enunciated as to cases under known special circumstances, because there both parties may reasonably be presumed to contemplate the estimation of the amount of damages according to the conventional rule. Now, in the present case, if we are to apply the principles above laid down, we find that the only circumstances here communicated by the plaintiffs to the defendants at the time of the contract was made, were, that the article to be carried was the broken shaft of a mill, and that the plaintiffs were the millers of the mill.

But how do these circumstances shew reasonably that the profits of the mill must be stopped by an unreasonable delay in the delivery of the broken shaft by the carrier to the third person? Suppose the plaintiffs had another shaft in their possession put up or putting up at the time, and that they only wished to send back the broken shaft to the engineer who made it; it is clear that this would be quite consistent with the above circumstances, and yet the unreasonable delay in the delivery would have no effect upon the intermediate profits of the mill. Or, again, suppose that, at the time of the delivery to the carrier, the machinery of the mill had been in other respects defective, then, also, the same results would follow. Here it is true that the shaft was actually sent back to serve as a model for the new one, and that the want of a new one was the only cause of the stoppage of the mill, and that the loss of profits really arose from not sending down the new shaft in proper time, and that this arose from the delay in delivering the broken one to serve as a model. But it is obvious that, in the great multitude of cases of millers sending off broken shafts to third persons by a carrier under ordinary circumstances, such consequences would not, in all probability, have occurred; and these special circumstances were here never communicated by the plaintiffs to the defendants. It follows therefore, that the loss of profits here cannot reasonably be considered such a consequence of the breach of contract as could have been fairly and reasonably contemplated by both the parties when they made this contract. For such loss would neither have flowed naturally from the breach of this contract in the great multitude of such cases occurring under ordinary circumstances, nor were the special circumstances, which, perhaps, would have made it a reasonable and natural consequence of such breach of contract, communicated to or known by the defendants. The Judge ought, therefore, to have told the jury that upon the facts then before them they ought not to take the loss of profits into consideration at all in estimating the damages. There must therefore be a new trial in this case.

Rule absolute.

[302] F. P. Hobgood, Jr., of Greensboro, N. C., and W. M. Hendren, of Winston-Salem, N. C., for appellant.

Edward S. Parker, Jr., of Greensboro, N. C. (Aubrey L. Brooks, of Greensboro, N. C., Julius C. Smith, of Robersonville, N. C., and C. R. Wharton, of Greensboro, N. C., on the brief), for appellee.

Before PARKER, Circuit Judge, and McCLINTIC and SOPER, District Judges.

PARKER, Circuit Judge.

This was an action at law instituted in the court below by the Luten Bridge Company, as plaintiff, to recover of Rockingham county, North Carolina, an amount alleged to be due under a contract for the construction of a bridge. The county admits the execution and breach of the contract, but contends that notice of cancellation was given the bridge company before the erection of the bridge was commenced, and that it is liable only for the damages which the company would have sustained, if it had abandoned construction at that time. The judge below refused to strike out an answer filed by certain members of the board of commissioners of the county, admitting liability in accordance with the prayer of the complaint, allowed this pleading to be introduced in evidence as the answer of the county, excluded evidence offered by the county in support of its contentions as to notice of cancellation and damages, and instructed a verdict for plaintiff for the full amount of its claim. From judgment on this verdict the county has appealed.

The facts out of which the case arises, as shown by the affidavits and offers of proof appearing in the record, are as follows: On January 7, 1924, the board of commissioners of Rockingham county voted to award to plaintiff a contract for the construction of the bridge in controversy. Three of the five commissioners favored the awarding of the contract and two opposed it. Much feeling was engendered over the matter, with the result that on February 11, 1924, W. K. Pruitt, one of the commissioners who had voted in the affirmative, sent his resignation to the clerk of the superior court of the county. The clerk received this resignation on the same day, and immediately accepted same and noted his acceptance thereon. Later in the day, Pruitt called him over the telephone and stated that he wished to withdraw the resignation, and later sent him written notice [303] to the same effect. The clerk, however, paid no attention to the attempted withdrawal, and proceeded on the next day to appoint one W. W. Hampton as a member of the board to succeed him.

After his resignation, Pruitt attended no further meetings of the board, and did nothing further as a commissioner of the county. Likewise Pratt and McCollum, the other two members of the board who had voted with him in favor of the contract, attended no further meetings. Hampton, on the other hand, took the oath of office immediately upon his appointment and entered upon the discharge of the duties of a commissioner. He met regularly with the two remaining members of the board, Martin and Barber, in the courthouse at the county seat, and with them attended to all of the business of the county. Between the 12th of February and the first Monday in December following, these three attended, in all, 25 meetings of the board.

At one of these meetings, a regularly advertised called meeting held on February 21st, a resolution was unanimously adopted declaring that the contract for the building of the bridge was not legal and valid, and directing the clerk of the board to notify plaintiff that it refused to recognize same as a valid contract, and that plaintiff should proceed no further thereunder. This resolution also rescinded action of the board theretofore taken looking to the construction of a hard-surfaced road, in which the bridge was to be a mere connecting link. The clerk duly sent a certified copy of this resolution to plaintiff.

At the regular monthly meeting of the board on March 3d, a resolution was passed directing that plaintiff be notified that any work done on the bridge would be done by it at its own risk and hazard, that the board was of the opinion that the contract for the construction of the bridge was not valid and legal, and that, even if the board were mistaken as to this, it did not desire to construct the bridge, and would contest payment for same if constructed. A copy of this resolution was also sent to plaintiff. At the regular monthly meeting on April 7th, a resolution was passed, reciting that the board had been informed that one of its members was privately insisting that the bridge be constructed. It repudiated this action on the part of the member and gave notice that it would not be recognized. At the September meeting, a resolution was passed to the effect that the board would pay no bills presented by plaintiff or any one connected with the bridge. At the time of the passage of the first resolution, very little work toward the construction of the bridge had been done, it being estimated that the total cost of labor done and material on the ground was around $1,900; but, notwithstanding the repudiation of the contract by the county, the bridge company continued with the work of construction.

On November 24, 1924, plaintiff instituted this action against Rockingham county, and against Pruitt, Pratt, McCollum, Martin, and Barber, as constituting its board of commissioners. Complaint was filed, setting forth the execution of the contract and the doing of work by plaintiff thereunder, and alleging that for work done up until November 3, 1924, the county was indebted in the sum of $18,301.07. On November 27th, three days after the filing of the complaint, and only three days before the expiration of the term of office of the members of the old board of commissioners, Pruitt, Pratt, and McCollum met with an attorney at the county seat, and, without notice to or consultation with the other members of the board, so far as appears, had the attorney prepare for them an answer admitting the allegations of the complaint. This answer, which was filed in the cause on the following day, did not purport to be an answer of the county, or of its board of commissioners, but of the three commissioners named.

On December 1, 1924, the newly elected board of commissioners held its first meeting and employed attorneys to defend the action which had been instituted by plaintiff against the county. These attorneys immediately moved to strike out the answer which had been filed by Pruitt, Pratt, and McCollum, and entered into an agreement with opposing counsel that the county should have 30 days from the action of the court on the motion within which to file answer. The court denied the motion on June 2, 1927, and held the answer filed by Pruitt, Pratt, and McCollum to be the answer of the county. An order was then entered allowing the county until August 1st to file answer, pursuant to stipulation, within which time the answer of the county was filed. This answer denied that the contract sued on was legal or binding, and for a further defense set forth the resolutions of the commissioners with regard to the building of the bridge, to which we have referred, and their communication to plaintiff. A reply was filed to this, and the case finally came to trial.

At the trial, plaintiff, over the objection [304] of the county, was allowed to introduce in evidence the answer filed by Pruitt, Pratt, and McCollum, the contract was introduced, and proof was made of the value under the terms of the contract of the work done up to November 3, 1924. The county elicited on cross-examination proof as to the state of the work at the time of the passage of the resolutions to which we have referred. It then offered these resolutions in evidence, together with evidence as to the resignation of Pruitt, the acceptance of his resignation, and the appointment of Hampton; but all of this evidence was excluded, and the jury was instructed to return a verdict for plaintiff for the full amount of its claim. The county preserved exceptions to the rulings which were adverse to it, and contends that there was error on the part of the judge below in denying the motion to strike out the answer filed by Pruitt, Pratt, and McCollum; in allowing same to be introduced in evidence; in excluding the evidence offered of the resignation of Pruitt, the acceptance of his resignation, and the appointment of Hampton, and of the resolutions attempting to cancel the contract and the notices sent plaintiff pursuant thereto; and in directing a verdict for plaintiff in accordance with its claim.

As the county now admits the execution and validity of the contract, and the breach on its part, the ultimate question in the case is one as to the measure of plaintiff's recovery, and the exceptions must be considered with this in mind. Upon these exceptions, three principal questions arise for our consideration, viz.: (1) Whether the answer filed by Pruitt, Pratt, and McCollum was the answer of the county. If it was, the lower court properly refused to strike it out, and properly admitted it in evidence. (2) Whether, in the light of the evidence offered and excluded, the resolutions to which we have referred, and the notices sent pursuant thereto, are to be deemed action on the part of the county. If they are not, the county has nothing upon which to base its position as to minimizing damages, and the evidence offered was properly excluded. And (3) whether plaintiff, if the notices are to be deemed action by the county, can recover under the contract for work done after they were received, or is limited to the recovery of damages for breach of contract as of that date.

With regard to the first question the learned District Judge held that the answer of Pruitt, Pratt, and McCollum was the answer of the county, but we think that this holding was based upon an erroneous view of the law. It appears, without contradiction, not only that their answer purports to have been filed by them individually, and not in behalf of the county or of the board of commissioners, but also that it was not authorized by the board of commissioners, acting as a board at a meeting regularly held. It appears that Pruitt, Pratt, and McCollum merely met at the county seat to consider the filing of an answer to plaintiff's complaint. This was not a "regular" meeting of the board, held on the first Mondays of December and June. It was not a "special" meeting held on the first Monday in some other month. It was not shown to be a meeting "called" by the chairman upon the written request of a member of the board, and advertised at the courthouse door and in a newspaper as provided by statute. Consol. St. § 1296. And between the filing of the complaint and the filing of the answer there was not sufficient time for the advertising of a called meeting of the board. Consequently any action taken by Pruitt, Pratt, and McCollum with regard to filing an answer was not taken at a meeting of the board in legal session. Even if it be assumed that Pruitt continued to be a member of the board, and that he, Pratt, and McCollum constituted a majority thereof, nevertheless such majority could bind the county only by action taken at a meeting regularly held. The rule is well settled that the governing board of a county can act only as a body and when in legal session as such. 7 R. C. L. 941; 15 C. J. 460 and cases cited; O'Neal v. Wake County, 196 N. C. 184, 145 S. E. 28, 29; Grand Island & N. W. R. Co. v. Baker, 6 Wyo. 369, 45 P. 494, 34 L. R. A. 835, 71 Am. St. Rep. 926; Board of Com'rs of Jasper County v. Allman, 142 Ind. 573, 42 N. E. 206, 39 L. R. A. 58, 68; Campbell County v. Howard & Lee, 133 Va. 19, 112 S. E. 876; Paola, etc., R. Co. v. Anderson County Com'rs, 16 Kan. 302, 310. As said in the case last cited: "* * * Commissioners casually meeting have no power to act for the county. There must be a session of the `board.' This single entity, the `board,' alone can by its action bind the county. And it exists only when legally convened."

The North Carolina case of Cleveland Cotton-Mills v. Commissioners, 108 N. C. 678, 13 S. E. 271, 274, established the rule in North Carolina. That case arose under the old law, which required bridge contracts involving more than $500 to be made with the concurrence of a majority of the justices [305] of the peace of the county. Such a contract was made, and a majority of the justices of the county, who were not then in session, executed a written instrument approving it. Afterwards, at a regular meeting of the justices with the board of commissioners, a majority of the quorum of the justices present voted to ratify the contract. A divided court held that this ratification at the regular meeting was sufficient, although the majority of the quorum which voted for ratification was less than a majority of all of the justices of the county; but all of the members of the court agreed that the execution of the instrument by a majority of the justices when not in session was without effect. As to this, it was said in the majority opinion:

"We attach no importance to the paper signed by an actual majority of the whole number of justices of the peace of the county. The action contemplated by the law was that of the justices of the peace in a lawfully constituted meeting as a body, as in cases where the validity of an agreement made by the governing officials of any other corporation is drawn in question. Duke v. Markham, 105 N. C. 131, 10 S. E. 1017 [18 Am. St. Rep. 889]."

It will be seen that the court applied to this case, where the validity of the action of the governing officials of a public corporation was drawn in question, the rule laid down in Duke v. Markham, which is, of course, the well-settled rule in the case of private corporations, viz. that such officials can exercise their powers as members of the governing board only at a meeting regularly held. See, also, First National Bank v. Warlick, 125 N. C. 593, 34 S. E. 687; Everett v. Staton, 192 N. C. 216, 134 S. E. 492.

But in the case of O'Neal v. Wake County, supra, decided in 1928, the Supreme Court of North Carolina set at rest any doubt which may have existed in that state as to the question here involved. In holding that the county could not be held liable on a contract made at a joint meeting of the county commissioners, the county board of education, and a representative of the insurance department, the court said:

"A county makes its contracts through the agency of its board of commissioners; but to make a contract which shall be binding upon the county the board must act as a body convened in legal session, regular, adjourned, or special. A contract made by members composing the board when acting in their individual and not in their corporate capacity while assembled in a lawful meeting is not the contract of the county. As a rule authorized meetings are prerequisite to corporate action based upon deliberate conference and intelligent discussion of proposed measures. 7 R. C. L. 941; 15 C. J. 460; 43 C. J. 497; P. & F. R. Ry. Co. v. Com'rs of Anderson County, 16 Kan. 302; Kirkland v. State, 86 Fla. 84, 97 So. 502. The principle applies to corporations generally, and by the express terms of our statute, as stated above, every county is a corporate body."

We think, therefore, that Pruitt, Pratt, and McCollum, even if they constituted a majority of the board of commissioners, did not bind the county by their action in filing an answer admitting its liability, where no meeting of the board of commissioners was held according to law, and where, so far as appears, the other commissioners were not even notified of what was being attempted. It is unthinkable that the county should be held bound by such action, especially where the commissioners attempting to bind it had taken no part in its government for nearly 10 months, and where the answer filed did not defend it in any particular, but, on the contrary, asserted its liability. If, therefore, the answer be considered as an attempt to answer on behalf of the county, it must be stricken out, because not authorized by its governing board; if considered as the answer of Pruitt, Pratt, and McCollum individually, it must go out because, having been sued in their official capacity, they had no right to answer individually. And, of course, not having been authorized by the county, the answer was not admissible as evidence against it on the trial of the cause.

Coming to the second inquiry — i. e., whether the resolutions to which we have referred and the notices sent pursuant thereto are to be deemed the action of the county, and hence admissible in evidence on the question of damages — it is to be observed that, along with the evidence of the resolutions and notices, the county offered evidence to the effect that Pruitt's resignation had been accepted before he attempted to withdraw same, and that thereafter Hampton was appointed, took the oath of office, entered upon the discharge of the duties of the office, and with Martin and Barber transacted the business of the board of commissioners until the coming into office of the new board. We think that this evidence, if true, shows (1) that Hampton, upon his appointment and qualification, became a member of the board in place of Pruitt, and that he, Martin, and [306] Barber constituted a quorum for the transaction of its business; and (2) that, even if this were not true, Hampton was a de facto commissioner, and that his presence at meetings of the board with that of the other two commissioners was sufficient to constitute a quorum, so as to give validity to its proceedings.

The North Carolina statutes make no provision for resignations by members of the boards of county commissioners. A public officer, however, has at common law the right to resign his office, provided his resignation is accepted by the proper authority. Hoke v. Henderson, 15 N. C. 1, 25 Am. Dec. 677; U. S. v. Wright, Fed. Cas. No. 16,775; Rowe v. Tuck, 149 Ga. 88, 99 S. E. 303, 5 A. L. R. 113; Van Orsdall v. Hazard, 3 Hill (N. Y.) 243; Philadelphia v. Marcer, 8 Phila. (Pa.) 319; Gates v. Delaware County, 12 Iowa, 405; 22 R. C. L. 556, 557; note, 19 A. L. R. 39, and cases there cited. And, in the absence of statute regulating the matter, his resignation should be tendered to the tribunal or officer having power to appoint his successor. 22 R. C. L. 558; State v. Popejoy, 165 Ind. 177, 74 N. E. 994, 6 Ann. Cas. 687, and note; State ex rel. Conley v. Thompson, 100 W. Va. 253, 130 S. E. 456; State v. Huff, 172 Ind. 1, 87 N. E. 141, 139 Am. St. Rep. 355; State v. Augustine, 113 Mo. 21, 20 S. W. 651, 35 Am. St. Rep. 696. In the case last cited it is said:

"It is well-established law that, in the absence of express statutory enactment, the authority to accept the resignation of a public officer rests with the power to appoint a successor to fill the vacancy. The right to accept a resignation is said to be incidental to the power of appointment. 1 Dillon on Municipal Corporations (3d Ed.) § 224; Mechem on Public Offices, § 413; Van Orsdall v. Hazard, 3 Hill (N. Y.) 243; State v. Boecker, 56 Mo. 17."

In North Carolina, the officer having power to appoint the successor of a member of the board of county commissioners is the clerk of the superior court of the county. Consolidated Statutes of North Carolina, § 1294. It is clear, therefore, that, when Pruitt tendered his resignation to the clerk of the superior court, he tendered it to the proper authority.

The mere filing of the resignation with the clerk of the superior court did not of itself vacate the office of Pruitt, it was necessary that his resignation be accepted. Hoke v. Henderson, supra; Edwards v. U. S., 103 U. S. 471, 26 L. Ed. 314. But, after its acceptance, he had no power to withdraw it. Mimmack v. U. S., 97 U. S. 426, 24 L. Ed. 1067; Murray v. State, 115 Tenn. 303, 89 S. W. 101, 5 Ann. Cas. 687, and note; State v. Augustine, supra; Gates v. Delaware County, supra; 22 R. C. L. 559. If, as the offer of proof seems to indicate, the resignation of Pruitt was accepted by the clerk prior to his attempt to withdraw it, the appointment of Hampton was unquestionably valid, and the latter, with Martin and Barber, constituted a quorum of the board of commissioners, with the result that action taken by them in meetings of the board regularly held was action by the county.

But, irrespective of the validity of Hampton's appointment, we think that he must be treated as a de facto officer, and that the action taken by him, Martin, and Barber in meetings regularly held is binding upon the county and upon those dealing with it. Hampton was appointed by the lawful appointing power. He took the oath of office and entered upon the discharge of the duties of a commissioner. The only government which the county had for a period of nearly 10 months was that which he and his associates, Martin and Barber, administered. If their action respecting this contract is to be ignored, then, for the same reason, their tax levy for the year must be treated as void, and the many transactions carried through at their 25 meetings, which were not attended by Pruitt, Pratt, or McCollum, must be set aside. This cannot be the law. It ought not be the law anywhere; it certainly is not the law in North Carolina. Section 3204 of the Consolidated Statutes provides:

"3204. Persons admitted to office deemed to hold lawfully. Any person who shall, by the proper authority, be admitted and sworn into any office, shall be held, deemed, and taken, by force of such admission, to be rightfully in such office until, by judicial sentence, upon a proper proceeding, he shall be ousted therefrom, or his admission thereto be, in due course of law, declared void."

In the case of State v. Lewis, 107 N. C. 967, 12 S. E. 457, 458, 13 S. E. 247, 11 L. R. A. 105, the court quotes with approval the widely accepted definition and classification of de facto officers by Chief Justice Butler in the case of State v. Carroll, 38 Conn. 449, 9 Am. Rep. 409, as follows:

"An officer de facto is one whose acts, though not those of a lawful officer, the law, upon principles of policy and justice, will hold valid so far as they involve the interests of the public and third persons, where the duties of the office were exercised — First, without a known appointment or election, [307] but under such circumstances of reputation or acquiescence as were calculated to induce people, without inquiry, to submit to or invoke his action, supposing him to be the officer he assumed to be; second, under color of a known and valid appointment or election, but where the officer failed to conform to some precedent requirement or condition, as to take an oath, give a bond, or the like; third, under color of a known election or appointment, void because there was a want of power in the electing or appointing body, or by reason of some defect or irregularity in its exercise, such ineligibility, want of power, or defect being unknown to the public; fourth, under color of an election or appointment by or pursuant to a public unconstitutional law before the same is adjudged to be such."

It is clear that, if the appointment of Hampton be considered invalid, the case falls under the third class in the above classification; for Hampton was discharging the duties of a county commissioner under color of a known appointment, the invalidity of which, if invalid, arose from a want of power or irregularity unknown to the public. Other North Carolina cases supporting this conclusion are Burke v. Elliott, 26 N. C. 355, 42 Am. Dec. 142; Burton v. Patton, 47 N. C. 124, 62 Am. Dec. 194; Norfleet v. Staton, 73 N. C. 546, 21 Am. Rep. 479; Markham v. Simpson, 175 N. C. 135, 95 S. E. 106; State v. Harden, 177 N. C. 580, 98 S. E. 782; 22 R. C. L. 596, 597. This is not a case like Baker v. Hobgood, 126 N. C. 149, 35 S. E. 253, where there were rival boards, both attempting to discharge the duties of office; for, upon the appointment of Hampton, Pruitt attended no further meetings and left him in the unchallenged possession of the office.

The rule is well settled in North Carolina, as it is elsewhere, that the acts of a de facto officer will be held valid in respect to the public whom he represents and to third persons with whom he deals officially, notwithstanding there was a want of power to appoint him in the person or body which professed to do so. Norfleet v. Staton, supra; Markham v. Simpson, supra; 22 R. C. L. 601, 602, and cases cited.

Coming, then, to the third question — i. e., as to the measure of plaintiff's recovery — we do not think that, after the county had given notice, while the contract was still executory, that it did not desire the bridge built and would not pay for it, plaintiff could proceed to build it and recover the contract price. It is true that the county had no right to rescind the contract, and the notice given plaintiff amounted to a breach on its part; but, after plaintiff had received notice of the breach, it was its duty to do nothing to increase the damages flowing therefrom. If A enters into a binding contract to build a house for B, B, of course, has no right to rescind the contract without A's consent. But if, before the house is built, he decides that he does not want it, and notifies A to that effect, A has no right to proceed with the building and thus pile up damages. His remedy is to treat the contract as broken when he receives the notice, and sue for the recovery of such damages as he may have sustained from the breach, including any profit which he would have realized upon performance, as well as any other losses which may have resulted to him. In the case at bar, the county decided not to build the road of which the bridge was to be a part, and did not build it. The bridge, built in the midst of the forest, is of no value to the county because of this change of circumstances. When, therefore, the county gave notice to the plaintiff that it would not proceed with the project, plaintiff should have desisted from further work. It had no right thus to pile up damages by proceeding with the erection of a useless bridge.

The contrary view was expressed by Lord Cockburn in Frost v. Knight, L. R. 7 Ex. 111, but, as pointed out by Prof. Williston (Williston on Contracts, vol. 3, p. 2347), it is not in harmony with the decisions in this country. The American rule and the reasons supporting it are well stated by Prof. Williston as follows:

"There is a line of cases running back to 1845 which holds that, after an absolute repudiation or refusal to perform by one party to a contract, the other party cannot continue to perform and recover damages based on full performance. This rule is only a particular application of the general rule of damages that a plaintiff cannot hold a defendant liable for damages which need not have been incurred; or, as it is often stated, the plaintiff must, so far as he can without loss to himself, mitigate the damages caused by the defendant's wrongful act. The application of this rule to the matter in question is obvious. If a man engages to have work done, and afterwards repudiates his contract before the work has been begun or when it has been only partially done, it is inflicting damage on the defendant without benefit to the plaintiff to allow the latter to insist on proceeding with the contract. The work may be useless to the defendant, and yet he would be forced to pay the full contract price. On [308] the other hand, the plaintiff is interested only in the profit he will make out of the contract. If he receives this it is equally advantageous for him to use his time otherwise."

The leading case on the subject in this country is the New York case of Clark v. Marsiglia, 1 Denio (N. Y.) 317, 43 Am. Dec. 670. In that case defendant had employed plaintiff to paint certain pictures for him, but countermanded the order before the work was finished. Plaintiff, however, went on and completed the work and sued for the contract price. In reversing a judgment for plaintiff, the court said:

"The plaintiff was allowed to recover as though there had been no countermand of the order; and in this the court erred. The defendant, by requiring the plaintiff to stop work upon the paintings, violated his contract, and thereby incurred a liability to pay such damages as the plaintiff should sustain. Such damages would include a recompense for the labor done and materials used, and such further sum in damages as might, upon legal principles, be assessed for the breach of the contract; but the plaintiff had no right, by obstinately persisting in the work, to make the penalty upon the defendant greater than it would otherwise have been."

And the rule as established by the great weight of authority in America is summed up in the following statement in 6 R. C. L. 1029, which is quoted with approval by the Supreme Court of North Carolina in the recent case of Novelty Advertising Co. v. Farmers' Mut. Tobacco Warehouse Co., 186 N. C. 197, 119 S. E. 196, 198:

"While a contract is executory a party has the power to stop performance on the other side by an explicit direction to that effect, subjecting himself to such damages as will compensate the other party for being stopped in the performance on his part at that stage in the execution of the contract. The party thus forbidden cannot afterwards go on, and thereby increase the damages, and then recover such damages from the other party. The legal right of either party to violate, abandon, or renounce his contract, on the usual terms of compensation to the other for the damages which the law recognizes and allows, subject to the jurisdiction of equity to decree specific performance in proper cases, is universally recognized and acted upon."

This is in accord with the earlier North Carolina decision of Heiser v. Mears, 120 N. C. 443, 27 S. E. 117, in which it was held that, where a buyer countermands his order for goods to be manufactured for him under an executory contract, before the work is completed, it is notice to the seller that he elects to rescind his contract and submit to the legal measure of damages, and that in such case the seller cannot complete the goods and recover the contract price. See, also, Kingman & Co. v. Western Mfg. Co. (C. C. A. 8th) 92 F. 486; Davis v. Bronson, 2 N. D. 300, 50 N. W. 836, 16 L. R. A. 655 and note, 33 Am. St. Rep. 783, and note; Richards v. Manitowoc & Northern Traction Co., 140 Wis. 85, 121 N. W. 837, 133 Am. St. Rep. 1063.

We have carefully considered the cases of Roehm v. Horst, 178 U. S. 1, 20 S. Ct. 780, 44 L. Ed. 953, Roller v. George H. Leonard & Co. (C. C. A. 4th) 229 F. 607, and McCoy v. Justices of Harnett County, 53 N. C. 272, upon which plaintiff relies; but we do not think that they are at all in point. Roehm v. Horst merely follows the rule of Hockster v. De La Tour, 2 El. & Bl. 678, to the effect that where one party to any executory contract refuses to perform in advance of the time fixed for performance, the other party, without waiting for the time of performance, may sue at once for damages occasioned by the breach. The same rule is followed in Roller v. Leonard. In McCoy v. Justices of Harnett County the decision was that mandamus to require the justices of a county to pay for a jail would be denied, where it appeared that the contractor in building same departed from the plans and specifications. In the opinions in all of these some language was used which lends support to plaintiff's position, but in none of them was the point involved which is involved here, viz. whether, in application of the rule which requires that the party to a contract who is not in default do nothing to aggravate the damages arising from breach, he should not desist from performance of an executory contract for the erection of a structure when notified of the other party's repudiation, instead of piling up damages by proceeding with the work. As stated above, we think that reason and authority require that this question be answered in the affirmative. It follows that there was error in directing a verdict for plaintiff for the full amount of its claim. The measure of plaintiff's damage, upon its appearing that notice was duly given not to build the bridge, is an amount sufficient to compensate plaintiff for labor and materials expended and expense incurred in the part performance of the contract, prior to its repudiation, plus the profit which would have been realized if it had been carried out in accordance with its terms. See [309] Novelty Advertising Co. v. Farmers' Mut. Tobacco Warehouse Co., supra.

Our conclusion, on the whole case, is that there was error in failing to strike out the answer of Pruitt, Pratt, and McCollum, and in admitting same as evidence against the county, in excluding the testimony offered by the county to which we have referred, and in directing a verdict for plaintiff. The judgment below will accordingly be reversed, and the case remanded for a new trial.

Reversed.

                IN THE COURT OF APPEALS OF TENNESSEE
                             AT JACKSON
                                  July 27, 2010 Session

         SAMMIE MANESS and SKM WOOD PRODUCTS, LLC
                              v.
     JOANNIE COLLINS, MIKE SMITH, JOSH SMITH and SKM, LLC

                Appeal from the Chancery Court for McNairy County
                      No. 8319   William C. Cole, Chancellor


              No. W2008-00941-COA-R3-CV - Filed November 17, 2010


This appeal involves an employment contract. The plaintiff employee owned a
manufacturing business. He sold the business to the defendant new owners, and agreed to
stay on as a management-level employee. To that end, the plaintiff entered into a three-year
employment agreement with the company, and signed a non-competition agreement. After
a few months, the company’s new owners terminated the plaintiff employee on the basis that
he had not fulfilled his job duties. The plaintiff filed this lawsuit against the company and
the new owners, alleging breach of the employment agreement. After a bench trial, the trial
court held that the company breached the employment agreement by terminating the
plaintiff’s employment without cause, finding that one of the new owners prevented the
plaintiff from performing his job duties. However, the trial court declined to award damages
to the plaintiff employee because the plaintiff did not seek other employment, and thus failed
to mitigate his damages. Both parties appeal. We affirm the trial court’s finding that the
company breached the employment agreement, finding that one of the new owners prevented
the plaintiff from performing his job duties, and therefore the plaintiff’s failure to perform
under the employment agreement was excused. We reverse the trial court’s holding on
mitigation of damages, finding that the defendant company and the new owners were
required to prove the availability of suitable and comparable substitute employment, and
failed to do so.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed in
                      Part, Reversed in Part and Remanded

H OLLY M. K IRBY, J.,, delivered the opinion of the Court, in which D AVID R. F ARMER, J., and
J. S TEVEN S TAFFORD, J., joined.
Terry L. Wood, Wilson, Hunton & Wood, P.A., Corinth, Mississippi, for Plaintiff/ Appellant,
Sammie Maness and SKM Wood Products, LLC.

Terry Abernathy, Selmer, Tennessee, for Defendants/Appellees, Joannie Collins, Mike
Smith, Josh Smith, and SKM, LLC.

                                            OPINION

                               F ACTS AND P ROCEEDINGS BELOW

Plaintiff/Appellant Sammie Maness (“Maness”), in his 50s at all pertinent times, lived most
of his life in McNairy County, Tennessee. Much of his work life was spent doing hourly
work, such as construction, maintenance, working as a mill operator, or working as a
carpenter. In 1997, Maness incorporated his own wood manufacturing business in
Adamsville, Tennessee, making table tops for a local sewing company. For a couple of
years, Maness worked part-time for his new business. In time, the sewing company business
diminished, but Maness’s new company began making wooden bases and support parts for
bath tubs for Aqua Glass, a local company whose business apparently involved
manufacturing bath tubs. As the work from Aqua Glass increased, by 1999, Maness’s
company became his full-time occupation. In 2001, Maness’s manufacturing company,
Plaintiff SKM Wood Products, LLC (“ SKM”), moved to a new facility in Adamsville.
Within several years, SKM grew to have annual sales of several million dollars, with
approximately twenty-five employees. SKM’s primary customer remained bath tub
manufacturer Aqua Glass.

In 2005, Defendant/Appellee Joannie Collins (“Collins”) approached Maness about the
possibility of purchasing SKM.1 After several meetings, Collins told Maness that her
brother-in-law, Defendant/Appellee Mike Smith (“Mike Smith”), and his son, Collins’
nephew, Defendant/ Appellee Josh Smith (“Josh Smith”), would be her partners in
purchasing and operating the business. Mike Smith took the lead role in negotiating the sale.
Not long before the negotiations began, Josh Smith was hospitalized for treatment for drug
addiction issues; this fact was not disclosed to Maness during the negotiations.

The three purchasers expected to take on different roles in the newly acquired business.
Collins, a certified public accountant, expected to maintain her full-time employment as a
financial advisor and handle the new business’s payroll and financial matters on a part-time


1
 Collins had been a friend of Maness’s deceased wife. Maness had known both Collins and Mike Smith for
many years. Prior to 2005, Collins and Mike Smith, with others, approached Maness about investing in
SKM, but nothing was done at that time.

                                                 -2-
basis. Similarly, Mike Smith expected to keep his full-time employment elsewhere and work
part-time at SKM. Josh Smith had a college degree in business and marketing and had
worked for a woodworking company; he was expected to be the “managing member,” that
is, to work full-time at SKM, supervising and managing the day-to-day operations. Part of
Mike Smith’s motivation in acquiring SKM was to have a business for Josh Smith as well
as his other son. All parties expected that, after the acquisition, Maness would remain with
SKM as an employee.

In anticipation of the acquisition, in the fall of 2005, Josh Smith was hired by SKM and
began working under Maness’s supervision. Maness was somewhat disappointed by Josh
Smith’s job performance at that point, but the record does not indicate that he voiced any
concerns about Josh Smith to any of the purchasers.

On January 13, 2006, the parties executed an asset purchase agreement under which SKM’s
assets were sold to SKM, LLC, with Collins, Mike Smith, and Josh Smith as guarantors.2
Part of the total $1,300,000 purchase price was paid by a $300,000 promissory note
guaranteed by Collins, Mike Smith, and Josh Smith. The new ownership of SKM was
structured such that Collins owned one-third, Mike Smith owned one-third, and Josh Smith
owned one-third.

The asset purchase agreement provided for SKM to employ Maness for three years, at an
annual salary of $67,600. It stated:

        As an integral part of this Agreement, the Purchaser [SKM, LLC] agrees to
        employ Sammie Maness, with the beginning date of such employment to be
        the date of the closing of this transaction for a period thereafter of not less than
        three (3) years, provided that the Company shall maintain the current sales
        volume and for so long as the Company shall not suffer any material
        interruption of its business by causes beyond its control. During the term of
        Maness’ employment, he shall generally serve as the Company’s Production
        Manager and shall be paid an annual salary of Sixty-Seven Thousand Six
        Hundred Dollars ($67,600.00). . . .




2
After the acquisition, the name of the business was changed to SKM, LLC. For simplicity, in this opinion,
we shall continue to refer to the business as “SKM.”

                                                  -3-
Attached to the asset purchase agreement was a job description for Maness as an employee
of SKM.3

On the same day, in conjunction with the asset purchase agreement, Maness also signed a
non-competition and non-solicitation agreement. The non-competition provision stated that
Maness would not:

           ...for a period of five (5) years following his termination of employment, for
           whatever reasons, with SKM, LLC by himself or by or through any other
           person or entity, whether as a shareholder, owner partner, joint venturer,
           employee, agent, contractor, consultant, directly or indirectly compete with the
           Company within the Restricted Area. The “Restricted Area” shall mean within
           the continental United States of America.

Thus, the noncompetition agreement had a geographic area of the entire continental United
States, for a time period of five years after Maness’s employment with SKM ended.

On the effective date of the asset purchase agreement, in mid-January 2006, Maness began
his employment as SKM’s Production Manager. As expected, Collins and Mike Smith
worked at SKM no more than a few hours per week. Josh Smith worked full-time at SKM.
At the time of the purchase, most of SKM’s sales came from customer Aqua Glass. A
primary aim of purchasers Collins, Mike Smith and Josh Smith was to bring in additional
customers and to diversify SKM’s customer base.

Initially, the parties’ working relationship was reasonably harmonious. However, conflicts
quickly arose. As Maness continued to discipline employees as he always had, the new
owners perceived his interactions with the employees as unacceptably confrontational.
Maness felt that, under the new ownership, SKM’s employees became increasingly
disrespectful toward him.


3
    The job description states that Maness was to:

                   Schedule the cutting department;
                   Work with Josh Smith on purchasing and scheduling incoming materials;
                   Coordinate maintenance on all equipment, forklifts, and vehicles;
                   Work with Chad Smith on maintenance and training on safety and OSHA compliance;
                   Work with Josh Smith, so he can schedule the frame-line, panel saw, and CNC;
                   Work on special projects;
                   Work with Josh Smith on developing new business; and
                   Train all new hires.


                                                     -4-
The problems came to a head in March 2006, when Maness fired an employee after a heated
confrontation in which the employee spoke to Maness in a manner that he perceived as
disrespectful of his authority. Afterward, the new owners admonished Maness for the
termination and rehired the employee. The new owners indicated to Maness that he did not
have the authority to discharge employees.

Maness’s working relationship with the new owners deteriorated precipitously after that. By
all accounts, Maness became unhappy and did much less work, spending considerable time
in his office, essentially idle. The parties disputed the reason for Maness’s behavior.

Finally, on May 16, 2006, the new owners terminated Maness’s employment with SKM. As
reason for termination, the termination notice stated: “Have not fulfilled job duties, according
to our original agreement, your actions and attitude have been detrimental to the success of
this Company.”

On July 6, 2006, Maness filed a lawsuit in the Chancery Court of McNairy County against
Collins, Mike Smith, Josh Smith, and SKM, LLC.4 The complaint alleged breach of
Maness’s employment agreement, and asserted that the non-competition agreement was
unenforceable. The complaint sought a judgment for the unpaid compensation under
Maness’s employment contract, pre-judgment interest, post-judgment interest, attorney fees
and costs, as well as a declaration that the non-competition agreement was unenforceable.

SKM, Collins, Mike Smith, and Josh Smith filed an answer to the complaint, asserting that
Maness’s employment was terminated for legal and justifiable cause, and that the non-
competition agreement was valid and enforceable. Discovery ensued.

The trial court conducted a bench trial over two days in March 2008, specifically March 17
and 28, 2008. The trial court heard testimony from Maness, Mike Smith, Collins, and Josh
Smith, as well as some former and current employees of SKM.

Maness testified at the outset of the trial. Prior to the acquisition, Maness said, Josh Smith
was not a particularly good employee, but Maness was able to work with him on some tasks.
After the acquisition, as Maness would walk through the plant correcting employees on
transgressions such as safety violations, Maness noticed that the employees acted in an
increasingly disrespectful and belligerent manner towards him. After Maness fired the


4
 In the complaint, SKM Wood Products, LLC was also a Plaintiff; it sought acceleration of the payments due
under the promissory note. The claim on the promissory note was the only claim asserted by SKM Wood
Products, LLC. This claim was dismissed by the trial court at the conclusion of the Plaintiff’s proof and is
not an issue in this appeal. Thus, SKM Wood Products, LLC raises no issues in this appeal.

                                                    -5-
disrespectful problem employee and the new owners reinstated him, Maness said, he told the
new owners that they had undercut his authority. Maness said that the new owners responded
by telling him that he no longer had the authority to discipline or terminate employees.

After that, Maness claimed, Josh Smith held a meeting with the SKM employees in which
he told them that Maness no longer had any authority to correct employees or tell them what
to do. Josh Smith did not inform Maness of this meeting. Maness alleged that “every time
[he] tried to do anything, correct people, quality, safety or anything, [he] was told that wasn’t
[his] job, [and] not to do it.” When he complained, Maness claimed, Mike Smith told him
to just stay in his office at his desk and draw his money.

Subsequently, on an occasion when Maness came to SKM at an unusually early hour, he
observed Josh Smith in what appeared to be a drug transaction. He told Collins what he had
seen. Not long after that, the new owners terminated Maness’s employment.

On cross-examination, Maness conceded that the new owners told him that his management
style was too confrontational; Maness disagreed with their characterization. He also admitted
that the new owners wanted to expand SKM’s customer base beyond Aqua Glass, and that
he did not care about such expansion.

Since his employment with SKM ended, Maness said, he had not been employed. Maness
conceded that, after his termination, he did not seek new employment, but instead focused
on building a new house for himself.

After Maness’s testimony, a former SKM employee testified that Josh Smith talked with him
about ideas for getting Maness to leave SKM. The former employee corroborated Maness’s
testimony that Josh Smith held a meeting at which SKM employees were told that Maness
was no longer an owner, so they did not need to listen to him. Another former SKM
employee testified that, several weeks after the acquisition, Josh Smith told employees that
Maness would not be with SKM much longer. Both former employees described Josh
Smith’s extensive drug use while on the job at SKM and his drug transactions with SKM
employees. That concluded Maness’s case-in-chief.

Collins and Mike Smith both testified that the working relationship with Maness started
amicably, but soon inexplicably deteriorated. Both acknowledged that their work time at the
SKM plant was limited; for information on Maness’s job performance, they relied in part on
Josh Smith and others. Prior to the acquisition, neither Collins nor Mike Smith were aware
that Josh Smith had undergone treatment for drug addiction. Both Collins and Mike Smith
received some indication, only shortly before Maness’s termination, that Josh Smith was
using drugs; however, neither was aware of the extent of the younger Smith’s drug problem

                                               -6-
until after Maness was let go. At the time Maness’s employment was terminated, neither
were aware of reports that Josh Smith had tried to get rid of Maness or that he had held a
meeting with employees to tell them that they need not listen to Maness; in their testimony,
neither would concede that such a meeting in fact occurred.

Collins and Mike Smith both testified that Maness was resistant to the new owners’ efforts
to get customers beyond Aqua Glass. Both maintained that, after SKM decided to rehire the
problem employee whom Maness had fired, Maness’s work attitude soured and he essentially
stopped working. Collins testified that Maness “sulked up like an old possum.” Mike Smith
denied telling Maness to just sit in his office and draw his pay. Both Collins and Mike Smith
insisted that there was just cause to terminate Maness’s employment.

Josh Smith testified as well. He said that his drug problems begin in 2005, and that he was
addicted to a variety of drugs, prescription and otherwise. He underwent treatment for
substance abuse in September 2005, shortly before he began working for SKM.5 To his
knowledge, neither his father, Mike Smith, nor his aunt, Collins, nor Maness were aware of
his past substance abuse. Josh Smith admitted that he used drugs on the premises of SKM
throughout his employment there. He denied buying or selling drugs on the premises of
SKM, and maintained that his drug use did not affect his work performance.

 In his testimony, Josh Smith denied having a meeting with the SKM employees in which
he told them that they were no longer required to listen to Maness, and he denied asking
employees to help him get rid of Maness. He maintained that Maness was often
confrontational with the employees, and that Maness made no attempt to get new customers.
After the new owners rehired the employee Maness had fired, Josh Smith testified, Maness
did little work, and began spending most of his work time in his office playing solitaire, and
repeatedly asking Collins, Mike Smith, and Josh Smith to buy out the remainder of his
contract. Josh Smith confirmed that, at this point, he did not want Maness dealing directly
with the employees. He testified that the decision to terminate Maness’s employment was
made by he, Collins and Mike Smith together, and that the decision was not made hastily.6

At the conclusion of the testimony, the trial court issued an oral ruling. At the outset of its
ruling, the trial court noted that no proof had been presented on the enforceability of the
noncompete agreement. Consequently, Maness’s claim for declaratory relief on the
noncompetition agreement was dismissed without prejudice. The trial court then addressed


5
    Josh Smith did not complete the recommended drug treatment at that time.
6
By the time of trial, Josh Smith was enrolled in a drug treatment program and had been drug-free for many
months.

                                                    -7-
whether the defendants had breached the employment agreement by terminating Maness’s
employment.

The trial judge found that Josh Smith was responsible for the daily operations of SKM, and
that he suffered from “extreme drug addiction.” It found that Maness’s work performance
was generally satisfactory until the new owners rescinded Maness’s firing of the problem
employee. After that, the trial court said, “everything went downhill.” The trial judge
credited the testimony of witnesses who testified that, unbeknownst to Mike Smith and
Collins, Josh Smith attempted to undercut Maness’s authority and to have Maness’s
employment terminated. The trial judge observed that Maness, by “sulk[ing] up and sitting
at a desk, and saying send me home,” conducted himself in a less-than-professional manner,
but the trial judge noted as well that Maness was dealing daily with “a drug-addicted business
owner,” namely, Josh Smith. The trial court found that the defendants did not meet their
burden of proof to show just cause for terminating Maness’s employment under the
employment agreement.

Regarding the issue of damages, the trial court noted that, after his termination, Maness spent
a year building a house and did not take any action to seek employment. The trial court
found that Maness, as a wrongfully terminated employee, had a duty to mitigate his damages,
but instead took no action. At that point, the trial court asked the attorneys for argument on
the issue of mitigation of damages. Maness’s attorney argued that the defendants’ attorney
had the burden to show that there was comparable, suitable employment available to Maness,
had he looked for a job. Especially in light of the noncompetition agreement, he contended,
the defendants’ burden was not met. In response, the defendants’ attorney argued that, since
Maness made no effort to find work, employer SKM had no obligation to show the
availability of substantially similar employment in the geographic area. After hearing the
arguments, the trial judge determined that, in light of Maness’s failure to make any effort to
find work, Maness failed to mitigate his damages. It concluded that Maness’s failure to
mitigate damages prohibited any award for damages.

On April 21, 2008, the trial court entered a written order, attaching a transcript of its prior
oral ruling. It found that the defendants did not have cause to terminate Maness’s
employment, but that Maness failed to mitigate his damages. Thus, it awarded Maness no
damages.

Maness now appeals, and Collins, Mike Smith, and Josh Smith cross-appeal.




                                              -8-
                      ISSUES ON A PPEAL AND S TANDARD OF R EVIEW

On appeal, SKM, Collins, Mike Smith, and Josh Smith argue that the trial court erred in
finding that Maness was terminated from his employment with SKM without cause. Maness
asserts on appeal that the trial court erred in considering the affirmative defense of mitigation
of damages when neither SKM nor the new owners asserted, either in their pleadings or at
trial, that Maness had a duty to mitigate his damages. In addition, Maness argues that the
trial court erred in denying Maness damages when SKM and the new owners produced no
evidence that comparable employment was available to Maness.

On appeal, the trial court’s findings of fact are reviewed de novo with a presumption of
correctness, unless the evidence preponderates to the contrary. T ENN. R.A PP. P. 13(d). To
the extent that a trial court’s factual determinations were based on its assessment of witness
credibility, this Court will not reevaluate that assessment absent clear and convincing
evidence to the contrary. Jones v. Barrett, 

, 838 (Tenn. 2002). The trial
court’s conclusions of law are reviewed de novo with no presumption of correctness.
Nashville Ford Tractor, Inc. v. Great American Insurance Co., 

, 425
(Tenn. Ct. App. 2005) (citing Johnson v. Johnson, 

, 894 (Tenn. 2001); Nutt
v. Champion Int’l Corp., 

, 367 (Tenn. 1998).

                                          A NALYSIS

                             Breach of Employment Contract

We consider first the issue raised on appeal by SKM, Collins, Mike Smith, and Josh Smith,
that the trial court erred in determining that SKM breached the employment agreement with
Maness by terminating Maness’s employment without cause. They assert that Maness was
terminated for cause, citing the description of good cause for termination contained in Biggs
v. Reinsman Equestrian Products, Inc., 

, 221 (Tenn. Ct. App. 2004) (citing
Video Catalog Channel, Inc. v. Blackwelder, No. 03A01-9705-CH-00155, 

(Tenn. Ct. App. Sept. 19, 1997) (“good cause exists . . . where the discharge is objectively
reasonable.”).

SKM, Collins, Mike Smith, and Josh Smith acknowledge that the trial court’s finding of no
cause was based in part on the trial court’s assessment of the credibility of the witnesses.
They argue that Josh Smith’s admitted drug use was no excuse for Maness to “sulk” and
refuse to do his job. Relying on Maness’s own testimony and the testimony of witnesses
credited by the trial court, they argue that the undisputed proof shows that Maness utilized
an inappropriately confrontational management style when dealing with SKM employees,
and that he spent most of his time at work doing nothing or playing games on his computer.

                                               -9-
They assert that Maness’s “failure to perform express or implied duties” gave SKM the right
to terminate his employment contract for cause, prior to the expiration of its term, without
incurring liability, citing Biggs, 169 S.W.3d at 221. They also contend that Maness’s
conduct amounted to job-related grounds for termination of his employment, which also
constitutes cause. They cite Lawrence v. Rollins, No. M1997-002233-COA-R3-CV, 

 (Tenn. Ct. App. Jan. 30, 2001), in support.

Tennessee has long adhered to the doctrine of employment-at-will, which recognizes the
right of either the employer or the employee to terminate the employment relationship at any
time, for good cause, bad cause, or no cause at all, without being guilty of a legal wrong.
Guy v. Mut. of Omaha Ins. Co., 79 S.w.3d 528, 534-35 (Tenn. 2002); Cummings, Inc. v.
Dorgan, 

, 332 (Tenn. Ct. App. 2009). In Tennessee, employees are
presumed to be employed at will in the absence of an agreement for employment for a term
certain. Cummings, Inc., 320 S.W.3d at 332; King v. TFE, Inc., 

, 460 (Tenn.
Ct. App. 1999). In this case, Maness’s employment with SKM is governed by Article 8 of
the asset purchase agreement, which provides for Maness’s employment as a Production
Manager for SKM. Generally, the interpretation of a contract is a question of law, subject
to de novo review. Allstate Ins. Co. v. Watson, 

, 611 (Tenn. 2006);
Cummings, 320 S.W.3d at 333.

The interpretation of contracts is governed by well-settled principles. “[T]he cardinal rule
for interpretation of contracts is to ascertain the intention of the parties and to give effect to
that intention as best can be done consistent with legal principles.” Cummings, 320 S.W.3d
at 333 (quoting Petty v. Sloan, 

, 360 (Tenn. 1955)). We ascertain the parties’
intent from what was “actually embodied and expressed in the instrument as written.” Petty,
277 S.W.2d at 361.

In the case at bar, the asset purchase agreement provides for Maness’s employment by SKM
for a term of three years. Often, an employment contract for a term certain will expressly
provide that the employee may be terminated “for cause” or “for good cause.” See, e.g.,
Worley v. Lister Distribution, Inc., No. E2005-02932-COA-R3-CV, 

(Tenn. Ct. App. June 20, 2006). In this case, the employment agreement contains no such
language. It states only that SKM “agrees to employ [Maness] for a period . . . of not less
than three (3) years . . . .” The only stated proviso to SKM’s obligation to employ Maness
is that SKM maintain its sales volume and not suffer any “material interruption of its
business.” The record contains no indication of a business interruption for SKM, and the
trial court specifically found that SKM’s sales volume had increased. The contract indicates
no other circumstance under which SKM is relieved of its obligation to employ Maness for
the mandated term. Thus, under the plain language of the employment agreement, SKM had
an essentially unqualified obligation to employ Maness for a period of three years, at a salary

                                               -10-
of $67,600 per year. In general, courts will not rewrite an agreement and “will not relieve
parties of their contractual obligations simply because these obligations later prove to be
burdensome or unwise.” Wages v. Life Care Centers of America, Inc., No. 2006-01054-
COA-R3-CV, 

, at *11 (Tenn. Ct. App. Nov. 30, 2007) (quoting Vargo v.
Lincoln Brass Works, Inc., 

, 492 (Tenn. Ct. App. 2003)).

However, there is authority in Tennessee to the effect that, even where an employment
agreement is for a definite term, the employer may nevertheless discharge the employee for
just cause. See Trabue, Inc. v. Professional Management-Automotive, Inc., 

, 663 (Tenn. 1970); Curtis v. Reeves, 

, 110-11 (Tenn. Ct. App. 1987)
(citing Trabue). Thus, we assume that, despite the unambiguous language in Maness’s
employment agreement, SKM retained the right to terminate his employment for just cause.

As noted by SKM and the new owners, the trial court found that Maness “was sulked up and
sitting at a desk,” and “saying send me home.” We agree that this indicates that Maness did
not perform his job duties under the employment contract. Viewed in isolation, this could
be seen as cause for termination under the caselaw cited by SKM, Collins, Mike Smith, and
Josh Smith. See Biggs, 169 S.W.3d at 221 (“Sub-performance that compromises the
employer’s interest or impedes the company’s progress will justify the termination for
cause.”) (citations omitted); Lawrence, 

, at *5 (“poor job performance, or
failure in the execution of assigned duties,” may constitute cause for termination.) (citation
omitted).

The trial court, however, did not view Maness’s actions in isolation; rather, it viewed
Maness’s failure to perform his function as Production Manager in the context of the
workplace disruption it found that Josh Smith created. Specifically, the trial court noted that
Maness dealt each day with an owner, Josh Smith, who undercut Maness’s authority as a
manager, tried to “foment dissent with the employees,” sought Maness’s removal, and
generally prevented him from effectively carrying out his job duties. On this basis, the trial
court held that SKM, Collins, Mike Smith, and Josh Smith did not meet their burden of proof
to show cause for the termination of Maness’s employment.

Our courts have recognized that each party to a contract is “under an implied obligation to
restrain from doing any act that would delay or prevent the other party’s performance of the
contract” and that “[e]ach party has the right to proceed free of hindrance by the other party.”
ACG, Inc. v. Southeast Elevator, Inc., 

, 168 (Tenn. Ct. App. 1995). In
German v. Ford, 

, 706 (Tenn. Ct. App. 2009), this Court elaborated on this
principle:




                                              -11-
       [E]very contract imposes on the parties a duty of good faith and fair dealing
       in its performance. R ESTATEMENT (S ECOND) OF C ONTRACTS § 205 (1981).
       For example, every contract includes an implied condition that one party will
       not prevent performance by the other party. See Moody Realty Co. v. Huestis,
       

, 678 (Tenn. Ct. App. 2007) (citation omitted). This is easily
       seen where the prevention of the other party’s performance takes the form of
       active hindrance:

       In any kind of contract, if the right of one party to compensation is conditional
       upon the rendition of some service or other performance by him . . ., it is
       nearly always a breach of contract for the other party to act so as to prevent .
       . . the performance of the condition. It is a breach of duty, only because the
       court finds a promise by implication not to prevent or hinder.

       6 A RTHUR L INTON C ORBIN, C ORBIN ON C ONTRACTS § 571 (Interim ed.). See
       Frank Fitzgerald, Inc. v. Pacella Bros., 

, 381 (Mass. App. Ct.
       1974) (holding that the subcontractor had a right to recover from the general
       contractor under the contract despite the subcontractor’s failure to fully
       perform because the subcontractor’s work was halted by an agent of the
       general contractor). Where the plaintiff’s performance has been wrongfully
       prevented or hindered by the conduct of the defendant, “[o]nly the law of the
       jungle would say that plaintiff’s failure to perform should not be excused.”
       P ERILLO, supra, § 11.28.

German v. Ford, 300 S.W.3d at 706. The German Court noted the consequence of such
active hindrance of the other party’s performance of his contractual obligations: “[A]ctive
prevention of another’s performance . . . may excuse performance by the other party.” Id.
at 707; accord, United States v. Peck, 

, 66, 

, at ** 1 (1880) (“the
conduct of one party to a contract which prevents the other from performing his part is an
excuse for non-performance.”). If performance under the contract is excused, it means that
even if performance of the plaintiff’s contractual obligation “did not take place, the plaintiff
may recover on the contract provided it is proved that plaintiff would have been ready,
willing and able to perform but for the prevention.” JOSEPH M. P ERILLO, C ALAMARI AND
P ERILLO ON CONTRACTS 453-54 ThomsonWest (5th ed. 2003) (emphasis in original).

In the instant case, the trial court made a factual finding that Josh Smith’s actions effectively
prevented Maness from functioning as a Production Manager for SKM. This factual finding
hinged on the trial court’s assessment of the witnesses’ credibility. Josh Smith’s disavowal
of any such actions was not credited by the trial court. Instead, the testimony of Maness and
the former SKM employees, that Josh Smith fomented dissent against Maness, undercut his

                                              -12-
authority, and sought to get rid of him, was credited. On appeal, the appellate court is
obliged to give great deference to the trial court’s assessment of the witnesses’ credibility.
Cornelius v. DCS, 

, 907 (Tenn. Ct. App. 2009) (citing McCaleb v. Saturn
Corp., 

, 415 (Tenn. 1995). According appropriate deference to the
credibility determinations of the trial court below, we find that the trial court’s factual
findings in this regard are supported by the preponderance of the evidence. Under these
circumstances, if Josh Smith prevented Maness from performing his job duties under the
employment agreement, then Maness’s performance was excused. This means that SKM
and the new owners were without cause to terminate his employment, and that Maness may
recover under the contract. Therefore, we affirm the finding of the trial court that Maness
was terminated from his employment without cause.

                                  Mitigation of Damages

Maness asserts on appeal that the trial court erred in applying the affirmative defense of
mitigation of damages, when there was no claim either in the pleadings or during the trial that
Maness had a duty to mitigate his damages and failed to do so. In response, Collins, Mike
Smith, and Josh Smith argue that, under Rule 15.02 of the Tennessee Rules of Civil
Procedure, the issue was tried by express or implied consent. See Farrar v. Farrar, 

, 744 (Tenn. 1977).

On the substantive issue of mitigation of damages, Maness asserts that the trial court erred
in declining to award Maness damages where there was no evidence at trial that comparable,
suitable employment was available to Maness. Maness maintains that, under Frye v.
Memphis State Univ., 

 (Tenn. 1991), it would have been futile for Maness
to seek other employment. Id. at 173. He contends that the noncompetition agreement,
prohibiting employment with a competitor anywhere in the United States for a period of five
years, prevented him from seeking comparable employment.

Maness asserts that, under Frye, “the employer must prove both the availability of suitable
and comparable substitute employment and a lack of reasonable diligence on the part of the
employee.” Id. (citing Raismas v. Michigan Dept. of Mental Health, 

, 624 (6th
Cir. 1983). Maness argues that at no point during the trial did SKM and the new owners offer
evidence of comparable, suitable employment for Maness.

In response, SKM and the new owners note that, without question, Maness had a duty to
mitigate his damages, and that it is undisputed that he made no effort whatsoever to find
substitute employment. They acknowledge candidly that they offered no proof of suitable,
comparable alternative employment available to Maness. They argue somewhat hopefully
on appeal that this case would be an excellent opportunity for this Court to adopt the

                                             -13-
exception noted in the case of Barnes v. Goodyear Tire and Rubber Co., No. W2000-01607-
COA-RM-CV, 

 (Tenn. Ct. App. May 25, 2001). In Barnes, the Court
stated:

       Some courts have carved out another exception to the general rule, holding that
       an employer is released from the duty to prove the availability of substantially
       equivalent employment if the employer proves that an employee has not made
       any reasonable efforts to obtain such work . . . . This exception has not been
       addressed in Tennessee.

Id. at *6 (citations omitted). The Barnes Court declined to adopt the exception based on the
facts in that case. Id. at *7.

In the alternative, SKM and the new owners argue that Maness should be bound by the
following language in the noncompetition agreement: “Maness acknowledges that his skills
are such that he could easily find alternative, commensurate employment or work that would
not violate the provisions of this Agreement. . . .”

In the instant case, Maness seeks damages for the breach of his employment contract; he
contends that, had his employment not been wrongfully terminated, he would have been paid
the agreed-upon salary for three years. “Although liability for breach of contract is primarily
based on a no-fault principle, . . . a party who has been wronged by a breach of contract may
not unreasonably sit idly by and allow damages to accumulate.” P ERILLO, supra, at 584.
This is the doctrine of avoidable consequences, often referred to as the plaintiff’s obligation
to mitigate his damages. See 22 A M. J UR.2 D Damages §§ 340, 345, 360 (2010). Thus, where
a party seeks damages for breach of contract, courts will enforce the plaintiff’s duty to
mitigate or reduce his damages incurred after the other party’s breach. See Feldman 22
T ENN. P RAC. C ONTRACT L AW AND P RACTICE § 2:32 (2010). In the context of the breach of
an employment contract by the employer, the terminated employee’s damages “consist of
compensation that the employee who has been wrongfully discharged would have received
if the contract had been carried out according to its terms, provided that the employee has
been unable to find comparable employment . . . .” 22 A M.J UR.2d § 101 (2010). See Frye,
806 S.W.2d at 173. See also Denney v. Lovett, No. M2004-03020-COA-R3-CV, 

, at *9 (Tenn. Ct. App. July 11, 2006).

The failure to mitigate damages is an affirmative defense. Id. In Tennessee, “the employer
must prove both availability of suitable and comparable substitute employment and a lack of
reasonable diligence on the part of the employee.” Frye, 806 S.W.2d at 173. In light of their
failure to proffer evidence of suitable comparable substitute employment for Maness, SKM
and the new owners urge this Court to adopt the exception referred to in Barnes. We must

                                             -14-
respectfully decline to do so. First, adopting such an exception renders problematic the
calculation of the plaintiff employee’s damages. The plaintiff’s failure to mitigate his
damages does not per se preclude him from recovering any damages whatsoever; rather,
“recovery is diminished only to the extent that the plaintiff fails to mitigate the damages as
they would be mitigated by an ordinary, reasonable person under similar circumstances.” 22
A M. J UR.2d § 336 (2010). Thus, only the amount that the plaintiff would have earned in the
exercise of reasonable diligence is applied to reduce his contractual damages. See, e.g.,
Barnes, 

, at *5 (“A back pay award must be reduced by any . . . amounts
that [the employee] could have earned had the employee exercised reasonable diligence.”)
(citations omitted). Therefore, the plaintiff is precluded from recovering damages only if the
proof shows that the amount he would have earned in the exercise of reasonable diligence
equaled or exceeded the amount he would have earned under the original employment
agreement. See, e.g., Denney, 

, at *10. If no proof of comparable,
suitable substitute employment is presented to the trial court, then the trial court has no basis
on which to determine the amount by which the plaintiff’s damages should be reduced.7

In the alternative, SKM and the new owners argue that the language in the noncompetition
agreement, in which Maness “acknowledges . . . that he could easily find alternative,
commensurate employment or work,” relieves them of the burden of proving suitable,
comparable substitute employment for the purpose of mitigation of damages. First, this
argument was not raised in the trial court, and consequently cannot appropriately be raised
for the first time on appeal. See Coleman Management, Inc. v. Meyer, 

, 355
(Tenn. Ct. App. 2009). Here, not only was the argument not raised to the trial court, but in
this case the trial court expressly declined to consider the noncompetition agreement or
Maness’s request for declaratory relief that it was unenforceable.8




7
 Thus, in the absence of supporting evidence, the trial court below clearly erred in holding that Maness’s
alleged failure to mitigate precluded him from any award of damages at all.
8
 Such circumstances present particular problems where, as here, the noncompetition agreement is likely
unenforceable. While it is conceivable that a draconian noncompetition agreement such as the one in this
case might be enforceable in a case involving a high-level executive with a global corporation, it is difficult
to imagine that a 25-employee manufacturing company could assert a protectable business interest that would
justify a noncompetition agreement with a geographic area of the entire United States for a time period of
five years. See generally, Columbus Med. Serv., LLC v. Thomas, 

 (Tenn. Ct. App. 2009);
Corbin v. Tom Lange Co., Inc., No. M2002-01162-COA-R3-CV, 

 (Tenn. Ct. App. Dec.
1, 2003).

                                                     -15-
Moreover, whatever the effect of such a provision in the consideration of whether the
noncompetition agreement is enforceable,9 it does not obviate the need for the employer to
submit evidence of suitable, comparable employment to prove the plaintiff’s failure to
mitigate damages. As noted above, the plaintiff’s recovery is only diminished by the amount
he would have earned in the exercise of reasonable diligence.                A contractual
acknowledgement that he could find “alternative, commensurate employment or work” is not
equivalent to a stipulation that Maness would have earned compensation that equaled or
exceeded the compensation he would have received pursuant to the employment agreement
with SKM. Thus, even if the trial court had been presented with this argument, consideration
of the language in the noncompete provision would not have enabled the trial court to
determine the amount by which Maness’s damages should be reduced. Therefore, in the
absence of evidence that suitable alternative employment was available to Maness, SKM and
new owners Collins, Mike Smith, and Josh Smith cannot rely on the affirmative defense of
mitigation of damages.

This holding pretermits the issue of whether the issue of mitigation of damages was tried by
implied consent.

                                                C ONCLUSION

Accordingly, we affirm the trial court’s holding that the termination of Maness’s employment
was a breach of the employment provisions contained in Article 8 of the parties’ asset
purchase agreement. We reverse the trial court’s holding that Maness’s failure to mitigate
his damages precludes him from recovering any damages for the breach of his employment
contract. The cause must be remanded to the trial court for entry of judgment in favor of
Maness and for calculation of Maness’s damages resulting from the breach of Article 8 of
the asset purchase agreement. The Appellees, having failed to offer proof of suitable
alternative employment available to Maness in the proceedings below, are precluded on
remand from submitting such proof. Otherwise, the trial court may consider any other
matters which the trial court, in its discretion, deems it necessary to consider.

The decision of the trial court is affirmed in part, reversed in part, and remanded, as set forth
above. Cost on appeal are to be taxed to Appellees SKM, LLC, Joannie Collins, Mike Smith,
and Josh Smith, for which execution may issue, if necessary.


                                                    _______________________________________
                                                    HOLLY M. KIRBY, JUDGE

9
    We expressly do not address this issue in this appeal.

                                                      -16-

COUNSEL

Musick, Peeler & Garrett and Bruce A. Bevan, Jr., for Defendant and Appellant.

Benjamin Neuman for Plaintiff and Respondent.

OPINION

BURKE, J.

Defendant Twentieth Century-Fox Film Corporation appeals from a summary judgment granting to plaintiff the recovery of agreed compensation under a written contract for her services as an actress in a motion picture. As will appear, we have concluded that the trial court correctly ruled in plaintiff's favor and that the judgment should be affirmed.

Plaintiff is well known as an actress, and in the contract between plaintiff and defendant is sometimes referred to as the "Artist." Under the contract, dated August 6, 1965, plaintiff was to play the female lead in defendant's contemplated production of a motion picture entitled "Bloomer Girl." The contract provided that defendant would pay plaintiff a minimum "guaranteed compensation" of $53,571.42 per week for 14 weeks commencing May 23, 1966, for a total of $750,000. Prior to May 1966 defendant decided not to produce the picture and by a letter dated April 4, 1966, it notified plaintiff of that decision and that it would not "comply with our obligations to you under" the written contract.

By the same letter and with the professed purpose "to avoid any damage to you," defendant instead offered to employ plaintiff as the leading actress in another film tentatively entitled "Big Country, Big Man" (hereinafter, "Big Country"). The compensation offered was identical, as were 31 of the 34 numbered provisions or articles of the original contract.^[1] Unlike "Bloomer Girl," however, which was to have been a musical production, "Big Country" was a dramatic "western type" movie. "Bloomer Girl" was to have been filmed in California; "Big Country" was to be produced in Australia. Also, certain terms in the proffered contract varied from those of the original.^[2] Plaintiff was given one week within which to accept; she did not and the offer lapsed. Plaintiff then commenced this action seeking recovery of the agreed guaranteed compensation.

The complaint sets forth two causes of action. The first is for money due under the contract; the second, based upon the same allegations as the first, is for damages resulting from defendant's breach of contract. Defendant in its answer admits the existence and validity of the contract, that plaintiff complied with all the conditions, covenants and promises and stood ready to complete the performance, and that defendant breached and "anticipatorily repudiated" the contract. It denies, however, that any money is due to plaintiff either under the contract or as a result of its breach, and pleads as an affirmative defense to both causes of action plaintiff's allegedly deliberate failure to mitigate damages, asserting that she unreasonably refused to accept its offer of the leading role in "Big Country."

Plaintiff moved for summary judgment under Code of Civil Procedure section 437c, the motion was granted, and summary judgment for $750,000 plus interest was entered in plaintiff's favor. This appeal by defendant followed.

(1a) The familiar rules are that the matter to be determined by the trial court on a motion for summary judgment is whether facts have been presented which give rise to a triable factual issue. The court may not pass upon the issue itself. (2) Summary judgment is proper only if the affidavits or declarations^[3] in support of the moving party would be sufficient to sustain a judgment in his favor and his opponent does not by affidavit show facts sufficient to present a triable issue of fact. The affidavits of the moving party are strictly construed, and doubts as to the propriety of summary judgment should be resolved against granting the motion. Such summary procedure is drastic and should be used with caution so that it does not become a substitute for the open trial method of determining facts. (3) The moving party cannot depend upon allegations in his own pleadings to cure deficient affidavits, nor can his adversary rely upon his own pleadings in lieu or in support of affidavits in opposition to a motion; however, a party can rely on his adversary's pleadings to establish facts not contained in his own affidavits. (Slobojan v. Western Travelers Life Ins. Co. (1969) 70 Cal.2d 432, 436-437 [74 Cal. Rptr. 895, 450 P.2d 271]; and cases cited.) (1b) Also, the court may consider facts stipulated to by the parties and facts which are properly the subject of judicial notice. (Ahmanson Bank & Trust Co. v. Tepper (1969) 269 Cal. App.2d 333, 342 [74 Cal. Rptr. 774]; Martin v. General Finance Co. (1966) 239 Cal. App.2d 438, 442 [48 Cal. Rptr. 773]; Goldstein v. Hoffman (1963) 213 Cal. App.2d 803, 814 [29 Cal. Rptr. 334]; Thomson v. Honer (1960) 179 Cal. App.2d 197, 203 [3 Cal. Rptr. 791].)

As stated, defendant's sole defense to this action which resulted from its deliberate breach of contract is that in rejecting defendant's substitute offer of employment plaintiff unreasonably refused to mitigate damages.

(4) The general rule is that the measure of recovery by a wrongfully discharged employee is the amount of salary agreed upon for the period of service, less the amount which the employer affirmatively proves the employee has earned or with reasonable effort might have earned from other employment. (W.F. Boardman Co. v. Petch (1921) 186 Cal. 476, 484 [182] [199 P. 1047]; De Angeles v. Roos Bros., Inc. (1966) 244 Cal. App.2d 434, 441-442 [52 Cal. Rptr. 783]; de la Falaise v. Gaumont-British Picture Corp. (1940) 39 Cal. App.2d 461, 469 [103 P.2d 447], and cases cited; see also Wise v. Southern Pac. Co. (1970) 1 Cal.3d 600, 607-608 [83 Cal. Rptr. 202, 463 P.2d 426].)^[4] (5) However, before projected earnings from other employment opportunities not sought or accepted by the discharged employee can be applied in mitigation, the employer must show that the other employment was comparable, or substantially similar, to that of which the employee has been deprived; the employee's rejection of or failure to seek other available employment of a different or inferior kind may not be resorted to in order to mitigate damages. (Gonzales v. Internat. Assn. of Machinists (1963) 213 Cal. App.2d 817, 822-824 [29 Cal. Rptr. 190]; Harris v. Nat. Union etc. Cooks, Stewards (1953) 116 Cal. App.2d 759, 761 [254 P.2d 673]; Crillo v. Curtola (1949) 91 Cal. App.2d 263, 275 [204 P.2d 941]; de la Falaise v. Gaumont-British Picture Corp., supra, 39 Cal. App.2d 461, 469; Schiller v. Keuffel & Esser Co. (1963) 21 Wis.2d 545 [124 N.W.2d 646, 651]; 28 A.L.R. 736, 749; 22 Am.Jur.2d, Damages, §§ 71-72, p. 106.)

In the present case defendant has raised no issue of reasonableness of efforts by plaintiffs to obtain other employment; the sole issue is whether plaintiff's refusal of defendant's substitute offer of "Big Country" may be used in mitigation. Nor, if the "Big Country" offer was of employment different or inferior when compared with the original "Bloomer Girl" employment, is there an issue as to whether or not plaintiff acted reasonably in refusing the substitute offer. Despite defendant's arguments to the contrary, no case cited or which our research has discovered holds or suggests that reasonableness is an element of a wrongfully discharged employee's option to reject, or fail to seek, different or inferior employment lest the possible earnings therefrom be charged against him in mitigation of damages.^[5]

(6) Applying the foregoing rules to the record in the present case, with all intendments in favor of the party opposing the summary judgment motion — here, defendant — it is clear that the trial court correctly ruled that plaintiff's failure to accept defendant's tendered substitute employment could not be applied in mitigation of damages because the offer of the "Big Country" lead was of employment both different and inferior, and that no factual dispute was presented on that issue. The mere circumstance that "Bloomer Girl" was to be a musical review calling upon plaintiff's talents as a dancer as well as an actress, and was to be produced in the City of Los Angeles, whereas "Big Country" was a straight dramatic role in a "Western Type" story taking place in an opal mine in Australia, demonstrates the difference in kind between the two employments; the female lead as a dramatic actress in a western style motion picture can by no stretch of imagination be considered the equivalent of or substantially similar to the lead in a song-and-dance production.

(7) Additionally, the substitute "Big Country" offer proposed to eliminate or impair the director and screenplay approvals accorded to plaintiff under the original "Bloomer Girl" contract (see fn. 2, ante), and thus constituted an offer of inferior employment. No expertise or judicial notice is required in order to hold that the deprivation or infringement of an employee's rights held under an original employment contract converts the available "other employment" relied upon by the employer to mitigate damages, into inferior employment which the employee need not seek or accept. (See Gonzales v. Internat. Assn. of Machinists, supra, 213 Cal. App.2d 817, 823-824; and fn. 5, post.)

(8) Statements found in affidavits submitted by defendant in opposition to plaintiff's summary judgment motion, to the effect that the "Big County" offer was not of employment different from or inferior to that under the "Bloomer Girl" contract, merely repeat the allegations of defendant's answer to the complaint in this action, constitute only conclusionary assertions with respect to undisputed facts, and do not give rise to a triable factual issue so as to defeat the motion for summary judgment. (See Colvig v. KSFO (1964) 224 Cal. App.2d 357, 364 [36 Cal. Rptr. 701]; Dashew v. Dashew Business Machines, Inc. (1963) 218 Cal. App.2d 711, 715 [32 Cal. Rptr. 682]; Hatch v. Bush (1963) 215 Cal. App.2d 692, 707 [30 Cal. Rptr. 397, 13 A.L.R.3d 503]; Barry v. Rodgers (1956) 141 Cal. App.2d 340, 342 [296 P.2d 898].)

In view of the determination that defendant failed to present any facts showing the existence of a factual issue with respect to its sole defense — plaintiff's rejection of its substitute employment offer in mitigation of damages — we need not consider plaintiff's further contention that for various reasons, including the provisions of the original contract set forth in footnote 1, ante, plaintiff was excused from attempting to mitigate damages.

The judgment is affirmed.

McComb, J., Peters, J., Tobriner, J., Kaus, J.,^[6] and Roth, J.,^[6] concurred.

SULLIVAN, Acting C.J.

The basic question in this case is whether or not plaintiff acted reasonably in rejecting defendant's offer of alternate employment. The answer depends upon whether that offer (starring in "Big Country, Big Man") was an offer of work that was substantially similar to her former employment (starring in "Bloomer Girl") or of work that was of a different or inferior kind. To my mind this is a factual issue which the trial court should not have determined on a motion for summary judgment. The majority have not only repeated this error but have compounded it by applying the rules governing mitigation of damages in the employer-employee context in a misleading fashion. Accordingly, I respectfully dissent.

The familiar rule requiring a plaintiff in a tort or contract action to mitigate damages embodies notions of fairness and socially responsible behavior which are fundamental to our jurisprudence. Most broadly stated, it precludes the recovery of damages which, through the exercise of due diligence, could have been avoided. Thus, in essence, it is a rule requiring reasonable conduct in commercial affairs. This general principle governs the obligations of an employee after his employer has wrongfully repudiated or terminated the employment contract. Rather than permitting the employee simply to remain idle during the balance of the contract period, the law requires him to make a reasonable effort to secure other employment.^[7] He is not obliged, however, to seek or accept any and all types of work which may be available. Only work which is in the same field and which is of the same quality need be accepted.^[8]

Over the years the courts have employed various phrases to define the type of employment which the employee, upon his wrongful discharge, is under an obligation to accept. Thus in California alone it has been held that he must accept employment which is "substantially similar" (Lewis v. Protective Security Life Ins. Co. (1962) 208 Cal. App.2d 582, 584 [25 Cal. Rptr. 213]; de la Falaise v. Gaumont-British Picture Corp. (1940) 39 Cal. App.2d 461, 469 [103 P.2d 447]); "comparable employment" (Erler v. Five Points Motors, Inc. (1967) 249 Cal. App.2d 560, 562 [57 Cal. Rptr. 516]; Harris v. Nat. Union etc. Cooks, Stewards (1953) 116 Cal. App.2d 759, 761 [254 P.2d 673]); employment "in the same general line of the first employment" (Rotter v. Stationers Corp. (1960) 186 Cal. App.2d 170, 172 [8 Cal. Rptr. 690]); "equivalent to his prior position" (De Angeles v. Roos Bros., Inc. (1966) 244 Cal. App.2d 434, 443 [52 Cal. Rptr. 783]); "employment in a similar capacity" (Silva v. McCoy (1968) 259 Cal. App.2d 256, 260 [66 Cal. Rptr. 364]); employment which is "not ... of a different or inferior kind...." (Gonzales v. Internat. Assn. of Machinists (1963) 213 Cal. App.2d 817, 822 [29 Cal. Rptr. 190].)^[9]

For reasons which are unexplained, the majority cite several of these cases yet select from among the various judicial formulations which they contain one particular phrase, "Not of a different or inferior kind," with which to analyze this case. I have discovered no historical or theoretical reason to adopt this phrase, which is simply a negative restatement of the affirmative standards set out in the above cases, as the exclusive standard. Indeed, its emergence is an example of the dubious phenomenon of the law responding not to rational judicial choice or changing social conditions, but to unrecognized changes in the language of opinions or legal treatises.^[10] However, the phrase is a serviceable one and my concern is not with its use as the standard but rather with what I consider its distortion.

The relevant language excuses acceptance only of employment which is of a different kind. (Gonzales v. Internat. Assn. of Machinists, supra, 213 Cal. App.2d 817, 822; Harris v. Nat. Union etc. Cooks, Stewards, supra, 116 Cal. App.2d 759, 761; de la Falaise v. Gaumont-British Picture Corp., supra, 39 Cal. App.2d 461, 469.) It has never been the law that the mere existence of differences between two jobs in the same field is sufficient, as a matter of law, to excuse an employee wrongfully discharged from one from accepting the other in order to mitigate damages. Such an approach would effectively eliminate any obligation of an employee to attempt to minimize damage arising from a wrongful discharge. The only alternative job offer an employee would be required to accept would be an offer of his former job by his former employer.

Although the majority appear to hold that there was a difference "in kind" between the employment offered plaintiff in "Bloomer Girl" and that offered in "Big Country" (ante, at p. 183), an examination of the opinion makes crystal clear that the majority merely point out differences between the two films (an obvious circumstance) and then apodically assert that these constitute a difference in the kind of employment. The entire rationale of the majority boils down to this: that the "mere circumstances" that "Bloomer Girl" was to be a musical review while "Big Country" was a straight drama "demonstrates the difference in kind" since a female lead in a western is not "the equivalent of or substantially similar to" a lead in a musical. This is merely attempting to prove the proposition by repeating it. It shows that the vehicles for the display of the star's talents are different but it does not prove that her employment as a star in such vehicles is of necessity different in kind and either inferior or superior.

I believe that the approach taken by the majority (a superficial listing of differences with no attempt to assess their significance) may subvert a valuable legal doctrine.^[11] The inquiry in cases such as this should not be whether differences between the two jobs exist (there will always be differences) but whether the differences which are present are substantial enough to constitute differences in the kind of employment or, alternatively, whether they render the substitute work employment of an inferior kind.

It seems to me that this inquiry involves, in the instant case at least, factual determinations which are improper on a motion for summary judgment. Resolving whether or not one job is substantially similar to another or whether, on the other hand, it is of a different or inferior kind, will often (as here) require a critical appraisal of the similarities and differences between them in light of the importance of these differences to the employee. This necessitates a weighing of the evidence, and it is precisely this undertaking which is forbidden on summary judgment. (Garlock v. Cole (1962) 199 Cal. App.2d 11, 14 [18 Cal. Rptr. 393].)

This is not to say that summary judgment would never be available in an action by an employee in which the employer raises the defense of failure to mitigate damages. No case has come to my attention, however, in which summary judgment has been granted on the issue of whether an employee was obliged to accept available alternate employment. Nevertheless, there may well be cases in which the substitute employment is so manifestly of a dissimilar or inferior sort, the declarations of the plaintiff so complete and those of the defendant so conclusionary and inadequate that no factual issues exist for which a trial is required. This, however, is not such a case.

It is not intuitively obvious, to me at least, that the leading female role in a dramatic motion picture is a radically different endeavor from the leading female role in a musical comedy film. Nor is it plain to me that the rather qualified rights of director and screenplay approval contained in the first contract are highly significant matters either in the entertainment industry in general or to this plaintiff in particular. Certainly, none of the declarations introduced by plaintiff in support of her motion shed any light on these issues.^[12] Nor do they attempt to explain why she declined the offer of starring in "Big Country, Big Man." Nevertheless, the trial court granted the motion, declaring that these approval rights were "critical" and that their elimination altered "the essential nature of the employment."

The plaintiff's declarations were of no assistance to the trial court in its effort to justify reaching this conclusion on summary judgment. Instead, it was forced to rely on judicial notice of the definitions of "motion picture," "screenplay" and "director" (Evid. Code, § 451, subd. (e)) and then on judicial notice of practices in the film industry which were purportedly of "common knowledge." (Evid. Code, § 451, subd. (f) or § 452, subd. (g).) This use of judicial notice was error. Evidence Code section 451, subdivision (e) was never intended to authorize resort to the dictionary to solve essentially factual questions which do not turn upon conventional linguistic usage. More important, however, the trial court's notice of "facts commonly known" violated Evidence Code section 455, subdivision (a).^[13] Before this section was enacted there were no procedural safeguards affording litigants an opportunity to be heard as to the propriety of taking judicial notice of a matter or as to the tenor of the matter to be noticed. Section 455 makes such an opportunity (which may be an element of due process, see Evid. Code, § 455, Law Revision Com. Comment (a)) mandatory and its provisions should be scrupulously adhered to. "[J]udicial notice can be a valuable tool in the adversary system for the lawyer as well as the court" (Kongsgaard, Judicial Notice (1966) 18 Hastings L.J. 117, 140) and its use is appropriate on motions for summary judgment. Its use in this case, however, to determine on summary judgment issues fundamental to the litigation without complying with statutory requirements of notice and hearing is a highly improper effort to "cut the Gordion knot of involved litigation." (Silver Land & Dev. Co. v. California Land Title Co. (1967) 248 Cal. App.2d 241, 242 [56 Cal. Rptr. 178].)

The majority do not confront the trial court's misuse of judicial notice. They avoid this issue through the expedient of declaring that neither judicial notice nor expert opinion (such as that contained in the declarations in opposition to the motion)^[14] is necessary to reach the trial court's conclusion. Something, however, clearly is needed to support this conclusion. Nevertheless, the majority make no effort to justify the judgment through an examination of the plaintiff's declarations. Ignoring the obvious insufficiency of these declarations, the majority announce that "the deprivation or infringement of an employee's rights held under an original employment contract" changes the alternate employment offered or available into employment of an inferior kind.

I cannot accept the proposition that an offer which eliminates any contract right, regardless of its significance, is, as a matter of law, an offer of employment of an inferior kind. Such an absolute rule seems no more sensible than the majority's earlier suggestion that the mere existence of differences between two jobs is sufficient to render them employment of different kinds. Application of such per se rules will severely undermine the principle of mitigation of damages in the employer-employee context.

I remain convinced that the relevant question in such cases is whether or not a particular contract provision is so significant that its omission creates employment of an inferior kind. This question is, of course, intimately bound up in what I consider the ultimate issue: whether or not the employee acted reasonably. This will generally involve a factual inquiry to ascertain the importance of the particular contract term and a process of weighing the absence of that term against the countervailing advantages of the alternate employment. In the typical case, this will mean that summary judgment must be withheld.

In the instant case, there was nothing properly before the trial court by which the importance of the approval rights could be ascertained, much less evaluated. Thus, in order to grant the motion for summary judgment, the trial court misused judicial notice. In upholding the summary judgment, the majority here rely upon per se rules which distort the process of determining whether or not an employee is obliged to accept particular employment in mitigation of damages.

I believe that the judgment should be reversed so that the issue of whether or not the offer of the lead role in "Big Country, Big Man" was of employment comparable to that of the lead role in "Bloomer Girl" may be determined at trial.

Appellant's petition for a rehearing was denied October 28, 1970. Mosk, J., did not participate therein. Sullivan, J., was of the opinion that the petition should be granted.

[1] Among the identical provisions was the following found in the last paragraph of Article 2 of the original contract: "We [defendant] shall not be obligated to utilize your [plaintiff's] services in or in connection with the Photoplay hereunder, our sole obligation, subject to the terms and conditions of this Agreement, being to pay you the guaranteed compensation herein provided for."

[2] Article 29 of the original contract specified that plaintiff approved the director already chosen for "Bloomer Girl" and that in case he failed to act as director plaintiff was to have approval rights of any substitute director. Article 31 provided that plaintiff was to have the right of approval of the "Bloomer Girl" dance director, and Article 32 gave her the right of approval of the screenplay.

Defendant's letter of April 4 to plaintiff, which contained both defendant's notice of breach of the "Bloomer Girl" contract and offer of the lead in "Big Country," eliminated or impaired each of those rights. It read in part as follows: "The terms and conditions of our offer of employment are identical to those set forth in the `BLOOMER GIRL' Agreement, Articles 1 through 34 and Exhibit A to the Agreement, except as follows:

"1. Article 31 of said Agreement will not be included in any contract of employment regarding `BIG COUNTRY, BIG MAN' as it is not a musical and it thus will not need a dance director.

"2. In the `BLOOMER GIRL' agreement, in Articles 29 and 32, you were given certain director and screenplay approvals and you had preapproved certain matters. Since there simply is insufficient time to negotiate with you regarding your choice of director and regarding the screenplay and since you already expressed an interest in performing the role in `BIG COUNTRY, BIG MAN,' we must exclude from our offer of employment in `BIG COUNTRY, BIG MAN' any approval rights as are contained in said Articles 29 and 32; however, we shall consult with you respecting the director to be selected to direct the photoplay and will further consult with you with respect to the screenplay and any revisions or changes therein, provided, however, that if we fail to agree ... the decision of ... [defendant] with respect to the selection of a director and to revisions and changes in the said screenplay shall be binding upon the parties to said agreement."

[3] In this opinion "affidavits" includes "declarations under penalty of perjury." (See Code Civ. Proc., § 2015.5.)

[4] Although it would appear that plaintiff was not discharged by defendant in the customary sense of the term, as she was not permitted by defendant to enter upon performance of the "Bloomer Girl" contract, nevertheless the motion for summary judgment was submitted for decision upon a stipulation by the parties that "plaintiff Parker was discharged."

[5] Instead, in each case the reasonableness referred to was that of the efforts of the employee to obtain other employment that was not different or inferior; his right to reject the latter was declared as an unqualified rule of law. Thus, Gonzales v. Internat. Assn. of Machinists, supra, 213 Cal. App.2d 817, 823-824, holds that the trial court correctly instructed the jury that plaintiff union member, a machinist, was required to make "such efforts as the average [member of his union] desiring employment would make at that particular time and place" (italics added); but, further, that the court properly rejected defendant's offer of proof of the availability of other kinds of employment at the same or higher pay than plaintiff usually received and all outside the jurisdiction of his union, as plaintiff could not be required to accept different employment or a nonunion job.

In Harris v. Nat. Union etc. Cooks, Stewards, supra, 116 Cal. App.2d 759, 761, the issues were stated to be, inter alia, whether comparable employment was open to each plaintiff employee, and if so whether each plaintiff made a reasonable effort to secure such employment. It was held that the trial court properly sustained an objection to an offer to prove a custom of accepting a job in a lower rank when work in the higher rank was not available, as "The duty of mitigation of damages ... does not require the plaintiff `to seek or to accept other employment of a different or inferior kind.'" (P. 764 [5].)

See also: Lewis v. Protective Security Life Ins. Co. (1962) 208 Cal. App.2d 582, 584 [25 Cal. Rptr. 213]: "honest effort to find similar employment...." (Italics added.)

de la Falaise v. Gaumont-British Picture Corp., supra, 39 Cal. App.2d 461, 469: "reasonable effort."

Erler v. Five Points Motors, Inc. (1967) 249 Cal. App.2d 560, 562 [57 Cal. Rptr. 516]: Damages may be mitigated "by a showing that the employee, by the exercise of reasonable diligence and effort, could have procured comparable employment...." (Italics added.)

Savitz v. Gallaccio (1955) 179 Pa.Super. 589 [118 A.2d 282, 286]; Atholwood Dev. Co. v. Houston (1941) 179 Md. 441 [19 A.2d 706, 708]; Harcourt & Co. v. Heller (1933) 250 Ky. 321 [62 S.W.2d 1056]; Alaska Airlines, Inc. v. Stephenson (1954) 217 F.2d 295, 299 [15 Alaska 272]; United Protective Workers v. Ford Motor Co. (7th Cir.1955) 223 F.2d 49, 52 [48 A.L.R.2d 1285]; Chisholm v. Preferred Bankers' Life Assur. Co. (1897) 112 Mich. 50 [70 N.W. 415]; each of which held that the reasonableness of the employee's efforts, or his excuses for failure, to find other similar employment was properly submitted to the jury as a question of fact. NB: Chisholm additionally approved a jury instruction that a substitute offer of the employer to work for a lesser compensation was not to be considered in mitigation, as the employee was not required to accept it.

Williams v. National Organization, Masters, etc. (1956) 384 Pa. 413 [120 A.2d 896, 901 [13]]: "Even assuming that plaintiff ... could have obtained employment in ports other than ... where he resided, legally he was not compelled to do so in order to mitigate his damages." (Italics added.)

[6] Assigned by the Acting Chairman of the Judicial Council.

[7] The issue is generally discussed in terms of a duty on the part of the employee to minimize loss. The practice is long-established and there is little reason to change despite Judge Cardozo's observation of its subtle inaccuracy. "The servant is free to accept employment or reject it according to his uncensored pleasure. What is meant by the supposed duty is merely this, that if he unreasonably reject, he will not be heard to say that the loss of wages from then on shall be deemed the jural consequence of the earlier discharge. He has broken the chain of causation, and loss resulting to him thereafter is suffered through his own act." (McClelland v. Climax Hosiery Mills (1930) 252 N.Y. 347, 359 [169 N.E. 605, 609], concurring opinion.)

[8] This qualification of the rule seems to reflect the simple and humane attitude that it is too severe to demand of a person that he attempt to find and perform work for which he has no training or experience. Many of the older cases hold that one need not accept work in an inferior rank or position nor work which is more menial or arduous. This suggests that the rule may have had its origin in the bourgeois fear of resubmergence in lower economic classes.

[9] See also 28 A.L.R. 736, 740-742; 15 Am.Jur. 431.

[10] The earliest California case which the majority cite is de la Falaise v. Gaumont-British Picture Corp., supra, 39 Cal. App.2d at p. 469. de la Falaise states "The `other employment' which the discharged employee is bound to seek is employment of a character substantially similar to that of which he has been deprived; he need not enter upon service of a different or inferior kind, ..." de la Falaise cites, in turn, two sources as authority for this proposition. The first is 18 R.C.L. (Ruling Case Law) 529. That digest, however, states only that the "discharged employee ... need not enter upon service of a more menial kind." (Italics added.) It was in this form that the rule entered California law explicitly, Gregg v. McDonald (1925) 73 Cal. App. 748, 757 [239 P. 373], quoting the text verbatim. The second citation is to 28 A.L.R. 737. The author of the annotation states: "The principal question with which this annotation is concerned is the kind of employment which the employee is under a duty to seek or accept in order to reduce the damages caused by his wrongful discharge. Must one who is skilled in some special work he is employed to do, as an actor, musician, accountant, etc., seek or accept employment of an entirely different nature?" (Italics added.) (28 A.L.R. 736.) In answering that question in the negative, the annotation employs the language adopted by the majority: The employee is "not obliged to seek or accept other employment of a different or inferior kind, ..." (Id. at p. 737.) Rather than a restatement of a generally agreed upon rule, however, the phrase is an epitomization of the varied formulations found in the cases cited. (See 28 A.L.R. 740-742.)

[11] The values of the doctrine of mitigation of damages in this context are that it minimizes the unnecessary personal and social (e.g., nonproductive use of labor, litigation) costs of contractual failure. If a wrongfully discharged employee can, through his own action and without suffering financial or psychological loss in the process, reduce the damages accruing from the breach of contract, the most sensible policy is to require him to do so. I fear the majority opinion will encourage precisely opposite conduct.

[12] Plaintiff's declaration states simply that she has not received any payment from defendant under the "Bloomer Girl" contract and that the only persons authorized to collect money for her are her attorney and her agent.

The declaration of Herman Citron, plaintiff's theatrical agent, alleges that prior to the formation of the "Bloomer Girl" contract he discussed with Richard Zanuck, defendant's vice president, the conditions under which plaintiff might be interested in doing "Big Country"; that it was Zanuck who informed him of Fox's decision to cancel production of "Bloomer Girl" and queried him as to plaintiff's continued interest in "Big Country"; that he informed Zanuck that plaintiff was shocked by the decision, had turned down other offers because of her commitment to defendant for "Bloomer Girl" and was not interested in "Big Country." It further alleges that "Bloomer Girl" was to have been a musical review which would have given plaintiff an opportunity to exhibit her talent as a dancer as well as an actress and that "Big Country" was a straight dramatic role; the former to have been produced in California, the latter in Australia. Citron's declaration concludes by stating that he has not received any payment from defendant for plaintiff under the "Bloomer Girl" contract.

Benjamin Neuman's declaration states that he is plaintiff's attorney; that after receiving notice of defendant's breach he requested Citron to make every effort to obtain other suitable employment for plaintiff; that he (Neuman) rejected defendant's offer to settle for $400,000 and that he has not received any payment from defendant for plaintiff under the "Bloomer Girl" contract. It also sets forth correspondence between Neuman and Fox which culminated in Fox's final rejection of plaintiff's demand for full payment.

[13] Evidence Code section 455 provides in relevant part: "With respect to any matter specified in Section 452 or in subdivision (f) of Section 451 that is of substantial consequence to the determination of the action: (a) If the trial court has been requested to take or has taken or proposes to take judicial notice of such matter, the court shall afford each party reasonable opportunity, before the jury is instructed or before the cause is submitted for decision by the court, to present to the court information relevant to (1) the propriety of taking judicial notice of the matter and (2) the tenor of the matter to be noticed."

[14] Fox filed two declarations in opposition to the motion; the first is that of Frank Ferguson, Fox's chief resident counsel. It alleges, in substance, that he has handled the negotiations surrounding the "Bloomer Girl" contract and its breach; that the offer to employ plaintiff in "Big Country" was made in good faith and that Fox would have produced the film if plaintiff had accepted; that by accepting the second offer plaintiff was not required to surrender any rights under the first (breached) contract nor would such acceptance have resulted in a modification of the first contract; that the compensation under the second contract was identical; that the terms and conditions of the employment were substantially the same and not inferior to the first; that the employment was in the same general line of work and comparable to that under the first contract; that plaintiff often makes pictures on location in various parts of the world; that article 2 of the original contract which provides that Fox is not required to use the artist's services is a standard provision in artists' contracts designed to negate any implied covenant that the film producer promises to play the artist in or produce the film; that it is not intended to be an advance waiver by the producer of the doctrine of mitigation of damages.

The second declaration is that of Richard Zanuck. It avers that he is Fox's vice president in charge of production; that he has final responsibility for casting decisions; that he is familiar with plaintiff's ability and previous artistic history; that the offer of employment for "Big Country" was in the same general line and comparable to that of "Bloomer Girl"; that plaintiff would not have suffered any detriment to her image or reputation by appearing in it; that elimination of director and script approval rights would not injure plaintiff; that plaintiff has appeared in dramatic and western roles previously and has not limited herself to musicals; and that Fox would have complied with the terms of its offer if plaintiff had accepted it.

[639] Morris D. Rosen, Charleston, S. C. (George B. Bishop, Moncks Corner, S. C., on brief) for appellant.

[640] Herman H. Hamilton, Jr., Montgomery, Ala., and Ben Scott Whaley, Charleston, S. C. (Nathaniel L. Barnwell, Charleston, S. C., on brief) for appellees.

Before HAYNSWORTH, Chief Judge, BRYAN, Senior Circuit Judge, and CRAVEN, Circuit Judge.

CRAVEN, Circuit Judge:

May a subcontractor, who justifiably ceases work under a contract because of the prime contractor's breach, recover in quantum meruit the value of labor and equipment already furnished pursuant to the contract irrespective of whether he would have been entitled to recover in a suit on the contract? We think so, and, for reasons to be stated, the decision of the district court will be reversed.

The subcontractor, Coastal Steel Erectors, Inc., brought this action under the provisions of the Miller Act, 40 U.S.C.A. § 270a et seq., in the name of the United States against Algernon Blair, Inc., and its surety, United States Fidelity and Guaranty Company. Blair had entered a contract with the United States for the construction of a naval hospital in Charleston County, South Carolina. Blair had then contracted with Coastal to perform certain steel erection and supply certain equipment in conjunction with Blair's contract with the United States. Coastal commenced performance of its obligations, supplying its own cranes for handling and placing steel. Blair refused to pay for crane rental, maintaining that it was not obligated to do so under the subcontract. Because of Blair's failure to make payments for crane rental, and after completion of approximately 28 percent of the subcontract, Coastal terminated its performance. Blair then proceeded to complete the job with a new subcontractor. Coastal brought this action to recover for labor and equipment furnished.

The district court found that the subcontract required Blair to pay for crane use and that Blair's refusal to do so was such a material breach as to justify Coastal's terminating performance. This finding is not questioned on appeal. The court then found that under the contract the amount due Coastal, less what had already been paid, totaled approximately $37,000. Additionally, the court found Coastal would have lost more than $37,000 if it had completed performance. Holding that any amount due Coastal must be reduced by any loss it would have incurred by complete performance of the contract, the court denied recovery to Coastal. While the district court correctly stated the "`normal' rule of contract damages,"^[1] we think Coastal is entitled to recover in quantum meruit.^[2]

In United States for Use of Susi Contracting Co. v. Zara Contracting Co., 146 F.2d 606 (2d Cir. 1944), a Miller Act action, the court was faced with a situation similar to that involved here—the prime contractor had unjustifiably breached a subcontract after partial performance by the subcontractor. The court stated:

For it is an accepted principle of contract law, often applied in the case of construction contracts, that the promisee upon breach has the option to forego any suit on the contract and claim only the reasonable value of his performance.

146 F.2d at 610. The Tenth Circuit has also stated that the right to seek recovery under quantum meruit in a Miller [641] Act case is clear.^[3] Quantum meruit recovery is not limited to an action against the prime contractor but may also be brought against the Miller Act surety, as in this case.^[4] Further, that the complaint is not clear in regard to the theory of a plaintiff's recovery does not preclude recovery under quantum meruit. Narragansett Improvement Co. v. United States, 290 F.2d 577 (1st Cir. 1961). A plaintiff may join a claim for quantum meruit with a claim for damages from breach of contract.^[5]

In the present case, Coastal has, at its own expense, provided Blair with labor and the use of equipment. Blair, who breached the subcontract, has retained these benefits without having fully paid for them. On these facts, Coastal is entitled to restitution in quantum meruit.

The "restitution interest," involving a combination of unjust impoverishment with unjust gain, presents the strongest case for relief. If, following Aristotle, we regard the purpose of justice as the maintenance of an equilibrium of goods among members of society, the restitution interest presents twice as strong a claim to judicial intervention as the reliance interest, since if A not only causes B to lose one unit but appropriates that unit to himself, the resulting discrepancy between A and B is not one unit but two.

Fuller & Perdue, The Reliance Interest in Contract Damages, 46 Yale L.J. 52, 56 (1936).^[6]

The impact of quantum meruit is to allow a promisee to recover the value of services he gave to the defendant irrespective of whether he would have lost money on the contract and been unable to recover in a suit on the contract. Scaduto v. Orlando, 381 F.2d 587, 595 (2d Cir. 1967). The measure of recovery for quantum meruit is the reasonable value of the performance, Restatement of Contracts § 347 (1932); and recovery is undiminished by any loss which would have been incurred by complete performance. 12 Williston on Contracts § 1485, at 312 (3d ed. 1970). While the contract price may be evidence of reasonable value of the services, it does not measure the value of the performance or limit recovery.^[7] Rather, the standard for measuring the reasonable value of the services rendered is the amount for which such services could have been purchased from one in the plaintiff's position at the time and place the services were rendered.^[8]

[642] Since the district court has not yet accurately determined the reasonable value of the labor and equipment use furnished by Coastal to Blair, the case must be remanded for those findings.^[9] When the amount has been determined, judgment will be entered in favor of Coastal, less payments already made under the contract. Accordingly, for the reasons stated above, the decision of the district court is

Reversed and remanded with instructions.

[1] Fuller & Perdue, The Reliance Interest in Contract Damages, 46 Yale L.J. 52 (1936); Restatement of Contracts § 333 (1932).

[2] Where there is a distinction between federal and state substantive law, federal law controls in actions under the Miller Act. United States for Use and Benefit of Astro Cleaning & Packaging Co. v. Jamison Co., 425 F.2d 1281, 1282 n. 1 (6th Cir. 1970). But in this case the result would be the same, we think, under either state or federal law. Compare United States for Use of Susi Contracting Co. v. Zara Contracting Co., 146 F.2d 606 (2d Cir. 1944), with Gantt v. Morgan, 199 S.C. 138, 18 S.E.2d 672 (1942).

[3] Southern Painting Co. v. United States, 222 F.2d 431, 433 (10th Cir. 1955). See also Great Lakes Constr. Co. v. Republic Creosoting Co., 139 F.2d 456 (8th Cir. 1943) (dealing with a prior statute).

[4] Central Steel Erection Co. v. Will, 304 F.2d 548, 552 (9th Cir. 1962); Zara Contracting, 146 F.2d at 612. This is consistent with the liberal construction which is given to the Miller Act to effectuate its protective purposes. See United States ex rel. Sherman v. Carter, 353 U.S. 210, 216-217, 77 S.Ct. 793, 1 L.Ed.2d 776 (1957).

[5] North Am. Graphite Corp. v. Allan, 87 U.S.App.D.C. 154, 184 F.2d 387, 389 (1950); 12 Williston on Contracts § 1469, at 210 (3d ed. 1970).

[6] This case also comes within the requirements of the Restatements for recovery in quantum meruit. Restatement of Restitution § 107 (1937); Restatement of Contracts §§ 347-357 (1932).

[7]Scaduto v. Orlando, 381 F.2d 587, 595-596 (2d Cir. 1967); St. Paul-Mercury Indem. Co. v. United States ex rel. Jones, 238 F.2d 917, 924 (10th Cir. 1956); United States for Use of Susi Contracting Co. v. Zara Contracting Co., 146 F.2d 606, 610-611 (2d Cir. 1944).

It should be noted, however, that in suits for restitution there are many cases permitting the plaintiff to recover the value of benefits conferred on the defendant, even though this value exceeds that of the return performance promised by the defendant. In these cases it is no doubt felt that the defendant's breach should work a forfeiture of his right to retain the benefits of an advantageous bargain.

Fuller & Perdue, supra at 77.

[8] See United States for Use of F. E. Robinson Co. v. Alpha-Continental, 273 F.Supp. 758, 777 (E.D.N.C.1967), aff'd 404 F.2d 343 (4th Cir. 1968), and aff'd sub nom. Ling Elec., Inc. v. Federal Ins. Co., 406 F.2d 561 (4th Cir.), cert. denied, 395 U.S. 922, 89 S.Ct. 1774, 23 L.Ed.2d 239 (1969), and the cases cited in note 7, supra.

[9] Under the view of the case taken by the district court it was unnecessary to precisely appraise the value of services and materials rendered; an approximation was thought to suffice because the hypothetical loss had the contract been fully performed was greater in amount.