[642]

Transferred from Superior Court, Coos County; Scammon, Judge.

Action by George Hawkins against Edward R. B. McGee. Verdict for plaintiff, which was set aside. Transferred on exceptions. New trial.

Assumpsit against a surgeon for breach of an alleged warranty of the success of an operation. Trial by jury. Verdict for the plaintiff. The writ also contained a count in negligence upon which a nonsuit was ordered, without exception.

Defendant's motions for a nonsuit and for a directed verdict on the count in assumpsit were denied, and the defendant excepted. During the argument of plaintiff's counsel to the jury, the defendant claimed certain exceptions, and also excepted to the denial of his requests for instructions and to the charge of the court upon the question of damages, as more fully appears in the opinion. The defendant seasonably moved to set aside the verdict upon the grounds that it was (1) contrary to the evidence; (2) against the weight of the evidence; (3) against the weight of the law and evidence; and (4) because the damages awarded by the jury were excessive. The court denied the motion upon the first three grounds, but found that the damages were excessive, and made an order that the verdict be set aside, unless the plaintiff elected to remit all in excess of $500. The plaintiff having refused to remit, the verdict was set aside "as excessive and against the weight of the evidence," and the plaintiff excepted.

The foregoing exceptions were transferred by Scammon, J. The facts are stated in the opinion.

Ovide J. Coulombe and Ira W. Thayer, both of Berlin, for plaintiff.

Matthew J. Ryan and Crawford D. Henlng, both of Berlin, for defendant.

BRANCH, J.

1. The operation in question consisted in the removal of a considerable quantity of scar tissue from the palm of the plaintiff's right hand and the grafting of skin taken from the plaintiff;'s chest in place thereof. The scar tissue was the result of a severe burn caused by contact with an electric wire, which the plaintiff received about nine years before the time of the transactions here involved. There was evidence to the effect that before the operation was performed the plaintiff and his father went to the defendant's office, and that the defendant, in answer to the question, "How long will the boy be in the hospital?" replied, "Three or four days, not over four; then the boy can go home and it will be just a few days when he will go back to work with a [643] good hand." Clearly this and other testimony to the same effect would not justify a finding that the doctor contracted to complete the hospital treatment in three or four days or that the plaintiff would be able to go back to work within a few days thereafter. The above statements could only be construed as expressions of opinion or predictions as to the probable duration of the treatment and plaintiff's resulting disability, and the fact that these estimates were exceeded would impose no contractual liability upon the defendant. The only substantial basis for the plaintiff's claim is the testimony that the defendant also said before the operation was decided upon, "I will guarantee to make the hand a hundred per cent perfect hand or a hundred per cent good hand." The plaintiff was present when these words were alleged to have been spoken, and, if they are to be taken at their face value, it seems obvious that proof of their utterance would establish the giving of a warranty in accordance with his contention.

The defendant argues, however, that, even if these words were uttered by him, no reasonable man would understand that they were used with the intention of entering "into any contractual relation whatever," and that they could reasonably be understood only "as his expression in strong language that he believed and expected that as a result of the operation he would give the plaintiff a very good hand." It may be conceded, as the defendant contends, that, before the question of the making of a contract should be submitted to a jury, there is a preliminary question of law for the trial court to pass upon, i. e. "whether the words could possibly have the meaning imputed to them by the party who founds his ease upon a certain interpretation," but it cannot be held that the trial court decided this question erroneously in the present case. It is unnecessary to determine at this time whether the argument of the defendant, based upon "common knowledge of the uncertainty which attends all surgical operations," and the improbability that a surgeon would ever contract to make a damaged part of the human body "one hundred per cent perfect," would, in the absence of countervailing considerations, be regarded as conclusive, for there were other factors in the present case which tended to support the contention of the plaintiff. There was evidence that the defendant repeatedly solicited from the plaintiff's father the opportunity to perform this operation, and the theory was advanced by plaintiff's counsel in cross-examination of defendant that he sought an opportunity to "experiment on skin grafting," in which he had had little previous experience. If the jury accepted this part of plaintiff's contention, there would be a reasonable basis for the further conclusion that, if defendant spoke the words attributed to him, he did so with the intention that they should be accepted at their face value, as an inducement for the granting of consent to the operation by the plaintiff and his father, and there was ample evidence that they were so accepted by them. The question of the making of the alleged contract was properly submitted to the jury.

2. The substance of the charge to the jury on the question of damages appears in the following quotation: "If you find the plaintiff entitled to anything, he is entitled to recover for what pain and suffering he has been made to endure and for what injury he has sustained over and aDove what injury he had before." To this instruction the defendant seasonably excepted. By it, the jury was permitted to consider two elements of damage: (1) Pain and suffering due to the operation; and (2) positive ill effects of the operation upon the plaintiff's hand. Authority for any specific rule of damages in cases of this kind seems to be lacking, but, when tested by general principle and by analogy, it appears that the foregoing instruction was erroneous.

"By 'damages,' as that term is used in the law of contracts, is intended compensation for a breach, measured in the terms of the contract." Davis v. New England Cotton Yarn Co., 77 N. H. 403, 404, 92 A. 732, 733. The purpose of the law is "to put the plaintiff in as good a position as he would have been in had the defendant kept his contract." 3 Williston Cont. § 1338; Hardie-Tynes Mfg. Co. v. Easton Cotton Oil Co., 150 N. C. 150, 63 S. E. 676, 134 Am. St. Rep. 899. The measure of recovery "is based upon what the defendant should have given the plaintiff, not what the plaintiff has given the defendant or otherwise expended." 3 Williston Cont. § 1341. "The only losses that can be said fairly to come within the terms of a contract are such as the parties must have had in mind when the contract was made, or such as they either knew or ought to have known would probably result from a failure to comply with its terms." Davis v. New England Cotton Yarn Co., 77 N. H. 403, 404, 92 A. 732, 733, Hurd v. Dunsmore, 63 N. H. 171.

The present case is closely analogous to one in which a machine is built for a certain purpose and warranted to do certain work. In such cases, the usual rule of damages for breach of warranty in the sale of chattels is applied, and it is held that the measure of damages is the difference between the value of the machine, if it had corresponded with the warranty and its actual value, together with such incidental losses as the parties knew, or ought to have known, would probably result from a failure to comply with its terms. Hooper v. Story, 155 N. Y. 171, 175, 49 N. E. 773; Adams Hardware Co.v. Wimbish, 201 Ala. 548, 78 So. 902; Isaacs v. Jackson, etc., Co., 108 Kan. 17, 193 P. 1081; Paducah Hosiery Mills Co. v. Proctor, 210 Ky. 806, 276 S. W. 803; Pioneer Co. v. McCurdy, 151 Minn. 304, 186 N. W. 776; Christian, [644] etc., Co. v. Goodman, 132 Miss. 786, 96 So. 692; Hardie, etc., Co. v. Easton, etc., Co., 150 N. C. 150, 63 S. E. 676, 134 Am. St. Rep. 899; York Mfg. Co. v. Chelten, etc., Co., 278 Pa. 351, 123 A. 327; General Motors, etc., Co. v. Shepard Co., 47 R. I. 88, 129 A. 825; Cavanagh v. Stevens Co., 24 S. D. 349, 123 N. W. 681; Foutty v. Chalniax Co., 99 TV. Va. 300, 128 S. E. 389.

The rule thus applied is well settled in this state. "As a general rule, the measure of the vendee's damages is the difference between the value of the goods as they would have been if the warranty as to quality had been true, and the actual value at the time of the sale, including gains prevented and losses sustained, and such other damages as could be reasonably anticipated by the parties as likely to be caused by the vendor's failure to keep his agreement, and could not by reasonable care on the part of the vendee have been avoided." Union Bank v. Blanchard, 65 N. H. 21, 23, 18 A. 90, 91; Hurd v. Dunsmore, supra; Noyes v. Blodgett, 58 N. H. 502; P. L. ch. 166, § 69, subd. 7. We therefore conclude that the true measure of the plaintiff's damage in the present case is the difference between the value to him of a perfect hand or a good hand, such as the jury found the defendant promised him, and the value of his hand in its present condition, including any incidental consequences fairly within the contemplation of the parties when they made their contract. 1 Sutherland, Damages (4th Ed.) § 92. Damages not thus limited, although naturally resulting, are not to be given.

The extent of the plaintiff's suffering does not measure this difference in value. The pain necessarily incident to a serious surgical operation was a part of the contribution which the plaintiff was willing to make to his joint undertaking with the defendant to produce a good hand. It was a legal detriment suffered by him which constituted a part of the consideration given by him for the contract. It represented a part of the price which he was willing to pay for a good hand, but it furnished no test of the value of a good hand or the difference between the value of the hand which the defendant promised and the one which resulted from the operation.

It was also erroneous and misleading to submit to the jury as a separate element of damage any change for the worse in the condition of the plaintiff's hand resulting from the operation, although this error was probably more prejudicial to the plaintiff than to the defendant. Any such ill effect of the operation would be included under the true rule of damages set forth above, but damages might properly be assessed for the defendant's failure to improve the condition of the hand, even if there were no evidence that its condition was made worse as a result of the operation.

It must be assumed that the trial court, in setting aside the verdict, undertook to apply the same rule of damages which he had previously given to the jury, and, since this rule was erroneous, it is unnecessary for us to consider whether there was any evidence to justify his finding that all damages awarded by the jury above $500 were excessive.

3. Defendant's requests for instructions were loosely drawn, and were properly denied. A considerable number of issues of fact were raised by the evidence, and it would have been extremely misleading to instruct the jury in accordance with defendant's request No. 2, that "the only issue on which you have to pass is whether or not there was a special contract between the plaintiff and the defendant to produce a perfect hand." Equally inaccurate was defendant's request No. 5, which reads as follows: "You would have to find, in order to hold the defendant liable in this case, that Dr. McGee and the plaintiff both understood that the doctor was guaranteeing a perfect result from this operation." If the defendant said that he would guarantee a perfect result, and the plaintiff relied upon that promise, any mental reservations which he may have had are immaterial. The standard by which his conduct is to be judged is not internal, but external. Woburn Bank v. Woods, 77 N. H. 172, 89 A. 491; McConnell v. Lamontagne, 82 N. H. 423, 425, 134 A. 718; Eleftherion v. Great Falls Mfg. Co. 83 N. H—, 146 A. 172.

Defendant's request No. 7 was as follows: "If you should get so far as to find that there was a special contract guaranteeing a perfect result, you would still have to find for the defendant unless you also found that a further operation would not correct the disability claimed by the plaintiff." In view of the testimony that the defendant had refused to perform a further operation, it would clearly have been erroneous to give this instruction. The evidence would have justified a verdict for an amount sufficient to cover the cost of such an operation, even if the theory underlying this request were correct.

4. It is unlikely that the questions now presented in regard to the argument of plaintiff's counsel will arise at another trial, and therefore they have not been considered.

New trial.

MARBLE, J., did not sit; the others concurred.

[164] Appeal from District Court, Hennepin County; A. W. Selover, Judge.

Action for breach of contract by Frank M. Groves against the John Wunder Company and others. Plaintiff obtained judgment for an unsatisfactory amount, and he appeals.

Judgment reversed and new trial ordered.

John P. Devaney, Louis B. Schwartz, and Bleecker & Babcock, all of Minneapolis, for appellant.

Fowler, Youngquist, Furber, Taney & Johnson, of Minneapolis, for respondent.

STONE, Justice.

Action for breach of contract. Plaintiff got judgment for a little over $15,000. Sorely disappointed by that sum, he appeals.

In August, 1927, S. J. Groves & Sons Company, a corporation (hereinafter mentioned simply as Groves), owned a tract of 24 acres of Minneapolis suburban real estate. It was served or easily could be reached by railroad trackage. It is zoned as heavy industrial property. But for lack of development of the neighborhood its principal value thus far may have been in the deposit of sand and gravel which it carried. The Groves company had a plant on the premises for excavating and screening the gravel. Nearby defendant owned and was operating a similar plant.

In August, 1927, Groves and defendant made the involved contract. For the most part it was a lease from Groves, as lessor, to defendant, as lessee; its term seven years. Defendant agreed to remove the sand and gravel and to leave the property "at a uniform grade, substantially the same as the grade now existing at the roadway * * * on said premises, and that in stripping the overburden * * * it will use said overburden for the purpose of maintaining and establishing said grade."

Under the contract defendant got the Groves screening plant. The transfer thereof and the right to remove the sand and gravel made the consideration moving from Groves to defendant, except that defendant incidentally got rid of Groves as a competitor. On defendant's part it paid Groves $105,000. So that from the outset, on Groves' part the contract was executed except for defendant's [165] right to continue using the property for the stated

[286 N.W. 236]

term. (Defendant had a right to renewal which it did not exercise.)

Defendant breached the contract deliberately. It removed from the premises only "the richest and best of the gravel" and wholly failed, according to the findings, "to perform and comply with the terms, conditions, and provisions of said lease * * * with respect to the condition in which the surface of the demised premises was required to be left." Defendant surrendered the premises, not substantially at the grade required by the contract "nor at any uniform grade." Instead, the ground was "broken, rugged, and uneven." Plaintiff sues as assignee and successor in right of Groves.

As the contract was construed below, the finding is that to complete its performance 288,495 cubic yards of overburden would need to be excavated, taken from the premises, and deposited elsewhere. The reasonable cost of doing that was found to be upwards of $60,000. But, if defendant had left the premises at the uniform grade required by the lease, the reasonable value of the property on the determinative date would have been only $12,160. The judgment was for that sum, including interest, thereby nullifying plaintiff's claim that cost of completing the contract rather than difference in value of the land was the measure of damages. The gauge of damage adopted by the decision was the difference between the market value of plaintiff's land in the condition it was when the contract was made and what it would have been if defendant had performed. The one question for us arises upon plaintiff's assertion that he was entitled, not to that difference in value, but to the reasonable cost to him of doing the work called for by the contract which defendant left undone.

1.

Defendant's breach of contract was wilful. There was nothing of good faith about it. Hence, that the decision below handsomely rewards bad faith and deliberate breach of contract is obvious. That is not allowable. Here the rule is well settled, and has been since Elliott v. Caldwell, 43 Minn. 357, 45 N.W. 845, 9 L.R.A. 52, that, where the contractor wilfully and fraudulently varies from the terms of a construction contract, he cannot sue [166] thereon and have the benefit of the equitable doctrine of substantial performance. That is the rule generally. See Annotation, "Wilful or intentional variation by contractor from terms of contract in regard to material or work as affecting measure of damages," 6 A.L.R. 137.

Jacob & Youngs, Inc. v. Kent, 230 N.Y. 239, 243, 244, 129 N.E. 889, 891, 23 A.L.R. 1429, is typical. It was a case of substantial performance of a building contract. (This case is distinctly the opposite.) Mr. Justice Cardozo, in the course of his opinion, stressed the distinguishing features. "Nowhere," he said, "will change be tolerated, however, if it is so dominant or pervasive as in any real or substantial measure to frustrate the purpose of the contract." Again, "the willful transgressor must accept the penalty of his transgression."

2.

In reckoning damages for breach of a building or construction contract, the law aims to give the disappointed promisee, so far as money will do it, what he was promised. 9 Am.Jur. Building and Construction Contracts, § 152. It is so ruled by a long line of decisions in this state, beginning with Carli v. Seymour, Sabin & Co., 26 Minn. 276, 3 N.W. 348, where the contract was for building a road. There was a breach. Plaintiff was held entitled to recover what it would cost to complete the grading as contemplated by the contract. For our other similar cases, see 2 Dunnell, Minn. Dig. (2 ed. & Supp.) §§ 2561, 2565.

Never before, so far as our decisions show, has it even been suggested that lack of value in the land furnished to the contractor who had bound himself to improve it any escape from the ordinary consequences of a breach of the contract.

A case presently as interesting as any of our own, is Sassen v. Haegle, 125 Minn. 441, 147 N.W. 445, 446, 52 L.R.A.,N.S., 1176. The defendant, lessee of a farm, had agreed to haul and spread manure. He removed it, but spread it elsewhere than on the leased farm. Plaintiff had a verdict, but a new trial was ordered for error in the charge as to the measure of damages. The point was thus discussed by Mr. Justice Holt [125 Minn. page 443, 147 N.W. page 446, 52 L.R.A.,N.S., 1176]: [167] "But it is also true that the landlord had a perfect right to stipulate as to the disposal of the manure or as to the way in which the farm should be worked, and the tenant cannot evade compliance by showing that the farm became more valuable or fertile by omitting the agreed work or doing other work. Plaintiff's pleading and proof was directed

[286 N.W. 237]

to the reasonable value of performing what defendant agreed but failed to perform. Such reasonable cost or value was the natural and proximate damages. The question is not whether plaintiff made a wise or foolish agreement. He had a right to have it performed as made, and the resulting damage, in case of failure, is the reasonable cost of performance. Whether such performance affects the value of the farm was no concern of defendant."

Even in case of substantial performance in good faith, the resulting defects being remediable, it is error to instruct that the measure of damage is "the difference in value between the house as it was and as it would have been if constructed according to contract." The "correct doctrine" is that the cost of remedying the defect is the "proper" measure of damages. Snider v. Peters Home Building Co., 139 Minn. 413, 414, 416, 167 N.W. 108.

Value of the land (as distinguished from the value of the intended product of the contract, which ordinarily will be equivalent to its reasonable cost) is no proper part of any measure of damages for wilful breach of a building contract. The reason is plain.

The summit from which to reckon damages from trespass to real estate is its actual value at the moment. The owner's only right is to be compensated for the deterioration in value caused by the tort. That is all he has lost. ¹But not so if a contract to improve the same land has been breached by the contractor who refuses to do the work, especially where, as here, he has been paid in advance. The summit from which to reckon damages for that wrong is the hypothetical peak of accomplishment (not value) which would [168] have been reached had the work been done as demanded by the contract.

The owner's right to improve his property is not trammeled by its small value. It is his right to erect thereon structures which will reduce its value. If that be the result, it can be of no aid to any contractor who declines performance. As said long ago in Chamberlain v. Parker, 45 N.Y. 569, 572: "A man may do what he will with his own, * * * and if he chooses to erect a monument to his caprice or folly on his premises, and employs and pays another to do it, it does not lie with a defendant who has been so employed and paid for building it, to say that his own performance would not be beneficial to the plaintiff." To the same effect is Restatement, Contracts, § 346, p. 576, Illustrations of Subsection (1), par. 4.

Suppose a contractor were suing the owner for breach of a grading contract such as this. Would any element of value, or lack of it, in the land have any relevance in reckoning damages? Of course not. The contractor would be compensated for what he had lost, i. e., his profit. Conversely, in such a case as this, the owner is entitled to compensation for what he has lost, that is, the work or structure which he has been promised, for which he has paid, and of which he has been deprived by the contractor's breach.

To diminish damages recoverable against him in proportion as there is presently small value in the land would favor the faithless contractor. It would also ignore and so defeat plaintiff's right to contract and build for the future. To justify such a course would require more of the prophetic vision than judges possess. This factor is important when the subject matter is trackage property in the margin of such an area of population and industry as that of the Twin Cities.

For purposes of measuring damages for breach of construction contracts, those with municipal corporations (see City of St. Paul v. Bielenberg, 164 Minn. 72, 204 N.W. 544) are no exception to the general rule. No sound reason is assigned why they should be. We have seen no case indicating their supposed exceptional character [169] as a factor of decision. If these so-called public contracts were in the suggested special category for measuring damages, a municipal corporation would be dealt with more favorably than the ordinary litigant. But courts cannot be more generous with one class of litigants than with another. Such partiality runs counter to the law's demand for equal treatment of litigants who stand on the same footing both as to right and as to remedy.

The genealogy of the error pervading the argument contra is easy to trace. It begins with Seely v. Alden, 61 Pa. 302, 100 Am.Dec. 642, a tort case for pollution of a stream. Resulting depreciation in value of plaintiff's premises, of course, was the

[286 N.W. 238]

measure of damages. About 40 years later, in Bigham v. Wabash-Pittsburg T. Ry., 223 Pa. 106, 72 A. 318, the measure of damages of the earlier tort case was used in one for breach of contract, without comment or explanation to show why. That case was followed in Sweeney v. Lewis Construction Co., 66 Wash. 490, 119 P. 1108, and Sandy Valley & Elkhorn Ry. Co. v. Hughes, 175 Ky. 320, 194 S.W. 344, with no thought given to the anomaly of using in a case in contract a standard ordinarily applicable only in cases of tort. The Washington case, by the way, is sui generis. The contract was to waive damages for the lowering of a street grade. So it adopted as matter of express contract the measure of damages applicable in cases of trespass.

It is at least interesting to note Morgan v. Gamble, 230 Pa. 165, 79 A. 410, decided two years after the Bigham case. The doctrine of substantial performance is there correctly stated, but plaintiff was denied its benefit because he had deliberately breached his building contract. It was held that: "Where a building contractor agrees to lay an extra strong lead water pipe, and he substitutes therefor an iron pipe, he will be required to allow to the owners in a suit upon the contract, not the difference [in value] between the iron and lead pipes, but the cost of laying a lead pipe as provided in the agreement."

To show how remote any factors of value were considered, it was also held that: [170] "Where a contractor of a building agrees to construct two gas lines, one for natural gas, and one for artificial gas, he will not be relieved from constructing both lines, because artificial gas was not in use in the town in which the building was being constructed."

The objective of this contract of present importance was the improvement of real estate. That makes irrelevant the rules peculiar to damages to chattels, arising from tort or breach of contract. Crowley v. Burns Boiler & Mfg. Co., 100 Minn. 178, 187, 110 N.W. 969, 973, dealt with a breach of contract for the sale of a steam boiler. The court observed: "If the application of a particular rule for measuring damages to given facts results in more than compensation, it is at once apparent that the wrong rule has been adopted."

That is unquestioned law, but for its correct application there must be ascertainment of the loss for which compensation is to be reckoned. In tort, the thing lost is money value, nothing more. But under a construction contract, the thing lost by a breach such as we have here is a physical structure or accomplishment, a promised and paid for alteration in land. That is the "injury" for which the law gives him compensation. Its only appropriate measure is the cost of performance.

It is suggested that because of little or no value in his land the owner may be unconscionably enriched by such a reckoning. The answer is that there can be no unconscionable enrichment, no advantage upon which the law will frown, when the result is but to give one party to a contract only what the other has promised; particularly where, as here, the delinquent has had full payment for the promised performance.

3.

It is said by the Restatement, Contracts, § 346, comment b: "Sometimes defects in a completed structure cannot be physically remedied without tearing down and rebuilding, at a cost that would be imprudent and unreasonable. The law does not require damages to be measured by a method requiring such economic waste. If no such waste is involved, the cost of remedying the defect is the [171] amount awarded as compensation for failure to render the promised performance."

The "economic waste" declaimed against by the decisions applying that rule has nothing to do with the value in money of the real estate, or even with the product of the contract. The waste avoided is only that which would come from wrecking a physical structure, completed, or nearly so, under the contract. The cases applying that rule go no further. Illustrative are Buchholz v. Rosenberg, 163 Wis. 312, 156 N.W. 946; Burmeister v. Wolfgram, 175 Wis. 506, 185 N.W. 517. Absent such waste, as it is in this case, the rule of the Restatement, Contracts, § 346, is that "the cost of remedying the defect is the amount awarded as compensation for failure to render the promised performance." That means that defendants here are liable to plaintiff for the reasonable cost of doing what defendants promised to do and have wilfully declined to do.

It follows that there must be a new trial. The initial question will be as to the proper construction of the contract. Thus far the case has been considered from the standpoint of the construction adopted by plaintiff and acquiesced in, very likely for

[286 N.W. 239]

strategic reasons, by defendants. The question has not been argued here, so we intimate no opinion concerning it, but we put the question whether the contract required removal from the premises of any overburden. The requirement in that respect was that the overburden should be used for the purpose of "establishing and maintaining" the grade. A uniform slope and grade were doubtless required. But whether, if it could not be accomplished without removal and deposit elsewhere of large amounts of overburden, the contract required as a condition that the grade everywhere should be as low as the one recited as "now existing at the roadway" is a question for initial consideration below.

The judgment must be reversed with a new trial to follow.

So ordered.

JULIUS J. OLSON, Justice (dissenting).

The situation here is unfortunate to the litigants as well as to this court in that because of the absence of two of the justices the [172] prevailing opinion represents but a minority of its full membership. But the court as such must go on transacting its business. The general rule is that a "majority of the members of a court is a quorum sufficient for the transaction of business and the decision of cases." Hence a majority of the quorum necessarily must prevail. 14 Am.Jur.Courts, §§ 57, 58; 15 C.J. pp. 965, 966, [§ 362] D; and see Hunt v. Ward, 193 Minn. 168, 258 N.W. 145, 259 N.W. 12.

There is no case directly in point in this state. My own notion has been that to reverse the trial court a clear majority of the whole court was necessary. (And this view has been shared by many of our lawyers judging from petitions for reargument that have recently come before us where the court was evenly divided due to the illness of Mr. Justice HILTON.) This notion of mine was probably unfounded; hence what has been said is not to be taken as in any way disparaging the value and binding effect of the prevailing opinion. One would much rather go along therewith than be opposed thereto if performance of duty as one sees it did not compel otherwise.

The involved lease provides that the granted premises were to be used by defendant "for the purpose of removing the sand and gravel therefrom." The cash consideration was $105,000, plus defendant's covenant to level and grade the premises to a specified base. There was no segregation or allocation of the cash consideration made applicable to any of the various items going into the deal, and the instrument does not suggest any sum as being representative of the cost of performance by defendant of the leveling and grading process. Nor is there any finding that the contractor "wilfully and fraudulently" violated the terms of its contract. All that can be said is that defendant did nothing except to mine the sand and gravel purchased by it and deemed best suited to its own interest and advantage. No question of partial or substantial performance of its covenant is involved since it did nothing in that behalf. The sole question here is whether the rule adopted by the court respecting recoverable damages is wrong. The essential facts, not questioned, are that [173] "The fair and reasonable value as of the end of the term of said lease, May 1, 1934, of performing the said work necessary to put the premises in the condition in which they were required by the terms of said lease to be left, is the sum of $60,893.28," and that if defendant "had left said premises at a uniform grade as required by said lease, the fair and reasonable value of said premises on May 1, 1934, would have been the sum of $12,160." In that sum, plus interest from May 1, 1934, plaintiff was awarded judgment, $15,053.58. His sole contention before the trial court and here is that upon these findings the court, as a matter of law, should have allowed him the cost of performance, $60,893.28, plus interest since date of the breach, May 1, 1934, amounting to more than $76,000.

Since there is no issue of fact we should limit our inquiry to the single legal problem presented: What amount in money will adequately compensate plaintiff for his loss caused by defendant's failure to render performance?

When the parties entered into this contract each had a right to rely upon the promise of full and complete performance on the part of the other. And by "performance" is meant "such a thorough fulfillment of a duty as puts an end to obligations by leaving nothing more to be done." McGuire v. J. Neils Lumber Co., 97 Minn. 293, 298, 107 N.W. 130, 132. But the "obligation of the contract does not inhere or

[286 N.W. 240]

subsist in the agreement itself proprio vigore, but in the law applicable to the agreement, that is, in the act of the law in binding the promisor to perform his promise. When it is said that one who enters upon an undertaking assumes the legal duties relating to it, what is really meant is that the law imposes the duties on him. A contract is not a law, nor does it make law. It is the agreement plus the law that makes the ordinary contract an enforceable obligation." 12 Am.Jur., Contracts, § 2.

There is here no room for dispute as to contract obligation; therefore it is the duty of the court to enforce its terms "without a [174] leaning in either direction," the parties being "on an equal footing" and as such "were free to do what they chose." Id. § 226.

Another principle, of universal application, is that a party is entitled to have that for which he contracted, or its equivalent. What that equivalent is depends upon the circumstances of each case. If the effect of performance is such that the defective part "may be remedied without the destruction of any substantial part of the benefit which the owner's property has received by reason of the contractor's work, the equivalent to which the owner is entitled is the cost of making the work conform to the contract." 9 Am.Jur., Building and Construction Contracts, § 152. Here, however, defendant did nothing. As such plaintiff "is entitled to be placed, in so far as this can be done by money, in the same position he would have occupied if the contract had been performed." But "his recovery is limited to the loss he has actually suffered by reason of the breach; he is not entitled to be placed in a better position than he would have been in if the contract had not been broken." 15 Am.Jur., Damages, § 43. The measure of damages "is not affected by the financial condition of the one entitled to the damages"; nor may there be included in the assessment of damages "the motive of the defendant in breaking" his contract, compensatory damages alone being involved. In such a case the measure is "the same whatever the cause of the breach, regardless of whether it was due to mistake, accident, or inability to perform or was wilful and malicious." Id. § 48. Liability in damages has for its basis the value of the promised performance to the promisee, not what it would cost the promisor in completing performance. Guardian Trust Co. v. Brothers, Tex.Civ. App., 59 S.W.2d 343, 345, and authorities cited. Plaintiff as the injured party is entitled to have compensation for all injuries sustained by him due to defendant's default. But he is only entitled to recover "actual pecuniary compensation," and this is true "whether the action is on contract or in tort," there being here no circumstances warranting allowance of exemplary damages. 8 R.C.L. § 8, pp. 431, 432, and cases cited under notes 16, 17, and 18.

[175] "Since one who has been injured by the breach of a contract or the commission of a tort is entitled to a just and adequate compensation for such injury and no more, it follows that his recovery must be limited to a fair compensation and indemnity for his injury and loss. And so in no case should the injured party be placed in a better position than he would be in had the wrong not been done, or the contract not been broken. The defendant may therefore show that, notwithstanding his default, the plaintiff has suffered no damages. And if any circumstances exist which mitigate the injury, they must be considered and taken into account." 8 R.C.L. § 9, pp. 434-435, and cases under notes 9, 10, 11, and 12.

That the subject matter here involved was one within the proper scope of contractual obligation, and its purpose entirely lawful, is obvious. Plaintiff, as owner of the tract upon which the work was to be done, had the undoubted right to insist upon that kind of contract and to its performance. We are not concerned with whether he exercised economic wisdom or displayed lack thereof. Defendant agreed to do the work for what is conceded to have been legally sufficient consideration. It must either perform or pay plaintiff for all damages by him suffered. In City of St. Paul v. Bielenberg, 164 Minn. 72, 74-75, 204 N.W. 544, 545, this court held that:

"The measure of damages for the defendant's breach of his contract, by a total failure to perform, is the cost of performance. [Citing cases.]

"It is urged by the defendant that his failure to perform his contract has not harmed the city, for, as he claims and as is perhaps true, the grading from Winifred street to George street will not be of use on account of the topography of the vicinity until the avenue is graded to Congress street. The action is on contract. The measure of damages is the contract

[286 N.W. 241]

measure. The plaintiff was entitled to that for which it contracted. It is no defense that it contracted for something which is not now beneficial to it."

Other cases upholding the general rule stated are, amongst many: County of Hennepin v. Richardson, 175 Minn. 60, 220 N.W. 432; [176] Sampson v. Brince, 146 Minn. 101, 177 N.W. 933; City of Winona v. Jackson, 92 Minn. 453, 100 N.W. 368; Haney v. Ferch, 150 Minn. 323, 185 N.W. 397; Carli v. Seymour, Sabin & Co., 26 Minn. 276, 3 N.W. 348; Frank W. Coy Real Estate Co. v. Pendleton, 45 R.I. 477, 123 A. 562; Day v. City of Malvern, 195 Ark. 804, 114 S.W.2d 459, and cases cited in Note 39 L.R.A.,N.S., 591. See, also, Anderson v. Nordstrom, 60 Minn. 231, 61 N.W. 1132; Sassen v. Haegle, 125 Minn. 441, 147 N.W. 445, 52 L.R.A.,N.S., 1176; McCormick, Damages, § 169, p. 650.

But to be noted, in none of the cited cases was it made to appear that the cost of completion or construction would exceed the value of the property as and when completed. Public contracts are in a separate class, and as to these comment will be made later.

As the rule of damages to be applied in any given case has for its purpose compensation, not punishment, we must be ever mindful that, "If the application of a particular rule for measuring damages to given facts results in more than compensation, it is at once apparent that the wrong rule has been adopted." Crowley v. Burns Boiler & Mfg. Co., 100 Minn. 178, 187, 110 N.W. 969, 973.

We have here then a situation where, concededly, if the contract had been performed, plaintiff would have had property worth, in round numbers, no more than $12,000. If he is to be awarded damages in an amount exceeding $60,000 he will be receiving at least 500 per cent more than his property, properly leveled to grade by actual performance, was intrinsically worth when the breach occurred. To so conclude is to give him something far beyond what the parties had in mind or contracted for. There is no showing made, nor any finding suggested, that this property was unique, specially desirable for a particular or personal use, or of special value as to location or future use different from that of other property surrounding it. Under the circumstances here appearing, it seems clear that what the parties contracted for was to put the property in shape for general sale. And the lease contemplates just that, for by the terms thereof defendant agreed "from time to time, as the sand and gravel are removed from the various lots * * * leased, it will surrender said lots to the lessor" if of no further [177] use to defendant "in connection with the purposes for which this lease is made."

The theory upon which plaintiff relies for application of the cost of performance rule must have for its basis cases where the property or the improvement to be made is unique or personal instead of being of the kind ordinarily governed by market values. His action is one at law for damages, not for specific performance. As there was no affirmative showing of any peculiar fitness of this property to a unique or personal use, the rule to be applied is, I think, the one applied by the court. The cases bearing directly upon this phase so hold. Briefly, the rule here applicable is this: Damages recoverable for breach of a contract to construct is the difference between the market value of the property in the condition it was when delivered to and received by plaintiff and what its market value would have been if defendant had fully complied with its terms. Bigham v. Wabash-Pittsburg T. Ry. Co., 223 Pa. 106, 72 A. 318; Sweeney v. Lewis Const. Co., 66 Wash. 490, 119 P. 1108; Sandy Valley & Elkhorn Ry. Co. v. Hughes, 175 Ky. 320, 194 S.W. 344. It is interesting to note that in the Kentucky case the court reversed its former opinion found in 172 Ky. 65, 188 S.W. 894. Its reason for changing its mind is thus stated (175 Ky. 320, 321, 194 S.W. 344):

"In our original opinion we fixed as the measure of damages the reasonable cost of reducing the land from which the earth and stone were taken to the level of the railroad grade and in condition for building purposes. Upon a reconsideration of the question, we conclude that this measure of damages is incorrect. From plaintiffs' avowal on the first trial it appears that it would cost at least $15,000 to do the work required by the contract, and from other testimony in the record it is by no means improbable that the cost would be far in excess of that sum. If this be true, the cost would far exceed the market value of the entire farm. If the contract had been performed, plaintiffs would have had a farm with the place from which the earth and stone were taken reduced to the

[286 N.W. 242]

level of the railroad grade and in condition for building purposes. As the case stands, this provision of the contract has not been complied

[178]

with. What, then, was plaintiff's damage? Manifestly, not what it would cost to do the work, for, if the work had been done, plaintiff would not have received the cost of the work, but would have been benefited only to the extent that the work increased the market value of his land.We therefore conclude that the measure of damages is the difference between the market value of the farm in its present condition and what its market value would have been if the land from which the earth and stone were removed had been reduced to the level of the railroad grade and left in condition for building purposes." (Italics supplied.)

The principle for which I contend is not novel in construction contract cases. It is well stated in McCormick, Damages, § 168, pp. 648, 649, as follows: "In whatever way the issue arises, the generally approved standards for measuring the owner's loss from defects in the work are two: First, in cases where the defect is one that can be repaired or cured without undue expense, so as to make the building conform to the agreed plan, then the owner recovers such amount as he has reasonably expended, or will reasonably have to spend, to remedy the defect. Second, if, on the other hand, the defect in material or construction is one that cannot be remedied without an expenditure for reconstruction disproportionate to the end to be attained, or without endangering unduly other parts of the building, then the damages will be measured not by the cost of remedying the defect, but by the difference between the value of the building as it is and what it would have been worth if it had been built in conformity with the contract."

And the same thought was expressed by Mr. Justice Cardozo in Jacob & Youngs, Inc. v. Kent, 230 N.Y. 239, 244, 129 N.E. 889, 891, 23 A.L.R. 1429, 1433, thus: "The owner is entitled to the money which will permit him to complete, unless the cost of completion is grossly and unfairly out of proportion to the good to be attained. When that is true, the measure is the difference in value." [179] To the same effect is 5 Williston, Contracts (Rev. ed.) § 1363, p. 3825. (The supporting cases are found under note 12.) In 1 Restatement, Contracts, § 346 p. 576, Illustrations of Subsection (1), par. 3, reads: "A contracts with B to sink an oil well on A's own land adjacent to the land of B, for development and exploration purposes. Other exploration wells prove that there is no oil in that region; and A breaks his promise to sink the well. B can get judgment for only nominal damages, not the cost of sinking the well."

And in Guardian Trust Co. v. Brothers, (Tex.Civ.App.) 59 S.W.2d 343, 346, a case in substance much like ours, the court said: "The loss or injury actually sustained by the obligee, rather than the cost of performance by the obligor, is the proper measure of damages for the breach of a contract. When that well-established rule is departed from, compensatory damages become either punitive damages, because too much, or inadequate damages, because too little, and the fundamental purpose of compensatory damages is lost sight of."

In Pedelty v. Wisconsin Zinc Co., 148 Wis. 245, 247, 252, 134 N.W. 356, 358, defendant contracted with plaintiffs for the privilege of "pumping and running waste water from their mine" across plaintiffs' land. "In the course of defendant's operations it caused waste material from the mill to pass with water in which it was held in suspense, into a small pond from which, from time to time, it caused the water and settlings, called `sludge,' to flow to and the sludge to be deposited in great quantities on plaintiffs' land."

The court stated the rule to be: "The diminished value of the land by reason of the wrong, was the proper basis for the assessment [of damages]. The cost of removing the foreign material, which appellant insists was the proper measure, was in fact evidentiary only. A situation might[180] well be created such that the cost of restoration would exceed the value of the property originally, or as restored. In that case it could not be well said that such cost would be the measure of recoverable loss. The actual loss sustained is the just measure of reparation in any case." (Italics supplied.)

If this were a case to recover damages for tortious injury the applicable rule is the difference in the market value and not the cost of restoring the premises to the former condition if such exceeds the diminution in value. Karst v. St. Paul, S. & T. F. R. Co., 23 Minn. 401; Ziebarth v. Nye, 42 Minn. 541, 547, 44 N.W. 1027. In Heath v. Minneapolis, St. P. & S. Ste. M. Ry. Co., 126 Minn. 470, 475, 148 N.W.

[286 N.W. 243]

311, 312, L.R.A.1916E, 977, it was held that, "The rental value plus the cost of restoration is the true measure of damages, in cases of continuing trespass, when it appears that this is less than the difference between the value of the premises before and immediately after the wrong."

Other helpful cases are: Elder v. Lykens Valley Coal Co., 157 Pa. 490, 27 A. 545, 37 Am.St.Rep. 742; Harvey v. Sides Silver Mining Co. 1 Nev. 539, 90 Am.Dec. 510; Jones v. Gooday, 8 M. & W. 146; Annotation, 35 A.L.R. 1142, "III. Basis of Computation," where numerous cases are cited to the effect that, "The true measure of damages for a reparable injury is the cost of repairs, if such cost is not greater than the diminution in value of the premises." Additional cases may be found under annotation, 17 L.R.A. 426; Armstrong v. City of Seattle, 180 Wash. 39, 38 P.2d 377, 97 A.L.R. 826, annotation at page 830.

In Karst v. St. Paul, S. & T. F. R. Co., 22 Minn. 118, 123, this court said: "For unlawful excavation and removal of his soil, a party is entitled to recover, not the cost of refilling, but the amount of the diminution of the value of the property by the excavation and removal, that being the amount of the injury directly resulting from the acts complained of." And is not that the most feasible measure in such a situation? It accomplishes the object to which damage law is directed, i. e., [181] toward full recompense to an injured plaintiff for his loss. If, then, the landowner received full compensation by this measure, why is he not also fully compensated by receiving the same amount in the case before us? Once it has been held that the market value wholly restores the landowner when his property is permanently damaged, it must be held that he is also entirely repaid by the same measure in our present situation. So it would seem that whether plaintiff's damages are to be measured by the rule applicable to the theory of breach of contract cases or that of tortious conduct the extent of his recovery can be no greater than his actual loss. In either case, he may not be heard to complain that because the equivalent to defendant's performance will cost a larger amount than that, therefore he should receive such greater amount rather than his real loss.

Some comment is in order respecting cases cited in the prevailing opinion. Too much stress is laid upon Morgan v. Gamble, 230 Pa. 165, 79 A. 410, the implication being that this case in some fashion limits or impairs Bigham v. Wabash-Pittsburg T. Ry. Co., 223 Pa. 106, 72 A. 318. A careful reading of the two opinions dispels any notion of lack of complete harmony between them. In the Gamble case the contractor had agreed to place two gas lines in a building, one for natural, the other for artificial, gas. He failed to lay the gas line for the latter because only natural gas was available when the building was being erected. The trial court deemed the important question to be that of whether the contractor had substantially performed. On appeal the court was of the opinion that (230 Pa. 174-175, 79 A. 413, 414) "over and beyond the question of substantial performance is whether the contract was complied with to the satisfaction of the owner. * * * The contract provides that the contractor shall furnish all the materials and perform all the work to the satisfaction of the owner. We have uniformly upheld such contracts and required their observance. Under a contract of that character it is the duty of the contractor to perform to the satisfaction of the owner, and that is the standard by which the sufficiency of the [182] work is to be tested. It is not for the court or the jury to determine whether the work is being done in compliance therewith, but solely for the owner to determine, and with his decision the contractor must comply."

Of course the court limited the owner's dissatisfaction to something not "prompted by caprice or bad faith, or for the purpose of evading payment of the balance due the contractor. If the objections made by the owner are bona fide, and not unreasonable or capricious they must be sustained."

Nothing whatever was said in any way limiting the rule laid down in the former case. Chamberlain v. Parker, 45 N.Y. 569, 572, 573, is also cited. There defendant had failed to drill a well and suit to recover cost of performance promptly followed.

" The pointto be considered," said the court, " is, whether the plaintiff in any sense,actual or legal, has lost by the default of the defendant a sum equal to the expense of digging the well." (Italics supplied).

A verdict for plaintiff for $2700 was reversed on appeal because (45 N.Y. 574)

[286 N.W. 244]

"plaintiff was, upon the proof given, entitled to nominal damages only," and "judgment absolute" was ordered for defendant. Sassen v. Haegle, 125 Minn. 441, 147 N. W. 445, 446, 52 L.R.A.,N.S., 1176, is also much emphasized. The record there is: Defendant had entered into a farm lease under the terms of which he promised and agreed not to "remove any straw or manure from the farm, but spread upon said premises all manure made thereon."

Plaintiff's claim for damages was stated in his complaint to be, "That said manure and the spreading thereof was reasonably worth and of the value of" $93.75, and in that sum sought recovery under his first cause of action. Defendant's answer admitted "that he did haul from said premises during the term of said lease twenty loads of manure. But he alleges that during the time he occupied said premises he hauled upon said premises and fed thereon a large amount of feed raised upon other lands. And that from said feed manure was made to a much greater extent and in amount than was hauled by this defendant from said premises. And that the [183] plaintiff suffered no damage thereby."

The testimony for plaintiff was—

"Q. What was that manure and the spreading of it upon the land reasonably worth? A. About Ninety-three or Ninety-four dollars, I thought the spreading and hauling [to be worth]."

What this court was considering here was necessarily based upon the record before it. There is nothing in the facts in that case upon which plaintiff can build anything at all helpful to his contentions. The futility of quoting from any opinion without reference to the facts upon which it is based is here clearly apparent. Compare Meisch v. Safranski, 147 Minn. 122, 124, 179 N.W. 685, where defendant tenant had failed to fall plow a certain part of the rented farm. The court said: "The damage from the failure to plow was not permanent nor recurrent. The land had a use or rental value for 1919 though not plowed in the fall of 1918. The difference between that value and the value if plowed in 1918 measured plaintiffs' loss. We are accustomed to measure damages by comparing rental value in cases not dissimilar in principle. [Citing cases.] A correct measure of damages results in just compensation. That adopted, properly applied, does."

No one doubts that a party may contract for the doing of anything he may choose to have done (assuming what is to be done is not unlawful) "although the thing to be produced had no marketable value." 45 N.Y. page 572. In 1 Restatement, Contracts, § 346, pp. 576, 577, Illustrations of Subsection (1), par. 4, the same thought is thus stated: "A contracts to construct a monumental fountain in B's yard for $5,000, but abandons the work after the foundation has been laid and $2800 has been paid by B. The contemplated fountain is so ugly that it would decrease the number of possible buyers of the place. The cost of completing the fountain would be $4000. B can get judgment for $1800, the cost of completion less the part of price unpaid." [184] But that is not what plaintiff's predecessor in interest contracted for. Such a provision might well have been made, but the parties did not. They could undoubtedly have provided for liquidated damages for nonperformance (2 Dunnell, Minn.Dig., 2d ed. & Supps., §§ 2536, 2537), or they might have determined in money what the value of performance was considered to be and thereby have contractually provided a measure for failure of performance.

The opinion also suggests that this property lies in an area where the owner might rightly look for future development, being in a so-called industrial zone, and that as such he should be privileged to so hold it. This he may of course do. But let us assume that on May 1, 1934, condemnation to acquire this area had so far progressed as to leave only the question of price (market value) undetermined; that the area had been graded in strict conformity with the contract but that the actual market value of the premises was only $12,160, as found by the court and acquiesced in by plaintiff, what would the measure of his damages be? Obviously, the limit of his recovery could be no more than the then market value of his property. In that sum he has been paid with interest and costs; and he still has the fee title to the premises, something he would not possess if there had been condemnation. In what manner has plaintiff been hurt beyond the damages awarded? As to him "economic waste" is not apparent. Assume that defendant abandoned the entire project without taking a single yard of gravel therefrom but left the premises as they were when the lease was made, could plaintiff recover damages upon the basis

[286 N.W. 245]

here established? The trouble with the prevailing opinion is that here plaintiff's loss is not made the basis for the amount of his recovery but rather what it would cost the defendant. No case has been decided upon that basis until now.

Plaintiff asserts that he knows of no rule "giving a different measure of damages for public contracts and for private contracts in case of nonperformance." It seems to me there is a clear distinction to be drawn with respect to the application of the rule for recoverable damages in case of breach of a public works contract from that applicable to contracts between private parties. The construction of a public building, a sewer, [185] drainage ditch, highway, or other public work, permits of no application of the market value doctrine. There simply is and can be no "market value" as to such. And for this cogent reason there can be but one rule of damages to apply, that of cost of completion of the thing contracted to be done. I think the judgment should be affirmed.

HOLT, Justice.

I join in the foregoing dissent.

HILTON, J., being incapacitated by illness, took no part.

LORING, J., took no part.

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Notes:

1. So also in condemnation cases, where the owner loses nothing of promised contractual performance.

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382 P.2d 109 (1962)

McConnell & Hanson, W.H. McConnell, Oklahoma City, for plaintiffs in error.

Looney, Watts, Looney, Nichols & Johnson, Tom D. Capshaw, Oklahoma City, for defendant in error.

[110] JACKSON, Justice.

In the trial court, plaintiffs Willie and Lucille Peevyhouse sued the defendant, Garland Coal and Mining Company, for damages for breach of contract. Judgment was for plaintiffs in an amount considerably less than was sued for. Plaintiffs appeal and defendant cross-appeals.

In the briefs on appeal, the parties present their argument and contentions under several propositions; however, they all [111] stem from the basic question of whether the trial court properly instructed the jury on the measure of damages.

Briefly stated, the facts are as follows: plaintiffs owned a farm containing coal deposits, and in November, 1954, leased the premises to defendant for a period of five years for coal mining purposes. A "strip-mining" operation was contemplated in which the coal would be taken from pits on the surface of the ground, instead of from underground mine shafts. In addition to the usual covenants found in a coal mining lease, defendant specifically agreed to perform certain restorative and remedial work at the end of the lease period. It is unnecessary to set out the details of the work to be done, other than to say that it would involve the moving of many thousands of cubic yards of dirt, at a cost estimated by expert witnesses at about $29,000.00. However, plaintiffs sued for only $25,000.00.

During the trial, it was stipulated that all covenants and agreements in the lease contract had been fully carried out by both parties, except the remedial work mentioned above; defendant conceded that this work had not been done.

Plaintiffs introduced expert testimony as to the amount and nature of the work to be done, and its estimated cost. Over plaintiffs' objections, defendant thereafter introduced expert testimony as to the "diminution in value" of plaintiffs' farm resulting from the failure of defendant to render performance as agreed in the contract — that is, the difference between the present value of the farm, and what its value would have been if defendant had done what it agreed to do.

At the conclusion of the trial, the court instructed the jury that it must return a verdict for plaintiffs, and left the amount of damages for jury determination. On the measure of damages, the court instructed the jury that it might consider the cost of performance of the work defendant agreed to do, "together with all of the evidence offered on behalf of either party".

It thus appears that the jury was at liberty to consider the "diminution in value" of plaintiffs' farm as well as the cost of "repair work" in determining the amount of damages.

It returned a verdict for plaintiffs for $5000.00 — only a fraction of the "cost of performance", but more than the total value of the farm even after the remedial work is done.

On appeal, the issue is sharply drawn. Plaintiffs contend that the true measure of damages in this case is what it will cost plaintiffs to obtain performance of the work that was not done because of defendant's default. Defendant argues that the measure of damages is the cost of performance "limited, however, to the total difference in the market value before and after the work was performed".

It appears that this precise question has not heretofore been presented to this court. In Ardizonne v. Archer, 72 Okl. 70, 178 P. 263, this court held that the measure of damages for breach of a contract to drill an oil well was the reasonable cost of drilling the well, but here a slightly different factual situation exists. The drilling of an oil well will yield valuable geological information, even if no oil or gas is found, and of course if the well is a producer, the value of the premises increases. In the case before us, it is argued by defendant with some force that the performance of the remedial work defendant agreed to do will add at the most only a few hundred dollars to the value of plaintiffs' farm, and that the damages should be limited to that amount because that is all plaintiffs have lost.

Plaintiffs rely on Groves v. John Wunder Co., 205 Minn. 163, 286 N.W. 235, 123 A.L.R. 502. In that case, the Minnesota court, in a substantially similar situation, adopted the "cost of performance" rule as-opposed to the "value" rule. The result was to authorize a jury to give plaintiff damages in the amount of $60,000, where the real estate concerned would have been worth only $12,160, even if the work contracted for had been done.

[112] It may be observed that Groves v. John Wunder Co., supra, is the only case which has come to our attention in which the cost of performance rule has been followed under circumstances where the cost of performance greatly exceeded the diminution in value resulting from the breach of contract. Incidentally, it appears that this case was decided by a plurality rather than a majority of the members of the court.

Defendant relies principally upon Sandy Valley & E.R. Co., v. Hughes, 175 Ky. 320, 194 S.W. 344; Bigham v. Wabash-Pittsburg Terminal Ry. Co., 223 Pa. 106, 72 A. 318; and Sweeney v. Lewis Const. Co., 66 Wash. 490, 119 P. 1108. These were all cases in which, under similar circumstances, the appellate courts followed the "value" rule instead of the "cost of performance" rule. Plaintiff points out that in the earliest of these cases (Bigham) the court cites as authority on the measure of damages an earlier Pennsylvania tort case, and that the other two cases follow the first, with no explanation as to why a measure of damages ordinarily followed in cases sounding in tort should be used in contract cases. Nevertheless, it is of some significance that three out of four appellate courts have followed the diminution in value rule under circumstances where, as here, the cost of performance greatly exceeds the diminution in value.

The explanation may be found in the fact that the situations presented are artificial ones. It is highly unlikely that the ordinary property owner would agree to pay $29,000 (or its equivalent) for the construction of "improvements" upon his property that would increase its value only about ($300) three hundred dollars. The result is that we are called upon to apply principles of law theoretically based upon reason and reality to a situation which is basically unreasonable and unrealistic.

In Groves v. John Wunder Co., supra, in arriving at its conclusions, the Minnesota court apparently considered the contract involved to be analogous to a building and construction contract, and cited authority for the proposition that the cost of performance or completion of the building as contracted is ordinarily the measure of damages in actions for damages for the breach of such a contract.

In an annotation following the Minnesota case beginning at 123 A.L.R. 515, the annotator places the three cases relied on by defendant (Sandy Valley, Bigham and Sweeney) under the classification of cases involving "grading and excavation contracts".

We do not think either analogy is strictly applicable to the case now before us. The primary purpose of the lease contract between plaintiffs and defendant was neither "building and construction" nor "grading and excavation". It was merely to accomplish the economical recovery and marketing of coal from the premises, to the profit of all parties. The special provisions of the lease contract pertaining to remedial work were incidental to the main object involved.

Even in the case of contracts that are unquestionably building and construction contracts, the authorities are not in agreement as to the factors to be considered in determining whether the cost of performance rule or the value rule should be applied. The American Law Institute's Restatement of the Law, Contracts, Volume 1, Sections 346(1) (a) (i) and (ii) submits the proposition that the cost of performance is the proper measure of damages "if this is possible and does not involve unreasonable economic waste"; and that the diminution in value caused by the breach is the proper measure "if construction and completion in accordance with the contract would involve unreasonable economic waste". (Emphasis supplied.) In an explanatory comment immediately following the text, the Restatement makes it clear that the "economic waste" referred to consists of the destruction of a substantially completed building or other structure. Of course no such destruction is involved in the case now before us.

[113] On the other hand, in McCormick, Damages, Section 168, it is said with regard to building and construction contracts that "* * * in cases where the defect is one that can be repaired or cured without undue expense" the cost of performance is the proper measure of damages, but where "* * * the defect in material or construction is one that cannot be remedied without an expenditure for reconstruction disproportionate to the end to be attained" (emphasis supplied) the value rule should be followed. The same idea was expressed in Jacob & Youngs, Inc. v. Kent, 230 N.Y. 239, 129 N.E. 889, 23 A.L.R. 1429, as follows:

"The owner is entitled to the money which will permit him to complete, unless the cost of completion is grossly and unfairly out of proportion to the good to be attained. When that is true, the measure is the difference in value."

It thus appears that the prime consideration in the Restatement was "economic waste"; and that the prime consideration in McCormick, Damages, and in Jacob & Youngs, Inc. v. Kent, supra, was the relationship between the expense involved and the "end to be attained" — in other words, the "relative economic benefit".

In view of the unrealistic fact situation in the instant case, and certain Oklahoma statutes to be hereinafter noted, we are of the opinion that the "relative economic benefit" is a proper consideration here. This is in accord with the recent case of Mann v. Clowser, 190 Va. 887, 59 S.E.2d 78, where, in applying the cost rule, the Virginia court specifically noted that "* * * the defects are remediable from a practical standpoint and the costs are not grossly disproportionate to the results to be obtained" (Emphasis supplied).

23 O.S. 1961 §§ 96 and 97 provide as follows:

"§ 96. * * * Notwithstanding the provisions of this chapter, no person can recover a greater amount in damages for the breach of an obligation, than he would have gained by the full performance thereof on both sides * * *.

"§ 97. * * * Damages must, in all cases, be reasonable, and where an obligation of any kind appears to create a right to unconscionable and grossly oppressive damages, contrary to substantial justice no more than reasonable damages can be recovered."

Although it is true that the above sections of the statute are applied most often in tort cases, they are by their own terms, and the decisions of this court, also applicable in actions for damages for breach of contract. It would seem that they are peculiarly applicable here where, under the "cost of performance" rule, plaintiffs might recover an amount about nine times the total value of their farm. Such would seem to be "unconscionable and grossly oppressive damages, contrary to substantial justice" within the meaning of the statute. Also, it can hardly be denied that if plaintiffs here are permitted to recover under the "cost of performance" rule, they will receive a greater benefit from the breach than could be gained from full performance, contrary to the provisions of Sec. 96.

An analogy may be drawn between the cited sections, and the provisions of 15 O.S. 1961 §§ 214 and 215. These sections tend to render void any provisions of a contract which attempt to fix the amount of stipulated damages to be paid in case of a breach, except where it is impracticable or extremely difficult to determine the actual damages. This results in spite of the agreement of the parties, and the obvious and well known rationale is that insofar as they exceed the actual damages suffered, the stipulated damages amount to a penalty or forfeiture which the law does not favor.

23 O.S. 1961 §§ 96 and 97 have the same effect in the case now before us. In spite of the agreement of the parties, these sections limit the damages recoverable to a reasonable amount not "contrary to substantial justice"; they prevent plaintiffs from recovering a "greater amount in damages for the breach of an obligation" than [114] they would have "gained by the full performance thereof".

We therefore hold that where, in a coal mining lease, lessee agrees to perform certain remedial work on the premises concerned at the end of the lease period, and thereafter the contract is fully performed by both parties except that the remedial work is not done, the measure of damages in an action by lessor against lessee for damages for breach of contract is ordinarily the reasonable cost of performance of the work; however, where the contract provision breached was merely incidental to the main purpose in view, and where the economic benefit which would result to lessor by full performance of the work is grossly disproportionate to the cost of performance, the damages which lessor may recover are limited to the diminution in value resulting to the premises because of the non-performance.

We believe the above holding is in conformity with the intention of the Legislature as expressed in the statutes mentioned, and in harmony with the better-reasoned cases from the other jurisdictions where analogous fact situations have been considered. It should be noted that the rule as stated does not interfere with the property owner's right to "do what he will with his own" Chamberlain v. Parker, 45 N.Y. 569), or his right, if he chooses, to contract for "improvements" which will actually have the effect of reducing his property's value. Where such result is in fact contemplated by the parties, and is a main or principal purpose of those contracting, it would seem that the measure of damages for breach would ordinarily be the cost of performance.

The above holding disposes of all of the arguments raised by the parties on appeal.

Under the most liberal view of the evidence herein, the diminution in value resulting to the premises because of non-performance of the remedial work was $300.00. After a careful search of the record, we have found no evidence of a higher figure, and plaintiffs do not argue in their briefs that a greater diminution in value was sustained. It thus appears that the judgment was clearly excessive, and that the amount for which judgment should have been rendered is definitely and satisfactorily shown by the record.

We are asked by each party to modify the judgment in accordance with the respective theories advanced, and it is conceded that we have authority to do so. 12 O.S. 1961 § 952; Busboom v. Smith, 199 Okl. 688, 191 P.2d 198; Stumpf v. Stumpf, 173 Okl. 1, 46 P.2d 315.

We are of the opinion that the judgment of the trial court for plaintiffs should be, and it is hereby, modified and reduced to the sum of $300.00, and as so modified it is affirmed.

WELCH, DAVISON, HALLEY, and JOHNSON, JJ., concur.

WILLIAMS, C.J., BLACKBIRD, V.C.J., and IRWIN and BERRY, JJ., dissent.

IRWIN, Justice (dissenting).

By the specific provisions in the coal mining lease under consideration, the defendant agreed as follows:

"* * * "7b Lessee agrees to make fills in the pits dug on said premises on the property line in such manner that fences can be placed thereon and access had to opposite sides of the pits.

"c Lessee agrees to smooth off the top of the spoil banks on the above premises.

"7d Lessee agrees to leave the creek crossing the above premises in such a condition that it will not interfere with the crossings to be made in pits as set out in 7b.

* * * * * *

"7f Lessee further agrees to leave no shale or dirt on the high wall of said pits. * * *"

[115] Following the expiration of the lease, plaintiffs made demand upon defendant that it carry out the provisions of the contract and to perform those covenants contained therein.

Defendant admits that it failed to perform its obligations that it agreed and contract to perform under the lease contract and there is nothing in the record which indicates that defendant could not perform its obligations. Therefore, in my opinion defendant's breach of the contract was wilful and not in good faith.

Although the contract speaks for itself, there were several negotiations between the plaintiffs and defendant before the contract was executed. Defendant admitted in the trial of the action, that plaintiffs insisted that the above provisions be included in the contract and that they would not agree to the coal mining lease unless the above provisions were included.

In consideration for the lease contract, plaintiffs were to receive a certain amount as royalty for the coal produced and marketed and in addition thereto their land was to be restored as provided in the contract.

Defendant received as consideration for the contract, its proportionate share of the coal produced and marketed and in addition thereto, the right to use plaintiffs' land in the furtherance of its mining operations.

The cost for performing the contract in question could have been reasonably approximated when the contract was negotiated and executed and there are no conditions now existing which could not have been reasonably anticipated by the parties. Therefore, defendant had knowledge, when it prevailed upon the plaintiffs to execute the lease, that the cost of performance might be disproportionate to the value or benefits received by plaintiff for the performance.

Defendant has received its benefits under the contract and now urges, in substance, that plaintiffs' measure of damages for its failure to perform should be the economic value of performance to the plaintiffs and not the cost of performance.

If a peculiar set of facts should exist where the above rule should be applied as the proper measure of damages, (and in my judgment those facts do not exist in the instant case) before such rule should be applied, consideration should be given to the benefits received or contracted for by the party who asserts the application of the rule.

Defendant did not have the right to mine plaintiffs' coal or to use plaintiffs' property for its mining operations without the consent of plaintiffs. Defendant had knowledge of the benefits that it would receive under the contract and the approximate cost of performing the contract. With this knowledge, it must be presumed that defendant thought that it would be to its economic advantage to enter into the contract with plaintiffs and that it would reap benefits from the contract, or it would have not entered into the contract.

Therefore, if the value of the performance of a contract should be considered in determining the measure of damages for breach of a contract, the value of the benefits received under the contract by a party who breaches a contract should also be considered. However, in my judgment, to give consideration to either in the instant action, completely rescinds and holds for naught the solemnity of the contract before us and makes an entirely new contract for the parties.

In Goble v. Bell Oil & Gas Co., 97 Okl. 261, 223 P. 371, we held:

"Even though the contract contains harsh and burdensome terms which the court does not in all respects approve, it is the province of the parties in relation to lawful subject matter to fix their rights and obligations, and the court will give the contract effect according to its expressed provisions, unless it be shown by competent evidence proof that the written agreement as executed is the result of fraud, mistake, or accident."

[116] In Cities Services Oil Co. v. Geolograph Co. Inc., 208 Okl. 179, 254 P.2d 775, we said:

"While we do not agree that the contract as presently written is an onerous one, we think the short answer is that the folly or wisdom of a contract is not for the court to pass on."

In Great Western Oil & Gas Company v. Mitchell, Okl., 326 P.2d 794, we held:

"The law will not make a better contract for parties than they themselves have seen fit to enter into, or alter it for the benefit of one party and to the detriment of the others; the judicial function of a court of law is to enforce a contract as it is written."

I am mindful of Title 23 O.S. 1961 § 96, which provides that no person can recover a greater amount in damages for the breach of an obligation than he could have gained by the full performance thereof on both sides, except in cases not applicable herein. However, in my judgment, the above statutory provision is not applicable here.

In my judgment, we should follow the case of Groves v. John Wunder Company, 205 Minn. 163, 286 N.W. 235, 123 A.L.R. 502, which defendant agrees "that the fact situation is apparently similar to the one in the case at bar", and where the Supreme Court of Minnesota held:

"The owner's or employer's damages for such a breach (i.e. breach hypothesized in 2d syllabus) are to be measured, not in respect to the value of the land to be improved, but by the reasonable cost of doing that which the contractor promised to do and which he left undone."

The hypothesized breach referred to states that where the contractor's breach of a contract is wilful, that is, in bad faith, he is not entitled to any benefit of the equitable doctrine of substantial performance.

In the instant action defendant has made no attempt to even substantially perform. The contract in question is not immoral, is not tainted with fraud, and was not entered into through mistake or accident and is not contrary to public policy. It is clear and unambiguous and the parties understood the terms thereof, and the approximate cost of fulfilling the obligations could have been approximately ascertained. There are no conditions existing now which could not have been reasonably anticipated when the contract was negotiated and executed. The defendant could have performed the contract if it desired. It has accepted and reaped the benefits of its contract and now urges that plaintiff's benefits under the contract be denied. If plaintiffs' benefits are denied, such benefits would inure to the direct benefit of the defendant.

Therefore, in my opinion, the plaintiffs were entitled to specific performance of the contract and since defendant has failed to perform, the proper measure of damages should be the cost of performance. Any other measure of damage would be holding for naught the express provisions of the contract; would be taking from the plaintiff the benefits of the contract and placing those benefits in defendant which has failed to perform its obligations; would be granting benefits to defendant without a resulting obligation; and would be completely rescinding the solemn obligation of the contract for the benefit of the defendant to the detriment of the plaintiffs by making an entirely new contract for the parties.

I therefore respectfully dissent to the opinion promulgated by a majority of my associates.

SUPPLEMENTAL OPINION ON REHEARING

JACKSON, Justice.

In a Petition for Rehearing, plaintiffs Peevyhouse have raised certain questions not presented in the original briefs on appeal.

[117] They insist that the trial court excluded evidence as to the total value of the premises concerned, and, in effect, that they have not had their "day in court". This argument arises by reason of the fact that their farm consists not merely of the 60 acres covered by the coal mining lease, but includes other lands as well.

Plaintiffs originally pleaded two causes of action against the defendant mining company. The first one was for damages for breach of contract; the second one was for damages to the water well and home of plaintiffs, because of the use of excessively large charges of dynamite or blasting powder in close proximity to the home and well.

Numbered paragraph 2 of plaintiffs' petition alleges that they own and live upon 60 acres of land which are specifically described. This is the only land described in the petition, and there is no allegation as to the ownership or leasing of any other lands.

Page 4 of the transcript of evidence reveals that near the beginning of the trial, plaintiff Peevyhouse was asked a question concerning improvements he had made to his property. His answer was "For one thing I built a new home on the place in 1951, and along about that time I was building a pasture. And I would say ninety percent of this 120 acres is in good grass." (Emphasis supplied.) Mr. Watts, defense counsel, then objected "to any testimony about the property, other than the 160 acres". (It is obvious that he means "60" instead of "160".) Further proceedings were as follows:

"The Court: The objection will be sustained as to any other part. Go ahead.

"Mr. McCornell (attorney for plaintiffs): Comes now the plaintiff and dismisses the second cause of action without prejudice."

It thus appears that plaintiffs made no complaint as to the court's exclusion of evidence concerning lands other than the 60 acres described in their petition.

Pages 7 and 8 of the transcript show that later during direct examination of Mr. Peevyhouse, the following occurred:

"Q. (By Mr. McConnell) Now, Mr. Peevyhouse, I ask you to step down here and I ask you if you are familiar with this sketch or drawing?

* * * * * *

"A. Yes. I've got about 40 acres here, and here would be 20, and there would be 20 on this sketch. And I've got leased land lying in here, 80 acres.

"Mr. Watts: If your Honor please, I object to anything except the 60 acres involved in this lawsuit.

"The Court: Sustained.

"Q. (By Mr. McConnell) Will you point out to the jury, the boundary line shown of your property?

* * * * * *

"A. That blue is where the water is actually standing at the present time. Up until a short time ago this area here came over that far. And this spring all of it would run, come in here out this way and through here, spreading over this land and all below it. And at the present time this is washed out here.

"Mr. Watts: If your Honor please, I object to that as not the proper measure of damages.

"The Court: The objection will be sustained."

This testimony of Mr. Peevyhouse is difficult for us to follow, even with the exhibits in the case before us. However, no complaint was made by plaintiffs, or any suggestion that the court was in error in excluding this testimony.

The defendant offered the testimony of five witnesses in the trial court; four of them testified as to "diminution in value". They were not cross examined by plaintiffs.

In their motion for new trial, plaintiffs did not complain that they had been prevented from offering evidence as to the diminution in value of their lands; on the [118] contrary, they affirmatively complained of the trial court's action in admitting evidence of the defendant on that point.

In the original brief of plaintiffs in error (Peevyhouse) filed in this court there appears the following language at page 4:

"* * * Near the outset of the trial plaintiffs dismissed their second cause of action without prejudice: further, it was stipulated * * *. It was further stipulated that the only issue remaining in the lawsuit was the proof and measure of damages to which plaintiffs were entitled * * *." (Emphasis supplied.)

In the answer brief of Garland Coal & Mining Co., at page 3, there appears the following language:

"Defendant offered evidence that the total value of the property involved before the mining operation would be $60.00 per acre, and $11.00 per acre after the mining operation (60 acres at $49.00 per acre is $2940.00). Other evidence was that the property was worth $5.00 to $15.00 per acre after the mining, but before the repairs; and would be worth an increase of $2.00 to $5.00 per acre after the repairs had been made (60 acres at $5.00 per acre is $300.00) (Tr. 96-97, 135, 137-138, 138-141, 143-145, 156, 158)."

At page 18 of the same brief there is another statement to the effect that the "amount of diminution in value of the land" was $300.00.

About two months after the answer brief was filed in this court, plaintiffs filed a reply brief. The reply brief makes no reference at all to the language of the answer brief above quoted and does not deny that the diminution in value shown by the record amounts to $300.00. On the contrary, it contains the following language at page 5:

"* * * Plaintiffs in error pointed out in their initial brief that this evidence concerning land values was objectionable as being incompetent and refused to cross-examine or offer rebuttal for the reason that they did not choose to waive their objections to the competency of the evidence by disproving defendant in error's allegations as to land values. We strongly urged at the trial below, and still do, that market value of the land has no application * * *."

Our extended reference to the pleadings, testimony and prior briefs in this case has not been solely for the purpose of showing that plaintiffs failed to complain of the court's rulings. Our purpose, rather, has been to demonstrate the plan and theory upon which plaintiffs tried their case below, and upon which they argued it in the prior briefs on appeal.

The whole record in this case justifies the conclusion that plaintiffs tried their case upon the theory that the "cost of performance" would be the sole measure of damages and that they would recognize no other. In view of the whole record in this case and the original briefs on appeal, we conclude that they so tried it with notice that defendant would contend for the "diminution [119] in value" rule. The testimony to which they specifically refer in the petition for rehearing shows that the trial court properly excluded defendant's evidence concerning lands other than the 60 acres described in the petition because such evidence was not within the scope of the pleadings. At no time did plaintiffs ask permission to amend their petition, either with or without prejudice to trial, so as to describe all of the lands they own or lease, and no evidence was admitted which could broaden the scope of the petition.

Plaintiffs' petition described 60 acres of land only; plaintiffs offered no evidence on the question of "diminution in value" and objected to similar evidence offered by the defendant; their motion for new trial contained no allegation that they had been prevented from offering evidence on this question; in their reply brief they did not controvert the allegation in defendant's answer brief that the record showed a "diminution in value" of only $300.00; and in view of the stipulation they admittedly made in the trial court, their statement in petition for rehearing that the court's instructions on the measure of damages came as a "complete surprise" and "did not afford them the opportunity to prepare and introduce evidence under the `diminution in value' rule" is not supported by the record.

We think plaintiffs' present position is that of a plaintiff in any damage suit who has failed to prove his damages — opposed by a defendant who has proved plaintiff's damages; and that plaintiffs' complaint that the record does not show the total "diminution in value" to their lands comes too late. It is well settled that a party will not be permitted to change his theory of the case upon appeal. Knox v. Eason Oil Co., 190 Okl. 627, 126 P.2d 247.

Also, plaintiffs' expressed fear that by introducing evidence on the question of "diminution in value" they would have waived their objection to similar evidence by defendant was not justified. Vogel v. Fisher et al., 203 Okl. 657, 225 P.2d 346; 53 Am.Jur. Trial, Sec. 144.

It is suggested in a brief of amici curiae that our decision in this case has resulted in an impairment of the obligation of the contract of the parties, in violation of Article 1, Section 10, of the Constitution of the United States, and in that connection the only case cited is Sturges v. Crowninshield, 4 Wheat 122, 17 U.S. 1229, 4 L.Ed. 529 (1819). In their brief, amici curiae quote language from the Lawyer's Edition notes of Mr. Stephen K. Williams, in which he summarized the "points and authorities" of one of the counsel appearing before the U.S. Supreme Court.

Sturges v. Crowninshield was an early case in which the Supreme Court considered the power of a statute to enact bankruptcy laws, and the extent, if any, to which such power is limited by Article 1, Section 10 of the Constitution. The contracts concerned consisted of promissory notes executed in March, 1811, and the bankruptcy law under which the promisor claimed a discharge was not enacted until April 3, 1811. In a memorable opinion written by Chief Justice Marshall, the court held that insofar as the bankruptcy law purported to discharge the obligations of contracts executed before its enactment, it was unconstitutional and void.

The same situation does not exist here. 23 O.S. 1961 §§ 96 and 97, cited in our original opinion, were a part of the Revised Laws of 1910 (R.L. 1910) Sections 2889 and 2890) and have been in force in this state, in unchanged form, since that codification was adopted by the legislature in 1911. The lease contract concerned in the case now before us was not executed until 1954.

Nor do we agree that our decision itself (as opposed to the statutes cited therein as controlling) impairs the obligations of the contract concerned. It may be conceded that at one time there was respectable authority for the proposition that the "contract" clause was violated by a judicial decision which overruled prior decisions, upon the strength of which contract rights had been acquired. In this connection, it should be noted that our decision overrules no prior holdings of this court upon which the contracting parties could be said to have relied. Even if it did,

"* * * it is now definitely and authoritatively settled that such prohibition in federal and state constitutions relate to legislative action and not to judicial decisions. Thus, they do not apply to the decision of a state court, where such decision does not expressly, or by necessary implication, give effect to a subsequent law of the state whereby the obligation of the contract is impaired. * * *" 16 C.J.S. Constitutional Law § 280.

To the same effect, see 12 Am.Jur. Constitutional Law, Sec. 398.

Our decision herein overrules no prior holdings of this court, and it does not give effect to a subsequent law of this state. It therefore cannot be said to impair the [120] obligations of the contract of the parties here concerned.

The petition for rehearing is denied.

HALLEY, V.C.J., and WELCH, DAVISON and JOHNSON, JJ., concur.

BLACKBIRD, C.J., and WILLIAMS, IRWIN and BERRY, JJ., dissent.

141 Ky. 718, 133 S.W. 784 (1911)

Acme Mills & Elevator Co
v.
J. C. Johnson.

Appeal from Circuit Court of Christian County, Kentucky.
(Decided January 24, 1911.)

[141 Ky. 718] [133 S.W. 784] Personal Property—Contract for Sale—Breach—Measure of Damages.—Where the vendor of personal property fails to comply with his contract the measure of damages in an action for breach of the contract is the difference between the contract price and the market price at the time and place of delivery. The fact that the vendor disposes of the property before the time fixed for delivery does not alter the rule.

DOWNER & RUSSELL, and JOE McCARROLL, fox appellant.  

C. H. BUSH, for appellee. 

OPINION OF THE COURT BY WM. ROGERS CLAY, COMMISSIONER—Affirming.

[141 Ky. 719] On April 26th, 1909, appellee J. C. Johnson executed and delivered to appellant Acme Mills & Elevator Company the following contract:

April 26th, 1909.

"I have this day sold to Ernest W. Steger, for Acme Mills & Elevator Company, 2,000 bushels No. 2 merchantable wheat, mill scale to apply, sacks to be furnished, to be paid for on delivery at Hopkinsville, Kentucky, at $1.03 per bushel, to be delivered from thresher 1909."

Appellee failed to deliver the wheat at the time agreed upon, and appellant brought this action to recover damages in the sum of $240 [133 S.W. 785] and for the further sum of $80, being the value of 1,000 sacks which appellant had furnished to appellee for his use in delivering the wheat. Appellee admitted the execution and breach of the contract, but denied that appellant was damaged. He further pleaded that he threshed his wheat after the 25th of July; that this was the time fixed for delivery, and wheat was then worth only about 97% cents per bushel. He also pleaded that, at the time fixed for the delivery of the wheat, appellant had suspended business, was unable to comply with its contract, and had no money to pay for the wheat. In another paragraph he admitted his indebtedness for the item of $80 covering the sacks furnished him by appellant, and offered to confess judgment for that amount. The allegations of the answer were denied by reply. Subsequently appellant tendered and offered to file an amended reply, wherein it pleaded that on the 13th day of July, 1909, appellee, of his own wrong and without right or legal authority or the consent of appellant, sold his wheat to the Liberty Mills at Nashville, Tennessee, at the price of $1.16 per bushel, and that by reason of this fact he was estopped to plead in his answer that his wheat was not threshed until after the 25th of July, 1909, or that the market price for said wheat at the date of said threshing did not exceed $1 per bushel. The court declined to permit this amended reply to be filed, but entered an order making it a part of the record. The trial resulted in a verdict for appellant in the sum of $80 for the sacks, whereupon judgment was entered against appellee for $80 and costs. From that judgment this appeal is prosecuted.

The evidence for appellee is to the effect that he did not begin threshing his wheat until after the 25th of July, 1909; he completed his threshing about the 29th of the same month. This fact is established by [141 Ky. 720] appellee and his brother and the testimony of two or three other witnesses who passed appellee's field while he was engaged in the work of threshing. There is no evidence to the contrary. At the time he finished threshing, wheat of the kind which he had contracted to sell appellant was not worth over $1 per bushel. This fact is established by the evidence of several witnesses, and there is practically no evidence to the contrary. Appellee attempted to justify his conduct in breaching the contract by certain rumors to the effect that appellant had suspended business and was unable to pay for the wheat. While there may have been rumors to this effect, the evidence fails to establish the fact that appellant had suspended business. About the 14th or 15th of July, appellee sold his wheat to the Liberty Mills at Nashville for $1.16 per bushel. On the 24th of July the price of wheat began to fall, until it reached about $1 per bushel on the 29th.

The evidence of appellant and its witnesses is devoted, chiefly, to establishing the fact that appellant did not suspend business and was fully able to pay for the wheat contracted for. While their evidence tends to show that the price of wheat, from the 14th or 15th of July to the 24th, was far in excess of the contract price, they practically admit that wheat was not worth more than a dollar per bushel at the time appellee claims he finished threshing.

One of the errors relied upon is the failure of the court to permit appellant's amended reply to be filed, wherein it attempted to plead that appellee was estopped by his conduct, in selling the wheat, from claiming that he threshed it at a later date, or that appellant was not damaged by reason of the breach of the contract. In this connection it is insisted that appellee had no right to violate his contract by selling the wheat to another at a price far in excess of the contract price, using for that purpose the sacks appellant had furnished, and then claim that as a matter of fact he had not threshed the wheat until a later date, and at that time the market price of wheat was below the contract price.

In contracts for the delivery of personal property at a fixed time and at a designated place, the vendee is entitled to damages against the vendor for a failure to comply, and the measure of damages is the difference between the contract price and the market price of the property at the place and time of delivery. (Miles v. Miller, 12 Bush, 134). This principle of law is so well [141 Ky. 721] settled, not only in this State, but in all the courts of this country, that it is no longer open to discussion. There is no reason why this rule should not apply to the facts of this case. The evidence clearly established the fact that the threshing was not completed until about the 29th of July. There is nothing in the evidence tending to show that appellee fraudulently delayed the threshing of the wheat for the purpose of permitting the market price of the wheat to go down. Indeed, all the circumstances pointed to an advance rather than a decline in the price, and appellee had no reason to anticipate that the market would decline. As he finished threshing on the 29th of July, and the wheat was to be delivered from the thresher, and appellant was not to accept and pay for the wheat until the time fixed for the delivery, that is the time which determines whether or not appellant was damaged. If appellee had sold his wheat on July 14th or 15th, at $1.16, and the price on July 29th was $1.50 per bushel, appellant would not be contending that the measure of his damages was the difference between the contract price and the price appellee received for it on July 14th or 15th, but would insist that he was entitled to the difference between the contract price and $1.50 per bushel. Besides, appellee was not required by his contract, to deliver to appellant any particular wheat. Had he delivered other wheat of like quantity and quality [133 S.W. 786] he would have complied with the contract. When he sold his wheat on July 14th or 15th, for a price in excess of the contract price, and, therefore, failed to deliver to appellant wheat of the quantity and quality contracted for, he took the chances of being mulcted in damages for the breach of the contract. Estoppel can only be invoked where a party by his conduct has led another to act to his prejudice. There is nothing in the facts of this case to justify the application of that doctrine.

But it is insisted that the court improperly placed the burden of proof upon the appellee, and thereby gave him the closing argument, and improperly admitted and rejected certain evidence. The ruling of the court with reference to the burden of proof was improper, for, notwithstanding the fact that appellee admitted the execution and breach of the contract, yet it was still incumbent upon appellant to prove that it had been damaged. But the question still remains: Was the action of the court prejudicial? As stated before, the evidence overwhelmingly established the fact—indeed, it is practically admitted—that the market price of wheat of the kind and [141 Ky. 722] quality contracted to be delivered at the time and place designated in the contract did not exceed $1 per bushel. That being true, appellant, instead of being damaged by the breach of the contract, was actually benefited to the extent of about three cents per bushel. Had the jury upon this state of facts found anything for the appellant, it would have been the duty of this court to reverse the judgment because the verdict was flagrantly against the evidence.

The evidence which it is claimed was improperly admitted and rejected concerned only certain immaterial issues; it had no bearing upon the market price of wheat at the time and place fixed for delivery. We deem it unnecessary to pass upon the propriety of the court's action in regard to such evidence, for the reason that if he erred in the respects complained of, such error could not have prejudiced the substantial rights of appellant.

Judgment affirmed.

Present: HENNESSEY, C.J., QUIRICO, BRAUCHER, WILKINS, & ABRAMS, JJ.

John D. Hodges, Jr., for the defendant.

Charles F. Foster (Jeremiah F. Murphy with him) for the plaintiffs.

BRAUCHER, J.

After the execution of a purchase and sale agreement and before the conveyance of the real estate, the vendor removed loam, gravel, trees and shrubs. The purchasers sought and were awarded damages including [689] the fair market value of the gravel, and we hold that such an award is proper in an action for breach of contract. But the value of the gravel should not have included the value of the defendant's efforts in removing the gravel and loading it on trucks. We therefore remand the case for redetermination of the amount of damages.

The plaintiffs purchased a parcel of real estate and a single family dwelling from the defendant. The purchase and sale agreement was executed on March 8, 1971, and the deed was delivered on September 21, 1971. The plaintiffs sued for specific performance and damages, the case was referred to a master, the master's report was adopted, and judgment was entered that the plaintiffs recover $6,480 damages, plus interest.

The defendant appealed, and the Appeals Court reversed the judgment and remanded the case to the Superior Court for a redetermination of the damages. 4 Mass. App. Ct. 869 (1976): "As the plaintiffs were not in or entitled to possession of the premises during the period when the gravel was removed therefrom by the defendant, they are not entitled to the value of the gravel removed on the theory of conversion which was employed by the master in determining damages. [Citations omitted]. The plaintiffs are entitled (as alleged and prayed for in their bill) to the diminution in the value of the land which was caused by the defendant's stripping and appropriation of such of the trees, gravel and loam as did not have to be removed in order to construct the house and its septic system. [Citations omitted.]" We allowed the plaintiffs' application for further appellate review. The sole issue argued to us is the appropriate measure of damages.

We summarize the master's findings of fact. The plaintiffs first viewed the property about March 1, 1971, and found a well-wooded lot with a building under construction. About April 11, 1971, after the execution of the purchase and sale agreement, one of the plaintiffs found that many trees had been uprooted and toppled on one side of the house, and he ordered the president of the defendant company to desist. The defendant continued [690] to bulldoze the trees on the premises and removed the majority of standing trees. From May 2 to July 30, 1971, the defendant removed about 3,600 cubic yards of gravel from the property in 360 truckloads with an average fair market value of $18, for a total of $6,480. The removal of standing trees, gravel and loam was expressly disapproved by the plaintiffs except as necessitated during the construction of the house and septic system. The purchase price of $26,900 was paid when title passed on September 21, 1971, and did not reflect the diminution in value as a result of the conversion of gravel, loam and trees.

1. The nature of the claim. The master concluded that the plaintiffs were the "equitable owners" of the property after the signing of the purchase and sale agreement on March 8, 1971, and that the defendant "unlawfully converted" the gravel, loam and trees "for its own enrichment and use." The defendant argues, as the Appeals Court held, that the master measured damages on a theory of "conversion," and that a person who does not have possession or a right to immediate possession of converted property has no right of action for conversion.

There is some support in our cases for that argument, but those cases seem to be influenced by the form of the action more than by the substantive rights of the parties. See, e.g., Greve v. Wood-Harmon Co., 173 Mass. 45, 47 (1899). In a proper form of action, it seems to have been sufficient that the plaintiff had a property interest in the converted property, whether or not he had a possessory right. Gooding v. Shea, 103 Mass. 360, 362-363 (1869) (action by third mortgagee). We are now largely emancipated from the forms of action, and we are not bound by precedents as to the scope of trespass quare clausum fregit or of trover. We should uphold tort recovery if it would have been proper in an action of trespass on the case or in a suit in equity.

In many States the purchaser is treated as the equitable owner of real estate from the date of the purchase and sale agreement; the rents and profits belong to him and the losses fall on him. See Beal v. Attleborough Sav. Bank, [691] 248 Mass. 342, 344 (1924), and cases cited; 3 American Law of Property §§ 11.22, 11.30 (A.J. Casner ed. 1952). In such States the vendor is responsible to the purchaser for injury if he commits waste. Worrall v. Munn, 53 N.Y. 185, 190-191 (1873). Cf. Walker v. Dibble, 241 Ark. 692, 696 (1966). See 3 American Law of Property § 11.32 (A.J. Casner ed. 1952); 5 R. Powell, Real Property par. 649 (P. Rohan ed. 1976).

We have taken a different view. When a purchase and sale agreement has been executed, the vendor holds the legal title to the property "subject to an equitable obligation to convey" it to the purchaser "on payment of the purchase money." Barrell v. Britton, 244 Mass. 273, 278-279 (1923). Kares v. Covell, 180 Mass. 206, 209 (1902). Until the deed is delivered the vendor bears all the risks of ownership should the property be destroyed. Libman v. Levenson, 236 Mass. 221, 222-224 (1920), and cases cited. He also has the exclusive right to possession of the property and the right to rents and profits. Beal v. Attleborough Sav. Bank, 248 Mass. 342, 345 (1924). Thus the rights of the purchaser are contract rights rather than rights of ownership of real property.

Here the purchasers saw a well-wooded lot. Their agreement provides that "walks, and hardy shrubs attached to or used with the property are included in this sale." They did not consent to the destruction of the trees, and the excavation removal of the standing trees, gravel and loam was done with their express disapproval except as necessary to construction. It is not now disputed that there was a breach of duty by the vendor. We think the case must be decided, not as a tort action for injury to or conversion of property, but as a claim for a deliberate and wilful breach of contract.

2. Damages. The basic principle of contract damages is that the aggrieved party should be put in as good a position as if the other party had fully performed. See 5 A. Corbin, Contracts § 992 (1964). Cf. G.L.c. 106, § 1-106 (1). The plaintiffs do not claim that they are entitled to recover the cost of restoring the premises to [692] the condition they should have been in. Cf. Crystal Concrete Corp. v. Braintree, 309 Mass. 463, 469-471 (1941) (breach by lessee); Cavanagh v. Durgin, 156 Mass. 466, 470 (1892) (trespass); Groves v. John Wunder Co., 205 Minn. 163, 170-171 (1939) (grading contract); Jacob & Youngs, Inc. v. Kent, 230 N.Y. 239, 242-245 (1921) (construction contract). Nor do they claim a right to the net proceeds of wrongful sales of gravel made by the defendant, since no such claim was made. See Arizona Commercial Mining Co. v. Iron Cap Copper Co., 236 Mass. 185, 190 (1920) (conversion of gravel). Cf. Timko v. Useful Homes Corp., 114 N.J. Eq. 433, 434 (1933) (land contract). See Rock-Ola Mfg. Corp. v. Music & Television Corp., 339 Mass. 416, 423-425 (1959) (bailment).

In similar factual situations involving a tortious conversion of property, we have held that the diminution in the value of the premises is a proper measure of damages; alternatively, at the owner's election, we have upheld the award of the fair market value of the material removed by the defendant. Lawrence v. O'Neill, 317 Mass. 393, 396-397 (1944) (cutting of trees), and cases cited. Gallagher v. R.E. Cunniff, Inc., 314 Mass. 7, 9-10 (1943) (conversion of gravel), and cases cited. In Crystal Concrete Corp. v. Braintree, 309 Mass. 463, 471 (1941), we upheld a like award in a suit in equity for breach of the terms of a lease. In eminent domain cases, however, where the owner of the land sought to prove the value of sand and gravel in place as an element of the value of the land taken, we have held that the evidence could be excluded in the judge's discretion as confusing and speculative. Consolini v. Commonwealth, 346 Mass. 501, 502 (1963), and cases cited. Cf. H.E. Fletcher Co. v. Commonwealth, 350 Mass. 316, 323-324 (1966) (granite).

Here the gravel was actually removed, and proof of its value is not confusing or speculative. Particularly where the defendant's breach is deliberate and wilful, we think damages limited to diminution in value of the premises may sometimes be seriously inadequate. "Cutting a few trees on a timber tract, or taking a few hundred tons of [693] coal from a mine, might not diminish the market value of the tract, or of the mine, and yet the value of the wood or coal, severed from the soil, might be considerable. The wrongdoer would, in the cases instanced, be held to pay the value of the wood and coal, and he could not shield himself by showing that the property from which it was taken was, as a whole, worth as much as it was before." Worrall v. Munn, 53 N.Y. 185, 190 (1873). This reasoning does not depend for its soundness on the holding of a property interest, as distinguished from a contractual interest, by the plaintiffs. Nor is it punitive; it merely deprives the defendant of a profit wrongfully made, a profit which the plaintiff was entitled to make.

Whatever the rule in a tort action, however, we think that the measure of damages in a contract action should not include the value added by defendant's labor in severing the gravel and loading it on trucks. In Gilmore v. Wilbur, 12 Pick. 120, 122 (1831), the defendants wrongfully cut the plaintiffs' wood, converted it into charcoal, and sold it, and the plaintiffs were apparently allowed to recover the proceeds without deduction for the wrongdoers' expenses; but the point was not considered by the full court. In Handforth v. Maynard, 154 Mass. 414, 417 (1891), damages for the destruction of ice on a pond were measured by the market "value of the ice harvested and deposited upon the shore of the pond, less the expense of so harvesting and depositing it." In Rockwood v. Robinson, 159 Mass. 406, 407 (1893), the court approved recovery of damages for removal of gravel, sand and other materials measured by "the price commonly paid for such materials, as they lie in the land." Cf. Crystal Concrete Corp. v. Braintree, supra at 464 (value of gravel "in the bank").

Since the master determined the value of the gravel loaded on trucks rather than its value as it lay in the land, we remand the case to the Superior Court for determination of damages consistent with this opinion.

So ordered.

Page 904

Page 905

        Joel Z. Eigerman, Boston, for plaintiff.

        Paul V. Power, Boston (Joseph P. Rooney, Boston, with him), for Reliance Ins. Co.

        Before TAURO, C.J., and REARDON, QUIRICO, BRAUCHER and HENNESSEY, JJ.

        QUIRICO, Justice.

        This is an action of contract in which Louise Caroline Nursing Home, Inc. (Nursing Home) seeks damages from Dix Construction Corp. (Dix) for breach of a contract to build a nursing home, and from Reliance Insurance Company (Reliance), for its default on a surety bond guaranteeing performance by Dix. Dix filed no answer, was defaulted, and did not participate in [362 Mass. 307] the litigation. Reliance filed an answer and defended in its own behalf. ¹

        The case was referred to an auditor for hearing pursuant to a stipulation of the parties that his findings of fact would be final. ² After hearing the parties, the auditor filed a report in which he found generally: (1) that the Nursing Home had fulfilled all of its contractual obligations to Dix; (2) that Dix had committed a breach of its contractual obligations to the Nursing Home by failing, without justification, to complete the contract within the time agreed; and (3) that Reliance committed a breach of its obligations as surety by failing to take any action when Dix defaulted. However, he further found that the Nursing Home 'suffered no compensable damages as a result of the breach by Dix . . . and the breach by Reliance . . . in that the cost to complete the nursing home . . . was within the contract

Page 906

        The Nursing Home filed a number of objections to the auditor's report and requested, pursuant to Rule 90 of the Superior Court (1954), that the auditor file a brief summary of the evidence relating to each such objection. After the auditor filed such a summary, the Nursing Home filed a motion to recommit the case to the auditor for correction of alleged errors. Reliance filed a cross motion asking (a) that the Nursing Home's objections [362 Mass. 308] to the report be overruled and (b) that judgment be entered in its favor on the report. The judge denied the motion of the Nursing Home and allowed that of Reliance. The case is before us on the Nursing Home's exceptions to those rulings which in turn involve its objections to the auditor's report.

        1. The Nursing Home objected to the auditor's failure to grant four of its requests for findings. Although we could properly refuse to consider this objection because it was not argued in the Nursing Home's brief, it is sufficient to say that requests to an auditor to make findings of fact have no standing, without more, as the basis for objections, although they may be part of the foundation for a motion to recommit. Greenhood v. Richardson, 226 Mass. 208, 209--210, 115 N.E. 296, and cases cited. Staples Coal Co. v. Ucello, 333 Mass. 464, 466, 131 N.E.2d 763.

        2. The Nursing Home objects to the auditor's action in striking the testimony of one Goggin offered by it as an expert witness to establish (1) the value of the incomplete building when Dix ceased construction and (2) the projected value of the building when completed. With reference to Goggin's testimony the auditor stated in his report: 'I am disregarding this opinion evidence of Goggin and striking it out without regard to its relevancy. The principal reason for striking this testimony is that the witness never stated any valid basis in fact for his opinions. Further, I have doubts about the witness's qualifications to give such testimony.' ³

        [362 Mass. 309] A judge, or an auditor or master designated by a judge to hear a matter, has broad discretion to determine whether an expert witness has a proper basis, in terms of adequate information and preparation, to render an opinion on the matter in dispute. See State Tax Commn. v. Assessors of Springfield, 331 Mass. 677, 684--685, 122 N.E.2d 372; H. H. Hawkins & Sons Co. v. Robie, 338 Mass. 61, 65, 153 N.E.2d 768. The auditor's exclusion of Goggin's testimony for the reasons set forth in his report and in his summary of evidence under Superior Court Rule 90 was a proper exercise of his discretion and was not error.

        The auditor's observation that he had doubts about Goggin's qualifications affords an additional ground for the exclusion

Page 907

        3. Two of the Nursing Home's objections relate to the measure of the damages applied by the auditor in reaching his conclusion that it suffered no 'compensable damages.' The rule of damages applied by the auditor was that if the cost of completing the contract by the use of a substitute contractor is within the contract price, less what had already been paid on the contract, no 'compensable damages' have occurred. The Nursing Home argues that the proper rule of damages would entitle it to the difference between the value of the building as left by Dix and the value it would have had if the contract had been fully performed. Under this rule the Nursing [362 Mass. 310] Home contends that it was entitled to the 'benefits of its bargain,' meaning that if the fair market value of the completed building would have exceeded the contractual cost of construction, recovery should be allowed for this lost extra value. It bases this argument primarily upon our statement in Province Sec. Corp. v. Maryland Cas. Co., 269 Mass. 75, 94, 168 N.E. 252, 257, that '(i)t is a settled rule that the measure of damages where a contractor has failed to perform a contract for the construction of a building for business uses is the difference between the value of the building as left by the contractor and its value had it been finished according to contract. In other words the question is how much less was the building worth than it would have been worth if the contract had been fully performed. Powell v. Howard, 109 Mass. 192. White v. McLaren, 151 Mass. 553, 24 N.E. 911. Norcross Brothers Co. v. Vose, 199 Mass. 81, 95, 96, 85 N.E. 468. Pelatowski v. Black, 213 Mass. 428, 100 N.E. 831.' This statement was probably not necessary to the court's decision in the Province Sec. Corp. case and, in any event, must be read in light of the cases cited by the court in support of it. All of these cases involved failure of performance in the sense of defective performance, as contrasted with abandonment of performance. In one of the cases, Pelatowski v. Black, 213 Mass. 428, 431, 100 N.E. 831, 832, the court expressly distinguished 'cases where a contractor has abandoned his work while yet unfinished.'

        The fundamental rule of damages applied in all contract cases was stated by this court in Ficara v. Belleau, 331 Mass. 80, 82, 117 N.E.2d 287, 289, in the following language: 'It is not the policy of our law to award damages which would put a plaintiff in a better position than if the defendant had carried out his contract. Magnolia Metal Co. v. Gale, 189 Mass. 124, 132--133, 75 N.E. 219. Snelling v. Dine, 270 Mass. 501, 506, 170 N.E. 403. Bucholz v. Green Bros. Co., 272 Mass. 49, 54, 172 N.E. 101. Associated Perfumers, Inc. v. Andelman, 316 Mass. 176, 185--186, 55 N.E.2d 209. 'The fundamental principle upon which the rule of damages is based is compensation. . . . Compensation is the value of the performance of the contract, that is, what the plaintiff would have made had the contract[362 Mass. 311] been performed.' F. A. Bartlett Tree Expert Co. v. Hartney, 308 Mass. 407, 412, 32 N.E.2d 237, 240. . . . The plaintiff is entitled to be made whole and no more.'

        Consonant with this principle we have held that in assessing damages for failure to complete a construction contract, '(t)he measure of the plaintiffs' damages (at least in the absence of other elements of damage, as, for example, for delay in construction, which the master has not found here) can be only in the

Page 908

⁴

        The Nursing Home additionally contends that even under the rule of damages applied by the auditor they were entitled, in the words of the DiMare case, supra, to recover 'other elements of damage, as, for example, for delay in construction.' 336 Mass. at 502, 146 N.E.2d at 521. The short answer to this contention is the auditor's express statement,[362 Mass. 312] in his summary of the evidence, that '(t)here was no specific evidence as to the costs of delay, if any.'

        The Nursing Home also argues that it is entitled to recover such additional interest as it was required to pay as a result of the default by Reliance and the breach of contract by Dix. This argument is based on the auditor's findings and summary of evidence that the interest rate on the $400,000 construction loan was to be one per cent per month 'commencing with the date of maturity,' and that the total interest paid, including all discounted interest, was $120,094.76. ⁵ There was no evidence or finding, however, as to the rate of interest paid prior to maturity or as to the amount of alleged excess interest attributable to the defendants' defaults. The Nursing Home simply has not sustained its burden of proof on this point.

        4. For the foregoing reasons the Nursing Home's exceptions to the denial of its

Page 909

        Exceptions overruled.

---------------

1 The City Bank and Trust Company, the first mortgagee of the nursing home property, was originally a plaintiff in this action seeking recovery from Reliance on the surety bond of which the bank was an obligee. During the hearings before the auditor counsel agreed that the bank is seeking no damages in this action. We treat this as tantamount to a discontinuance by the bank. This was probably due to the fact that the bank foreclosed its mortgage and the proceeds of the foreclosure sale were sufficient to pay what was due it at that time. Several months before this action was started, a court of this Commonwealth appointed a receiver for Dix. Although Dix seasonably filed a suggestion of that fact in this case with a request that the receiver be substituted for it, no action appears to have been taken on the request. A third party action brought by Reliance against several officers of Dix was severed from this case before the hearing and is not before us.

2 A companion case brought by Dix against the Nursing Home was also referred to the same auditor for hearing with the present case, but it was discontinued at some unspecified time before the auditor filed his report.

3 In his summary of the evidence relating to the objection on this point the auditor amplified his reasons for excluding Goggin's testimony. The summary states, in part: 'The basis of Goggin's opinions with reference to the value of the nursing home at different times was a rule of thumb or practice of appraisal by which a purchaser of a nursing home determined the value of such nursing home. He also testified there was a per bed valuation put on a building and this sometimes was regardless of the cost of the building. When asked to clarify or explain the 'perbed valuation,' the witness did state that it (the valuation) varied with the type of construction, that at that time the state came out with rules and so did the Government that it was Class 1, 2, 3, 4, 5 construction, that the per bed cost would be formulated or based on the type of construction, . . . the area in which it was located, the land area, the surrounding scene and the environment. He further testified that all of these things had a bearing, and that each and every nursing home was considered in all the lights of these various aspects of an appraisal and that he approached this nursing home in this manner. The witness did not state the particular or specific facts on which his opinions were based.'

4 In the earlier case of Pelatowski v. Black, 213 Mass. 428, 431, 100 N.E. 831, 832, the court had suggested that '(i)n such cases the measure of damages to be recovered or recouped well might be the reasonable cost of completing the work.' However, this observation was subsequently disapproved in Ficara v. Belleau, 331 Mass. 80, 82, 117 N.E.2d 287, because it included no provision for the deduction of 'such part of the contract price as has not been paid and is not still payable . . ..' 331 Mass. at 81, 117 N.E.2d at 289 (quoting from Restatement: Contracts, § 346(1)).

5 There is an aura of mystery about this interest figure of $120,094.76. The auditor's report states that this is '(t)he total amount of interest paid by . . . (the Nursing Home) to' the bank under the construction loan agreement. The manner in which it is computed is not disclosed. When the bank foreclosed its mortgage on February 2, 1967, it had advanced a total of $230,905.24 for periodic payments to Dix as construction of the building progressed. The foreclosure sale price was $351,000 which, by coincidence or otherwise, happens to be exactly $120,094.76 above the principal balance due on the mortgage. This figure of $120,094.76 appears to be a computation of interest at the rate of one per cent per month, or twelve per cent per year, on $400,000 for the two years, six months and nine days between July 24, 1964, when the bank agreed to loan that amount, and February 2, 1967, when it foreclosed its mortgage. Of course, the bank never advanced more than $230,905.24 of the $400,000 face amount of the mortgage. Even if we were to assume, contrary to fact, that the sum of $230,905.24 had been advanced on July 24, 1964, it would require an interest rate in excess of twenty per cent per annum to accumulate interest of $120.094.76 by February 2, 1967. A careful reading of the record sheds no light on issue on which the Nursing Home had the burden of proof.

[857]

357 N.Y.S.2d 857
34 N.Y.2d 379, 314 N.E.2d 419
Philip FREUND, Respondent,
v.
WASHINGTON SQUARE PRESS, INC., Appellant.
Court of Appeals of New York.
June 13, 1974. [858]

Joel T. Camche and Selig J. Levitan, New York City, for appellant.

[34 N.Y.2d 380] Janet Fine Cotton, New York City, for respondent.

SAMUEL RABIN, Judge.

In this action for breach of a publishing contract, we must decide what damages are recoverable for defendant's failure to publish plaintiff's manuscript. In 1965, plaintiff, an author and a college teacher, and defendant, Washington Square Press, Inc., entered into a written agreement which, in relevant part, provided as follows. Plaintiff ('author') granted defendant ('publisher') exclusive rights to publish and sell in book form plaintiff's work on modern drama. Upon plaintiff's delivery of the manuscript, defendant agreed to complete payment of a nonreturnable $2,000 'advance'. Thereafter, if defendant deemed the manuscript not 'suitable for publication', it had the right to terminate the agreement by written notice within 60 days of delivery. Unless so terminated, defendant agreed to publish the work in hardbound[314 N.E.2d 420] edition within 18 [34 N.Y.2d 381] months and afterwards in paperbound edition. The contract further provided that defendant would pay royalties to plaintiff, based upon specified percentages of sales. (For example, plaintiff was to receive 10% Of the retail price of the first 10,000 copies sold in the continental United States.) If defendant failed to publish within 18 months, the contract provided that 'this agreement shall terminate and the rights herein granted to [859] the Publisher shall revert to the Author. In such event all payments therefore made to the Author shall belong to the Author without prejudice to any other remedies which the Author may have.' The contract also provided that controversies were to be determined pursuant to the New York simplified procedure for court determination of disputes (CPLR 3031--3037, Consol.Laws, c. 8).

Plaintiff performed by delivering his manuscript to defendant and was paid his $2,000 advance. Defendant thereafter merged with another publisher and ceased publishing in hardbound. Although defendant did not exercise its 60-day right to terminate, it has refused to publish the manuscript in any form.

Plaintiff commenced the instant action pursuant to the simplified procedure practice and initially sought specific performance of the contract. The Trial Term Justice denied specific performance but, finding a valid contract and a breach by defendant, set the matter down for trial on the issue of monetary damages, if any, sustained by the plaintiff. At trial, plaintiff sought to prove: (1) delay of his academic promotion; (2) loss of royalties which would have been earned; and (3) the cost of publication if plaintiff had made his own arrangements to publish. The trial court found that plaintiff had been promoted despite defendant's failure to publish, and that there was no evidence that the breach had caused any delay. Recovery of lost royalties was denied without discussion. The court found, however, that the lost of hardcover publication to plaintiff was the natural and probable consequence of the breach and, based upon expert testimony, awarded $10,000 to cover this cost. It denied recovery of the expenses of paperbound publication on the ground that plaintiff's proof was conjectural.

The Appellate Division, (3 to 2) affirmed, finding that the cost of publication was the proper measure of damages. In support of its conclusion, the majority analogized to the construction [34 N.Y.2d 382] contract situation where the cost of completion may be the proper measure of damages for a builder's failure to complete a house or for use of wrong materials. The dissent concluded that the cost of publication is not an appropriate measure of damages and consequently, that plaintiff may recover nominal damages only.^[1] We agree with the dissent. In so concluding, we look to the basic purpose of damage recovery and the nature and effect of the parties' contract.

It is axiomatic that, except where punitive damages are allowable, the law awards damages for breach of contract to compensate for injury caused by the breach--injury which was foreseeable, i.e., reasonably within the contemplation of the parties, at the time the [860] contract was entered into. (Swain v. Schieffelin, 134 N.Y. 471, 473, 31 N.E. 1025, 1026.) Money damages are substitutional relief designed in theory 'to put the injured party in as good a position as he would have been put by full performance of the contract, at the least cost to the defendant and without charging him with harms that he had no sufficient reason to foresee when he made the contract.' (5 Corbin, Contracts, § 1002, pp. 31--32; 11 Williston, Contracts (3d ed.), § 1338, p. 198.) In other words, so far as possible, the law attempts to secure to the injured party the benefit of his bargain, subject to the limitations that the injury--whether it be losses suffered or gains prevented--was [314 N.E.2d 421] foreseeable, and that the amount of damages claimed be measurable with a reasonable degree of certainty and, of course, adequately proven. (See, generally, Dobbs, Law of Remedies, p. 148; see, also, Farnsworth, Legal Remedies for Breach of Contract, 70 Col.L.Rev. 1145, 1159.) But it is equally fundamental that the injured party should not recover more from the breach than he would have gained had the contract been fully performed. (Baker v. Drake, 53 N.Y. 211, 217; see, generally, Dobbs, Law of Remedies, p. 810.)

Measurement of damages in this case according to the cost of publication to the plaintiff would confer greater advantage than performance of the contract would have entailed to plaintiff and would place him in a far better position than he would have occupied had the defendant fully performed. Such measurement[34 N.Y.2d 383] bears no relation to compensation for plaintiff's actual loss or anticipated profit. Far beyond compensating plaintiff for the interests he had in the defendant's performance of the contract--whether restitution, reliance or expectation (see Fuller & Perdue, Reliance Interest in Contract Damages, 46 Yale L.J. 52, 53--56) an award of the cost of publication would enrich plaintiff at defendant's expense.

Pursuant to the contract, plaintiff delivered his manuscript to the defendant. In doing so, he conferred a value on the defendant which, upon defendant's breach, was required to be restored to him. Special Term, in addition to ordering a trial on the issue of damages, ordered defendant to return the manuscript to plaintiff and plaintiff's restitution interest in the contract was thereby protected. (Cf. 5 Corbin, Contracts, § 996, p. 15.)

At the trial on the issue of damages, plaintiff alleged no reliance losses suffered in performing the contract or in making necessary preparations to perform. Had such losses, if foreseeable and ascertainable, been incurred, plaintiff would have been entitled to compensation for them. (Cf. Bernstein v. Meech, 130 N.Y. 354, 359, 29 N.E. 255, 257.)

As for plaintiff's expectation interest in the contract, it was basically two-fold--the 'advance' and the royalties. (To be sure, [861] plaintiff may have expected to enjoy whatever notoriety, prestige or other benefits that might have attended publication, but even if these expectations were compensable, plaintiff did not attempt at trial to place a monetary value on them.) There is no dispute that plaintiff's expectancy in the 'advance' was fulfilled--he has received his $2,000. His expectancy interest in the royalities--the profit he stood to gain from sale of the published book--while theoretically compensable, was speculative. Although this work is not plaintiff's first, at trial he provided no stable foundation for a reasonable estimate of royalties he would have earned had defendant not breached its promise to publish. In these circumstances, his claim for royalties falls for uncertainty. (Cf. Broadway Photoplay Co. v. World Film Corp., 225 N.Y. 104, 121 N.E. 756; Hewlett v. Caplin, 275 App.Div. 797, 88 N.Y.S.2d 428.)

Since the damages which would have compensated plaintiff for anticipated royalties were not proved with the required certainty,[34 N.Y.2d 384] we agree with the dissent in the Appellate Division that nominal damages alone are recoverable. (Cf. Manhattan Sav. Inst. v. Gottfried Baking Co., 286 N.Y. 398, 36 N.E.2d 637.) Though these are damages in name only and not at all compensatory, they are nevertheless awarded as a formal vindication of plaintiff's legal right to compensation which has not been given a sufficiently certain monetary valuation. (Cf. Baker v. Hart, 123 N.Y. 470, 474, 25 N.E. 948, 949; see, generally, Dobbs, Law of Remedies, p. 191; 11 Williston, Contracts (3d ed.), § 1339A, pp. 206--208.)

In our view, the analogy by the majority in the Appellate Division to the construction contract situation was inapposite. In [314 N.E.2d 422] the typical construction contract, the owner agrees to pay money or other consideration to a builder and expects, under the contract, to receive a completed building in return. The value of the promised performance to the owner is the properly constructed building. In this case, unlike the typical construction contract, the value to plaintiff of the promised performance--publication--was a percentage of sales of the books published and not the books themselves. Had the plaintiff contracted for the printing, binding and delivery of a number of hardbound copies of his manuscript, to be sold or disposed of as he wished, then perhaps the construction analogy, and measurement of damages by the cost of replacement or completion, would have some application.

Here, however, the specific value to plaintiff of the promised publication was the royalties he stood to receive from defendant's sales of the published book. Essentially, publication represented what it would have cost the defendant to confer that value upon the plaintiff, and, by its breach, defendant saved that cost. The error by the courts below was in measuring damages not by the value to plaintiff of the promised performance but by the cost of that performance [862] to defendant. Damages are not measured, however, by what the defaulting party saved by the breach, but by the natural and probable consequences of the breach To the plaintiff. In this case, the consequence to plaintiff of defendant's failure to publish is that he is prevented from realizing the gains promised by the contract--the royalties. But, as we have stated, the amount of royalties plaintiff would have realized was not ascertained with adequate certainty[34 N.Y.2d 385] and, as a consequence, plaintiff may recover nominal damages only.

Accordingly, the order of the Appellate Division should be modified to the extent of reducing the damage award of $10,000 for the cost of publication to six cents, but with costs and disbursements to the plaintiff.

BREITEL, C.J., and JASEN, GABRIELLI, JONES and WACHTLER, JJ., concur.

STEVENS, J., taking no part.

Order modified, with costs and disbursements to plaintiff-respondent, in accordance with opinion herein and, as so modified, affirmed.

---------------

[1] Plaintiff does not challenge the trial court's denial of damages for delay in promotion or for anticipated royalties.

Keywell & Rosenfeld (by Sidney L. Frank and Christopher Jeffries) for plaintiffs.

Zussman, Doctoroff, Wartell & Kaplow for defendants Village Plaza, Inc., and Fairborn Property Co., Inc.

Hammond, Ziegelman & Sotiroff (by Lawrence R. Abramczyk) for defendants Schostak Brothers & Company, Inc., and Bank of the Commonwealth.

Decided June 3, 1976. Rehearing denied 397 Mich 956.

KAVANAGH, C.J.

Plaintiffs received a jury award of $200,000 for loss of anticipated profits in their proposed new business as a result of defendants' breach of a lease. The Court of Appeals reversed. 52 Mich App 532; 218 NW2d 155 (1974). We reverse and reinstate the jury's award.

FACTS

On August 20, 1965 plaintiffs and agents of Fairborn-Village Plaza executed a ten-year lease for a "book and bottle" shop in defendants' proposed shopping center. This lease provided for occupancy of a specific location at a rental of $1,000 minimum monthly rent plus 5% of annual receipts in excess of $240,000. A $1,000 deposit was paid by plaintiffs.

After this lease was executed, plaintiffs gave up approximately 600 square feet of their leased space so that it could be leased to another tenant. In exchange, it was agreed that liquor sales would be excluded from the percentage rent override provision of the lease.

Complications arose, including numerous work stoppages. Bank of the Commonwealth received a deed in lieu of foreclosure after default by Fairborn and Village Plaza. Schostak Brothers managed the property for the bank.

When the space was finally ready for occupancy, plaintiffs were refused the space for which they had contracted because the lease had been misplaced, and the space rented to other tenants. Alternative space was offered but refused by plaintiffs as unsuitable for their planned business venture.

Plaintiffs initiated suit in Wayne Circuit Court, alleging inter alia a claim for anticipated lost profits. The jury returned a verdict for plaintiffs against all defendants for $200,000.

The Court of Appeals reversed and remanded for new trial on the issue of damages only, holding that the trial court "erroneously permitted lost profits as the measure of damages for breach of the lease". 52 Mich App 532, 542; 218 NW2d 155, 160.

In Jarrait v Peters, 145 Mich 29, 31-32; 108 NW 432 (1906), plaintiff was prevented from taking possession of the leased premises. The jury gave plaintiff a judgment which included damages for lost profits. This Court reversed:

"It is well settled upon authority that the measure of damages when a lessor fails to give possession of the leased premises is the difference between the actual rental value and the rent reserved. 1 Sedgwick on Damages (8th ed), § 185. Mr. Sedgwick says:

"`If the business were a new one, since there could be no basis on which to estimate profits, the plaintiff must be content to recover according to the general rule.'

"The rule is different where the business of the lessee has been interrupted.

* * *

"The evidence admitted tending to show the prospective profits plaintiff might have made for the ensuing two years should therefore have been excluded under the objections made by defendant, and the jury should have been instructed that the plaintiff's damages, if any, would be the difference between the actual rental value of the premises and the rent reserved in the lease."

Six years later, in Isbell v Anderson Carriage Co, 170 Mich 304, 318; 136 NW 457 (1912), the Court wrote:

"It has sometimes been stated as a rule of law that prospective profits are so speculative and uncertain that they cannot be recognized in the measure of damages. This is not because they are profits, but because they are so often not susceptible of proof to a reasonable degree of certainty. Where the proof is available, prospective profits may be recovered, when proven, as other damages. But the jury cannot be asked to guess. They are to try the case upon evidence, not upon conjecture."

These cases and others since should not be read as stating a rule of law which prevents every new business from recovering anticipated lost profits for breach of contract. The rule is merely an application of the doctrine that "[i]n order to be entitled to a verdict, or a judgment, for damages for breach of contract, the plaintiff must lay a basis for a reasonable estimate of the extent of his harm, measured in money". 5 Corbin on Contracts, § 1020, p 124. The issue becomes one of sufficiency of proof. "The jury should not [be] allowed to speculate or guess upon this question of the amount of loss of profits". Kezeli v River Rouge Lodge IOOF, 195 Mich 181, 188; 161 NW 838 (1917).

"Assuming, therefore, that profits prevented may be considered in measuring the damages, are profits to be divided into classes and kinds? Does the term `speculative profits' express one of these classes, differing in nature from nonspeculative profits? Do `uncertain' profits differ in kind from `certain' profits? The answer is assuredly, No. There is little that can be regarded as `certain,' especially with respect to what would have happened if the march of events had been other than it in fact has been. Neither court nor jury is required to attain `certainty' in awarding damages; and this is just as true with respect to `value' as with respect to `profits'. Therefore, the term `speculative and uncertain profits' is not really a classification of profits, but is instead a characterization of the evidence that is introduced to prove that they would have been made if the defendant had not committed a breach of contract. The law requires that this evidence shall not be so meager or uncertain as to afford no reasonable basis for inference, leaving the damages to be determined by sympathy and feelings alone. The amount of evidence required and the degree of its strength as a basis of inference varies with circumstances." 5 Corbin on Contracts, § 1022, pp 139-140.

The rule was succinctly stated in Shropshire v Adams, 40 Tex Civ App 339, 344; 89 SW 448, 450 (1905):

"Future profits as an element of damage are in no case excluded merely because they are profits but because they are uncertain. In any case when by reason of the nature of the situation they may be established with reasonable certainty they are allowed."

It is from these principles that the "new business"/"interrupted business" distinction has arisen.

"If a business is one that has already been established a reasonable prediction can often be made as to [645] its future on the basis of its past history. If the business has not had such a history as to make it possible to prove with reasonable accuracy what its profits have been in fact, the profits prevented are often but not necessarily too uncertain for recovery." 5 Corbin on Contracts, § 1023, pp 147, 150-151.

Cf Jarrait v Peters, supra.

The Court of Appeals based its opinion reversing the jury's award on two grounds: First, that a new business cannot recover damages for lost profits for breach of a lease. We have expressed our disapproval of that rule. Secondly, the Court of Appeals held plaintiffs barred from recovery because the proof of lost profits was entirely speculative. We disagree.

The trial judge in a thorough opinion made the following observations upon completion of the trial.

"On the issue of lost profits, there were days and days of testimony. The defendants called experts from the Michigan Liquor Control Commission and from Cunningham Drug Stores, who have a store in the area, and a man who ran many other stores. The plaintiffs called experts and they, themselves, had experience in the liquor sales business, in the book sales business and had been representatives of liquor distribution firms in the area.

"The issue of the speculative, conjectural nature of future profits was probably the most completely tried issue in the whole case. Both sides covered this point for days on direct and cross-examination. The proofs ranged from no lost profits to two hundred and seventy thousand dollars over a ten-year period as the highest in the testimony. A witness for the defendants, an expert from Cunningham Drug Company, testified the plaintiffs probably would lose money. Mr. Fera, an expert in his own right, testified the profits would probably be two hundred and seventy thousand dollars. The jury found two hundred thousand dollars. This is well within the limits of the high and the low testimony presented by both sides, and a judgment was granted by the jury.

* * *

"The court cannot invade the finding of fact by the jury, unless there is no testimony to support the jury's finding. There is testimony to support the jury's finding. We must realize that witness Stein is an interested party in this case, personally. He is an officer or owner in Schostak Brothers. He may personally lose money as a result of this case. The jury had to weigh this in determining his credibility. How much credibility they gave his testimony was up to them. How much weight they gave to counter-evidence was up to them.

* * *

"The court must decide whether or not the jury had enough testimony to take this fact from the speculative-conjecture category and find enough facts to be able to make a legal finding of fact. This issue [damages for lost profits] was the most completely tried issue in the whole case. Both sides put in testimony that took up days and encompassed experts on both sides. This fact was adequately taken from the category of speculation and conjecture by the testimony and placed in the position of those cases that hold that even though loss of profits is hard to prove, if proven they should be awarded by the jury. In this case, the jury had ample testimony to make this decision from both sides.

* * *

"The jury award was approximately seventy thousand dollars less than the plaintiffs asked and their proofs showed they were entitled to. The award of the jury was well within the range of the proofs and the court cannot legally alter it, as determination of damages is a jury function and their finding is justified by the law in light of the evidence in this case.

* * *

"The loss of profits are often speculative and conjectural on the part of witnesses. When this is true, the court should deny loss of profits because of the speculative nature of the testimony and the proofs. However, the law is also clear that where lost profits are shown, and there is ample proof on this point, they should not be denied merely because they are hard to prove. In this case, both parties presented testimony on this issue for days. This testimony took the lost profits issue out of the category of speculation and conjecture. The jury was given an instruction on loss of profits and what the proofs must show, and the nature of the proofs, and if they found them to be speculative they could not award damages therefor. The jury, having found damages to exist, and awarded the same in this case in accord with the proper instructions, the court cannot, now, overrule the jury's finding."

As Judge Wickens observed, the jury was instructed on the law concerning speculative damages. The case was thoroughly tried by all the parties. Apparently, the jury believed the plaintiffs. That is its prerogative.

The testimony presented during the trial was conflicting. The weaknesses of plaintiffs' specially prepared budget were thoroughly explored on cross-examination. Defendants' witnesses testified concerning the likelihood that plaintiffs would not have made profits if the contract had been performed. There was conflicting testimony concerning the availability of a liquor license. All this was spread before the jury. The jury weighed the conflicting testimony and determined that plaintiffs were entitled to damages of $200,000.

As we stated in Anderson v Conterio, 303 Mich 75, 79; 5 NW2d 572 (1942):

"The testimony is in direct conflict, and that of plaintiff was impeached to some extent. However, it cannot be said as a matter of law that the testimony thus impeached was deprived of all probative value or that the jury could not believe it. The credibility of witnesses is for the jury, and it is not for us to determine who is to be believed."

The trial judge, who also listened to all of the conflicting testimony, denied defendants' motion for a new trial, finding that the verdict was justified by the evidence. We find no abuse of discretion in that decision. Sloan v Kramer-Orloff Co, 371 Mich 403; 124 NW2d 255 (1963). "The trial court has a large amount of discretion in determining whether to submit the question of profits to the jury; and when it is so submitted, the jury will also have a large amount of discretion in determining the amount of its verdict." 5 Corbin on Contracts, § 1022, pp 145-146.

"`[W]here injury to some degree is found, we do not preclude recovery for lack of precise proof. We do the best we can with what we have. We do not, "in the assessment of damages, require a mathematical precision in situations of injury where, from the very nature of the circumstances precision is unattainable." Particularly is this true where it is defendant's own act or neglect that has caused the imprecision.'" Godwin v Ace Iron & Metal Co, 376 Mich 360, 368; 137 NW2d 151 (1965).

While we might have found plaintiffs' proofs lacking had we been members of the jury, that is not the standard of review we employ. "As a reviewing court we will not invade the fact-finding of the jury or remand for entry of judgment unless the factual record is so clear that reasonable minds may not disagree." Hall v Detroit, 383 Mich 571, 574; 177 NW2d 161 (1970). This is not the situation here.

The Court of Appeals is reversed and the trial court's judgment on the verdict is reinstated.

Costs to plaintiffs.

WILLIAMS, FITZGERALD, and LINDEMER, JJ., concurred with KAVANAGH, C.J.

LEVIN and RYAN, JJ., took no part in the decision of this case.

COLEMAN, J. (concurring in part, dissenting in part).

Although anticipated profits from a new business may be determined with a reasonable degree of certainty such was not the situation regarding loss of profits from liquor sales as proposed by plaintiffs.

First, plaintiffs had no license and a Liquor Control Commission regional supervisor and a former commissioner testified that the described book and bottle store could not obtain a license. Further, the proofs of possible profits from possible liquor sales — if a license could have been obtained — were too speculative. The speculation of possible licensing plus the speculation of profits in this case combine to cause my opinion that profits from liquor sales should not have been submitted to the jury.

I agree with Judge O'HARA in his Court of Appeals dissent and would have allowed proof of loss from the bookstore operation to go to the jury, but not proof of loss from liquor sales. His remedy is also approved. I would affirm the trial court judgment conditioned upon plaintiffs' consenting within 30 days following the release of this opinion, to "remitting that portion of the judgment in excess of $60,000. Otherwise, the judgment should be reversed and a new trial had". Plaintiffs are also entitled to the $1,000 deposit.

51 S.W.2d 572

SECURITY STORE & MANUFACTURING CO., RESPONDENT,
v.
AMERICAN RAILWAYS EXPRESS CO., APPELLANT.

No. 17560.
Kansas City Court of Appeals. Missouri.
May 23, 1932.

[573] Appeal from the Circuit Court of Jackson County. — Hon. Ralph S. Latshaw, Judge.

AFFIRMED.

Joseph F. Keirnan for respondent.

Lathrop, Crane, Reynolds, Sawyer & Mersereau and Dean Wood for appellant.

BLAND, J.

This is an action for damages for the failure of defendant to transport, from Kansas City to Atlantic City, New Jersey, within a reasonable time, a furnace equipped with a combination oil and gas burner. The cause was tried before the court without the aid of a jury, resulting in a judgment in favor of plaintiff in the sum of $801.50 and interest, or in a total sum of $1000. Defendant has appealed.

The facts show that plaintiff manufactured a furnace equipped with a special combination oil and gas burner it desired to exhibit at the American Gas Association Convention held in Atlantic City in October, 1926. The president of plaintiff testified that plaintiff engaged space for the exhibit for the reason "that the Henry L. Dougherty Company was very much interested in putting out a combination oil and gas burner; we had just developed one, after we got through, better than anything on the market and we thought this show would be the psychological time to get in contact with the Dougherty Company;" that "the thing wasn't sent there for sale but primarily to show;" that at the time the space was engaged it was too late to ship the furnace by freight so plaintiff decided to ship it by express, and, on September 18, 1926, wrote the office of the defendant in Kansas City, stating that it had engaged a booth for exhibition purposes at Atlantic City, New Jersey, from the American Gas Association, for the week beginning October 11th; that its exhibition consisted of an oil burning furnace, together with two oil burners which weighed at least 1500 pounds; that, "In order to get this exhibit in place on time it should be in Atlantic City not later than October the 8th. What we want you to do is to tell us how much time you will require to assure the delivery of the exhibit on time."

Mr. Bangs, chief clerk in charge of the local office of the defendant, upon receipt of the letter, sent Mr. Johnson, a commercial representative of the defendant, to see plaintiff. Johnson called upon plaintiff taking its letter with him. Johnson made a notation on the bottom of the letter giving October 4th, as the day that defendant was required to have the exhibit in order for it to reach Atlantic City on October 8th.

On October 1st, plaintiff wrote the defendant at Kansas City, referring to its letter of September 18th, concerning the fact that the furnace must be in Atlantic City not later than October 8th, and stating what Johnson had told it, saying:

"Now, Mr. Banks, we want to make doubly sure that this shipment is in Atlantic City not later than October 8th and the purpose of this letter is to tell you that you can have your truck call for the shipment between 12 and 1 o'clock on Saturday, October 2nd for this." (Italics plaintiff's.)

On October 2nd, plaintiff called the office of the express company in Kansas City and told it that the shipment was ready. Defendant came for the shipment on the last mentioned day, received it and delivered the express receipt to plaintiff. The shipment contained twenty-one packages. Each package was marked with stickers backed with glue and covered with silica of soda, to prevent the stickers being torn off in shipping. Each package was given a number. They ran from one to twenty-one.

Plaintiff's president made arrangements to go to Atlantic City to attend the convention and install the exhibit, arriving there about October 11th. When he reached Atlantic City he found the shipment had been placed in the booth that had been assigned to plaintiff. The exhibit was set up, but it was found [574] that one of the packages shipped was not there. This missing package contained the gas manifold, or that part of the oil and gas burner that controlled the flow of gas in the burner. This was the most important part of the exhibit and a like burner could not be obtained in Atlantic City.

Wires were sent and it was found that the stray package was at the "over and short bureau" of defendant in St. Louis. Defendant reported that the package would be forwarded to Atlantic City and would be there by Wednesday, the 13th. Plaintiff's president waited until Thursday, the day the convention closed, but the package had not arrived at the time, so he closed up the exhibit and left. About a week after he arrived in Kansas City, the package was returned by the defendant.

Banks testified that the reasonable time for a shipment of this kind to reach Atlantic City from Kansas City would be four days; that if the shipment was received on October 4th, it would reach Atlantic City by October 8th; that plaintiff did not ask defendant for any special rate; that the rate charged was the regular one; that plaintiff asked no special advantage in the shipment; that all defendant, under its agreement with plaintiff was required to do was to deliver the shipment at Atlantic City in the ordinary course of events; that the shipment was found in St. Louis about Monday afternoon or Tuesday morning; that it was delivered at Atlantic City at the Ritz Carlton Hotel, on the 16th of the month. There was evidence on plaintiff's part that the reasonable time for a shipment of this character to reach Atlantic City from Kansas City was not more than three or four days.

The petition upon which the case was tried alleges that plaintiff, on October 2, 1926, delivered the shipment to the defendant; that defendant agreed, in consideration of the express charges received from plaintiff, to carry the shipment from Kansas City to Atlantic City, and

"to deliver the same to plaintiff at Atlantic City, New Jersey, on or before October 8, 1926, the same being the reasonable and proper time necessary to transport said shipment to Atlantic City, in as good condition as when received of defendant (plaintiff) at Kansas City, Missouri; that previous to the delivery of said goods to defendant at Kansas City, Missouri, this plaintiff apprised defendant of the kind and nature of the goods and told defendant of the necessity of having the goods at Atlantic City by October 8, 1926, and the reason therefor; that defendant knew that the goods were intended for an exhibit at the place and that they would have to be at Atlantic City by that date to be of any service to the defendant (plaintiff)." (Italics ours.)

"That this defendant through its servants and agents, after being apprised of the nature of the shipment of goods and all of the necessity of having the goods at Atlantic City at the time specified, to-wit: October 8, 1926, agreed with plaintiff and promised and assured plaintiff that if they would transport the goods through defendant, and deliver said goods to defendant at Kansas City by October 4th, that they would be at Atlantic City by said date, to-wit: October 8, 1926; that relying upon the promises and assurances of the defendant's agents and servants that the goods would be in Atlantic City by October 8, 1926, this plaintiff delivered said goods to the defendant on October 2, 1926, at Kansas City, Missouri, and paid defendant the express charges on same, as above set out, in packages or parcels, numbered from one to twenty-one inclusive.

"That relying upon defendant's promise and the promises of its agents and servants, that said parcels would be delivered at Atlantic City by October 8, 1926, if delivered to defendant by October 4, 1926, plaintiff herein hired space for an exhibit at the American Gas Association Convention at Atlantic City, and planned for an exhibit at said Convention and sent men in the employ of this plaintiff to Atlantic City to install, show and operate said exhibit, and that these men were in Atlantic City ready to set up this plaintiff's exhibit at the American Gas Association Convention on October 8, 1926."

"That defendant, in violation of its agreement, failed and neglected to deliver one of the packages to its destination on October 8, 1926:

"That the package not delivered by defendant contained the essential part of plaintiff's exhibit which plaintiff was to make at said convention on October 8th, was later discovered in St. Louis, Missouri, by the defendant herein, and that plaintiff, for this reason, could not show his exhibit."

Plaintiff asked damages, which the court in its judgment allowed as follows: $147 express charges (on the exhibit); $45.12 freight on the exhibit from Atlantic City to Kansas City; $101.39 railroad and pullman fares to and from Atlantic City, expended by plaintiff's president and a workman taken by him to Atlantic City; $48 hotel room for the two; $150 for the time of the president; $40 for wages of plaintiff's other employee and $270 for rental of the booth, making a total of $801.51.

Defendant contends that its instructions in the nature of demurrers to the evidence should have been given for the reason that the petition and plaintiff's evidence show that plaintiff has based its cause of action on defendant's breach of a promise to deliver [575] the shipment at a specified time and that promise is non-enforceable and void under the Interstate Commerce Act; that the court erred in allowing plaintiff's expenses as damages; that the only damages, if any, that can be recovered in cases of this kind, are for loss of profits and that plaintiff's evidence is not sufficient to base any recovery on this ground.

No attack was made upon the petition at the trial and at this late day it must be adjudged to be sufficient if it states any cause of action whatever, however in artificially it may be drawn. Of course, the law applicable to the case is governed by the Statutes of the United States as construed by the Federal Courts. [Bilby v. A.T.S.F. Ry. Co., 199 S.W. 1004.] It is well established that a shipper cannot recover on a special contract to move a shipment within a specified time, for such would work an unjust discrimination among shippers. The only duty that the carrier is under is to carry the shipment safely and to deliver it at its destination within a reasonable time. [United States v. Am. Ry. Exp. Co., 265 U.S. 425; 44 Sup. Ct. Rep. 560; C. & A.R.R. Co. v. Kirby, 225 U.S. 155, 164; A.T. & S.F. Ry. v. Robinson, 233 U.S. 173, 34 Sup. Ct. 556; Fruit & Produce Co. v. Pa. Co., 201 Mo. App. 609.]

While the petition alleges that defendant agreed to deliver the shipment at Atlantic City on or before October 8, 1926, it also alleges that this was the reasonable and proper time necessary to transport said shipment to Atlantic City. Therefore, giving the petition a liberal construction, it would appear that all that plaintiff was contending therein was that defendant had agreed to transport the shipment within a reasonable time, and that delivery on or before October 8th was necessary to comply with the agreement. The petition refers several times to the agreement that if the goods were delivered to defendant by October 4th, they would be delivered at Atlantic City not later than October 8th, but it also alleges that the goods were not delivered to defendant until October 2nd. It is quite apparent from reading the petition, as a whole, that it was not upon a contract to deliver at Atlantic City on October 8th, goods delivered by plaintiff to defendant at Kansas City on October 4th. It would appear that the purpose of plaintiff, in pleading this agreement, was to allege sufficient facts to base its claim of special damages, that is that defendant was notified that it was necessary to have the shipment at Atlantic City by October 8th, and that the damages sustained accrued as a result of plaintiff's reliance on its being so delivered and that October 8th was plenty of time for defendant to have taken to transport the shipment. Much of the petition is surplusage but we cannot adjudge it wholly insufficient at this juncture.

There is nothing in the evidence tending to show any unjust discrimination between shippers in the agreement had between plaintiff and defendant. Boiled down to its last analysis, the agreement was nothing more than that the shipment would be transported within the ordinary time. Plaintiff sought no special advantage, was asking nothing that would be denied any other shipper, was asking no particular route, no particular train, nor for any expedited service. It was simply seeking the same rights any other shipper could have enjoyed on the same terms. No special instructions were given or involved in the case. [Foster v. Cleveland, et al. R. Co., 56 Fed. 434; Packing Co. v. Alaska S.S. Co., 22 Fed. (2d) 12.]

We think, under the circumstances in this case, that it was proper to allow plaintiff's expenses as its damages. Ordinarily the measure of damages where the carrier fails to deliver a shipment at destination within a reasonable time is the difference between the market value of the goods at the time of the delivery and the time when they should have been delivered. But where the carrier has notice of peculiar circumstances under which the shipment is made, which will result in an unusual loss by the shipper in case of delay in delivery, the carrier is responsible for the real damage sustained from such delay if the notice given is of such character, and goes to such extent, in informing the carrier of the shipper's situation, that the carrier will be presumed to have contracted with reference thereto. [Central Trust Co. v. Savannah & W.R. Co., 69 Fed. 683, 685.]

In the case at bar defendant was advised of the necessity of prompt delivery of the shipment. Plaintiff explained to Johnson the "importance of getting the exhibit there on time." Defendant knew the purpose of the exhibit and ought to respond for its negligence in failing to get it there. As we view the record this negligence is practically conceded. The undisputed testimony shows that the shipment was sent to the over and short department of the defendant in St. Louis. As the packages were plainly numbered this, prima facie, shows mistake or negligence on the part of the defendant. No effort was made by it to show that it was not negligent in sending it there, or not negligence in not forwarding it within a reasonable time after it was found.

There is no evidence or claim in this case that plaintiff suffered any loss of profits by reason of the delay in the shipment. In fact defendant states in its brief:

"The plaintiff introduced not one whit of [576] evidence showing or tending to show that he would have made any sales as a result of his exhibit but for the negligence of the defendant. On the contrary Blakesley testified that the main purpose of the exhibit was to try to interest the Henry L. Dougherty Company in plaintiff's combination oil and gas burner, yet that was all the evidence that there was as to the benefit plaintiff expected to get from the exhibit.

"As a matter of evidence, it is clear that the plaintiff would not have derived a great deal of benefit from the exhibit by any stretch of the imagination....

"Nowhere does plaintiff introduce evidence showing that the Henry L. Doherty Company in all probability would have become interested in the combination oil and gas burner and made a profitable contract with the plaintiff."

There is evidence that the exhibit was not sent to make a sale.

In support of its contention that plaintiff can sue only for loss of profit, if anything, in a case of this kind, defendant, among other cases cites that of Adams Exp. Co. v. Egbert, 36 Pa. 360. That case involved the shipment of a box containing architectural drawings or plans for a building, to a building committee of the Touro Almshouse, in New Orleans. This committee had offered a premium of $500 to the successful competitor. These plans arrived after the various plans had been passed upon and the award made to another person. It was sought in that case to recover the value of the plans. The evidence, however, showed that the plans would not have won the prize had they arrived on time. The court held that the plans, under the circumstances, had no appreciable value and recovery could not be had for them and there was no basis for recovery for loss of the opportunity to compete for the prize. The opinion states that in denying recovery for the plans it is contrary to the English rule in such cases. Other cases cited by defendant involve loss of profits or the loss of opportunity to compete in such events as horse racing and the like. In one case, Table & Chair Co. v. R.R., 105 Miss. 861, it was held that the plaintiff could recover for loss of profits that might have been made in the sale of its commodity, as a result of exhibiting a sample at an exhibition, where the shipment was delayed too late for the exhibit. Some of the cases cited by defendant hold that such profits in those classes of cases are not recoverable, and others to the contrary.

Defendant contends that plaintiff "is endeavoring to achieve a return of the status quo in a suit bases on a breach of contract. Instead of seeking to recover what he would have had, had the contract not been broken, plaintiff is trying to recover what he would have had, had there never been any contract of shipment;" that the expenses sued for would have been incurred in any event. It is no doubt, the general rule that where there is a breach of contract the party suffering the loss can recover only that which he would have had, had the contract not been broken, and this is all the cases decided upon which defendant relies, including C.M. & St. P. Ry. v. McCaull-Dinsmore Co., 253 U.S. 97, 100, 40 Sup. Ct. Rep. 504, 504. But this is merely a general statement of the rule and is not inconsistent with the holdings that, in some instances, the injured party may recover expenses incurred in relying upon the contract, although such expenses would have been incurred had the contract not been breached. [See Morrow v. Railroad, 140 Mo. App. 200, 212, 213; Bryant v. Barton, 32 Neb. 613, 616; Woodbury v. Jones, 44 N.H. 206; Driggs v. Dwight, 31 Am. Dec. 283.]

In Sperry et al. v. O'Neill-Adams Co., 185 Fed. 231, the court held that the advantages resulting from the use of trading stamps as a means of increasing trade are so contingent that they cannot form a basis on which to rest a recovery for a breach of contract to supply them. In lieu of compensation based thereon the court directed a recovery in the sum expended in preparation for carrying on business in connection with the use of the stamps. The court said, l.c 239:

"Plaintiff in its complaint had made a claim for lost profits, but, finding it impossible to marshal any evidence which would support a finding of exact figures, abandoned that claim. Any attempt to reach a precise sum would be mere blind guesswork. Nevertheless a contract, which both sides conceded would prove a valuable one, had been broken and the party who broke it was responsible for resultant damage. In order to carry out this contract, the plaintiff made expenditures which otherwise it would not have made. . . . The trial judge held, as we think rightly, that plaintiff was entitled at least to recover these expenses to which it had been put in order to secure the benefits of a contract of which defendant's conduct deprived it."

In the case of Gilbert v. Kennedy, 22 Mich. 117, involved the question of the measure of plaintiff's damages, caused by the conduct of defendant in wrongfully feeding his cattle with plaintiff's in the latter's pasture, resulting in plaintiff's cattle suffering by the overfeeding of the pasture. The court said l.c. 135, 136:

"There being practically no market value for pasturage when there was none in the market, that element of certainty is wanting, even as to those cattle which were removed [577] from the Pitcher farm to the home farm of the plaintiff for pasturage; and, as it could not apply to the others at all, and there being no other element of certainty by which the damages can be accurately measured, resort must be had to such principle or basis of calculation applicable to the circumstances of the case (if any be discoverable) as will be most likely to approximate certainty, and which may serve as a guide in making the most probable estimate of which the nature of the case will admit; and, though it may be less certain as a scale of measurement, yet if the principle be just in itself, and more likely to approximate the actual damages, it is better than any rule, however certain, which must certainly produce injustice, by excluding a large portion of the damages actually sustained."

In Hobbs v. Davis, 30 Ga. 423, a negro slave was hired to make a crop, but she was taken away by her owner in the middle of the year, the result of which the crop was entirely lost. The court said, l.c. 425:

"As it was, the true criterion of damages was perhaps, the hire of the negro, the rent of the land and all the expense incurred, and actual loss sustained by the misconduct of the defendant, rather than the conjecture of the witness, as to what the crop would have been worth.

"Compensation is a fundamental principle of damages whether the action is in contract or tort. [Wicker v. Hoppock, 6 Wall, 94, 99, 18 L. Ed. 752.] One who fails to perform his contract is justly bound to make good all damages that accrue naturally from the breach; and the other party is entitled to be put in as good a position pecuniarily as he would have been by performance of the contract."

The case at bar was to recover damages for loss of profits by reason of the failure of the defendant to transport the shipment within a reasonable time, so that it would arrive in Atlantic City for the exhibit. There were no profits contemplated. The furnace was to be shown and shipped back to Kansas City. There was no money loss, except the expenses, that was of such a nature as any court would allow as being sufficiently definite or lacking in pure speculation. Therefore, unless plaintiff is permitted to recover the expenses that it went to, which were a total loss to it by reason of its inability to exhibit the furnace and equipment, it will be deprived of any substantial compensation for its loss. The law does not contemplate any such injustice. It ought to allow plaintiff, as damages, the loss in the way of expenses that it sustained, and which it would not have been put to if it had not been for its reliance upon the defendant to perform its contract. There is no contention that the exhibit would have been entirely valueless and whatever it might have accomplished defendant knew of the circumstances and ought to respond for whatever damages plaintiff suffered. In cases of this kind the method of estimating the damages should be adopted which is the most definite and certain and which best achieves the fundamental purpose of compensation. [17 C.J., p. 846: Miller v. Robertson, 266 U.S. 243, 257, 45 Sup. Ct. Rep. 73, 78.] Had the exhibit been shipped in order to realize a profit on sales and such profits could have been realized, or to be entered in competition for a prize, and plaintiff failed to show loss of profits with sufficient definiteness, or that he would have won the prize, defendant's cases might be in point. But as before stated, no such situation exists here.

While, it is true that plaintiff already had incurred some of these expenses, in that it had rented space at the exhibit before entering into the contract with defendant for the shipment of the exhibit and this part of plaintiff's damages, in a sense, arose out of a circumstance which transpired before the contract was even entered into, yet, plaintiff arranged for the exhibit knowing that it could call upon defendant to perform its common-law duty to accept and transport the shipment with reasonable dispatch. The whole damage, therefore, was suffered in contemplation of defendant performing its contract, which it failed to do, and would not have been sustained except for the reliance by plaintiff upon defendant to perform it. It can, therefore, be fairly said that the damages or loss suffered by plaintiff grew out of the breach of the contract, for had the shipment arrived on time, plaintiff would have had the benefit of the contract, which was contemplated by all parties, defendant being advised of the purpose of the shipment.

The judgment is affirmed. All concur.

[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.

Kenneth S. Rau of Moench Law Firm, Bismarck, for plaintiff and appellant.

Sharon A. Gallagher, City Atty., Mandan, for defendant and appellee.

LEVINE, Justice.

Robert Leingang appeals from an award of damages for breach of contract. The issue is whether the trial court used the appropriate measure of damages. We hold it did not, and reverse and remand.

The City of Mandan Weed Board awarded Leingang a contract to cut weeds on lots with an area greater than 10,000 square feet.^[1] Another contractor received the contract [398] for smaller lots. During 1987, Leingang discovered that the Weed Board's agent was improperly assigning large lots to the small-lot contractor. Leingang complained and the weed board assigned some substitute lots to him.

Leingang brought a breach of contract action in small claims court and the City removed the action to county court. The City admitted that it had prevented Leingang's performance under the contract and that the contract price for the lost work was $1,933.78. A bench trial was held to assess the damages suffered by Leingang.

At trial, Leingang argued that the applicable measure of damages was the contract price less the costs of performance he avoided due to the breach. Leingang testified that the total gas, oil, repair and replacement blade expenses saved when he was prevented from cutting the erroneously assigned lots was $211.18.

The City argued that to identify Leingang's damages for net profits, some of Leingang's overhead expenses should be attributed to the weed cutting contract and deducted from the contract price. The City offered testimony about the profitability of businesses in Mandan and testimony from Leingang's competitor about the profitability of a weed cutting business in Mandan. The City also offered Leingang's 1986 and 1987 federal tax returns. Based on the Schedule C—"Profit or Loss From Business" —in those returns, the City argued that Leingang attributed considerably more expenses to the business of cutting weeds than he had testified he had avoided.

The trial court adopted what it called a "modified net profit" approach as the measure of damages. It derived a profit margin of 20% by subtracting four categories of expenses reported on Leingang's Schedule C, and attributed to the weed-cutting business, from the weed-cutting income reported to the IRS. The trial court selected insurance, repairs, supplies, and car and truck expenses as costs attributed to the weed-cutting business. Applying the profit margin of 20% to the contract price, the trial court deducted 80% from the contract price as expenses and awarded Leingang $368.59 plus interest. Leingang appeals.

Leingang contends that the method used by the trial court to derive net profits was improper because it did not restrict the expenses that are deductible from the contract price to those which would have been incurred but for the breach of the contract, i.e., those expenses Leingang did not have to pay because the City kept him from doing the work. We agree.

For a breach of contract, the injured party is entitled to compensation for the loss suffered, but can recover no more than would have been gained by full performance. NDCC §§ 32-03-09, 32-03-36. Our law thus incorporates the notion that contract damages should give the nonbreaching party the benefit of the bargain by awarding a sum of money that will put that person in as good a position as if the contract had been performed. See generally 22 Am.Jur.2d Damages § 45 (1988). Where the contract is for service and the breach prevents the performance of that service, the value of the contract consists of two items: (1) the party's reasonable expenditures toward performance, including costs paid, material wasted, and time and services spent on the contract, and (2) the anticipated profits. Welch Mfg. Co. v. Herbst Dept. Store, 53 N.D. 42, 204 N.W. 849, 854 (1925). Thus, a party is entitled to recover for the detriment caused by the defendant's breach, including lost profits if they are reasonable and not speculative. Id. See 25 C.J.S. Damages § 78 (1966).

Where a plaintiff offers evidence estimating anticipated profits with reasonable certainty, they may be awarded. See King Features Synd. v. Courrier, 241 Iowa 870, 43 N.W.2d 718 (1950). In King Features, the plaintiff proved the value of its anticipated profits by reducing the contract price by the amount it would have spent to perform. The court held that this proof was reasonably certain. In quantifying the costs of performance, the plaintiff did not deduct "overhead" expenses because the evidence established that those [399] expenses were constant whether or not the contract was performed. 43 N.W.2d at 725-26.

The King Features approach fulfills the Welch Mfg. requirement that a plaintiff be compensated for all the detriment caused by the breach. Under King Features, constant overhead expenses are not deducted from the contract price because they are expenses the plaintiff had to pay whether or not the contract was breached. The King Features approach compensates plaintiff for constant overhead expenses by allowing an award of the contract price, reduced only by expenses actually saved because the contract did not have to be performed. The remaining contract proceeds are available to pay constant expenses. See also Buono Sales, Inc. v. Chrysler Motors Corp., 449 F.2d 715, 720 (3d Cir.1971) [because fixed expenses must be paid from the sum remaining after costs of performance are deducted, further reducing contract price by fixed expenses would not fully, or fairly, compensate plaintiff].

Neither side argues that lost profits are not calculable here. Instead, each urges a different method for computing lost profits. In measuring Leingang's anticipated profits, the trial court erroneously calculated a "net profit" margin by deducting general costs of doing business including insurance, repairs, supplies, and car and truck expenses, without determining whether these costs remained constant regardless of the City's breach and whether they were, therefore, not to be deducted from the contract price. King Features, 43 N.W.2d at 726. The reduction from the contract price of a portion of the "fixed," or constant expenses, effectively required Leingang to pay that portion twice. See Buono Sales, Inc., 449 F.2d at 720.

We reverse the judgment and remand for a new trial on the issue of damages.

ERICKSTAD, C.J., and VANDE WALLE, GIERKE and MESCHKE, JJ., concur.

[1] Leingang has not provided a transcript of proceedings as required by Rule 10(b), North Dakota Rules of Appellate Procedure. Although the parties stipulated that a transcript was not needed, they did not prepare a statement of the case using Rule 10(g), North Dakota Rules of Appellate Procedure or stipulate to any facts. We, therefore, base our recitation of facts upon undisputed assertions made by the parties on appeal.

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.

Bernbaum, Kleinrock & Freeman for Appellant.

Lyle W. Rucker for Respondent.

WILSON, J.

Alleging that she was employed by defendants for a period of one year at an agreed salary and was wrongfully discharged before the expiration of the employment period, plaintiff brings this action to recover the balance owing to her for the remainder of the contract period. From a judgment in favor of plaintiff, defendant Posell appeals.

On or about July 1, 1946, plaintiff and defendants entered into an oral contract whereby plaintiff was employed as a floor lady and designer for the period of one year commencing July 1, 1946, and ending June 30, 1947, at an agreed salary of $75 per week and as additional compensation a Christmas bonus of $500 to be paid to her on or about December 25, 1946. About December 31, 1946, defendants terminated plaintiff's employment without cause under the circumstances hereinafter related.

Defendants contend the evidence is insufficient to sustain the findings (1) that they had employed plaintiff for a period of one year, and (2) that they breached the employment contract.

[1] Plaintiff testified that shortly prior to July 1, 1946, while in the employ of defendants, she told them she desired to resign her position with them for the reason that she had been offered an employment contract by another establishment for one year at $75 per week and a bonus of $500 at Christmas time; the proposed contract was in writing; at defendant Levy's request she gave him the contract and after reading [860] it he said they would give her the $75 per week for a year and the $500 Christmas bonus--they would give her that or better; he threw the contract into the wastepaper basket and thereupon called defendant Posell and told the latter he had made the arrangement above outlined. She further testified that during the Christmas holidays defendants told her they had decided to have another designer and to have plaintiff take the place of a floor lady at a salary of $55 per week. Being unwilling to accept the reduction in salary plaintiff left defendants' employ.

Plaintiff received $75 per week until the end of 1946 and $300 on account of the Christmas bonus.

The foregoing evidence sustains the findings complained of by defendants and since the evidence of the latter, contradictory of plaintiff's testimony, merely creates a conflict it need not be related. (Buckhantz v. R. G. Hamilton & Co., 71 Cal.App.2d 777, 779 [163 P.2d 756].)

[2] The contract which Levy threw into the wastepaper basket, having been recovered and retained by plaintiff, was offered and received in evidence. Defendants' contention that the court erred in admitting it is untenable. It was offered for the purpose of showing the terms upon which plaintiff had been employed. The document was not a self-serving declaration; its contents were known to both parties, and the terms of plaintiff's employment were adopted from it.

[3] During the time when plaintiff was unemployed she received payments from the State Unemployment Compensation Fund. Defendants contend they should be allowed credit for the moneys so received by her. Such funds are not deductible as compensation received from other employment in mitigation of damages. Benefits of this character are intended to alleviate the distress of unemployment and not to diminish the amount which an employer must pay as damages for the wrongful discharge of an employee. (Bang v. International Sisal Co., 212 Minn. 135 [4 N.W.2d 113, 116]. See section 1, Cal. Unemployment Ins. Act, Stats. 1935, p. 1226, 3 Deering's Gen. Laws (1944 ed.), Act 8780d, p. 3322.)

At the time plaintiff's employment terminated defendants offered to continue her in their employ at the rate of $60 per week and she refused to work for less than $65. Contrary to defendants' contention they are not entitled to credit for the amount they offered to pay her.

[4] When a person is employed for a definite period of time at an agreed rate of wages and is wrongfully discharged [861] before the expiration of the period for which he was employed, he may refuse his former employer's offer of reemployment at less wages than were stipulated in the original contract of employment when acceptance of such offer would amount to a modification of the original contract or to a waiver of his right to recover according to its terms. (Morris Shoe Co. v. Coleman, 187 Ky. 837 [221 S.W. 242, 245]; Jackson v. Independent School Dist., 110 Iowa 313 [81 N.W. 596, 597]; Chisholm v. Preferred Bankers' etc. Co., 112 Mich. 50 [70 N.W. 415, 416]; Miller v. Abraham, 159 Ark. 493 [252 S.W. 15]; People's Co-op. Ass'n v. Lloyd, 77 Ala. 387, 390; Wachs v. Friedmann, 11 Mo.App. 602; Whitmarsh v. Littlefield, 46 Hun. (N.Y.) 418; Hussey v. Holloway, 217 Mass. 100 [104 N.E. 471, 472]; Americus Grocery Co. v. Roney, 129 Ga. 40 [58 S.E. 462]; Trawick v. Peoria etc. Ry. Co., 68 Ill.App. 156, 159; Sparta School Twp. v. Mendell, 138 Ind. 188 [37 N.E. 604, 606]; Curtis v. A. Lehmann & Co., 115 La. 40 [38 So. 887, 888]; Howard v. Vaughan-Monnig Shoe Co., 82 Mo.App. 405, 410; Prichard v. Martin, 27 Miss. 305, 310.)

[5] It is the rule that an employee is not required to perform the same work for a less price in mitigation of damages, and an offer of an employer who has wrongfully discharged the employee to continue the employment at a lower rate of wages is not a defense. (Chisholm v. Preferred Bankers' etc. Co., supra; Redfield v. Boston P. & M. Co., 183 Iowa 194 [165 N.W. 365, 366]; Whitmarsh v. Littlefield, supra.) An employee, upon wrongful discharge, is not required to choose between making a new agreement with his employer and losing all his rights under the old one. He is not bound to accept a new employment from the same employer unless (1) the work is in the same general line of the first employment, and (2) the offer is made in such manner that his acceptance will not amount to a modification of the original agreement. (Jackson v. Independent School Dist., supra.)

Cases are cited in a note in 72 American Law Reports, page 1054, to the effect that an employee who has been wrongfully discharged must accept his employer's offer of reemployment in order to reduce the damages where the offer may be accepted in such manner that it will be without prejudice to the discharged employee's rights under his original contract. There is nothing in those cases contrary to the general rule above stated. In each of them the employee was fully compensated or his rights under his contract were properly protected. If the [862] employee is offered his former employment for the same time and at the same rate of wages for which he was originally employed or is otherwise protected against loss he is barred from recovery of damages for wrongful discharge. (Hussey v. Holloway, 217 Mass. 100 [104 N.E. 471, 472]; Squire v. Wright, 1 Mo.App. 172, 175; Ryan v. Mineral etc. Dist., 27 Colo.App. 63 [146 P. 792, 795]; Dary v. The Caroline Miller (D.C.Ala.), 36 F. 507, 509.) An offer of reemployment may be couched in such terms as to save the rights of the employee, as where it is expressly understood that the employment will not cure the breach of the contract. (Robinson v. Walker, 7 Cal.App.2d 268, 269 [46 P.2d 174].)

One who has been prevented from performing a contract of service should not be required to accept a new employment under circumstances which permit the claim that he consents to a modification of the original contract and an abandonment of his right of action under it. (Farmers' Co-op. Ass'n v. Shaw, 171 Okla. 358 [42 P.2d 887, 889]; Levy v. Tharrington, 178 Okla. 276 [62 P.2d 641, 642]; Chisholm v. Preferred Bankers' etc. Co., 112 Mich. 50 [70 N.W. 415, 417]; People's Co- op. Ass'n v. Lloyd, 77 Ala. 387, 390.)

In the instant action defendants' offer of reemployment was not coupled with any protective condition and was not made without prejudice to plaintiff's right of recovery under the original contract. Had she remained in defendants' employ and accepted their offer of $60 per week she would have been precluded from recovering any additional amount since such arrangement would have signified her consent either to a new contract or to a modification of the old one. In either case she would have waived and abandoned any right to claim under her former contract. (Miller v. Abraham, 159 Ark. 493 [252 S.W. 15, 16]; People's Co-op. Ass'n v. Lloyd, supra; Trawick v. Peoria etc. Ry. Co., 68 Ill.App. 156, 159; Whitmarsh v. Littlefield, 46 Hun. (N.Y.) 418, 420.) A discharged employee is not required to accept reemployment from his employer if acceptance would sacrifice his right to claim damages to which he is entitled by reason of the violation of the contract by the employer. (Morris Shoe Co. v. Coleman, 187 Ky. 837 [221 S.W. 242, 245]; Hussey v. Holloway, supra; Wachs v. Friedmann, 11 Mo.App. 602.)

Since defendants' offer to continue plaintiff in their employ at a lower salary than that agreed upon was not so qualified as to preserve her rights under the contract and since if she [863] had accepted the offer she would have modified her employment contract and waived any right to recovery thereunder, defendants are not entitled to the credit claimed.

Judgment affirmed.

Moore, P. J., concurred.

McComb, J., dissented.

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.

Appeal from Circuit Court, Jackson County; S. M. Bone, Judge.

Action in replevin by the International Harvester Company against Grover Lamkins to recover a tractor sold to defendant, wherein defendant filed a cross-complaint against plaintiff and Gay Lacy to recover special damages allegedly resulting from defendant's inability to use tractor at night for cultivation of crops. The trial court dismissed defendant's cross-complaint and directed a verdict against him and, from the judgment entered thereon, defendant appeals.

Judgment affirmed.

Ras Priest, of Newport, for appellant.

Kaneaster Hodges and Pickens & Pickens, all of Newport, for appellees.

KNOX, Justice.

The question presented by this appeal is whether in view of the special facts and circumstances connected with the sale of a tractor, the seller thereof could be held liable for special damages resulting from the loss of crops, occasioned by inability to cultivate the same because the tractor could not be used at night, the seller having failed to furnish starter and lighting equipment for the tractor within the time contemplated by contract.

On or about December 4, 1941, appellant verbally contracted with appellee, Gay Lacy, dealer for International Tractors, for the purchase of one H. Tractor, one H. M. 221 Cultivator, two cylinders, and one 9 A. Disc Harrow, for a total price of $1485. The parties agreed that buyer would deliver and seller accept a pair of horses and an old tractor for a credit of $642, and that the balance of the purchase price, $843, together with a finance charge of $53.71, a total of $896.71, should be represented by a title retaining note, payable in three installments as follows: 10/1/42 — $404.84, 4/1/43 — $162.72, and 10/1/43 — $329.15.

Because of the limited number of tractors available, it was agreed that delivery [204] of the new equipment might be postponed until about March 1, 1942, and as a matter of fact delivery was actually delayed until after May 1, 1942. In the meantime appellant had surrendered to dealer the horses and old tractor.

The new equipment was finally delivered to appellant's home at a time when he was absent therefrom, but a few days thereafter the dealer returned and requested appellant to execute the note and the sales contract. Appellant testified that he at first refused to execute the papers, because the tractor was not equipped with lights and starter, but upon the express promise by dealer that such equipment would be supplied within three weeks he finally did sign the papers. On account of governmental priority regulations this equipment was not supplied within the three weeks period. In November 1942, the dealer obtained this equipment, and requested that appellant bring the tractor to his shop so that it might be installed. Fearing that the tractor would be held for past due installment on note, appellant refused to deliver it to dealer, but insisted that equipment be installed at his home and while tractor was in his possession. This equipment was actually installed on the tractor after this action was begun.

When the equipment, without starter and lighting equipment, was delivered in May of 1942, appellant did sign the note, and, also, a document designated "Order for Farm Equipment". These instruments were introduced in evidence at the trial. No words appear in these written instruments indicating that any part of the equipment had not been delivered, nor that the dealer was charged with notice that the tractor was to be used in cultivating a crop at night, nor that the parties were contracting with respect to special damage which might accrue to appellant by reason of loss of crops resulting from his inability to use tractor at night for want of lights thereon. The note and contract each lists one article of equipment included in the sale and price thereof as follows: "Two Cylinders $20". Appellee Lacy, the dealer, in his brief says that this item "constituted the lighting equipment for this tractor".

The note was endorsed and negotiated to appellee International Harvester Company on June 4, 1942, which company began this action in replevin on January 16, 1943. Appellant filed answer and also filed cross-complaint against Lacy, the dealer, and the International Harvester Company. His cross-action was based upon the failure to deliver the starter and lighting equipment, and the resultant loss occasioned by inability to use the tractor at night. At the time the original cross-complaint was filed the equipment had not been placed on the tractor. He alleged: "That by reason of the failure of the cross-defendant, Gay Lacy, and the International Harvester Company, to equip said tractor with lights and a starter as he agreed to do, the defendant was denied the use of said tractor at nights over a period of forty-five days; and by reason of such deprivation, the defendant was unable to plant, cultivate and harvest a part of his crop, namely, twenty-five acres of land which he could and would have planted and cultivated in soy beans if he had had the lights and starter on said tractor, and by reason of such loss, the defendant has been damaged in the sum of $10 per night, for each and every night he was unable to use said tractor, or a total sum of $450, in which amount he is entitled to a set off against the indebtedness of $896.71 mentioned in the note sued on."

The prayer was for said sum of $450, and the "additional sum of $100.00, the value of the lights and starter which were not delivered".

The starter and lighting equipment was later delivered and thereafter appellant, in an amendment to his cross-complaint, stated: "Defendant further says that the starter and lights in question were in fact delivered about April 1, 1943, and installed, and, while they were second-hand, or appeared to be so, and have never been satisfactory, they have been retained by the defendant, and the demand for their value is therefore waived." His amended prayer is "for $450.00 by way of special damages as a set off against the note sued on * * * or * * * judgment * * * against Lacy for said sum."

Other facts reflected by the record, which relate directly to the question of special damages, will be stated in the course of the opinion.

Both here and in the court below, appellant limited his defense solely to his right to recover special damages. The trial court held that the facts presented by the record were not sufficient to justify submission of the question to the jury and directed a verdict against appellant.

Ordinarily when a seller fails to deliver goods within the time agreed upon [205] the buyer is entitled to recover as damages the difference between the contract price and the market price at the time of the breach. Under some circumstances, however, a buyer may recover special or consequential damages resulting from failure to deliver, or delay in delivery. The rules applicable in such cases are fully discussed in the case of Hooks Smelting Co. v. Planters' Compress Co., 72 Ark. 275, 79 S.W. 1052; which case has been consistently cited and adhered to. Long v. Chas. T. Abeles Co., 77 Ark. 150, 91 S.W. 29; Pine Bluff Iron Works v. Boling & Bro., 75 Ark. 469, 88 S.W. 306, 308; Sager v. Jung & Sons Co., 143 Ark. 506, 220 S.W. 801, Southwestern Bell Tel. Co. v. Carter, 181 Ark. 209, 25 S.W.2d 448; Interstate Grocery Co v. Namour, 201 Ark. 1095, 148 S. W.2d 175.

In Hooks Smelting Co. v. Planters' Compress Co., supra, Mr. Justice Riddick points out that the rule of law relating to special or consequential damages was first announced in the English case of Hadley v. Baxley, 9 Exch. 341.

After reviewing and criticising the interpretation given to the English case by certain text writers, the learned Justice declared what this court had determined was the correct rules of law for the assessment of special damages. A complete restatement of these rules, as set forth in that opinion, is unnecessary. For the purpose of this opinion it is necessary to point out only that in order to render a seller liable to the buyer for special or consequential damages arising from delay in delivering the article of sale it is necessary that at or before the time of the making of the contract of sale he knew of the special circumstances which would expose the buyer to special damages by reason of the delay in delivery, and that such seller at least tacitly consented to assume the particular risks arising from such delay. The seller cannot be charged with special damages, where his knowledge respecting the special circumstances which would cause such special damage is acquired after the purchase price of the article of sale is fixed. But notice of such circumstances is not alone sufficient to make the seller liable, for as was said in Hooks, etc., v. Planters', etc., supra [72 Ark. 275, 79 S.W. 1056]: "where the damages arise from special circumstances, and are so large as to be out of proportion to the consideration agreed to be paid for the services to be rendered under the contract, it raises a doubt at once as to whether the party would have assented to such a liability, had it been called to his attention at the making of the contract, unless the consideration to be paid was also raised so as to correspond in some respect to the liability assumed. To make him liable for the special damages in such a case, there must not only be knowledge of the special circumstances, but such knowledge `must be brought home to the party sought to be charged under such circumstances that he must know that the person he contracts with reasonably believes that he accepts the contract with the special condition attached to it.' In other words, the facts and circumstances in proof must be such as to make it reasonable for the judge or jury trying the case to believe that the party at the time of the contract tacitly consented to be bound to more than ordinary damages in case of default on his part."

Evidence relating to notice and, also, relating to circumstances indicating an implied agreement by seller to be liable for special damages is meager, vague and indefinite. Responding to a general question from his counsel, appellant testified in detail as to the original sales agreement made on December 4th, but failed to recount that in such agreement there was any mention of the starter or lighting equipment, the necessity therefor, or special understanding with respect thereto. Referring to the conversation had between himself and Lacy relative to these items after the tractor was delivered, he testified as follows: "I says `Mr. Lacy I can't use this tractor * * * I don't want it without a starter or lights'. And I told him that when we traded." "I had been operated on and didn't want the tractor that had no starter." Asked what reason he had given to the dealer as to why he "wanted the lights", appellant replied "so that I could operate it at night, I had nearly 200 acres of land to work." To the leading question, "Did you tell Mr. Lacy that you required the starter and lights and the reason why at the time you made the original trade with him?" appellant answered, "Yes, sir."

The above quotations reflect the entire evidence contained in the record relative to special damages. Conceding that such evidence is sufficient to show that appellant communicated notice to the dealer on or before December 4, 1941, that he desired lighting equipment so that he might [206] work at night, there is nothing in the testimony showing circumstances surrounding and connected with the transaction which were calculated to bring home to the dealer knowledge that appellant expected him to assume liability for a crop loss, which might amount to several hundreds of dollars, if he should fail to deliver a $20 lighting accessory. There was, of course, no such express contract on the dealer's part, and the facts and circumstances are not such as to make it reasonable for the trier of facts to believe that the dealer at the time tacitly consented to be bound for more than ordinary damages in case of default on his part.

Furthermore, appellant's claim for damages, asserted in his cross-complaint, is based upon allegations that he was prevented from planting and growing a twenty-five acre crop of soy beans. The measure of damages for preventing planting of a crop is the rental value of the land. Dilday v. David, 178 Ark. 898, 12 S.W.2d 899; St. Louis, I. M. & S. R. Co. v. Saunders, 85 Ark. 111, 107 S.W. 194. Proof of the rental value of this twenty-five acres is absent from the record.

We are convinced that the trial court did not err in dismissing appellant's cross-complaint and directing a verdict against him for the full amount of the note and interest. The judgment is affirmed.

[528] Sale of goods—Purchase of boiler by laundry company—Part of profit—making plant—Delay in delivery—Measure of damages—Loss of business profits.

The plaintiffs, launderers and dyers, wishing to extend their business, and having in view (inter alia) the prospect of certain profitable dyeing contracts, required a larger boiler. They therefore on April 26, 1946 concluded a contract with the defendants an [529] engineering firm, to purchase a boiler, then installed on the defendants' premises, for 2,150l., and delivery was arranged to be taken on June 5. Owing to a mishap while the boiler was being dismantled by the third parties, under contract with the defendants, it rolled over and sustained damage, and delivery to the plaintiffs was delayed until November 8, 1946. The defendants were aware of the nature of the plaintiffs' business, and by letter had been informed that the plaintiffs intended to put the boiler in use in the shortest possible space of time. In an action for breach of contract the plaintiffs claimed to include in their damages their loss of business profits. The trial judge allowed the plaintiffs a sum for damages under certain minor heads but disallowed the claim for loss of profits on the ground that it was based on special circumstances which had not been drawn to the attention of the defendants, and therefore came within the second rule in Hadley v. Baxendale (1854) 9 Exch. 341. On appeal:-

Held, that the defendants, an engineering company, with knowledge of the nature of the plaintiffs' business, having promised delivery by a particular date of a large and expensive plant, could not reasonably contend that they could not foresee that loss of business profit would be liable to result to the purchaser from a long delay in delivery; that although the defendants had no knowledge of the dyeing contracts which the plaintiffs had in prospect, it did not follow that the plaintiffs were precluded from recovering some general, and perhaps conjectural, sum for loss of business in respect of contracts reasonably to be expected; and therefore the appeal must be allowed and the damages referred to an Official Referee for assessment in consonance with those findings of the court.

Decision of Streatfeild J. [1948] W. N. 397, reversed.

Accuracy of the headnote in Hadley v. Baxendale questioned.

APPEAL from Streatfeild J.

The plaintiffs, a limited company, carrying on a business as launderers and dyers at Windsor, were in January, 1946, minded to expand their business, and to that end required a boiler of much greater capacity than the one they then possessed, which was of a capacity of 1,500-1,600 lbs. evaporation per hour. Seeing an advertisement by the defendants on January 17, 1946, of two "vertical Cochran boilers of 8,000 lb. per hour capacity heavy steaming," the plaintiffs negotiated for the purchase of one of them, and by April 26 had concluded a contract for its purchase at a price of 2,150l., loaded free on transport at Harpenden, where it was installed in the premises of the defendants. The defendants knew that the plaintiffs were launderers and dyers, and wanted the boiler for use in their business. Also, during the negotiations [530 the plaintiffs by letter expressed their intention to "put it into use in the shortest possible space of time." Arrangements were made by the plaintiffs with the defendants to take delivery at Harpenden on June 5, and the plaintiffs on that date sent a lorry to Harpenden to take delivery, but it was then ascertained that four days earlier the third parties, who had been employed by the defendants to dismantle the boiler, had allowed it to fall on its side and sustain damage. The plaintiffs refused to take delivery unless the damage was made good and ultimately the defendants agreed to arrange for the necessary repairs. The plaintiffs did not receive delivery of the boiler until November 8, 1946, and in the present action they claimed damages for breach of contract and sought to include in the damages loss of business profits during the period from June 5 to November 8, 1946.

Streatfeild J. gave judgment for the plaintiffs against the defendants for 110l. damages under certain minor heads, but held that they were not entitled to include in their measure of damages loss of business profits during the period of delay. The boiler, he said, was not a whole plant capable of being used by itself as a profit-making machine. Only the entire plant, including the vats, was a profit-making machine. The defendants were supplying the plaintiffs with only a part, the function of which they did not know, of that plant. The case fell, in his opinion, within the second rule in Hadley v. Baxendale ^[1] and the defendants were not liable for the loss of profits because the special object for which the plaintiffs were acquiring the boiler had not been drawn to the defendants' attention.

The plaintiffs appealed.

Beney K.C. and John Davidson for plaintiffs: The learned judge it is submitted came to a wrong decision. The speeches of their Lordships in A/B. Karlshamns Oljefabriker v. Monarch Steamship Co. Ld. ^[2] contain the latest pronouncement on the meaning of the rules in Hadley v. Baxendale ^[3]. Lord Wright said: "The ruling of Baron Alderson has consistently been followed, and the only difficulty, as Lord Sankey observed in Banco de Portugal v. Waterlow & Sons ^[4], has been in applying it. The distinction there drawn is between damages arising naturally (which means in the normal course of things) [531] and cases where there are special and extraordinary circumstances beyond the reasonable prevision of the parties. The distinction between these types is usually described in English law as that between general and special damages; the latter are such that if they are not communicated it would not be fair or reasonable to hold the defendant responsible for losses which he could not be taken to contemplate as likely to result from the breach of contract." He continued: "It appears that if the respondents had been claiming special and peculiar loss due to interference with their business such damages might, prima facie, be too remote and not proper to be recovered in the absence of notice when the contract was entered into .... But the respondents are claiming only for their loss directly due to the failure of the appellants to fulfil their promise to deliver the beans at Karlshamn. Their claim is not based on any extraordinary or peculiar matter, but is only what might be claimed by any party which suffers injury in the general circumstances of that business and at that time and place." If the defendants in this case had considered in April, 1946, the probable effects of a delay of five months, with due regard to what might reasonably be expected to occur, they could not have failed to foresee that some financial loss to the plaintiffs was a serious possibility. That, however, is not the test which the learned judge below appears to have applied. The defendants describe themselves as electrical engineers and manufacturers, and from the fact that they were asked if they would do the erection and fitting of the boiler they must have known that the boiler was to be put into operation and was not being purchased merely as a spare. Also the fact that by letter the plaintiffs had intimated their intention to put the boiler into use as speedily as possible justified the inference being drawn that speed was necessary. It must have been reasonably conveyed to the defendants that the boiler was wanted for use promptly. Although the facts in Cory v. Thames Ironworks Co. ^[5] were different from those in the present case, the test laid down to see into what category the case fell is of assistance in this case. The dividing line is not between a whole profit-earning plant and a part. It is a matter of degree. The test is what a reasonable hypothetical man would contemplate was the profitable use to which the article was to be put. It does not depend on actual knowledge, [532] but on what a reasonable person would contemplate. The appeal should be allowed and the matter referred to an official referee for the assessment of damages.

Paull K.C. and A. J. Hodgson for defendants. The measure of damages recoverable in any case of breach of contract must depend upon the inferences which the court is entitled to draw from the facts. The defendants here were selling a secondhand boiler. They had no special knowledge of the use of boilers generally and no knowledge of how laundries were run. There may be a great difference between a sale such as this and the sale of a chattel by manufacturers of and experts in the use of a particular chattel. The seller having no special knowledge or information that this part of machinery was essential for immediate profit-making, he is not liable for that loss of profit: Hadley v. Baxendale ^[6]. To saddle the defendant with liability where the loss of profit is due to special circumstances the court must be able to draw the inference that those circumstances have been brought to the notice of the defendant. The authorities draw a distinction between the supply of part of a profit-making machine and the supply of the machine itself: see Portman v. Middleton ^[7]. The fact that what is being supplied is only part of a plant negatives the idea that it is wanted for immediate use. Gee v. Lancashire and Yorkshire Railway ^[8] and British Columbia Sawmills v. Nettleship ^[9] are decisions strongly in favour of the present defendants. In the latter case it was expressly held that it was not sufficient that the defendant knew the thing supplied was going to be used in the plaintiffs' business. It must be found that the defendant had that knowledge at the time he entered into the contract and expressly or impliedly accepted liability for a breach. Special circumstances must have been brought to the knowledge of the other contracting party or else the claim comes under the second rule in Hadley v. Baxendale ^[10]. The defendants did not know that the boiler they were supplying was a bigger boiler than the one already possessed by the plaintiffs and therefore they must not be assumed to know that delay in delivery would cause loss of profits. They did not know that everything was ready for putting the boiler in place. So far as they knew it might be required as a spare. Mere knowledge that the boiler was to be [533] used in the plaintiffs' business is not sufficient to fix the defendants with liability.

Caplan for third parties.

Cur. adv. vult.

April 12. ASQUITH L.J. delivered the judgment of the court:

This is an appeal by the plaintiffs against a judgment of Streatfeild J. in so far as that judgment limited the damages to 110l. in respect of an alleged breach of contract by the defendants, which is now uncontested. The breach of contract consisted in the delivery of a boiler sold by the defendants to the plaintiffs some twenty odd weeks after the time fixed by the contract for delivery. The short point is whether, in addition to the 110l. awarded, the plaintiffs were entitled to claim in respect of loss of profits which they say they would have made if the boiler had been delivered punctually. Seeing that the issue is as to the measure of recoverable damage and the application of the rules in Hadley v. Baxendale ^[11], it is important to inquire what information the defendants possessed at the time when the contract was made, as to such matters as the time at which, and the purpose for which, the plaintiffs required the boiler. The defendants knew before, and at the time of the contract, that the plaintiffs were laundrymen and dyers, and required the boiler for purposes of their business as such. They also knew that the plaintiffs wanted the boiler for immediate use. On the latter point the correspondence is important. The contract was concluded by, and is contained in, a series of letters. In the earliest phases of the correspondence - that is, in letters of January 31 and February 1, 1946 - (which letters, as appears from their terms, followed a telephone call on the earlier date) - the defendants undertook to make the earliest possible arrangements for the dismantling and removal of the boiler. The natural inference from this is that in the telephone conversation referred to the plaintiffs had conveyed to the defendants that they required the boiler urgently. Again, on February 7 the plaintiffs write to the defendants: "We should appreciate your letting us know how quickly your people can dismantle it"; and finally, on April 26, in the concluding letter of the series by which the contract was made: "We are most anxious that this" (that is, the boiler) "should be put into use in the shortest possible space of time." Hence, up to and at the very moment [534] when a concluded contract emerged, the plaintiffs were pressing upon the defendants the need for expedition; and the last letter was a plain intimation that the boiler was wanted for immediate use. This is none the less so because when, later, the plaintiffs encountered delays in getting the necessary permits and licences, the exhortations to speed come from the other side, who wanted their money, which in fact they were paid in advance of delivery. The defendants knew the plaintiffs needed the boiler as soon as the delays should be overcome, and they knew by the beginning of June that such delays had by then in fact been overcome. The defendants did not know at the material time the precise role for which the boiler was cast in the plaintiffs' economy, e.g. whether (as the fact was) it was to function in substitution for an existing boiler of inferior capacity, or in replacement of an existing boiler of equal capacity, or as an extra unit to be operated side by side with and in addition to any existing boiler. It has indeed been argued strenuously that, for all they knew, it might have been wanted as a "spare" or "standby," provided in advance to replace an existing boiler when, perhaps some time hence, the latter should wear out; but such an intention to reserve it for future use seems quite inconsistent with the intention expressed in the letter of April 26, to "put it into use in the shortest possible space of time."

In this connexion, certain admissions made in the course of the hearing are of vital importance. The defendants formally admitted what in their defence they had originally traversed, namely, the facts alleged in para. 2 of the statement of claim. That paragraph reads as follows: "At the date of the contract hereinafter mentioned the defendants well knew as the fact was that the plaintiffs were launderers and dyers carrying on business at Windsor and required the said boiler for use in their said business and the said contract was made upon the basis that the said boiler was required for the said purpose."

On June 5 the plaintiffs, having heard that the boiler was ready, sent a lorry to Harpenden to take delivery. Mr. Lennard, a director of the plaintiff company, preceded the lorry in a car. He discovered on arrival that four days earlier the contractors employed by the defendants to dismantle the boiler had allowed it to fall on its side, sustaining injuries. Mr. Lennard declined to take delivery of the damaged [535] boiler in its existing condition and insisted that the damage must be made good. He was, we think, justified in this attitude, since no similar article could be bought in the market. After a long wrangle, the defendants agreed to perform the necessary repairs and, after further delay through the difficulty of finding a contractor who was free and able to perform them, completed the repairs by October 28. Delivery was taken by the plaintiffs on November 8 and the boiler was erected and working by early December. The plaintiffs claim, as part - the disputed part - of the damages, loss of the profits they would have earned if the machine had been delivered in early June instead of November. Evidence was led for the plaintiffs with the object of establishing that if the boiler had been punctually delivered, then, during the twenty odd weeks between then and the time of actual delivery, (1.) they could have taken on a very large number of new customers in the course of their laundry business, the demand for laundry services at that time being insatiable - they did in fact take on extra staff in the expectation of its delivery - and (2.) that they could and would have accepted a number of highly lucrative dyeing contracts for the Ministry of Supply. In the statement of claim, para. 10, the loss of profits under the first of these heads was quantified at 16l. a week and under the second at 262l. a week.

The evidence, however, which promised to be voluminous, had not gone very far when Mr. Paull, for the defendants, submitted that in law no loss of profits was recoverable at all, and that to continue to hear evidence as to its quantum was merely waste of time. He suggested that the question of remoteness of damage under this head should be decided on the existing materials, including the admissions to which we have referred. The learned judge accepted Mr. Paull's submission, and on that basis awarded 110l. damages under certain minor heads, but nothing in respect of loss of profits, which he held to be too remote. It is from that decision that the plaintiffs now appeal. It was a necessary consequence of the course which the case took that no evidence was given on behalf of the defendants, and only part of the evidence available to the plaintiffs. It should be observed parenthetically that the defendants had added as third parties the contractors who, by dropping the boiler, and causing the injuries to it, prevented its delivery in early June and caused the defendants to break their contract. Those third-party proceedings have been [536] adjourned pending the hearing of the present appeal as between the plaintiffs and the defendants. The third parties, nevertheless, were served with notice of appeal by the defendants and argument was heard for them at the hearing of the appeal.

The ground of the learned judge's decision, which we consider more fully later, may be summarized as follows: He took the view that the loss of profit claimed was due to special circumstances and therefore recoverable, if at all, only under the second rule in Hadley v. Baxendale and not recoverable in this case because such special circumstances were not at the time of the contract communicated to the defendants. He also attached much significance to the fact that the object supplied was not a self-sufficient profit-making article, but part of a larger profit-making whole, and cited in this connexion the cases of Portman v. Middleton ^[12] and British Columbia Sawmills v. Nettleship ^[13]. Before commenting on the learned judge's reasoning, we must refer to some of the authorities.

The authorities on recovery of loss of profits as a head of damage are not easy to reconcile. At one end of the scale stand cases where there has been non-delivery or delayed delivery of what is on the face of it obviously a profit-earning chattel; for instance, a merchant or passenger ship: see Fletcher v. Tayleur ^[14], In re Trent and Humber Company, ex parte Cambrian Steam Packet Company ^[15]; or some essential part of such a ship; for instance, a propeller, in Wilson v. General Ironscrew Company ^[16], or engines, Saint Line v. Richardson ^[17]. In such cases loss of profit has rarely been refused. A second and intermediate class of case in which loss of profit has often been awarded is where ordinary mercantile goods have been sold to a merchant with knowledge by the vendor that the purchaser wanted them for resale; at all events, where there was no market in which the purchaser could buy similar goods against the contract on the seller's default, see, for instance, Borries v. Hutchinson ^[18]. At the other end of the scale are cases where the defendant is not a vendor of the goods, but a carrier, see, for instance, Hadley v. Baxendale ^[19] and Gee v. Lancashire and Yorkshire Railway ^[20]. In such cases the courts have been slow to allow loss of [537] profit as an item of damage. This was not, it would seem, because a different principle applies in such cases, but because the application of the same principle leads to different results. A carrier commonly knows less than a seller about the purposes for which the buyer or consignee needs the goods, or about other "special circumstances" which may cause exceptional loss if due delivery is withheld.

Three of the authorities call for more detailed examination. First comes Hadley v. Baxendale ^[21] itself. Familiar though it is, we should first recall the memorable sentence in which the main principles laid down in this case are enshrined: "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 as 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." The limb of this sentence prefaced by "either" embodies the so-called "first" rule; that prefaced by "or" the "second." In considering the meaning and application of these rules, it is essential to bear clearly in mind the facts on which Hadley v. Baxendale ^[22] proceeded. The head-note is definitely misleading in so far as it says that the defendant's clerk, who attended at the office, was told that the mill was stopped and that the shaft must be delivered immediately. The same allegation figures in the statement of facts which are said on page 344 to have "appeared" at the trial before Crompton J. If the Court of Exchequer had accepted these facts as established, the court must, one would suppose, have decided the case the other way round; must, that is, have held the damage claimed was recoverable under the second rule. But it is reasonably plain from Alderson B's judgment that the court rejected this evidence, for on page 355 he says: "We find that the only circumstances here communicated by the plaintiffs to the defendants at the time when 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 that mill," and it is on this basis of fact that he proceeds to ask, "How do these circumstances show reasonably that the profits of the mill [538] must be stopped by an unreasonable delay in the delivery of the broken shaft by the carrier to the third person?"

British Columbia Sawmills v. Nettleship ^[23] annexes to the principle laid down in Hadley v. Baxendale ^[24] a rider to the effect that where knowledge of special circumstances is relied on as enhancing the damage recoverable that knowledge must have been brought home to the defendant at the time of the contract and in such circumstances that the defendant impliedly undertook to bear any special loss referable to a breach in those special circumstances. The knowledge which was lacking in that case on the part of the defendant was knowledge that the particular box of machinery negligently lost by the defendants was one without which the rest of the machinery could not be put together and would therefore be useless.

Cory v. Thames Ironworks Company ^[25]- a case strongly relied on by the plaintiffs - presented the peculiarity that the parties contemplated respectively different profit-making uses of the chattel sold by the defendant to the plaintiff. It was the hull of a boom derrick, and was delivered late. The plaintiffs were coal merchants, and the obvious use, and that to which the defendants believed it was to be put, was that of a coal store. The plaintiffs, on the other hand, the buyers, in fact intended to use it for transhipping coals from colliers to barges, a quite unprecedented use for a chattel of this kind, one quite unsuspected by the sellers and one calculated to yield much higher profits. The case accordingly decides, inter alia, what is the measure of damage recoverable when the parties are not ad idem in their contemplation of the use for which the article is needed. It was decided that in such a case no loss was recoverable beyond what would have resulted if the intended use had been that reasonably within the contemplation of the defendants, which in that case was the "obvious" use. This special complicating factor, the divergence between the knowledge and contemplation of the parties respectively, has somewhat obscured the general importance of the decision, which is in effect that the facts of the case brought it within the first rule of Hadley v. Baxendale ^[26] and enabled the plaintiff to recover loss of such profits as would have arisen from the normal and obvious use of the article. The "natural consequence," said Blackburn J., of not delivering the derrick was that 420l. representing those [539] normal profits was lost. Cockburn C.J., interposing during the argument, made the significant observation: "No doubt in order to recover damage arising from a special purpose the buyer must have communicated the special purpose to the seller; but there is one thing which must always be in the knowledge of both parties, which is that the thing is bought for the purpose of being in some way or other profitably applied." This observation is apposite to the present case. These three cases have on many occasions been approved by the House of Lords without any material qualification.

What propositions applicable to the present case emerge from the authorities as a whole, including those analysed above? We think they include the following:-

(1.) It is well settled that the governing purpose of damages is to put the party whose rights have been violated in the same position, so far as money can do so, as if his rights had been observed: (Sally Wertheim v. Chicoutimi Pulp Company ^[27]). This purpose, if relentlessly pursued, would provide him with a complete indemnity for all loss de facto resulting from a particular breach, however improbable, however unpredictable. This, in contract at least, is recognized as too harsh a rule. Hence,

(2.) In cases of breach of contract the aggrieved party is only entitled to recover such part of the loss actually resulting as was at the time of the contract reasonably forseeable as liable to result from the breach.

(3.) What was at that time reasonably so foreseeable depends on the knowledge then possessed by the parties or, at all events, by the party who later commits the breach.

(4.) For this purpose, knowledge "possessed" is of two kinds; one imputed, the other actual. Everyone, as a reasonable person, is taken to know the "ordinary course of things" and consequently what loss is liable to result from a breach of contract in that ordinary course. This is the subject matter of the "first rule" in Hadley v. Baxendale ^[28]. But to this knowledge, which a contract-breaker is assumed to possess whether he actually possesses it or not, there may have to be added in a particular case knowledge which he actually possesses, of special circumstances outside the "ordinary course of things," of such a kind that a breach in those special circumstances would be liable to cause more loss. Such a case attracts the operation of the "second rule" so as to make additional loss also recoverable.

[540] (5.) In order to make the contract-breaker liable under either rule it is not necessary that he should actually have asked himself what loss is liable to result from a breach. As has often been pointed out, parties at the time of contracting contemplate not the breach of the contract, but its performance. It suffices that, if he had considered the question, he would as a reasonable man have concluded that the loss in question was liable to result (see certain observations of Lord du Parcq in the recent case of A/B Karlshamns Oljefabriker v. Monarch Steamship Company Limited ^[29].)

(6.) Nor, finally, to make a particular loss recoverable, need it be proved that upon a given state of knowledge the defendant could, as a reasonable man, foresee that a breach must necessarily result in that loss. It is enough if he could foresee it was likely so to result. It is indeed enough, to borrow from the language of Lord du Parcq in the same case, at page 158, if the loss (or some factor without which it would not have occurred) is a "serious possibility" or a "real danger." For short, we have used the word "liable" to result. Possibly the colloquialism "on the cards" indicates the shade of meaning with some approach to accuracy.

If these, indeed, are the principles applicable, what is the effect of their application to the facts of this case? We have, at the beginning of this judgment, summarized the main relevant facts. The defendants were an engineering company supplying a boiler to a laundry. We reject the submission for the defendants that an engineering company knows no more than the plain man about boilers or the purposes to which they are commonly put by different classes of purchasers, including laundries. The defendant company were not, it is true, manufacturers of this boiler or dealers in boilers, but they gave a highly technical and comprehensive description of this boiler to the plaintiffs by letter of January 19, 1946, and offered both to dismantle the boiler at Harpenden and to re-erect it on the plaintiffs' premises. Of the uses or purposes to which boilers are put, they would clearly know more than the uninstructed layman. Again, they knew they were supplying the boiler to a company carrying on the business of laundrymen and dyers, for use in that business. The obvious use of a boiler, in such a business, is surely to boil water for the purpose of washing or dyeing. A laundry might conceivably buy a boiler for some other purpose; for instance, to [541] work radiators or warm bath water for the comfort of its employees or directors, or to use for research, or to exhibit in a museum. All these purposes are possible, but the first is the obvious purpose which, in the case of a laundry, leaps to the average eye. If the purpose then be to wash or dye, why does the company want to wash or dye, unless for purposes of business advantage, in which term we, for the purposes of the rest of this judgment, include maintenance or increase of profit, or reduction of loss? (We shall speak henceforward not of loss of profit, but of "loss of business.") No commercial concern commonly purchases for the purposes of its business a very large and expensive structure like this - a boiler 19 feet high and costing over 2,000l. - with any other motive, and no supplier, let alone an engineering company, which has promised delivery of such an article by a particular date, with knowledge that it was to be put into use immediately on delivery, can reasonably contend that it could not foresee that loss of business (in the sense indicated above) would be liable to result to the purchaser from a long delay in the delivery thereof. The suggestion that, for all the supplier knew, the boiler might have been needed simply as a "standby," to be used in a possibly distant future, is gratuitous and was plainly negatived by the terms of the letter of April 26, 1946.

Since we are differing from a carefully reasoned judgment, we think it due to the learned judge to indicate the grounds of our dissent. In that judgment, after stressing the fact that the defendants were not manufacturers of this boiler or of any boilers (a fact which is indisputable), nor (what is disputable) people possessing any special knowledge not common to the general public of boilers or laundries as possible users thereof, he goes on to say: "That is the general principle and I think that the principle running through the cases is this - and to this extent I agree with Mr. Beney - that if there is nothing unusual, if it is a normal user of the plant, then it may well be that the parties must be taken to contemplate that the loss of profits may result from non-delivery, or the delay in delivery, of the particular article. On the other hand, if there are, as I think there are here, special circumstances, I do not think that the defendants are liable for loss of profits unless these special circumstances were drawn to their notice. In looking at the cases, I think there is a distinction as Mr. Paull has pointed out and insists upon, between the [542] supply of the part of the profit-making machine, as against the profit-making machine itself." Then, after referring to Portman v. Middleton ^[30], he continues: "It is to be observed that not only must the circumstances be known to the supplier, but they must be such that the object must be taken to have been within the contemplation of both parties. I do not think that on the facts of the case as I have heard them, and upon the admissions, it can be said that it was within the contemplation of the supplier, namely, the defendants, that any delay in the delivery of this boiler was going to lead necessarily to loss of profits. There was nothing that I know of in the evidence to indicate how it was to be used or whether delivery of it by a particular day would necessarily be vital to the earning of these profits. I agree with the propositions of Mr. Paull that it was no part of the contract, and it cannot be taken to have been the basis of the contract, that the laundry would be unable to work if there was a delay in the delivery of the boiler, or that the laundry was extending its business, or that it had any special contracts which they could fulfil only by getting delivery of this boiler. In my view, therefore, this case falls within the second rule of Hadley v. Baxendale ^[31] under which they are not liable for the payment of damages for loss of profits unless there is evidence before the court - which there is not - that the special object of this boiler was drawn to their attention and that they contracted upon the basis that delay in the delivery of the boiler would make them liable to payment of loss of profits."

The answer to this reasoning has largely been anticipated in what has been said above, but we would wish to add: First, that the learned judge appears to infer that because certain "special circumstances" were, in his view, not "drawn to the notice of" the defendants and therefore, in his view, the operation of the "second rule" was excluded, ergo nothing in respect of loss of business can be recovered under the "first rule." This inference is, in our view, no more justified in the present case than it was in the case of Cory v. Thames Ironworks Company ^[32]. Secondly, that while it is not wholly clear what were the "special circumstances" on the non-communication of which the learned judge relied, it would seem that they were, or included, the following:- (a) the [543] "circumstance" that delay in delivering the boiler was going to lead "necessarily" to loss of profits. But the true criterion is surely not what was bound "necessarily" to result, but what was likely or liable to do so, and we think that it was amply conveyed to the defendants by what was communicated to them (plus what was patent without express communication) that delay in delivery was likely to lead to "loss of business"; (b) the "circumstance" that the plaintiffs needed the boiler "to extend their business." It was surely not necessary for the defendants to be specifically informed of this, as a precondition of being liable for loss of business. Reasonable, persons in the shoes of the defendants must be taken to foresee without any express intimation, that a laundry which, at a time when there was a famine of laundry facilities, was paying 2,000l. odd for plant and intended at such a time to put such plant "into use" immediately, would be likely to suffer in pocket from five months' delay in delivery of the plant in question, whether they intended by means of it to extend their business, or merely to maintain it, or to reduce a loss; (c) the "circumstance" that the plaintiffs had the assured expectation of special contracts, which they could only fulfil by securing punctual delivery of the boiler. Here, no doubt, the learned judge had in mind the particularly lucrative dyeing contracts to which the plaintiffs looked forward and which they mention in para. 10 of the statement of claim. We agree that in order that the plaintiffs should recover specifically and as such the profits expected on these contracts, the defendants would have had to know, at the time of their agreement with the plaintiffs, of the prospect and terms of such contracts. We also agree that they did not in fact know these things. It does not, however, follow that the plaintiffs are precluded from recovering some general (and perhaps conjectural) sum for loss of business in respect of dyeing contracts to be reasonably expected, any more than in respect of laundering contracts to be reasonably expected.

Thirdly, the other point on which Streatfeild J. largely based his judgment was that there is a critical difference between the measure of damages applicable when the defendant defaults in supplying a self-contained profit-earning whole and when he defaults in supplying a part of that whole. In our view, there is no intrinsic magic, in this connexion, in the whole as against a part. The fact that a part only is involved is only significant in so far as it bears on the capacity of the [544] supplier to foresee the consequences of non-delivery. If it is clear from the nature of the part (or the supplier of it is informed) that its non-delivery will have the same effect as non-delivery of the whole, his liability will be the same as if he had defaulted in delivering the whole. The cases of Hadley v. Baxendale ^[33], British Columbia Sawmills v. Nettleship ^[34] and Portman v. Middleton ^[35], which were so strongly relied on for the defence and by the learned judge, were all cases in which, through want of a part, catastrophic results ensued, in that a whole concern was paralysed or sterilized; a mill stopped, a complex of machinery unable to be assembled, a threshing machine unable to be delivered in time for the harvest and therefore useless. In all three cases the defendants were absolved from liability to compensate the plaintiffs for the resulting loss of business, not because what they had failed to deliver was a part, but because there had been nothing to convey to them that want of that part would stultify the whole business of the person for whose benefit the part was contracted for. There is no resemblance between these cases and the present, in which, while there was no question of a total stoppage resulting from non-delivery, yet there was ample means of knowledge on the part of the defendants that business loss of some sort would be likely to result to the plaintiffs from the defendants' default in performing their contract.

We are therefore of opinion that the appeal should be allowed and the issue referred to an official referee as to what damage, if any, is recoverable in addition to the 110l. awarded by the learned trial judge. The official referee would assess those damages in consonance with the findings in this judgment as to what the defendants knew or must be taken to have known at the material time, either party to be at liberty to call evidence as to the quantum of the damage in dispute.

Appeal allowed.

Solicitors for plaintiffs: Kenneth Brown, Baker, Baker.

Solicitors for defendants: Braikenridge & Edwards for Veale & Co., Bristol.

Solicitors for third parties: Bosman, Robinson & Co.

A. W. G.

[1] (1854) 9 Exch. 341.

[2] [1948] A. C. 196.

[3] (1854) 9 Exch. 341.

[4] [1932] A. C. 452.

[5] (1868) L. R. 3 Q. B. 181.

[6] 9 Exch. 341.

[7] (1858) 4 C. B. (N. S.) 322.

[8] (1860) 6 H. &. N. 211.

[9] (1868) L. R. 3 C. P. 499.

[10] 9 Exch. 341.

[11] 9 Exch. 341.

[12] 4 C. B. (N. S.) 322.

[13] L. R. 3 C. P. 499.

[14] (1855) 17 C. B. 21.

[15] (1868) L. R. 6 Eq. 396.

[16] (1878) 47 L. J. (Q. B.) 23.

[17] [1940] 2 K. B. 99.

[18] (1865) 18 C. B. (N. S.) 445.

[19] 9 Exch. 341.

[20] 6 H. & N. 211.

[21] 9 Exch. 341.

[22] 9 Exch. 341.

[23] L. R. 3 C. P. 409.

[24] 9 Exch. 341.

[25] L. R. 3 Q. B. 181, 187.

[26] 9 Exch. 341.

[27] [1911] A. C. 301.

[28] 9 Exch. 341.

[29] [1949] A. C. 196.

[30] 4 C. B. (N. S.) 322.

[31] 9 Exch. 341.

[32] L. R. 3 Q. B. 181.

[33] 9 Exch. 341.

[34] L. R. 3 C. P. 499.

[35] 4 C. B. (N. S.) 322.

[107] Paul J. Chitwood, Dallas, Tex., for plaintiff-appellant.

Howard P. Newton, San Antonio, Tex., for defendant-appellee.

Before WISDOM, HILL and VANCE, Circuit Judges.

Rehearing and Rehearing En Banc Denied December 20, 1979.

VANCE, Circuit Judge:

Martinez appeals the trial court's dismissal of his claim under 49 U.S.C. § 20(11) (Carmack Amendment to the Interstate Commerce Act) for losses resulting from delay and damage in transportation by carrier Southern Pacific. The district court granted Southern Pacific's motion under Rule 12(b)(6) to dismiss the claim for delay damages. It held that such damages are special and Martinez failed to allege that the carrier had any notice of the possibility that such damages would accrue upon a breach of the contract between the parties. We reverse and remand for trial on the claim for some but not all of the damages sought.

Martinez's agent delivered a 2400 Lima Dragline, Model 66, to the Penn Central Railroad, the origin carrier, on February 11, 1974, for shipment from New Philadelphia, Ohio to Eagle Pass, Texas. The dragline was loaded onto five separate railroad cars. A single uniform bill of lading, which described the dragline as "used strip mining machinery and parts," was issued by Penn Central, listing Martinez's agent in Eagle Pass as the consignee.

The last of the five cars, which were shipped separately, arrived in Eagle Pass on April 2, 1974. Martinez had to make reasonable repairs in the amount of $14,467.00 because the dragline was damaged in transit. These repairs were not completed until June 20, 1974. Martinez also alleges delay damages in the amount of $117,600.00 because the dragline could not be used from March 1, when he contends that the last of the cars should have arrived, until June 20. The claimed sum represents the dragline's fair rental value during this period.

After filing a claim as prescribed by the bill of lading, Martinez sued Southern Pacific, which as delivering carrier is liable for all recoverable damages. Martinez framed his original complaint to allege three separate claims under the Carmack Amendment. First, Martinez sought recovery of the cost of repairing the damage to the [108] dragline. Second, he sought the refund of certain demurrage or storage charges assessed by Southern Pacific and paid at the time of delivery. Third, Martinez sought compensation for wrongful deprivation of the dragline's use during the periods of delay in transit and of repair.

Martinez and Southern Pacific had already settled the first two of these claims, when Southern Pacific filed its Rule 12(b)(6) motion to dismiss the third claim for loss of use. Southern Pacific argues that, because such damages are special, they are not recoverable under the Carmack Amendment absent notice of the possibility of such damages. The trial court denied this motion upon condition that Martinez amend his complaint to allege such notice. When Martinez refused, the district court granted Southern Pacific's motion under Rule 12(b)(6). This ruling, which had the effect of dismissing all that remained of Martinez's suit, is the basis of this appeal.

Martinez's delay claim involves two very different items. Lost use during the period of March 1 until April 2 resulted from a delay in transit. Lost use from April 2 until June 20 resulted from repair of the damaged goods. Neither the parties nor the district court have focused on the full import of this distinction. Martinez's claimed loss during repair is not severable from the physical damage to the dragline but is a part of the same legal claim. Thus Martinez necessarily settled his claim regarding damages for the repair period when he settled his first claim for damages to the dragline. The surviving issue is the appropriate measure of damages for the claimed loss resulting from Southern Pacific's unreasonable delay in transportation.

The Carmack Amendment^[1] governs Martinez's claim for damages resulting from the delay in transit. That amendment incorporates common law principles for damages. F. J. McCarty Co. v. Southern Pacific Co., 428 F.2d 690, 693 (9th Cir. 1970); L. E. Whitlock Truck Service, Inc. v. Regal Drilling Co., 333 F.2d 488, 491 (10th Cir. 1964); J & H Flyer Inc. v. Pennsylvania Rr., 316 F.2d 203, 205 (2d Cir. 1963). In applying that statute, we first examine the extent to which the innocent party actually has been injured by the alleged breach. This inquiry assists in determining how the innocent party can be restored to the position in which he would have been had the contract been fully performed. See Liberty Navigation & Trading Co. v. Kinoshita & Co., 285 F.2d 343, 350 (2d Cir. 1960) (Lumbard, C. J., concurring in relevant part), cert. denied, 366 U.S. 949, 81 S.Ct. 1904, 6 L.Ed.2d 1242 (1961); 11 Williston on Contracts § 1338, at 198 (3d ed. W. Jaeger 1968).

Normally, the remedy is an award of money damages to the aggrieved party as compensation for his economic injury.^[2] This rule in effect protects the innocent party's expectation interest, giving him the "benefit of the bargain."^[3] Martinez's alleged injury in this case was deprivation of the dragline's use between March 1, when it should have been delivered, and April 2. [109] Besides compensating the injured plaintiff, the common law also seeks to protect the defendant from unforeseeable large losses to the plaintiff.^[4] This limitation makes good sense. An award of full compensation for all of the plaintiff's losses due to the breach, no matter how unforeseeable or bizarre these losses are, would simply be unfair to the defendant as well as possibly paralyzing to commerce.

We next assess the reasonable foreseeability of the plaintiff's actual injury at the time of entry into the contract—here the bill of lading. Globe Refining Co. v. Landa Cotton Oil Co., 190 U.S. 540, 544, 23 S.Ct. 754, 47 L.Ed. 1171 (1903); De Fore v. United States, 145 F.Supp. 484, 491 (M.D. Ga.1956), aff'd sub nom. Georgia Kaolin Co. v. United States, 249 F.2d 148 (5th Cir. 1957). Our analysis on this point begins with Hadley v. Baxendale, 9 Ex. 341, 156 Eng.Rep. 145 (1854). There, mill operators were forced to close operations to ship a broken shaft for repairs, and the carrier negligently delayed shipment. The carrier, however, had not been informed of the situation at the mill. The court refused to award profits lost during the period of delay because such damages were not in the contemplation of the parties. The court articulated the rules, still almost universally followed,^[5] that general damages are awarded only if injury were foreseeable to a reasonable man and that special damages are awarded only if actual notice were given the carrier of the possibility of injury.^[6] Damage is foreseeable by the carrier if it is the proximate and usual consequence of the carrier's action. 11 Williston on Contracts, supra § 1344, at 226.

Martinez asserts that his loss resulting from the delay in shipment was reasonably foreseeable when he entered the contract to transport his dragline. Hadley held that the damages arising from an inoperative mill were not foreseeable results of delayed shipment of a shaft, without specific notice. It was not obvious that the shaft in Hadley was an indispensable element of a mill. In the instant case, however, it was obvious that the dragline is a machine which of itself has a use value. Some cases after Hadley have suggested that the injury resulting from loss of a machine's use are not foreseeable results of delayed transport, because it is not a usual consequence although it is a proximate consequence. See 11 Williston on Contracts, supra § 1344, at 226-27. These decisions are unwarranted extensions of Hadley and employ arbitrary and inflexible definitions of foreseeability. Capital goods such as machinery have a use value, which may equal the rental value of the equipment or may be an interest value. The latter is ordinarily interest at the market rate on the value of the machine. It might be quite foreseeable that deprivation of the machine's use because of a carriage delay will cause a loss of rental value or interest value during the delay period.^[7] [110] See generally F. Kessler & G. Gilmore, Contracts 1042 (2d ed. 1970). We must not lose sight of the basic common law rule, enunciated in Hadley, of damages for foreseeable loss. The amount of damages that was reasonably foreseeable involves a fact question that Martinez is entitled to present to a jury.

Southern Pacific replies that it was as foreseeable that the goods were to be sold as that they were to be used. This contention proves too much because Hadley allows recovery for harms that should have been foreseen. The general rule does not require the plaintiff to show that the actual harm suffered was the most foreseeable of possible harms. He need only demonstrate that his harm was not so remote as to make it unforeseeable to a reasonable man at the time of contracting. Even if the dragline were being shipped for sale it does not follow that delay in shipment would cause no recoverable loss.

Southern Pacific argues that, because only market value damages are foreseeable under common law, damages for lost rental value must be special and therefore require notice by Martinez. This argument confuses one common law method for computing damages with the underlying common law rule of awarding reasonable compensation for foreseeable injury from a contract's breach.

The common law employs a number of methods for computing damages recoverable for unreasonable delay in shipment. One of these is the market value test that measures damages by the diminution in the goods' value between the time of dispatch and the time of actual delivery. See 11 Williston on Contracts, supra § 1342, at 223. That test, however, "is merely a method," and it "is not applied in cases where . . . another rule will better compute actual damages." Great Atlantic & Pacific Tea Co. v. Atchison, T. & Ste. F. Ry., 333 F.2d 705, 708 (7th Cir. 1964), cert. denied, 379 U.S. 967, 85 S.Ct. 661, 13 L.Ed.2d 560 (1965). Accord, Olsen v. Railway Express Agency, Inc., 295 F.2d 358, 359 (10th Cir. 1961). Cf. Illinois Cent. Ry. v. Crail, 281 U.S. 57, 64-65, 50 S.Ct. 180, 74 L.Ed. 699 (1930) (Cummins Amendment). Lost rental value is frequently an appropriate measure of damages from a delay in shipment of machinery.^[8]See Resolute Ins. Co. v. Percy Jones, Inc., 198 F.2d 309, 312 (10th Cir. 1952). E. g., Burlington Northern Inc. v. United States, 462 F.2d 526, 529-30, 199 Ct.Cl. 143 (1972); New Orleans & N. E. R. v. J. H. Miner Saw Mfg. Co., 117 Miss. 646, 78 So. 577, 578 (1918). In deciding which measure of damage to apply, courts look to the actual loss suffered by the plaintiff and the common law rule of compensating that loss.

There is only one rule, of universal application, . . . and that is to give compensation for the loss suffered. Frequently, this ideal is found impossible of complete attainment; perhaps generally the market value rule is found to be the nearest approach to reaching the actual loss. But the market value rule is inapplicable when, on the facts, it is not the nearest practicable approach to an ascertainment of the actual loss. Each case must be governed by its own facts. [111] United States v. Palmer & Parker Co., 61 F.2d 455, 459 (1st Cir. 1932). The Carmack Amendment, in compensating the aggrieved party's "full actual loss," does not restrict the measure of damages solely to the diminution in value of the goods involved. Great Atlantic & Pacific Tea Co. v. Atchison, T. & Ste. F. Ry., 333 F.2d at 708-09.^[9]

Martinez has stated a claim for damages resulting from the delay in shipment. We reverse the district court's order of dismissal on this point, and remand for trial. We affirm, however, the district court's decision to dismiss Martinez's claim for damages resulting from the delay during repair.

REVERSED AND REMANDED IN PART; AFFIRMED IN PART.

[1] The Carmack Amendment, 49 U.S.C. § 20(11), provides that any common carrier subject to the provisions of the Interstate Commerce Act, such as Southern Pacific, who receives property for transportation in interstate commerce shall be liable for damages it causes in the amount of "the full actual loss, damage or injury" suffered. Federal law controls our determination of liability and the measure of damages, Dublin Co. v. Ryder Truck Lines, Inc., 417 F.2d 777, 778 (5th Cir. 1969), although it adopts common law principles.

[2] In some situations in which money damages cannot adequately compensate the innocent party, the court may order specific performance of the contract.

[3] Damages may be awarded for the expectation interest, the reliance interest, or the restitution interest of the aggrieved party. Fuller & Perdue, The Reliance Interest in Contract Damages (pts. 1-2), 46 Yale L.J. 52, 373 (1936-1937); J. Calamari & J. Perillo, Contracts § 205, at 328-29 (1970). If it is impossible to calculate a plaintiff's expectation interest, courts award damages to protect his reliance interest, to restore him to his position before the contract was entered. If reliance damages do not represent a fair measure of recovery, courts calculate damages on the basis of the restitution interest, to restore the benefit received from the plaintiff's performance.

[4] In addition to the foreseeability limitation, damages may also be limited because of uncertainty, e. g., United States v. Huff, 175 F.2d 678, 680 (5th Cir. 1949), or because of failure to mitigate damages, e. g., De Fore v. United States, 145 F.Supp. 484, 493 (M.D.Ga.1956), aff'd sub nom. Georgia Kaolin Co. v. United States, 249 F.2d 148 (5th Cir. 1957).

[5] J. Calamari & J. Perillo, supra note 3, at 329. As Professor Gilmore admonished, Hadley "has meant all things to all men." G. Gilmore, The Death of Contract 50 (1974).

[6] There are two tests for determining special damages. The more restrictive test requires proof both that notice was given of special circumstances and that the defendant impliedly or expressly assented to bearing the risk of these damages. Globe Refining Co. v. Landa Cotton Oil Co., 190 U.S. 540, 23 S.Ct. 754, 47 L.Ed. 1171 (1903). The more common test rejects the added showing of a tacit agreement for special damages. E. g., L. E. Whitlock Truck Svc., Inc. v. Regal Drilling Co., 333 F.2d at 492; U.C.C. § 2-715, Comment 2.

[7] Unlike loss of use, Martinez would have had to plead notice had he sought to recover for a variety of damages that could not have been foreseeable here such as lost profits, the cost of idle labor hired to operate the dragline, the cost of idle equipment that had been rented to be used with the dragline, or the daily royalties Martinez was paying for the land on which he planned to run his dragline. Cf. Texas Instruments, Inc. v. Branch Motor Express Co., 308 F.Supp. 1228, 1230 (D.Mass.), aff'd, 432 F.2d 564 (1st Cir. 1970) (unforeseeable consequences of delay due to total destruction of machinery in transit). Thus Martinez may recover for lost use of the machine but not for the costs of the mining operations in which the machine was to be involved. Similarly, Hadley held that one cannot equate a shaft with the operation of an entire mill unless notice of the shaft's use had been given to the carrier. The result in Hadley might have been different had the plaintiff sought to recover solely for the loss of use of the shaft.

[8] Diminution in market value is a proper measure of damages from a delay in carriage of food and other non-rentable goods. E. g., Gulf, C., & Ste. F. Ry. v. Texas Packing Co., 244 U.S. 31, 37, 37 S.Ct. 487, 61 L.Ed. 970 (1917) (poultry); Fort Worth & D. Ry. v. United States, 242 F.2d 702, 705 (5th Cir. 1957) (livestock feed); Reider v. Thompson, 197 F.2d 158, 160 (5th Cir. 1952) (sheepskins). However, this test is generally not as accurate a measure of injury from a delay in transport of capital goods, with an ascertainable rental value for the machinery or interest value of the invested sum. Otherwise, a carrier could breach its contractual duties with impunity as long as the market value of the equipment did not drop, even though the shipper might lose a substantial use value or pay high installment purchase costs.

[9] This holding should hardly surprise Southern Pacific. F. J. McCarty Co. v. Southern Pacific Co., 428 F.2d 690 (9th Cir. 1970) (rejecting Southern Pacific's arguments for market value test and against "special damages").

Law Offices of Joseph A. Golden (by Joseph A. Golden and Patricia A. Stamler) for the plaintiff.

Garan, Lucow, Miller, Seward, Cooper & Becker, P.C. (by Milton Lucow), and Gromek, Bendure & Thomas (by Daniel J. Wright), of counsel, for the defendant.

Amici Curiae:

The Fishman Group (by Steven J. Fishman and Malcolm D. Brown) for Michigan State Chamber of Commerce.

Stark & Gordon (by Sheldon J. Stark) for Michigan Trial Lawyers Association.

LEVIN, J.

Sharon Valentine seeks to recover mental distress damages arising out of the alleged breach of an employment contract. Valentine claims that, under the contract, she was entitled to [258] job security and the peace of mind that is associated with job security. Because an employment contract providing for job security has a personal element, and breach of such a contract can be expected to result in mental distress, Valentine argues that she should be able to recover mental distress damages. She also asks for exemplary damages.

The Court of Appeals affirmed the decision of the trial court dismissing the claims for mental distress and exemplary damages.^[1] We affirm.

I

In Toussaint v Blue Cross & Blue Shield of Michigan, 408 Mich 579; 292 NW2d 880 (1980), this Court held that an employment contract providing that an employee would not be terminated except for cause was enforceable although no definite term of employment was stated.

Toussaint makes employment contracts which provide that an employee will not be dismissed except for cause enforceable in the same manner as other contracts. It did not recognize employment as a fundamental right or create a new "special" right. The only right held in Toussaint to be enforceable was the right that arose out of the promise not to terminate except for cause.

Employers and employees remain free to provide, or not to provide, for job security. Absent a contractual provision for job security, either the employer or the employee may ordinarily terminate [259] an employment contract at any time for any, or no, reason.^[2] The obligation which gave rise to this action is based on the agreement of the parties;^[3] it is not an obligation imposed on the employer by law. This is an action for breach of contract and not a tort action.

II

Valentine may not recover mental distress damages for breach of the employment contract, although such damages may have been foreseeable and she might not be "made whole" absent an award of mental distress damages.

Valentine relies on the rule of Hadley v Baxendale, 9 Exch 341; 156 Eng Rep 145 (1854), which provides that damages recoverable for a breach of contract are those that "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."^[4]

Although courts frequently begin analysis with a reference to the rule stated in Hadley v Baxendale,^[5] that rule has not been applied scrupulously. As stated by Professor Dobbs in his treatise on [260] remedies, a "difficulty in the Hadley type case is that the test of foreseeability [i.e., whether damages `arise naturally'^[6]] has little or no meaning. The idea is so readily subject to expansion or contraction that it becomes in fact merely a technical way in which the judges can state their conclusion."^[7]

Under the rule of Hadley v Baxendale, literally applied, damages for mental distress would be recoverable for virtually every breach of contract. Professor Dobbs said:

"When a defendant breaches a contract, this may and often does cause pecuniary loss to the other party, at least temporarily. It is a common experience of mankind that pecuniary loss almost invariably causes some form and degree of mental distress."^[8]

In Stewart v Rudner, 349 Mich 459, 470; 84 NW2d 816 (1957), this Court said that "all breaches of contract do more or less" cause "vexation and annoyance"; similarly, see Kewin v Massachusetts Mutual Life Ins Co, 409 Mich 401, 417; 295 NW2d 50 (1980).^[9]

Yet the general rule, with few exceptions, is to "uniformly den[y]" recovery for mental distress damages although they are "foreseeable within the rule of Hadley v Baxendale."^[10] The rule barring recovery of mental distress damages — a gloss on the generality of the rule stated in Hadley v [261] Baxendale — is fully applicable to an action for breach of an employment contract.^[11]

The denial of mental distress damages, although the result is to leave the plaintiff with less than a full recovery, has analogy in the law. The law does not generally compensate for all losses suffered.^[12] Recovery is denied for attorney's fees,^[13] for mental anguish not accompanied by physical manifestation,^[14] and "make-whole" or full recovery has been denied where the cost of performance exceeds the value to the promisee.^[15] The courts have not, despite "make whole" generalizations regarding the damages recoverable,^[16] attempted to provide compensation for all losses. Instead, specific rules have been established that provide for the calculation of the damages recoverable in particular kinds of actions.^[17] In contract actions, the market price is the general standard.^[18]

In determining what damages are recoverable, the courts of this state have qualified the general [262] rule, pursuant to which mental distress damages for breach of contract are not recoverable, with a narrow exception. Rather than look to the foreseeability of loss to determine the applicability of the exception, the courts have considered whether the contract "has elements of personality"^[19] and whether the "damage suffered upon the breach of the agreement is capable of adequate compensation by reference to the terms of the contract."^[20]

The narrow scope of those verbal formulas appears on consideration of the limited situations in which this Court has allowed the recovery of mental distress damages for breach of contract. In Vanderpool v Richardson, 52 Mich 336; 17 NW 936 (1883), recovery was allowed for breach of a promise to marry. In Stewart v Rudner, 349 Mich 459; 84 NW2d 816 (1957), a doctor who failed to fulfill his promise to deliver a child by caesarean section was required to pay mental distress damages. In Miholevich v Mid-West Mutual Auto Ins Co, 261 Mich 495; 246 NW 202 (1933), the plaintiff, who was jailed for failure to pay a liability judgment, recovered mental distress damages from an insurer who had failed to pay the judgment.^[21]

Loss of a job is not comparable to the loss of a marriage or a child and generally results in estimable monetary damages. In Miholevich, the breach resulted in a deprivation of personal liberty.^[22]

[263] An employment contract will indeed often have a personal element. Employment is an important aspect of most persons' lives, and the breach of an employment contract may result in emotional distress. The primary purpose in forming such contracts, however, is economic and not to secure the protection of personal interests. The psychic satisfaction of the employment is secondary.

Mental distress damages for breach of contract have not been awarded where there is a market standard by which damages can be adequately determined. Valentine's monetary loss can be estimated with reasonable certainty according to the terms of the contract and the market for, or the market value of, her service. Mental distress damages are not awarded an employee found to have been wrongfully discharged in violation of a collective-bargaining agreement.^[23]

We conclude, because an employment contract is not entered into primarily to secure the protection of personal interests and pecuniary damages can be estimated with reasonable certainty, that a person discharged in breach of an employment contract may not recover mental distress damages.

III

Valentine has not separately argued her exemplary damage claim. In Kewin, supra, pp 420-421, this Court said that "absent allegation and proof of tortious conduct existing independent of the breach, * * * exemplary damages may not be awarded in common-law actions brought for breach of a commercial contract." Valentine failed to plead the requisite purposeful tortious conduct, [264] and therefore she may not recover exemplary damages.

Affirmed.

WILLIAMS, C.J., and KAVANAGH, RYAN, BRICKLEY, CAVANAGH, and BOYLE, JJ., concurred with LEVIN, J.

[1] On April 11, 1980, Valentine filed an action alleging breach of a contract of employment and intentional infliction of mental distress. She sought mental distress damages and exemplary damages. On June 1, 1981, the trial court granted defendant General American Credit's motion for partial summary judgment on the issues of mental distress damages and exemplary damages. The Court of Appeals, dividing two-to-one, affirmed. Valentine v General American Credit, Inc, 123 Mich App 521; 332 NW2d 591 (1983).

[2] See Suchodolski v Michigan Consolidated Gas Co, 412 Mich 692, 694-695; 316 NW2d 710 (1982), and Clifford v Cactus Drilling Corp, 419 Mich 356, 360; 353 NW2d 469 (1984).

[3] McIntosh v Groomes, 227 Mich 215, 218; 198 NW 954 (1924); Lichnovsky v Ziebart Int'l Corp, 414 Mich 228, 241, fn 23; 324 NW2d 732 (1982); Prosser & Keeton, Torts (5th ed), § 92, pp 655-656; 17 Am Jur 2d, Contracts, § 1, p 333.

[4] Hadley, supra, p 354.

[5] See Frederick v Hillebrand, 199 Mich 333, 341; 165 NW 810 (1917); 1 Restatement Contracts, § 330, p 509; 3 Restatement Contracts, 2d, § 351, p 135; 5 Corbin, Contracts, § 1007, p 70; Grismore, Contracts (rev ed), § 196, p 302.

[6] See 5 Corbin, Contracts, § 1007, p 70.

[7] Dobbs, Remedies, § 12.3, p 814. See also Dobbs, § 12.3, p 804; 5 Corbin, Contracts, § 1007, pp 70-71.

[8] Dobbs, Remedies, § 12.4, p 819.

[9] In Kewin, supra, p 417, this Court said that the breach of "almost any agreement, results in some annoyance and vexation."

[10] Grismore, Contracts (rev ed), § 203, p 320. See also Kewin, supra, p 414; Dobbs, Remedies, § 12.4, p 819.

[11] McCormick, Damages, § 163, pp 637-638, and cases cited therein. See also Paxson v Cass County Road Comm, 325 Mich 276, 278-279; 38 NW2d 315 (1949) (Court noted that the trial court had ordered a remittitur of mental distress damages, but did not address the question); Fisher v General Telephone Co of the Northwest, Inc, 510 F Supp 347 (ED Mich, 1980); Isagholian v Carnegie Institute of Detroit, Inc, 51 Mich App 220; 214 NW2d 864 (1974).

[12] See Dobbs, Remedies, § 1.1, pp 1, 5 and § 3.2, p 146.

[13] Bullock v Taylor, 39 Mich 137, 140 (1878); Dobbs, Remedies, § 3.8, p 194; 5 Corbin, Contracts, § 1037, pp 225-227. Cf. Friedman v Dozorc, 412 Mich 1, 32, 42; 312 NW2d 585 (1981).

[14] Manie v Matson Oldsmobile-Cadillac Co, 378 Mich 650, 658; 148 NW2d 779 (1967) (tort action); 1 Restatement Contracts, § 341, p 559; 5 Corbin, Contracts, § 1076, p 427.

[15] Grismore, Contracts (rev ed), § 195, p 299, citing Sandy Valley & Elkhorn R Co v Hughes, 175 Ky 320; 194 SW 344 (1917).

[16] See, e.g., Hammond v Hannin, 21 Mich 374, 384 (1870); Grismore, Contracts (rev ed), § 195, pp 298-300.

[17] See McCormick, Damages, and the separate chapters stating the damages recoverable for breach of employment contracts (ch 25), construction contracts (ch 26), sales of personal property (ch 27), and land sale contracts (ch 28).

[18] Id.

[19] Stewart, supra, p 471. In Stewart, supra, p 471, the Court also said that mental distress damages are recoverable in cases "where a contract is made to secure relief from a particular inconvenience or annoyance, or to confer a particular enjoyment." (Emphasis supplied.) See also Kewin, supra, p 416, in which the Court emphasized that, for mental distress damages to be recoverable, the parties must have formed "a contract meant to secure [the] protection" of personal interests. (Emphasis supplied.)

[20] Kewin, supra, p 417. See also Stewart, supra, p 470.

[21] Humphrey v Michigan United R Co, 166 Mich 645; 132 NW 447 (1911), concerned the duty of a common carrier to a passenger. This duty is imposed by law without regard to contract.

[22] See Friedman, fn 13 supra, pp 32, 42.

[23] See 2 Morris, The Developing Labor Law (2d ed), ch 33, pp 1658-1659; Gorman, Labor Law, pp 138-139.

[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.

[696]

Appeal from Court of Common Pleas, Hartford County; Thomas J. Molloy, Judge.

Action by John T. Kearns against Joseph W. Andree to recover damages for alleged breach of contract by the defendant to purchase real estate from the plaintiff, brought to the court of common pleas for Hartford county, and tried to the court. Judgment for the plaintiff for $167, and appeal by the defendant. Error, and new trial ordered.

Argued before WHEELER, C. J., and MALTBIE, HAINES, HINMAN, and BANKS, JJ.

Nathan A. Schatz and Louis M. Schatz, both of Hartford, for appellant.

John J. Burke, of Hartford, for appellee.

MALTBIE, J.

The plaintiff was the owner of a lot of land at the corner of Prospect and Edwards streets in the town of East Hartford, on which stood a dwelling house then in the process of construction, but practically finished. In the rear of the land upon which this house stood, he owned other land upon which another house was located. He and the defendant entered into an oral contract, whereby, as it is stated in the finding, "the defendant agreed to purchase the house and lot at the corner of Prospect and Edwards streets at a price of $8,500; it being agreed the defendant should assume a first mortgage of $4,500, a bank mortgage, and pay $4,000 in cash." This mortgage was not then in existence, but the plaintiff promised to obtain it; there being no agreement, however, as to the identity of the mortgagee or as to its terms.

The defendant thereafter became dissatisfied with his purchase, but finally agreed to stand by the bargain, if certain alterations were made in the house, if it was finished in a certain way, and if certain trees standing upon the lot were cut down. The plaintiff proceeded to make the changes and finish the house as desired by the defendant, and to cut down the trees, and he also secured a bank mortgage upon the premises in the sum of $4,500. The defendant, however, refused to complete the purchase. The way in which the house had been finished at the defendant's request made the premises less salable, but the plaintiff finally secured a purchaser for the price of $8,250, after, to meet this purchaser's desires, he had repainted the house a different color and repapered certain rooms. The plaintiff brings this action to recover for the expenses to which he was put in order to finish the house to meet the defendant's wishes, and thereafter, to adapt it to the desires of the purchaser, and also to recover the difference between the price agreed to be paid by the defendant and that for which the house was finally sold.

The trial court reached the conclusion that the acts of the plaintiff in finishing the house were sufficient to take the case out of the statute of frauds, but that the agreement between the plaintiff and defendant was too indefinite to be enforceable, because the land sold was not sufficiently identified, and because the agreement as to the mortgage to be secured and assumed by the defendant did not specify either the identity of the mortgagee or the terms it was to contain, and it gave judgment for the plaintiff to recover the value of the trees cut and the cost of repainting and repapering to meet the desires of the ultimate purchaser.

If the trial court was right in its conclusion that the agreement was too indefinite to be enforced, it becomes of no moment whether the acts done by the plaintiff were sufficient part performance to take the case out of the statute of frauds. The finding, particularly when read in the light of the memorandum of decision made a part of it, does not present the situation with reference to the land and houses owned by the plaintiff in such a way as to afford any satisfactory basis for a review of its conclusion that the premises sold were not sufficiently described so as to make the agreement definite enough to be enforceable. But its conclusion as to the indefiniteness of the provison concerning the mortgage which the plaintiff was to secure is clearly sound. In Griffin v. Smith, [697] 101 Conn. 219, 125 A. 465, we had before us an oral agreement for the sale of land, in which it was provided that the price was to be $2,850, of which $850 was to be paid in cash, and the balance secured by mortgage; and we there said :

"The defendants claim that the parol contract * * * is too indefinite to be enforced, in that the contract did not provide when the $2,000 to be left on mortgage was to become due. This claim we sustain."

In Piatt v. Stonington Savings Banks, 46 Conn. 476, we had before us an agreement between a savings bank which was foreclosing a mortgage upon certain premises and a second mortgagee that, on failure of redemption, the bank would convey the land to him, and that he would pay the accrued interest on the debt, and secure the principal by a mortgage upon the real estate conveyed, without any specification of the length of time the mortgage was to run; and we said :

"How long is it to remain? No time is mentioned. How shall the court decree as to the time the loan should remain when the contract is silent on the subject? The court can make no contract for the parties; they must stand or fall upon the contract they have made, and this contract is clearly void for uncertainty in this particular."

The case is then one where the plaintiff seeks to recover the expense and loss which he has incurred in reliance upon the performance by the defendant of an agreement unenforceable because too indefinite in its terms. That in such a case recovery may often be had admits of no doubt. Rowland v. New York, N. H. & H. R. Co., 61 Conn. 103, 111, 23 A. 755, 29 Am. St. Rep. 175; Collins v. Richmond Stove Co., 63 Conn. 356, 363, 28 A. 534; Varney v. Ditmars, 217 N. Y. 223, 231, 111 N. E. 822, Ann. Cas. 1916B, 758; note, 26 L. R. A. (N. S.) 810. But the work done and the expenditures made by the plaintiff to adapt it to meet the wishes of the defendant in the instant case have been of no benefit to the latter, and his main contention is that the basis of a recovery in such cases is the benefit conferred. Several decisions might be cited in which it has been so held No doubt there are cases where, to support a recovery, it must appear that benefit has accrued to the defendant. For instance, such is the rule where a vendee of real estate has made improvements upon the land in reliance upon an oral agreement of sale and upon his own initiative, but the vendor refuses thereafter to carry out the agreement (Wainwright v. Talcott, 60 Conn. 43, 52, 22 A. 484) so, where one, in the honest belief that he is the absolute owner of property, makes improvements thereon, he is entitled to an allowance of their fair value in a suit to foreclose a mortgage on the premises (Ensign v. Batterson, 68 Conn. 298, 307, 36 A. 51). Within the same category fall, perhaps, those actions wherein a plaintiff who has substantially but not fully performed a contract is yet in certain circumstances permitted to recover for the work he has done. We have stated the rule applicable in such a case in this way:

"The plaintiff, not being found to have been in willful default, had a cause of action for the reasonable value of the work and materials so furnished, estimated with reference to the contract price, and to the resulting benefit to the defendant, provided she appropriated that benefit under circumstances sufficient to raise an implied promise to pay for it." Jones & Hotchkiss Co. v. Davenport, 74 Conn. 418, 420, 50 A. 1028.

See, also, Gillis v. Cobe, 177 Mass. 584, 59 N. E. 455.

But there are other cases wherein a plaintiff, who cannot bring an action upon a special contract for some reason other than his own fault, is permitted a recovery for the reasonable value of the services which he has performed, without regard to the extent of the benefit conferred upon the other party to the contract. Examples are those where the defendant has himself prevented full performance of the contract (Valente v. Weinberg, 80 Conn. 134, 67 A. 369, 13 L. R. A. [N. S.] 448); or where there has been a rescission of the contract during the course of performance; (Young v. Shetucket Coal & Wood Co., 97 Conn. 92, 94, 115 A. 672); or where a building which is in the course of construction under a contract is destroyed by fire (Goldfarb v. Cohen, 92 Conn. 277, 284, 102 A. 649); or where one has agreed to perform personal services for another during the latter's life upon a promise of compensation by will, and dies before that other (Leahy v. Cheney, 90 Conn. 611, 98 A. 132, L. R. A. 1917D, 809); or where services have been performed by one who has been promised compensation by will or by an heir, who has been promised that no will would be made (Grant v. Grant, 63 Conn. 530, 29 A. 15, 38 Am. St. Rep. 379; Schempp v. Beardsley, 83 Conn. 34, 75 A. 141; Downey v. Guilfoile, 96 Conn. 383, 114 A. 73).

The rationale of these decisions is best seen in the latter class of cases, where a special promise to make compensation by will is unenforceable by reason of the statute of frauds. In such a case the services have been performed at the request of him for whom they were done, and in the expectation that compensation would be made for them, to his knowledge, and with his acquiescence. In the absence of any special contract, the law would in such a situation imply an agreement that reasonable compensation should be made. The basis of that implication is that the services have been requested and have been performed by the plaintiff in the known expectation that he would receive compensation, and neither the extent nor the presence of benefit to the defendant from their performance is of controlling significance. General [698] Hospital Society v. New Haven Rendering Co., 79 Conn. 581, 65 A. 1065, 118 Am. St. Rep. 173, 9 Ann. Cas. 168; Taylor v. Robertson Co., 85 Conn. 504, 83 A. 534. If there were a valid and subsisting special contract, that would control; but where, though an attempt has been made to bring about such a contract, it has proved unavailing, the attempted contract is ordinarily of no consequence save as it shows the expectation of the parties that compensation for the services was to be made. It therefore leaves unimpaired the legal implication arising out of the rendition of the services upon request and in the known expectation of receiving compensation therefor. The measure of recovery is the reasonable value of the services performed, and not the amount of benefit which actually accrued from them to him for whom they were performed. Grant v. Grant, 63 Conn. 530, 542, 29 A. 15, 38 Am. St. Rep. 379; Gay v. Mooney, 67 N. J. Law, 27, 50 A. 596.

The same principles apply where the parties have attempted to make a contract which is void because its terms are too indefinite, but where one party has, in good faith, and believing that a valid contract existed, performed part of the services which he had promised in reliance upon it. He has performed those services at the request of the other party to the contract, and in the expectation, known to the other, that he would be compensated therefor. Here is a sufficient basis for an implication in law that reasonable compensation would be made. The attempted special contract being void, there is nothing to overcome that implication. Vickery v. Ritchie, 202 Mass. 247, 88 N. E. 835, 26 L. R. A. (N. S.) 810. The situation is therefore one recognized by the law as falling within the underlying principle of implied contracts, which, in the various situations we have noted, and no doubt others, places a legal obligation upon one to do that which in equity and good conscience he ought to do. Fischer v. Kennedy, 106 Conn. 484, 492, 138 A. 503.

The sums allowed to the plaintiff for the repapering and repainting, which was done after the defendant refused to purchase, do not fall within the principles applicable to the case; to allow them in this action would be, in effect, to permit a recovery upon an unenforceable contract, which may not be done. But, if the work done on the property to adapt it to the desires of the defendant was done under the terms of an oral agreement for the sale of the premises, in good faith, and in the honest belief that the agreement was sufficiently definite to be enforced, the plaintiff is entitled to recover reasonable compensation therefor. In fixing the amount of that compensation, however, a proper deduction must be made for any benefit that has accrued to the plaintiff himself by reason of the work he did upon the premises at the defendant's request.

There is error, the judgment is set aside, and a new trial ordered.

All concur.

William H. Neblett and Brett Smithers for Appellant.

Clyde C. Shoemaker and Byron O. Smith for Respondent.

CARTER, J.

Plaintiff appeals from a judgment for defendant, administratrix of the estate of Roy Campbell, deceased, in an action for attorney's fees.

Plaintiff's cause of action was stated in a common count alleging that Roy Campbell became indebted to him in the sum of $10,000, the reasonable value of services rendered as attorney for Campbell; that no part had been paid except $450. Campbell died after the services were rendered by plaintiff. Plaintiff filed a claim against his estate for the fees which defendant rejected. Defendant in her answer denied the allegations made and as a "further" defense alleged that plaintiff and Campbell entered into an "express written contract" employing plaintiff as attorney for a stated fee of $750, and all work alleged to have been performed by plaintiff was performed under that contract.

According to the findings of the trial court the claim against the estate was founded on the alleged reasonable value of legal services rendered by plaintiff for Campbell in an action for separate maintenance by defendant, Campbell's wife, against Campbell and in which the latter cross-complained for a divorce. Plaintiff was not counsel when the pleadings in that action were filed. He came into the case on December 16, 1949, before trial of the action. He and Campbell entered into a written contract on that date for plaintiff's representation of Campbell in the action, the contract stating that plaintiff agrees to represent Campbell in the separate maintenance and divorce action which has been set for trial in the superior court for a "total fee" of $750 plus court costs and other incidentals in the sum of $100 making a total of $850. The fees were to be paid after trial. Plaintiff represented Campbell at the trial consuming 29 days and lasting until May, 1950. (Defendant's complaint for [301] separate maintenance was changed to one for divorce.) After the trial ended the court indicated its intention to give Mrs. Campbell a divorce. But while her proposed findings were under consideration by plaintiff and the court, defendant Campbell substituted himself instead of plaintiff and thereby the representation by plaintiff of Campbell was "terminated." The findings in the divorce action were filed in May, 1951. Plaintiff's services were furnished pursuant to the contract. The reasonable value of the services was $5,000. Campbell paid $450 to plaintiff and the $100 costs.

The court concluded that plaintiff should take nothing because neither his claim against the estate nor his action was on the contract but were in quantum meruit and no recovery could be had for the reasonable value of the services because the compensation for those services was covered by the express contract.

According to plaintiff's undisputed testimony Campbell told him after defendant had offered proposed findings in the divorce action that he was dissatisfied with plaintiff as his counsel and would discharge him and asked him if he would sign a substitution of attorneys under which Campbell would represent himself. Plaintiff replied that he recognized Campbell had a right to discharge him but that he was prepared to carry the case to conclusion; that he expected to be paid the reasonable value of his services which would be as much as defendant's counsel in the divorce action received, $9,000, to which Campbell replied he was not going to pay "a cent more." (At that time Campbell had paid $450.) Thereupon the substitution (dated January 25, 1951) was signed and Campbell took plaintiff's file in the divorce case with him.

It seems that the contract of employment contemplated that plaintiff was to continue his services and representation at least until and including final judgment in the divorce action. (See Neblett v. Getty, 20 Cal.App.2d 65 [66 P.2d 473].) It might thus appear that plaintiff was discharged before he had fully completed his services under the contract and the discharge prevented him from completing his performance. (That question is later discussed.)

One alleged rule of law applied by the trial court and that urged by defendant is that where there is a contract of employment for a definite term which fixes the compensation, there cannot be any recovery for the reasonable value of the services even though the employer discharges the employee [302] --repudiates the contract before the end of the term; that the only remedy of the employee is an action on the contract for the fixed compensation or damages for the breach of the contract. The trial court accepted that theory and rendered judgment for defendant because plaintiff did not state a cause of action on the contract nor for damages for its breach; it was for the reasonable value of the services performed before plaintiff's discharge. Accordingly there is no express finding on whether the discharge was wrongful or whether there was a rescission of the contract by plaintiff because of Campbell's breach of it, or whether plaintiff had substantially performed at the time of this discharge.

The rule applied is not in accord with the general contract law, the law applicable to employment contracts or employment of an attorney by a client. [1] The general rule is stated: "... that one who has been injured by a breach of contract has an election to pursue any of three remedies, to wit: 'He may treat the contract as rescinded and may recover upon a quantum meruit so far as he has performed; or he may keep the contract alive, for the benefit of both parties, being at all times ready and able to perform; or, third, he may treat the repudiation as putting an end to the contract for all purposes of performance, and sue for the profits he would have realized if he had not been prevented from performing.' " (Alder v. Drudis, 30 Cal.2d 372, 381 [182 P.2d 195]; see 12 Cal.Jur.2d, Contracts, 253; Rest. Contracts, 347.) It is the same in agency or contract for services cases. [2] "If the principal, in violation of the contract of employment, terminates or repudiates the employment, or the agent properly terminates it because of breach of contract by the principal, the agent is entitled at his election to receive either:"

"(a) the amount of the net losses caused and gains prevented by the principal's breach or, if there are no such losses or gains, a small sum as nominal damages; or"

"(b) the reasonable value of the services previously rendered the principal, not limited by the contract price, except that for services for which a price is apportioned by the terms of the contract he is entitled to receive the contract price and no more."

"Comment:"

"a. In no event is the agent entitled to compensation for services unperformed. If, however, the principal terminates the relationship in breach of contract, or if the agent chooses [303] to terminate it because of a total breach by the principal, the agent is entitled, at his option, to affirm or disaffirm the contract. If he affirms the contract, he can maintain an action for its breach and recover damages in accordance with the rule stated in Clause (a). For a complete statement as to the amount of damages recoverable, if he chooses this alternative, see the Restatement of Contracts, 326-346. The rule stated in Clause (b) is based upon the disaffirmance of the contract by the agent, and damages are given him by way of restitution. The Restatement of Contracts, 347, states the consequences of disaffirmance and the non-availability of restitution as a remedy where part performance has been completed, for which compensation has been apportioned." (Rest. Agency, 455.) "If the performance rendered consists of services, there cannot ordinarily, from the nature of legal remedies, be actual restitution, but it is possible to give the equivalent in value under a common count. Since money paid may be thus recovered and similarly in the United States in many instances, land, logic would require such a remedy; and it is allowed in part, but only in part. If the plaintiff has fully performed the contract, or a severable part thereof, and 'if the only part of the agreed exchange for such performance that has not been rendered by the defendant is a sum of money constituting a liquidated sum,' the only redress he has for breach of contract by the other side is damages for the breach. It is true that if the performance to which he is entitled in return is a liquidated sum of money, he may sue in indebitatus assumpsit and not on the special contract, but the measure of damages is what he ought to have received--not the value of what he has given. If, however, the plaintiff has only partly performed and has been excused from further performance by prevention or by the repudiation or abandonment of the contract by the defendant, he may recover, either in England or America, the value of the services rendered, though such a remedy is no more necessary than where he has fully performed, since in both cases alike the plaintiff has an effectual remedy in an action on the contract for damages. In some jurisdictions, if a price or rate of compensation is fixed by the contract, that is made the conclusive test of the value of the services rendered. More frequently, however, the plaintiff is allowed to recover the real value of the services though in excess of the contract price. The latter rule seems more in accordance with the theory on which the right of action must be based-- [304] that the contract is treated as rescinded, and the plaintiff restored to his original position as nearly as possible." (Williston on Contracts (rev. ed.), 1459.) (See Haub v. Coustette, 31 Cal.App. 424 [160 P. 836], contract price less reasonable value of work yet to be done allowed; Blair v. Brownstone Oil & Refining Co., 35 Cal.App. 394 [170 P. 160], dictum; Fatta v. Catalano, 41 Cal.App. 630 [183 P. 224]; Laiblin v. San Joaquin Agr. Corp., 60 Cal.App. 516 [213 P. 529]; Williston on Contracts (rev. ed.), 1459, 1485; Corbin on Contracts, 1104-1113; Hart v. Buckley, 164 Cal. 160 [128 P. 29]; Davidson v. Laughlin, 138 Cal. 320 [71 P. 345, 5 L.R.A.N.S. 579]; Brown v. Crown Gold Milling Co., 150 Cal. 376 [89 P. 86].) [3] And in entire contracts employing an attorney for a fixed fee it has been said that when the client wrongfully discharges the attorney before he has completed the contract, the attorney may recover the reasonable value of the services performed to the time of discharge. (Neblett v. Getty, supra, 20 Cal.App.2d 65, dictum; Lessing v. Gibbons, 6 Cal.App.2d 598 [45 P.2d 258]; McManus v. Montgomery, 12 Cal.2d 397 [84 P.2d 787], dictum; Echlin v. Superior Court, 13 Cal.2d 368 [90 P.2d 63, 124 A.L.R. 719], dictum; Kirk v. Culley, 202 Cal. 501 [261 P. 994]; Ayres v. Lipschatz, 68 Cal.App. 134 [228 P. 720]; 109 A.L.R. 674.) Inasmuch as the contract has been repudiated by the employer before its term is up and after the employee has partly performed and the employee may treat the contract as "rescinded," there is no longer any contract upon which the employer can rely as fixing conclusively the limit of the compensation--the reasonable value of services recoverable by the employee for his part performance. [4] Hence it is stated in Lessing v. Gibbons, supra, 6 Cal.App.2d 598, 607, that: "It is well settled that one who is wrongfully discharged and prevented from further performance of his contract may elect as a general rule to treat the contract as rescinded, may sue upon a quantum meruit as if the special contract of employment had never been made and may recover the reasonable value of the services performed even though such reasonable value exceeds the contract price." That statement is quoted with approval in Neblett v. Getty, supra, 20 Cal.App.2d 65, 70 (dictum). The same is said in Laiblin v. San Joaquin Agr. Corp., supra, 60 Cal.App. 516, quoting with approval from sections 1459, supra, and 1485 of Williston on Contracts. (See also Adams v. Burbank, 103 Cal. 646 [37 P. 640]; Gray v. Bekins, 186 Cal. 389 [199 P. 767]; Tubbs [305] v. Delillo, 19 Cal.App. 612 [127 P. 514]; 23 Cal.L.Rev. 313; 109 A.L.R. 674.) [5] Of course the contract price is competent evidence bearing on the reasonable value of the services. (Adams v. Burbank, supra, 103 Cal. 646; Kimes v. Davidson Inv. Co., 101 Cal.App. 382 [281 P. 639]; Rest. Contracts, 347, Com. d.)

It is true that in the Lessing case, supra (6 Cal.App.2d 598), the trial court found against an express contract of employment of the attorney fixing his compensation, but in affirming the judgment for reasonable value of the services the District Court of Appeal as one of its grounds, and in making the above quoted statement, assumed that there was an express contract fixing the fees. In Elconin v. Yalen, 208 Cal. 546 [282 P. 791], there was involved a case where the fees were not stated in the contract of employment and the court's statement that if there had been such a fixing it would have "measured" the amount of recovery, was dictum. It is not clear whether it was meant that such a contract would be only evidence of the amount or the conclusive measure. Moreover it cited for its dictum Kirk v. Culley, supra, 202 Cal. 501, and Webb v. Trescony, 76 Cal. 621 [18 P. 796], which merely held that where an attorney is wrongfully discharged under a partially performed contract he may sue for damages for the breach and in a proper case the full contract price may be the measure of damages. The same is true of Denio v. City of Huntington Beach, 22 Cal.2d 580 [140 P.2d 392, 149 A.L.R. 320], and Zurich G. A. & L. Ins. Co., Ltd. v. Kinsler, 12 Cal.2d 98 [81 P.2d 913].

[6] Inherent in the right to plead by common count in quantum meruit where the employee has partly performed but has been prevented from full performance by the employer's repudiation of the contract, is the principle that he need not plead the contract or its repudiation and his rescission of it. There are cases indicating that those special facts should be pleaded (see Roche v. Baldwin, 135 Cal. 522 [65 P. 459, 67 P. 903]; 5 Cal.Jur.2d, Assumpsit, 9; 14 So.Cal.L.Rev. 288) but the well established rule is that a common count declaration is sufficient under the circumstances above mentioned. (See authorities cited supra; 5 Cal.Jur.2d Assumpsit, 10, 11, 12, 22, 25; 14 So.Cal.L.Rev. 288.) [7] A common count may be used where the only thing that remains to be done is the payment of money. (O'Connor v. Dingley, 26 Cal. 11; Castagnino v. Balletta, 82 Cal. 250 [23 P. 127]; Donegan v. Houston, 5 Cal.App. 626 [90 P. 1073].) [306] In the instant case all that remained to be done by defendant was the payment of the amount still due on the contract as it became due by its terms after the trial of the divorce action.

It should further be noted that under the only evidence on the subject, above mentioned, plaintiff in effect promptly notified Campbell of the rescission of the contract when he advised him that he would execute the substitution of attorneys when he was discharged by Campbell but told Campbell he would hold him for the reasonable value of the services. [8] On the issue of the necessity of restoration or offer to restore the part payment for the services which Campbell had made, the rule applies that such restoration is not necessary where plaintiff would be entitled to it in any event. (See Kales v. Houghton, 190 Cal. 294 [212 P. 21]; Silvey v. Fink, 99 Cal.App. 528 [279 P. 202]; Mitchell v. Samuels, 39 Cal.App. 134 [178 P. 336]; Sime v. Malouf, 95 Cal.App.2d 82 [212 P.2d 946, 213 P.2d 788]; Rest. Contracts, 349.) It is clear that plaintiff was entitled to receive the $450 paid to him either under the contract or for the reasonable value of his services.

The question remains, however, of the application of the foregoing rules to the instant case. Plaintiff had performed practically all of the services he was employed to perform when he was discharged. The trial was at an end. The court had indicated its intention to give judgment against Campbell and all that remained was the signing of findings and judgment. The full sum called for in the contract was payable because the trial had ended. [9] Under these circumstances it would appear that in effect, plaintiff had completed the performance of his services and the rule would apply that: "The remedy of restitution in money is not available to one who has fully performed his part of a contract, if the only part of the agreed exchange for such performance that has not been rendered by the defendant is a sum of money constituting a liquidated debt; but full performance does not make restitution unavailable if any part of the consideration due from the defendant in return is something other than a liquidated debt." (Rest. Contracts, 350; Locke v. Duchesnay, 84 Cal.App. 448 [258 P. 418]; Willett & Burr v. Alpert, 181 Cal. 652 [185 P. 976]; Williston on Contracts (rev.ed.), 1459; Corbin on Contracts, 1110; Civ. Code, 3302.) In such cases he recovers the full contract price and no more. As we have seen, as far as pleading is concerned, however, the action may be stated as a common count other than a [307] declaration on the special contract. Here plaintiff alleged an indebtedness on defendant's part for services performed by plaintiff of a reasonable value of $10,000 of which only $450 had been paid. [10] While it may have been more appropriate for him to have alleged that the price of such services was the contract figure, any deficiency of the pleading is eliminated by defendant's answer setting forth that factor. Plaintiff's action can thus be said to be common count indebitatus assumpsit, and there being no dispute as to the amount called for in the contract, the services having been in effect fully performed, the court should have rendered judgment for the balance due on the contract which is conceded to be $300.

The judgment is therefore reversed and the trial court is directed to render judgment in favor of plaintiff for the sum of $300.

Shenk, Acting C.J., Traynor, J., and Spence, J., concurred.

Edmonds, J., concurred in the judgment.

SCHAUER, J.

I dissent. I agree with a great deal of the discussion in the majority opinion, and even to a larger extent with the authorities therein cited, relative to the rules of law which should govern this case but I think this court misapplies the very rules it cites.

Specifically, I think this court errs when it says "there being no dispute as to the amount called for in the contract, the services having been in effect fully performed, the court should have rendered judgment for the balance due on the contract which is conceded to be $300." The foregoing statement is neither supported factually by the record nor legally by the authorities cited.

Upon the record and the authorities the judgment should be reversed and the cause remanded either (a) with directions to the trial court to enter judgment for the plaintiff for $5,000 or (b) for a retrial upon all issues. I would prefer to end the litigation by adopting alternative (a) and in my view the record fully justifies that disposition of the cause. Directed to that conclusion is the succinctly stated opinion prepared by Justice Vallee when the cause was before the District Court of Appeal (reported at (Cal.App.) pp. 932-933, 265 P.2d) and I adopt it as a most worthy presentation of the views which I think should prevail: [308]

"I am of the opinion that the judgment should be reversed with directions to the superior court to render judgment for plaintiff for $5,000. The court found that the reasonable value of the services performed by plaintiff is $5,000. Plaintiff was the only witness who testified concerning his discharge by Dr. Campbell. The opinion of this court fails to state all of the testimony of plaintiff with respect to his discharge. I set it forth in toto in the margin." ^[194] I think [309] no reasonable conclusion can be drawn from the evidence other than that the discharge amounts to a clear repudiation and abrogation of the contract in its entirety, in which case plaintiff is entitled to recover the reasonable value of the service performed. The contract plaintiff made with Dr. Campbell did not limit his services to the trial of the case. ^[195] (Italics added.] Under the contract he agreed to represent the doctor until final judgment, and he told the doctor that he 'thought the case would be reversed on appeal.' [Italics added.] Manifestly, the evidence will be no different on a retrial. Dr. Campbell is dead. Plaintiff is the only witness who can [310] testify to the conversation. There is nothing in plaintiff's testimony to impugn his integrity. He did all any lawyer of the highest professional standards could have done under the conditions. Defendant waived plaintiff's disqualification under the dead man's statute. ^[196] (Deacon v. Bryans, 212 Cal. 87, 90-93 [298 P. 30].) Defendant will be unable to make any showing to the contrary of the testimony of plaintiff. Under these circumstances, the judgment should be reversed with directions as I have indicated. (Conner v. Grosso, 41 Cal.2d 229, 232 [259 P.2d 435].)""

Dooling, J. pro tem., ^[197] concurred.

" 'The Witness: I did not."

" 'By Mr. Neblett: [Attorney for plaintiff]."

" 'Q. Did you have a discussion with Dr. Campbell about that time in your office? A. I did."

" 'Q. What was said? ... A. Dr. Campbell came into my office and stated that he was dissatisfied with the announced judgment of the court. In his opinion, Mrs. Campbell should have been allowed nothing in way of alimony I told Dr. Campbell that after 28 years of married life and with his property and his earning capacity that I thought the least the court would have allowed would have been possibly $250.00 a month."

" 'He also stated to me at that time that he was dissatisfied with the proposed amendments that I had prepared on the findings of fact and conclusions of law because he thought the findings should state in there that Mr. Shoemaker had suborned and bribed certain witnesses for the plaintiff."

" 'I told Dr. Campbell that there was no evidence of any such action on the part of Mr. Shoemaker and that I was not going to submit to the court any proposed findings in that regard."

" 'He stated at that time that if I wouldn't run this case the way he wanted it that he would discharge me, and asked me if I would sign a substitution of attorneys. I told him that I recognized that he had the power to discharge me as his attorney, that I was prepared to carry the case through to a conclusion, and I thought the case would be reversed on appeal. [Italics added.]"

" 'He said "no," he wanted to act as his own attorney, so he could argue the proposed findings himself; and with that I prepared the substitution of attorneys which is in the file, and Dr. Campbell signed it and I signed it."

" 'He left the office carrying the files of this case, the divorce case, and also the file of the Municipal Court case with him, and that is the substance of the conversation."

" 'Q. You turned over to Dr. Campbell at that time all of the files in Campbell against Campbell? A. The two cases."

" 'Q. And the other case that is, the case in the Municipal Court? A. The entire file."

" 'Q. You have had nothing to do with the case from that time until now? A. I have not."

" 'Q. Mr. Oliver, will you look in the file of Campbell against Campbell, Number D370,670, and find the substitution to which you have just referred? A. Here it is."

" 'Q. This substitution which you have presented to me appears to have been signed by Dr. Campbell, January 25, 1951, and by John Oliver on account of Ralph D. Paonessa and John Oliver on the same day? A. That is correct."

" 'Q. That is Dr. Campbell's signature? A. That is Dr. Campbell's signature; he signed that in my presence; and that is my signature."

" 'Q. That reads: "Defendant and cross-complainant hereby substitutes himself Roy Campbell in pro. per. as his attorney of record in place of Ralph D. Paonessa and John Oliver,""

" 'and under that: "We consent to the above substitution, dated: January 25, 1951.""

" 'Then on the other page there is another signature of Dr. Campbell above "substitution accepted." A. That is correct."

" 'Q. Did you have any conversation at that time with Dr. Campbell about compensation? A. Yes, I told him that I expected to be paid the reasonable value ..."

" '(Continuing) That I expected to be paid a reasonable value for my services. He says: "What do you think the reasonable value of your services are?" I said, "I expect to be paid as much as Mr. Shoemaker." ..."

" 'Q. When you told Dr. Campbell that you expected to be paid and you expected to be paid approximately, or the same amount that was allowed Mr. Shoemaker what did Dr. Campbell say? A. He said, "I am not going to pay you a cent more." ' "

"December 16th, 1949"

" 'We, the undersigned do hereby agree to represent Roy Campbell in an action for separate maintenance instituted by his wife, Iva Lee Campbell and on cross-complaint for divorce filed by Roy Campbell against his wife, and which has been set for trial for February 20th, 1950 in Department 1 of the Superior Court of the County of Los Angeles State of California for a total fee of $750.00 plus Court Costs and other incidental in the sum of $100.00 making a total sum of $850.00. Said fees of $750.00 to be paid after trial."

" 'Ralph D. Paonessa"

" 'John Oliver"

" 'I accept the services of Ralph D. Paonessa and John Oliver as per above agreement."

" 'RC'"

[194] 1. 'Q. Mr. Oliver, did you have any discussion with Dr. Campbell about that contract or as to the writing of that contract sometime after Judge Clark had announced his decision, and about the time that you had received the proposed findings of fact drawn by Mr. Shoemaker for Mrs. Campbell.

[195] 2. " ' The contract reads:

[196] 3. "The court fails to state that in questioning plaintiff, in addition to asking him with respect to the payments that had been made on account, defendant's attorney questioned him about his signature and that of Mr. Paonessa on the contract, and thus waived plaintiff's disqualification under section 1880 of the Code of Civil Procedure.

[197] *. Assigned by Chairman of Judicial Council.

6 N.H. 481

BRITTON
versus
TURNER.

July Term, 1834.

Where a party undertakes to pay, upon a special contract for the performance of labour, he is not liable to be charged upon such special contract, until the money is earned according to the terms of the agreement; and where the parties have made an express contract, the law will not imply and raise a contract different from that which the parties have entered into, except upon some farther transaction between them.

In case of a failure to perform such special contract, by the default of the party contracting to do the service, if the money is not due by the terms of the special agreement, and the nature of the contract be such that the employer can reject what has been done, and refuse to receive any benefit from the part performance, he is entitled so to do, unless he have before assented to and accepted of what has been done, and in such case the party performing the labor is not entitled to recover however much he may have done.

But if, upon a contract of such a character, a party actually receives useful labor, and thereby derives a benefit and advantage, over and above the damage which has resulted from a breach of the contract by the other party, the labor actually done, and the value received, furnish a new consideration, and the law thereupon raises a promise to pay to the extent of the reasonable worth of the excess. And the rule is the same, whether the labor was received and accepted, by the assent of the party prior to the breach, and under a contract, by which, from its nature, the party was to receive the labour from time to time until the completion of the whole contract, or whether it was received and accepted by an assent subsequent to the performance of all which was in fact done.

In case such contract is broken, by the fault of the party employed after part performance has been received, the employer is entitled, if he so elect, to put the breach of the contract in defence, for the purpose of reducing the damages, or showing that nothing is due, and the benefits for which he is liable to be charged, in that case, is the amount of value which he has received, if any, beyond the amount of the damage—and the implied promise which the law will raise, is, to pay such amount of the stipulated price for the whole labour, as remains after deducting what it would cost to procure a completion of the whole service, and also any damage which has been sustained by reason of the non fulfilment of the contract.

If in such case it be found that the damages are equal to, or greater than the amount of the value of the labour performed, so that the employer, having a right to the performance of the whole contract, has not upon the whole case received a beneficial service, the plaintiff cannot recover.

[482] If the employer elects to permit himself to be charged for the value of the labor, without interposing the damages in defence, he is entitled to do so, and may have an action to recover his damages for the non performance of the contract.

If he elects to have the damages considered in the action against him, he must be understood as conceding that they are not to be extended beyond the amount of what he has received, and he cannot therefore afterwards sustain an action for further damages.

ASSUMPSIT for work and labour, performed by the plaintiff, in the service of the defendant, from March 9th, 1831, to December 27, 1831.

The declaration contained the common counts, and among them a count in quantum meruit, for the labor, averring it to be worth one hundred dollars.

At the trial in the C. C. Pleas, the plaintiff proved the performance of the labor as set forth in the declaration.

The defence was that it was performed under a special contract—that the plaintiff agreed to work one year, from some time in March, 1831, to March 1832, and that the defendant was to pay him for said year's labor the sum of one hundred and twenty dollars; and the defendant offered evidence tending to show that such was the contract under which the work was done.

Evidence was also offered to show that the plaintiff left the defendant's service without his consent, and it was contended by the defendant that the plaintiff had no good cause for not continuing in his employment.

There was no evidence offered of any damage arising from the plaintiffs departure, farther than was to be inferred from his non fulfilment of the entire contract.

The court instructed the jury, that if they were satisfied from the evidence that the labor was performed, under a contract to labor a year, for the sum of one hundred and twenty dollars, and if they were satisfied that the plaintiff labored only the time specified in the declaration, and then left the defendant's service, against his consent, and without any good cause, yet the plaintiff was entitled to recover, under his quantum meruit count, [483] as much as the labor he performed was reasonably worth, and under this direction the jury gave a verdict for the plaintiff for the sum of $95.

The defendant excepted to the instructions thus given to the jury.

Handerson for the defendant.

The general principle established by all the old cases, is, that where the contract is entire, as where A agrees to do a certain thing, for which B is to make a certain compensation, the doing of the tiling by A is a condition precedent, and he has no remedy until he has fully performed his part.

There are several leading cases relating to the subject. Cutter Adr. v. Powell, 6 D. & E. 320; McMillen v. Vanderlip, 12 Johns. 165; Hudson v. Swift, 20 Johns. 24; Lantry v. Parks, 8 Cowen, 63; Ellis v. Hamlin, 4 Taunt. 52; 11 Com. Law Rep. 251; 17 ditto, 340; Faxon v. Mansfield and Holbrook, Trustee, 2 Mass. Rep. 147; Stark v. Parker, 2 Pick. 267; Mores v. Stevens, 2 Pick. 332.

Hayward v. Leonard, 7 Pick. 181, was a contract to build a house on the plaintiffs land, at a certain price, and in a particular manner. The first count was upon the contract, the second quantum meruit for work and labor, and materials found. The court there decided that the count in quantum meruit might be sustained, and refer with approbation to 14 Mass. 282, and 2 Pick. 267. They say, the defendant saw the work go on from day to day, and found no fault, either with the work or materials, and may be presumed to have agreed to receive the work as it was done, &c.

The case of Wadleigh v. Sutton, an'e 15, is like the case in the 7th Pickering, and may be sustained without affecting the case under consideration.

On a full examination of the decisions upon this subject, no doubt it will be found, that in modern times courts have, to a certain extent, relaxed from the strict rules [484] formerly adopted, and have sustained a count in quantum meruit in cases where the plaintiff had not fully performed his contract. But all the cases where it has been so held may be distinguished from this case—none have gone the length of maintaining the present action.

Take the cases of contracts to build a house, a bridge, or highway, and all the variety of cases where the agreement consists in certain labor to be done, and materials provided—the contract is not fulfilled according to its terms—the house, or bridge, or highway are built, but not so well done as agreed. No action, therefore, will lie upon the contract. But the court in those cases say when the party for whose benefit the materials are furnished, and the labor done, sees the work from day to day, as it proceeds, sees also the materials, and suffers the building to go on without objection, or without putting an end to the work, it shall be considered that he accepts it—that he in fact consents to abandon the strict terms of the contract, and makes a new one, which is to pay what the labor and materials are reasonably worth.

So also in another class of cases, where an agreement is made for the sale and delivery of articles estimated by weight or measure—Suppose A agrees to deliver me 150 bushels of wheat, at $1,50 per bushel, to be paid when it is all delivered, but he delivers only fifty. If I keep the fifty bushels I make a new contract, and agree to pay what the fifty bushels are worth. But if I decline keeping it, and request A to take it away, he cannot force it upon me nolens, volens, and compel me to pay for it against my consent.

In the foregoing cases the person with whom the contract is made, it is presumed from his conduct, has consented, in the one case to receive less than the whole amount agreed to be delivered, and in the other to receive the labor and materials of a different kind, or in a different form and manner, from that stipulated. He has in short made a new contract, and abandoned the old, [485] and it is on this ground, and this only, that those decisions can be sustained.

But the case before the court is different from those where it hits been held a quantum meruit lies. It cannot be contended that the defendant consented to receive a part of the labor, and be accountable for such part; no contract to this effect can be implied. He had it not in his power to prevent this part execution, as in the case of building the house, bridge, &c. nor could he deliver back the labor done. If any contract is fastened upon him, it is put upon him against his consent. He made a contract for an entire year's work. He has never consented to receive and pay for any time less than a year. No such consent can be implied.

The cases before cited, in 2 Mass. 147; 2 Pick. 267; 12 Johns. 165; and 8 Cowen, 63; are as fully in point as if made for the occasion; and although courts in modern times may have succeeded in getting around the old law, in sundry cases, it is believed that the decisions last referred to yet stand, having never been overruled, bat remain in full force, and they seem fully to support this defence.

To hold out inducements to men to violate their contracts, when fairly entered into, is of immoral tendency, and whether the decisions have not gone quite far enough, and held out inducements enough to men disposed to disregard their engagements, may perhaps deserve consideration.

Wilson, for the plaintiff.

PARKER, J. delivered the opinion of the court.

It may be assumed, that the labor performed by the plaintiff, and for which he seeks to recover a compensation in this action, was commenced under a special contract to labor for the defendant the term of one year, for the sum of one hundred and twenty dollars, and that the [486] plaintiff has labored but a portion of that time, and has voluntarily failed to complete the entire contract.

It is clear, then, that he is not entitled to recover upon the contract itself, because the service, which was to entitle him to the sum agreed upon, has never been performed.

But the question arises, can the plaintiff, under these circumstances, recover a reasonable sum for the service he has actually performed, under the count in quantum meruit.

Upon this, and questions of a similar nature, the decisions to be found in the books are not easily reconciled.

It has been held, upon contracts of this kind for labor to be performed at a specified price, that the party who voluntarily fails to fulfil the contract by performing the whole labor contracted for, is not entitled to recover any thing for the labor actually performed, however much he may have done towards the performance, and this has been considered the settled rule of law upon this subject.

2 Pick. 267, Stark v. Parker; 2 Mass. 147, Faxon v. Mansfield; 12 Johns. 165, McMillen v. Vanderclip; 13 Johns. 94, Jennings v. Camp; 19 Johns, 337, Reab v. Moor; 8 Cowen, 63, Lantry v. Parks; 9 Barn. & Cres. 92, Sinclair v. Bowles; 2 Stark. Rep. 256, Spain v. Arnott.

That such rule in its operation may be very unequal, not to say unjust, is apparent.

A party who contracts to perform certain specified labor, and who breaks his contract in the first instance, without any attempt to perform it, can only be made liable to pay the damages which the other party has sustained by reason of such non performance, which in many instances may be trifling—whereas a party who in good faith has entered upon the performance of his contract, and nearly completed it, and then abandoned the further performance—although the other party has had the full benefit of all that has been done, and has perhaps sustained no actual damage—is in fact subjected to [487] a loss of all which has been performed, in the nature of damages for the non fulfilment of the remainder, upon the technical rule, that the contract must be fully performed in order to a recovery of any part of the compensation.

By the operation of this rule, then, the party who attempts performance may be placed in a much worse situation than he who wholly disregards his contract, and the other party may receive much more, by the breach of the contract, than the injury which he has sustained by such breach, and more than he could be entitled to were he seeking to recover damages by an action.

The case before us presents an illustration. Had the plaintiff in this case never entered upon the performance of his contract, the damage could not probably have been greater than some small expense and trouble incurred in procuring another to do the labor which he had contracted to perform. But having entered upon the performance, and labored nine and a half months, the value of which labor to the defendant as found by the jury is $95, if the defendant can succeed in this defence, he in fact receives nearly five sixths of the value of a whole year's labor, by reason of the breach of contract by the plaintiff a sum not only utterly disproportionate to any probable, not to say possible damage which could have resulted from the neglect of the plaintiff to continue the remaining two and an half months, but altogether beyond any damage which could have been recovered by the defendant, had the plaintiff done nothing towards the fulfillment of his contract.

Another illustration is furnished in Lantry v. Parks, 8 Cowen, 83. There the defendant hired the plaintiff for a year, at ten dollars per month. The plaintiff worked ten and an half months, and then left saying he would work no more for him. This was on Saturday—on Monday the plaintiff returned, and offered to resume his work, but the defendant said he would employ him no longer. [488] The court held that the refusal of the defendant on Saturday was a violation of his contract, and that he could recover nothing for the labor performed.

There are other cases, however, in which principles have been adopted leading to a different result.

It is said, that where a party contracts to perform certain work, and to furnish materials, as, for instance, to build a house, and the work is done, but with some variations from the mode prescribed by the contract, yet if the other party has the benefit of the labor and materials he should be bound to pay so much as they are reasonably worth. 2 Stark. Ev. 97, 98; 7 Pick. 181, Hayward v. Leonard; 8 Pick. 178, Smith v. First Cong. Meeting House in Lowell; 4 Cowen, 564, Jewell v. Schroeppel; 7 Green. 78, Hayden v. Madison; Bull. N. P. 139; 4 Bos. & Pul. 355; 10 Johns. 36; 13 Johns. 97; 7 East, 479.

A different doctrine seems to have been holden in Ellis v. Hamlen, 3 Taunt. 52, and it is apparent, in such cases, that if the house has not been built in the manner specified in the contract, the work has not been done. The party has no more performed what he contracted to perform, than he who has contracted to labor for a certain period, and failed to complete the time.

It is in truth virtually conceded in such cases that the work has not been clone, for if it had been, the party performing it would be entitled to recover upon the contract itself, which it is held he cannot do.

Those cases arc not to be distinguished, in principle, from the present, unless it be in the circumstance, that where the party has contracted to furnish materials, and do certain labor, as to build a house in a specified manner, if it is not done according to the contract, the party for whom it is built may refuse to receive it—elect to take no benefit from what has been performed—and therefore if he does receive, he shall be bound to pay the value—whereas in a contract for labor, merely, from day to day, the party is continually receiving the benefit of the con [489] tract under an expectation that it will be fulfilled, and  cannot, upon the breach of it, have an election to refuse to receive what has been done, and thus discharge himself from payment.

But we think this difference in the nature of the contracts does not justify the application of a different rule in relation to them.

The party who contracts for labor merely, for a certain period, does so with full knowledge that he must, from the nature of the case, be accepting part performance from day to day, if the other party commences the performance, and with knowledge also that the other may eventually fail of completing the entire term.

If under such circumstances he actually receives a benefit from the labor performed, over and above the damage occasioned by the failure to complete, there is as much reason why lie should pay the reasonable worth of what has thus been done for his benefit, as there is when he enters and occupies the house which has been built for him, but not according to the stipulations of the contract, and which he perhaps enters, not because he is satisfied with what has been done, but because circumstances compel him to accept it such as it is, that he should pay for the value of the house.

Where goods are sold upon a special contract as to their nature, quality, and price, and have been used before their inferiority has been discovered, or other circumstances have occurred which have rendered it impracticable or inconvenient for the vendee to rescind the contract in toto, it seems to have been the practice formerly to allow the vendor to recover the stipulated price, and the vendee recovered by a cross action damages for the breach of the contract.

"But according to the later and more convenient practice, the vendee in such case is allowed, in an action for the price, to give evidence of the inferiority of the goods in reduction of damages, and the plaintiff who has broken his contract is not entitled [490] to recover more than the value of the benefits which the Turner, defendant has actually derived from the goods; and where the latter has derived no benefit, the plaintiff cannot recover at all."

2 Stark. Ev. 640, 642; 1 Starkie's Rep. 107, Okell v. Smith.

So where a person contracts for the purchase of a quantity of merchandize, at a certain price, and receives a delivery of part only, and lie keeps that part, without any offer of a return, it has been held that he must pay the value of it. 5 Barn. & Cres. Shipton v. Casson; Com. Dig. Action F. Baker v. Sutton; 1 Camp. 55, note.

A different opinion seems to have been entertained, 5 Bos. & Pul. 61, Waddington v. Oliver, and a different decision was had, 2 Stark. Rep. 281, Walker v. Dixon.

There is a close analogy between all these classes of cases, in which such diverse decisions have been made.

If the party who has contracted to receive merchandize, takes a part and uses it, in expectation that the whole will be delivered, which is never done, there seems to be no greater reason that he should pay for what he has received, than there is that the party who has received labor in part, under similar circumstances, should pay the value of what has been done for his benefit.

It is said, that in those cases where the plaintiff has been permitted to recover there was an acceptance of what had been done. The answer is, that where the contract is to labor from clay to day, for a certain period, the party for whom the labor is done in truth stipulates to receive it from day to day, as it is performed, and although the other may not eventually do all he has contracted to do, there has been, necessarily, an acceptance of what has been done in pursuance of the contract, and the party must have understood when he made the contract that there was to be such acceptance.

If then the party stipulates in the outset to receive part performance from time to time, with a knowledge that the whole may not be completed, we see no reason [491] why he should not equally he holden to pay for the amount of value received, as where lie afterwards takes  the benefit of what has been done, with a knowledge that the whole which was contracted for has not been performed.

In neither case has the contract been performed. In neither can an action be sustained on the original contract.

In both the party has assented to receive what is done. The only difference is, that in the one case the assent is prior, with a knowledge that all may not be performed, in the other it is subsequent, with a knowledge that the whole has not been accomplished.

We have no hesitation in holding that the same rule should be applied to both classes of cases, especially, as the operation of the rule will be to make the party who has failed to fulfil his contract, liable to such amount of damages as the other party has sustained, instead of subjecting him to an entire loss for a partial failure, and thus making the amount received in many cases wholly disproportionate to the injury. 1 Saund. 320, c; 2 Stark. Evid. 643.

It is as "hard upon the plaintiff to preclude him from recovering at all, because he has failed as to part of his entire undertaking," where his contract is to labor for a certain period, as it can be in any other description of contract, provided the defendant has received a benefit and value from the labor actually performed.

We, hold then, that where a party undertakes to pay upon a special contract for the performance of labor, or the furnishing of materials, he is not to be charged upon, such special agreement until the money is earned according to the terms of it, and where the parties have made an express contract the law will not imply and raise a contract different from that which the parties have entered into, except upon some farther transaction between the parties.

[492] In case of a failure to perform such special contract, by the default of the party contracting to do the service, if the money is not due by the terms of the special agreement he is not entitled to recover for his labor, or for the materials furnished, unless the other party receives what has been done, or furnished, and upon the whole case derives a benefit from it. 14 Mass. 282, Taft v. Montague; 2 Stark. Ev. 644.

But if, where a contract is made of such a character, a party actually receives labor, or materials, and thereby derives a benefit and advantage, over and above the damage which has resulted from the breach of the contract by the other party, the labor actually done, and the value received, furnish a new consideration, and the law thereupon raises a promise to pay to the extent of the reasonable worth of such excess. This may be considered as making a new case, one not within the original agreement, and the party is entitled to "recover on his new case, for the work done, not as agreed, but yet accepted by the defendant." 1 Dane's Abr. 224.

If on such failure to perform the whole, the nature of the contract be such that the employer can reject what has been done, and refuse to receive any benefit from the part performance, he is entitled so to do, and in such case is not liable to be charged, unless he has before assented to and accepted of what has been done, however much the other party may have done towards the performance, lie has in such case received nothing, and having contracted to receive nothing but the entire matter contracted for, he is not bound to pay, because his express promise was only to pay on receiving the whole, and having actually received nothing the law cannot and plight not to raise an implied promise to pay. But where the party receives value—takes and uses the materials, or has advantage from the labor, he is liable to pay the reasonable worth of what he has received. 1 Camp. 38, Farnsworth v. Garrard. And the rule is the same wheth [493] er it was received and accepted by the assent of the party prior to the breach, under a contract by which, from its nature, he was to receive labor, from time to time until the completion of the whole contract; or whether it was received and accepted by an assent subsequent to the performance of all which was in fact done. If he received it under such circumstances as precluded him from rejecting it afterwards, that does not alter the case—it has still been received by his assent.

In fact we think the technical reasoning, that the performance of the whole labor is a condition precedent, and the right to recover any thing dependent upon it—that the contract being entire there can be no apportionment—and that there being an express contract no other can be implied, even upon the subsequent performance of service—is not properly applicable to this species of contract, where a beneficial service has been actually performed; for we have abundant reason to believe, that the general understanding of the community is, that the hired laborer shall be entitled to compensation for the service actually performed, though he do not continue the entire term contracted for, and such contracts must be presumed to be made with reference to that understanding, unless an express stipulation shows the contrary.

Where a beneficial service has been performed and received, therefore, under contracts of this kind, the mutual agreements cannot be considered as going to the whole of the consideration, so as to make them mutual conditions, the one precedent to the other, without a specific proviso to that effect. 1 H. Black. 273, note, Boone v. Eyre; 6 D. & E. 570, Campbell v. Jones; 10 East, 295, Ritchie v. Atkinson; 4 Taunt. 745, Burn v. Miller.

It is easy, if parties so choose, to provide by an express agreement that nothing shall be earned, if the laborer leaves his employer without having performed the whole service contemplated, and then there can be no [494] pretence for a recovery if he voluntarily deserts the service before the expiration of the time.

The amount, however, for which the employer ought to be charged, where the laborer abandons his contract, is only the reasonable worth, or the amount of advantage lie receives upon the whole transaction, (ante 15, Wadleigh v. Sutton,) and, in estimating the value of the labor, the contract price for the service cannot be exceeded. 7 Green. 78; 4 Wendell, 285, Dubois v. Delaware & Hudson Canal Company; 7 Wend. 121, Koon v. Greenman.

If a person makes a contract fairly he is entitled to have it fully performed, and if this is not done he is entitled to damages. He may maintain a suit to recover the amount of damage sustained by the non performance.

The benefit and advantage which the party takes by the labor, therefore, is the amount of value which he receives, if any, after deducting the amount of damage; and if he elects to put this in defence he is entitled so to do, and the implied promise which (he law will raise, in such case, is to pay such amount of the stipulated price for the whole labor, as remains after deducting what it would cost to procure a completion of the residue of the service, and also any damage which has been sustained by reason of the non fulfilment of the contract.

If in such case it be found that the damages are equal to, or greater than the amount of the labor performed so that the employer, having a right to the full performance of the contract, has not upon the whole case received a beneficial service, the plaintiff cannot recover.

This rule, by binding the employer to pay the value of the service he actually receives, and the laborer to answer in damages where lie docs not complete the entire contract, will leave no temptation to the former lo drive the laborer from his service, near the close of his term, by ill treatment, in order to escape from payment; nor to the latter in desert his service before the stipulated time, without a sufficient  reason; and it will be in most in [495] stances settle the whole controversy in one action, and prevent a multiplicity of suits and cross actions.

There may be instances, however, where the damage occasioned is much greater than the value of the labor performed, and if the party elects to permit himself to be charged for the value of the labor, without interposing the damages in defence, he is entitled to do so, and may have an action to recover his damages for the nonperformance, whatever, they may be. 1 Mason's Rep. Crowninshield v. Robinson.

And he may commence such action at any time after the contract is broken, notwithstanding no suit has been instituted against him; but if he elects to have the damages considered in the action against him, he must be understood as conceding that they are not to be extended beyond the amount of what he has received, and he cannot afterwards sustain an action for farther damages.

Applying the principles thus laid down, to this case, the plaintiff is entitled to judgment on the verdict.

The defendant sets up a mere breach of the contract in defence of the action, but this cannot avail him. He does not appear to have offered evidence to show that he was damnified by such breach, or to have asked that a deduction should be made upon that account. The direction to the jury was therefore correct, that the plaintiff was entitled to recover as much as the labor performed was reasonably worth, and the jury appear to have allowed a pro rata compensation, for the time which the plaintiff labored in the defendant's service.

As the defendant has not claimed or had any adjustment of damages, for the breach of the contract, in this action, if he has actually sustained damage he is still entitled to a suit to recover the amount.

Whether it is not necessary, in cases of this kind, that notice should be given to the employer that the contract is abandoned, with an otter of adjustment and demand of payment; and whether the laborer must not wait until [496] the time when the money would have been due according to the contract, before commencing an action, (5 B. & P. 61) are questions not necessary to be settled in this case, no objections of that nature having been taken here.

Judgment on the verdict.

27 A. 912
56 N.J.L. 23
KEHOE
v.
MAYOR, ETC., OF BOROUGH OF RUTHERFORD.
Supreme Court of New Jersey.
Nov. 9, 1893.

(Syllabus by the Court.)

Action on a contract by John Kehoe against the mayor and common council of the borough of Rutherford. Heard on a rule to show cause why a new trial should not be granted after order of nonsuit Rule discharged.

Argued June term, 1893, before BEASLEY, C. J., and MAGIE, GARRISON, and DIXON, JJ.

Addison Ely and S. B. Ransom, for plaintiff.

Geo. B. Luce, for defendant.

DIXON, J. On October 15, 1888, the plaintiff and defendant entered into a written contract, under seal, by which the plaintiff became bound to grade, work, shape, level, smooth, and roll Montrose avenue, in the borough of Rutherford, to its entire width, according to [27 A. 913] the established grade, commencing at Washington avenue, and ending at Pierpont avenue, and the defendant became bound to pay him therefor 65 cents per lineal or running foot.

Soon afterwards, the plaintiff began the work, and continued until it was discovered that some of the land to be graded under the contract was private property. Then, being forbidden by the owners to enter upon this property, the plaintiff stopped the work, by direction of the borough authorities, and concluded to abandon it in the meantime, he had been paid $1,850 of the contract price.

On this state of facts, he brought suit against the defendant, relying, in one count of his declaration, upon the breach of the special contract, and, in another, on the quantum meruit for the work done.

At the trial in the Bergen circuit the plaintiff's evidence tended to prove that the length of the whole work required by the contract was 4,220 feet, which, at the contract rate,—65 cents per lineal foot,—made the aggregate price $2,743; that about 3,500 feet in length had been substantially graded, but still needed trimming up and finishing; that in doing this work he had excavated about 8,000 cubic yards of earth, and had put in about 1,300 cubic yards of filling; that to complete the job, about 14,000 cubic yards of filling were still necessary, besides the trimming up and finishing of the entire length of the street. His evidence further indicated that the fair cost of the work done was:

8,000 cubic yards of excavation, at 35 cents     $2,800
900 cubic yards of filling, at 21 cts                      189
400 cubic yards of filling, at 41 cts                      164
Making a total of                                           $3,153

—and that the fair cost of the work remaining to be done, in completely performing the contract, was:

14,000 cubic yards of filling, at 12 cents            $1,680
4,220 feet of finishing, at 5 cents                        211
Making a total of                                           $1,891

—thus showing the fair cost of the whole work required by the contract to be $5,044.

These calculations are, in every instance, based upon the testimony most favorable to the plaintiff; allowing him the highest estimates for what he had done, and reckoning the residue at the lowest. If his own estimates, or those of any single witness, were taken throughout, the result would be more to his disadvantage.

Upon the evidence thus presented, the plaintiff was nonsuited, and a rule allowed that the defendant show cause why a new trial should not be awarded.

The nonsuit was ordered upon the theory that the plaintiff could recover, for the work done, only such a proportion of the contract price as the fair cost of that work bore to the fair cost of the whole work required, and, in respect of the work not done, only such profit, if any, as he might have made by doing it for the unpaid balance of the contract price. Under this theory, his recovery for the work done was to be limited to such a proportion of $2,743 as 3,153 bears to 5,044, viz. $1,715; and as to the work not done, since it would cost him $1,891 to do it, while the unpaid balance of the price was only $893, no profit could be earned by doing it. Hence, it was considered that he had been overpaid to the extent of the difference between $1,850 and $1,715.

But the contention of the plaintiff was and is that, as he was prevented from completing the contract without fault on his part, he is entitled to the reasonable value of the work done, without reference to the contract price; and if this be the correct rule, undoubtedly the case should have gone to the jury. But, at the very threshold, we are confronted with this possible result of the application of the rule contended for: That the plaintiff might recover $3,153 for doing about three-fifths of the work, while, if he had done it all, he could have recovered only $2,743. The absurdity of the result condemns the application of such a rule.

Circumstances may exist in which, for work done under a special contract, the plaintiff will recover its fair value. Thus, if the contract be within the prohibition of the statute of frauds, (McElroy v. Ludlum, 32 N.J. Eq. 828;) or if, the work being only partly done, that which is done, or that which is left undone, cannot be measured, so as to ascertain its price at the rate specified in the contract, (Derby v. Johnson, 21 Vt. 17,) or, in the absence of evidence to the contrary, it may be assumed that the rate specified is a reasonable one, (U. S. v. Behan, 110 U. S. 338, 4 Sup. Ct. Rep. 81.) But, generally, when it can be determined what, according to the contract, the plaintiff would receive for that which he has done, and what profit he would have realized by doing that which, without fault, he has been prevented from doing, then these sums become the legal, as they are the just, measure of his damages. He is to lose nothing, but, on the other hand, he is to gain nothing, by the breach of the contract, except as the abrogation of a losing bargain may save him from additional loss.

This is the rule applied in the case of Masterton v. Mayor, etc., of Brooklyn, 7 Hill, 61, where the plaintiff was to receive $271,600 for 88,819 feet of marble, and after he had delivered 14,779 feet the defendant stopped him. He was awarded the contract price for the 14,779 feet, and the profit which he would have made by delivering the balance. The same principle was declared by this court in Boyd v. Meighan, 48 N.J. Law, 404, 4 Atl. Rep. 778, and accords with the fundamental doctrines laid down by Mr. Sedgwick, (1 Sedg. Dam. [200] 432:) First, that the plaintiff must show himself to have sustained damage, or, in other words, that actual compensation [27 A. 914] will only be given for actual loss; and, second, that the contract itself furnishes the measure of damages.

Sometimes it has been held that if the contract binds the defendant to pay otherwise than in money, and he refuses, then the plaintiff may recover the cash value of what he has done or delivered. Ankeny v. Clark, 148 U. S. 345, 13 Sup. Ct. Rep. 617. But in New Jersey the rule is that he shall recover the cash value of what he was to receive, (Hinchman v. Rutan, 31 N.J. Law, 496,) thus maintaining the standard fixed by the contract.

Some of the obscurity surrounding this subject springs, I think, from a failure to distinguish between the right to sue upon the quantum meruit, when the contract remains uncompleted through the fault of the defendant, and the measure of damages in such a state of facts. It is well settled that if the plaintiff has fully performed his contract, so that nothing remains but the duty of the defendant to pay, the plaintiff may declare upon the quantum meruit, ignoring the special contract, and the plaintiff's readiness and offer to perform are to this extent, but to this extent only, (Shannon v. Comstock, 21 Wend. 457,) equivalent to actual performance. In both cases, however, the amount which the plaintiff deserves to recover is regulated by the contract. The refusal of the defendant to pay, after all the work is done, is no less a breach of the contract than is his refusal to permit the plaintiff to do all that the bargain entitled him to do; but neither breach does or ought to put the parties in the position they would have occupied if no contract had been made. In both cases, what is done was done under the contract, and should be paid for accordingly.

If, on partial performance, the plaintiff confines himself to the common counts, he excludes by his pleading any claim for what he has not performed, but he does not thereby enhance his deserts for what he has performed; and therefore, in order to obtain complete justice on breach of a profitable bargain, he must resort to a special count.

Our conclusion is that, as the plaintiff had been paid up to the full measure of the contract for the work done, and could have made no profit by its further prosecution, the nonsuit was substantially right.

The rule to show cause is discharged.

COTTER, C. J., BOGDANSKI, PETERS, HEALEY and PARSKEY, JS.

[502] Walter A. Stewart, Jr., for the appellant (defendant).

Joel Schlossberg, for the appellees (plaintiffs).

PETERS, J.

This case concerns the right of purchasers of real property, after their own default, to recover moneys paid at the time of execution of a valid contract of sale. The plaintiffs, Euel D. Vines and his wife Etta Vines, contracted, on July 11, 1973, to buy Unit No. 10, Orchard Hills Condominium, New Canaan, from the defendant Orchard Hills, Inc. for $78,800. On or before that date, they had paid the defendant $7880 as a down payment toward the purchase. Alleging that the sale of the property was never consummated, the plaintiffs sought to recover their down payment. The trial court, I. Levine, J., overruled the defendant's demurrer to the plaintiffs' amended complaint; subsequently, after a hearing, the trial court, Novack, J., rendered judgment for the plaintiffs for $7880 plus interest. The defendant's appeal [503] maintains that its demurrer should have been sustained, that its liquidated damages clause should have been enforced, and that evidence of the value of the property at the time of the trial should have been excluded.

The facts underlying this litigation are straightforward and undisputed. When the purchasers contracted to buy their condominium in July, 1973, they paid $7880, a sum which the contract of sale designated as liquidated damages.^[1] The purchasers decided not to take title to the condominium because Euel D. Vines was transferred by his employer to New Jersey; the Vines so informed the seller by a letter dated January 4, 1974. There has never been any claim that the seller has failed, in any respect, to conform to his obligations under the contract, nor does the complaint allege that the purchasers are legally excused from their performance under the contract. In short, it is the purchasers and not the seller whose breach precipitated the present cause of action.

In the proceedings below, the purchasers established that the value of the condominium that they had agreed to buy for $78,800 in 1973 had, by the time of the trial in 1979, a fair market value of $160,000. The trial court relied on this figure to conclude that, because the seller had gained what it characterized as a windfall of approximately $80,000, the purchasers were entitled to recover their down payment of $7880. Neither the purchasers nor the seller proffered any evidence at the [504] trial to show the market value of the condominium at the time of the purchasers' breach of their contract or the damages sustained by the seller as a result of that breach.

The seller's principal argument on this appeal is that the trial court improperly disregarded the parties' valid liquidated damages clause. That claim is pursued both by a renewal of the seller's position that the purchasers' complaint was demurrable and by an argument on the merits of the evidence presented at the trial. As to the demurrer, now denominated a motion to strike by Practice Book, 1978, § 152, we find no error. Whether a party may recover payments made despite its own default and despite its agreement to a liquidated damages clause is a question that presents issues of fact which transcend the legal sufficiency of the complaint, as the trial itself demonstrated. Putnam, Coffin & Burr, Inc. v. Halpern, 154 Conn. 507, 517, 227 A.2d 83 (1967); 1 Stephenson, Conn. Civ. Proc. § 119b (1970). The trial court was, however, in error in its conclusion that the evidence before it was sufficient to sustain a judgment in favor of the purchasers.

The ultimate issue on this appeal is the enforceability of a liquidated damages clause as a defense to a claim of restitution by purchasers in default on a land sale contract. Although the parties, both in the trial court and here, have focused on the liquidated damages clause per se, we must first consider when, if ever, purchasers who are themselves in breach of a valid contract of sale may affirmatively invoke the assistance of judicial process to recover back moneys paid to, and withheld by, their seller.

[505] I

The right of a contracting party, despite his default, to seek restitution for benefits conferred and allegedly unjustly retained has been much disputed in the legal literature and in the case law. See 5A Corbin, Contracts §§ 1122-1135 (1964); Dobbs, Remedies § 12.14 (1973); 1 Palmer, Restitution, c. 5 (1978); 12 Williston, Contracts §§ 1473 through 1478 (3d Ed. 1970); 5 Williston, Contracts § 791 (3d Ed. 1961); Lee, "The Plaintiff in Default," 19 Vand. L. Rev. 1023 (1965-66); Talbott, "Restitution for the Defaulting Buyer," 9 W. Res. L. Rev. 445 (1958); annot., "Vendee's Recovery of Purchase Money," 31 A.L.R.2d, pp. 8-131 (1953). Although earlier cases often refused to permit a party to bring an action that could be said to be based on his own breach; see, e.g., Hansbrough v. Peck, 72 U.S. (5 Wall.) 497, 506, 18 L. Ed. 520 (1867); Wheeler v. Mather, 56 Ill. 241, 246-47 (1870); Miller v. Snedeker, 257 Minn. 204, 217-18, 101 N.W.2d 213 (1960); Ketchum & Sweet v. Evertson, 13 Johns. 359, 365 (N.Y. 1816); Dluge v. Whiteson, 292 Pa. 334, 335-36, 141 A. 230 (1928); many of the more recent cases support restitution in order to prevent unjust enrichment and to avoid forfeiture. See, e.g., Hook v. Bomar, 320 F.2d 536, 541 (5th Cir. 1963); Amtorg Trading Corporation v. Miehle Printing Press & Mfg. Co., 206 F.2d 103, 108 (2d Cir. 1953); Honey v. Henry's Franchise Leasing Corporation, 64 Cal. 2d 801, 803, 415 P.2d 833 (1966); Freedman v. Rector, Wardens & Vestrymen of St. Matthias Parish, 37 Cal. 2d 16, 20, 230 P.2d 629 (1951); Haas v. Crisp Realty Co., 65 So. 2d 765, 768 (Fla. 1953); Nichols v. Knowles, 87 Idaho 550, 556, 394 P.2d 630 (1964); Graves v. Cupic, 75 [506] Idaho 451, 456-59, 272 P.2d 1020 (1954); Woodliff v. Al Parker Securities Co., 233 Mich. 154, 156, 206 N.W. 499 (1925); Newcomb v. Ray, 99 N.H. 463, 467, 114 A.2d 882 (1955); Massey v. Love, 478 P.2d 948, 950-51 (Okla. 1971); DeLeon v. Aldrete, 398 S.W.2d 160, 163-64 (Tex. 1966); Perkins v. Spencer, 121 Utah 468, 475-77, 243 P.2d 446 (1952); Schwartz v. Syver, 264 Wis. 526, 531, 533, 59 N.W.2d 489 (1953); and see Restatement (Second), Contracts § 388 (Tent. Draft No. 14, 1979).

A variety of considerations, some practical and some theoretical, underlie this shift in attitude toward the plaintiff in breach. As Professor Corbin pointed out in his seminal article, "The Right of a Defaulting Vendee to the Restitution of Instalments Paid," 40 Yale L.J. 1013 (1931), the anomalous result of denying any remedy to the plaintiff in breach is to punish more severely the person who has partially performed, often in good faith, than the person who has entirely disregarded his contractual obligations from the outset. Only partial performance triggers a claim for restitution, and partial performance will not, in the ordinary course of events, have been more injurious to the innocent party than total nonperformance. Recognition of a claim in restitution is, furthermore, consistent with the economic functions that the law of contracts is designed to serve. See Kessler & Gilmore, Contracts, pp. 4-6 (1970). The principal purpose of remedies for the breach of contract is to provide compensation for loss; see Restatement (Second), Contracts, c. 16, Introductory Note (Tent. Draft No. 14, 1979); Farnsworth, "Legal Remedies for Breach of Contract," 70 Colum. L. Rev. 1145 (1970); and therefore a party injured by breach [507] of contract is entitled to retain nothing in excess of that sum which compensates him for the loss of his bargain. Indeed, there are those who argue that repudiation of contractual obligations is socially desirable, and should be encouraged, whenever gain to the party in breach exceeds loss to the party injured by breach. Birmingham, "Breach of Contract, Damage Measures, and Economic Efficiency," 24 Rut. L. Rev. 273, 284 (1970); Posner, Economic Analysis of Law § 4.9, pp. 89-90 (2d Ed. 1977). To assign such primacy to inferences drawn from economic models requires great confidence that the person injured by breach will encounter no substantial difficulties in establishing the losses for which he is entitled to be compensated. It is not necessary to push the principle of compensatory damages that far, or to disregard entirely the desirability of maintaining some incentives for the performance of promises. A claim in restitution, although legal in form, is equitable in nature, and permits a trial court to balance the equities, to take into account a variety of competing principles to determine whether the defendant has been unjustly enriched. "Even though we adhere to the rule that only compensatory damages are to be awarded, there are other important questions of policy to be considered. One is whether aid is to be given to one who breaches his contract, particularly when the breach is deliberate and without moral justification. Another is whether restitution can be administered without leaving the innocent party with uncompensated damages." 1 Palmer, Restitution § 5.1, p. 574 (1978).

Recognition that there are circumstances under which a defaulting purchaser may be entitled to restitution for benefits conferred upon the innocent [508] seller of land is consistent with parallel developments elsewhere in the law of contracts. Judicial resistance to enforcement of forfeitures has of course long been a commonplace, particularly with regard to contract clauses purporting to liquidate damages. See 5 Corbin, Contracts § 1058 (1964); 5 Williston, Contracts § 788 (3d Ed. 1961). Despite the deference afforded by nineteenth-century courts to freedom of contract in other areas; see Weisbrod, The Boundaries of Utopia, pp. 165-67, 210-11 (1980); clauses that might impose forfeitures were invariably carefully scrutinized and frequently denounced as penal. Contract clauses permitting retention of partial payments pursuant to contracts of conditional sale temporarily escaped this obloquy, on the theory that a seller's retention of a property interest in his goods entitled him, upon any default by the buyer, both to retake his goods and to retain any moneys paid. See 1 Gilmore, Security Interests in Personal Property § 3.2 (1965); 3 Jones, Chattel Mortgages and Conditional Sales §§ 1378, 1382 (6th Ed. 1933); Glenn, "The Conditional Sale at Common Law and as a Statutory Security," 25 Va. L. Rev. 559, 572 (1939). The law of conditional sales contracts came, however, in this century, to recognize that avoidance of forfeiture was more important than retention of title, so that conditional sales, like chattel mortgages, were enforced in such a way as to preserve the debtor's equity. See 1 Gilmore, supra, 68; Glenn, supra, 580. In a similar vein, in real property transactions courts have long protected a debtor's equity from forfeiture by allowing the debtor to show by parol evidence that a deed although absolute on its face was actually intended to be a mortgage. See Osborne, Mortgages §§ 72-73 (1970).

[509] In this state, at the turn of the century, in Pierce v. Staub, 78 Conn. 459, 466, 62 A. 760 (1906), this court acknowledged the equitable claim of a purchaser in breach to recover moneys paid under a contract to purchase real property. Pierce v. Staub is distinguishable from the case before us, because the court there found (p. 465) that the parties had, after the buyer's breach, rescinded the contracts in question. In view of this rescission, the purchaser's widow was held to be entitled to a return of the $60,000 paid on the purchase price of $150,000. Pierce v. Staub was thereafter relied upon in another case involving rescission after termination of a contract, Remington Arms U.M.C. Co. v. Gaynor Mfg. Co., 98 Conn. 721, 734-35, 120 A. 572 (1923), and has, since then, been cited for the proposition that courts of law may, on suitable occasions, afford equitable relief from forfeiture. Menzies v. Fisher, 165 Conn. 338, 357, 334 A.2d 452 (1973); Elberton Cotton Mills, Inc. v. Indemnity Ins. Co., 108 Conn. 707, 714, 145 A. 33 (1929); Baurer v. Devenis, 99 Conn. 203, 216, 121 A. 566 (1923). Apart from Pierce v. Staub, we have never directly decided whether a purchaser of real estate may, despite his breach, recover payments made to his seller. But Pierce v. Staub is an impressive, and an impressively early, guidepost toward permitting such a cause of action. The court's narrow reliance on the possibly artificial conclusion of mutual rescission should not obscure the breadth of its language deploring forfeiture. Pierce v. Staub, supra, 466. We therefore conclude that a purchaser whose breach is not willful has a restitutionary claim to recover moneys paid that unjustly enrich his seller. In this case, no one has alleged that the purchasers' breach, arising out of a transfer to a more distant [510] place of employment, should be deemed to have been willful. The trial court was therefore not in error in initially overruling the seller's demurrer and entertaining the purchasers' cause of action.

II

The purchaser's right to recover in restitution requires the purchaser to establish that the seller has been unjustly enriched. The purchaser must show more than that the contract has come to an end and that the seller retains moneys paid pursuant to the contract. To prove unjust enrichment, in the ordinary case, the purchaser, because he is the party in breach, must prove that the damages suffered by his seller are less than the moneys received from the purchaser. Schwasnick v. Blandin, 65 F.2d 354, 358 (2d Cir. 1933); Kitchin v. Mori, 437 P.2d 865, 866 (Nev. 1968). It may not be easy for the purchaser to prove the extent of the seller's damages, it may even be strategically advantageous for the seller to come forward with relevant evidence of the losses he has incurred and may expect to incur on account of the buyer's breach. Nonetheless, only if the breaching party satisfies his burden of proof that the innocent party has sustained a net gain may a claim for unjust enrichment be sustained. Dobbs, Remedies § 12.14 (1973); 1 Palmer, Restitution § 5.4 (1978).

In the case before us, the parties themselves stipulated in the contract of sale that the purchasers' down payment of 10 percent of the purchase price represents the damages that would be likely to flow from the purchasers' breach. The question then becomes whether the purchasers have demonstrated the seller's unjust enrichment in the face of the liquidated damages clause to which they agreed.

[511] This is not a suitable occasion for detailed review of the checkered history of liquidated damages clauses. Despite the judicial resistance that such clauses have encountered in the past; 5 Corbin, Contracts § 1066 (1964); 5 Williston, Contracts § 788 (3d Ed. 1961); Goetz & Scott, "Liquidated Damages, Penalties and the Just Compensation Principle: Some Notes on an Enforcement Model and a Theory of Efficient Breach," 77 Colum. L. Rev. 554-56 (1977); Macneil, "Power of Contract and Agreed Remedies," 47 Cornell L. Q. 495, 507-508 (1962); this court has recognized the principle that there are circumstances that justify private agreements to supplant judicially determined remedies for breach of contract. Berger v. Shanahan, 142 Conn. 726, 731-32, 118 A.2d 311 (1955); King Motors v. Delfino, 136 Conn. 496, 498, 72 A.2d 233 (1950); cf. General Statutes § 42a-2-718 (1); and Restatement (Second), Contracts § 370 (Tent. Draft No. 14, 1979). This court has however refused to enforce an otherwise valid liquidated damages clause upon a finding that no damages whatsoever ensued from the particular breach of contract that actually occurred. Norwalk Door Closer Co. v. Eagle Lock & Screw Co., 153 Conn. 681, 689, 220 A.2d 263 (1966).

Most of the litigation concerning liquidated damages clauses arises in the context of an affirmative action by the party injured by breach to enforce the clause in order to recover the amount therein stipulated. In such cases, the burden of persuasion about the enforceability of the clause naturally rests with its proponent. See, e.g., Norwalk Door Closer Co. v. Eagle Lock & Screw Co., supra, 688. In the case before us, by contrast, where the plaintiffs are themselves in default, the plaintiffs bear [512] the burden of showing that the clause is invalid and unenforceable. See Frank Towers Corporation v. Laviana, 140 Conn. 45, 53-54, 97 A.2d 567 (1953); 5A Corbin, Contracts § 1132, p. 64 (1964); Macneil, supra, 517. It is not unreasonable in these circumstances to presume that a liquidated damages clause that is appropriately limited in amount bears a reasonable relationship to the damages that the seller has actually suffered. See Restatement (Second), Contracts § 388, esp. subsection (2) (Tent. Draft No. 14, 1979).^[2] The seller's damages, as Professor Palmer points out, include not only his expectation damages suffered through loss of his bargain, and his incidental damages such as broker's commissions, but also less quantifiable costs arising out of retention of real property beyond the time of the originally contemplated sale. 1 Palmer, Restitution §§ 5.4, 5.8 (1978). See also Goetz & Scott, supra, 577. A liquidated damages clause allowing the seller to retain 10 percent of the contract price as earnest money is presumptively a reasonable allocation of the risks associated with default. See Wilkins v. Birnbaum, 278 A.2d 829, 831 (Del. 1971); [513] Oliver v. Lawson, 92 N.J. Super. 331, 336, 223 A.2d 355 (1966); 1 Palmer, supra, § 5.1, p. 587.^[3]

The presumption of validity that attaches to a clause liquidating the seller's damages at 10 percent of the contract price in the event of the purchaser's unexcused nonperformance is, like most other presumptions, rebuttable. The purchaser, despite his default, is free to prove that the contract, or any part thereof, was the product of fraud or mistake or unconscionability. Cf. Hamm v. Taylor, 180 Conn. 491, 495-96, 429 A.2d 946 (1980). In the alternative, the purchaser is free to offer evidence that his breach in fact caused the seller no damages or damages substantially less than the amount stipulated as liquidated damages. See Norwalk Door Closer Co. v. Eagle Lock & Screw Co., supra, 689.

The trial court concluded that the plaintiff purchasers had successfully invoked the principle of Norwalk Door Closer Co. v. Eagle Lock & Screw Co. by presenting evidence of increase in the value of the real property between the date of the contract of sale and the date of the trial. That conclusion was in error. The relevant time at which to measure the seller's damages is the time of breach. Zirinsky v. Sheehan, 413 F.2d 481, 489 (8th Cir. 1969); Gordon v. Indusco Management Corporation, 164 Conn. 262, 274, 320 A.2d 811 (1973). Benefits to the seller that are attributable to a rising market subsequent to breach rightfully accrue to the seller. Beckley v. Munson, 22 Conn. 299, 313 [514] (1853); Baffa v. Johnson, 35 Cal. 2d 36, 39-40, 216 P.2d 13 (1950). There was no evidence before the court to demonstrate that the seller was not injured at the time of the purchasers' breach by their failure then to consummate the contract. Neither the seller's status as a developer of a condominium project nor the absence of willfulness on the part of the purchasers furnishes a justification for disregarding the liquidated damages clause, although these factors may play some role in the ultimate determination of whether the seller was in fact unjustly enriched by the down payment he retained.

Because the availability of, and the limits on, restitutionary claims by a plaintiff in default have not previously been clearly spelled out in our cases, it is appropriate to afford to the purchasers herein another opportunity to proffer evidence to substantiate their claim. What showing the purchasers must make cannot be spelled out with specificity in view of the sparsity of the present record. The purchasers may be able to demonstrate that the condominium could, at the time of their breach, have been resold at a price sufficiently higher than their contract price to obviate any loss of profits and to compensate the seller for any incidental and consequential damages. Alternatively, the purchasers may be able to present evidence of unconscionability or of excuse, to avoid the applicability of the liquidated damages clause altogether. The plaintiffs' burden of proof is not an easy one to sustain, but they are entitled to their day in court.

There is error, the judgment is set aside, and the case is remanded for further proceedings in conformity with this opinion.

In this opinion the other judges concurred.

[1] Paragraph 9 of the contract of sale provided: "DEFAULT: In the event Purchaser fails to perform any of the obligations herein imposed on the Purchaser, the Seller performing all obligations herein imposed on the Seller, the Seller shall retain all sums of money paid under this Contract, as liquidated damages, and all rights and liabilities of the parties hereto shall be at an end."

[2]Section 388 of the Restatement (Second) of Contracts (Tent. Draft No. 14, 1979) provides: "RESTITUTION IN FAVOR OF PARTY IN BREACH. (1) Subject to the rule stated in Subsection (2), if a party justifiably refuses to perform on the ground that his remaining duties of performance have been discharged by the other party's breach, the party in breach is entitled to restitution for any benefit that he has conferred on the injured party by way of part performance or reliance.

(2) To the extent that, under the manifested assent of the parties, a party's performance is to be retained in the case of breach, that party is not entitled to restitution if the value of the performance as liquidated damages is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss."

[3] We have, in another context, viewed 10 percent as a reasonable cutoff point to determine presumptively what inferences are to be drawn from ambiguous commercial undertakings. See Granite Equipment Leasing Corporation v. Acme Pump Co., 165 Conn. 364, 368, 335 A.2d 294 (1973).

Anthony T. Antinozzi, Corporation Counsel, for appellant.

Sidney Advocate for Public Service Mutual Insurance Company, respondent.

Frank H. Connelly for remaining respondents.

Judges JASEN, GABRIELLI, JONES, WACHTLER and STEVENS concur; Judge RABIN taking no part.

[471] Chief Judge BREITEL.

In this action to recover on a surety bond given to secure timely completion of some six buildings, the City of Rye, as obligee under the bond, seeks to recover the face amount of $100,000. The surety and the developers are defendants. Special Term denied the city's motion for summary judgment, and a divided Appellate Division affirmed the denial. In his concurring opinion at the Appellate Division, [472] Mr. Justice SHAPIRO reasoned that the bond was penal in nature and therefore not enforceable. The dissenters, in an opinion by Mr. Justice HOPKINS, would have sustained the city's contention that, as a governmental entity pursuing its governmental responsibilities, it had the power, without violating any public policy, to exact a substantial bond to secure performance of obligations imposed on a developer by the zoning ordinance and action taken under it.

The order of the Appellate Division denying plaintiff city's motion for summary judgment should be affirmed. The bond of $100,000 posted by the developers with the city to ensure completion of the remaining six "peripheral" buildings by a date certain did not reflect a reasonable estimate of probable monetary harm or damages to the city, but a penalty, and, in the absence of statutory authority for the penal bond, may not be recovered upon.

The developers, under a plan approved by the City Planning Commission, had constructed six luxury co-operative apartment buildings and were to construct six more. In order to obtain certificates of occupancy for the six completed buildings the developers were required to post a bond with the city to ensure completion of the remaining six buildings. By letter agreement with the city in the fall of 1967, they agreed to post a $100,000 bond and to pay $200 per day for each day after April 1, 1971 that the six remaining buildings were not completed, up to the aggregate amount of the bond. More than 500 days have passed without the additional buildings having been completed within the time limit. The city seeks to recover the entire $100,000 amount of the bond.

Concededly, no statute authorizes the city to exact a penalty or forfeiture from the developers. If there were such a statute, the statutory penalty would undoubtedly be upheld (see, e.g., Lyman v. Perlmutter, 166 N.Y. 410, 413-415; Clark v. Barnard, 108 U. S. 436, 461; see, also, United States v. Zerbey, 271 U. S. 332, 340, and cases cited). Hence, general principles of contract law governing the enforceability of liquidated damage clauses should apply (cf. Priebe & Sons v. United States, 332 U. S. 407, 411; see 5 Williston, Contracts [3d ed.], § 775B, at p. 664). The sole issue, then, becomes whether the agreement exacted from the developers and the conditional bond supplied provide for a [473] penalty or for liquidated damages. If the agreement provides for a penalty or forfeiture without statutory authority, it is unenforceable. Where, however, damages flowing from a breach are difficult to ascertain, a provision fixing the damages in advance will be upheld if the amount is a reasonable measure of the anticipated probable harm (Ward v. Hudson Riv. Bldg. Co., 125 N.Y. 230, 235; Restatement, Contracts, § 339; 5 Corbin, Contracts, §§ 1059, 1063). If, on the other hand, the amount fixed is grossly disproportionate to the anticipated probable harm or if there were no anticipatable harm, the provision will not be enforced.

The harm which the city contends it would suffer by delay in construction is minimal, speculative, or simply not cognizable. The city urges that its inspectors and employees will be required to devote more time to the project than anticipated because it has taken extra years to complete. It also urges that it will lose tax revenues for the years the buildings are not completed. It contends, too, that it is harmed by a continuing violation of the height restrictions of its zoning ordinance. This is entailed because the 12 buildings in the entire complex vary in height between two and four stories; the ordinance sets a maximum average height of 30 feet for the complex; and the taller buildings, those higher than the allowable average, were built first. Only after all of the structures in the complex are built will the project comply with the average height requirement of the ordinance.

The most serious disappointments in expectation suffered by the city are not pecuniary in nature and therefore not measurable in monetary damages. The effect on increased inspectorial services or on tax revenue are not likely to be substantial and, in any event, are not developed in the record on summary judgment. There is nothing to show that either the sum of $200 per day or the aggregate amount of the bond bear any reasonable relationship to the pecuniary harm likely to be suffered or in fact suffered.

There is, as noted, no statutory authority for the city to exact harsh penal bonds from developers who are perforce dependent on approvals by local officials at the various stages of construction, and after construction for certificates of occupancy. For [474] municipalities, without statutory authorization or restriction, to condition perhaps arbitrarily the grant of building permits or certificates of occupancy on large penalty bonds raises potential for grave abuse. A developer, especially an outside developer, is rarely in a position to bargain on an equal basis with local officials, after completion of buildings rendered useless and an economic drain without a certificate of occupancy. Whether, and under what circumstances, the drastic remedy of penal bonds may be exacted is a matter best left to legislated authority, standards, and limitations.

There is no suggestion in this case that the developers' delay was purposeful. Apparently, the mortgage market "dried up" and the developers could not obtain additional financing for the remaining six buildings in the time planned. (The court is informed by the developers in their brief that, while this litigation has been pending, the remaining six buildings have almost been completed.)

Developers ask not only that the denial of summary judgment to the city be affirmed, but that summary judgment be granted to defendants dismissing the city's complaint. Since the city by this action sought, not actual damages, but only to recover the face amount of the bond, for the reasons discussed above, defendants perhaps might have been entitled to judgment dismissing the complaint. In denying the city's motion for summary judgment, the motion court and perhaps the Appellate Division, could have, but did not, grant summary judgment for defendants (see CPLR 3212, subd. [b]). Defendants, however, took no appeal from that determination. This court has no power to grant defendants, respondents on this appeal, affirmative relief (People v. Consolidated Edison Co. of N. Y., 34 N Y 2d 646, 648).

Accordingly, the order of the Appellate Division should be affirmed, without costs, and the question certified by that court answered in the affirmative.

Order affirmed, etc.

M. MULDOON ET AL., Respondents,

v.

MARGARET LYNCH, Appelant. 

No. 8,729.

March 23, 1885. 

BUILDING CONTRACT — DELAY IN COMPLETION—PENALTY — FORFEITURE— LIQUIDATED DAMAGES.—A clause in a contract for the erection of a marble tomb, requiring its completion by the contractor within a stated time under forfeiture of $10 per day for each and every day's delay beyond such time, provides for the payment of a penalty, and not liquidated damages, since it was evidently intended as a spur, there being no actual damage.

APPEAL from a judgment of the Superior Court of the-city and county of San Francisco, and from an order refusing a new trial.

Action to enforce a contract. The facts are sufficiently stated in the opinion of the court.

Gunnison & Booth, and Charles F. Hanlon, for Appellant.

The actual damage that would have resulted from a breach of the contract by the plaintiff was impossible to be determined. Consequently, the parties had a right to agree upon a definite sum as liquidated damages. (Civil Code, § 1671; Fletcher v. [537] Dycke, 2 T. R. 32; Huband v. Grattan, 1 Al. & N. 389; Pettis v. Bloomer, 21 How. Pr. 317; Pearson y. Williams, 24 Wend. 245; Smith v. Smith, 4 Wend. 468; Cothad v. Talmage, 9 N. Y. 551; Bagley v. Peddie, 16 N. Y. 469; Streeter v. Bush, 25 Cal. 71; Green v. Price, 13 M. & W. 696; Hosmer v. True, 19 Barb. 106; Mundy v. Culver, 18 Barb. 336; Knapp v. Maltby, 13 Wend. 587; Coffee v. Meiggs, 9 Cal. 363; People v. Love, 19 Cal. 677; Holmes v. Holmes, 12 Barb. 147; Dakin v. Williams, 17 Wend. 447.) If the intention of the parties is to assess the amount, the mere use of the word “penalty” is no obstruction to the enforcement of the obligation. (2 Greenl. Ev., §§ 257, 259; People v. Love, 19 Cal. 677; Tayloe v. Sandiford, 7 Wheat. 13.)

A. N. Drown, for Respondents.

The forfeiture of ten dollars a day is merely a penalty, and not a provision for liquidated damages. (1 Sutherland on Damages, 480; White v. Arlith, 1 Bond, 319; Myers v. Hart, 40 Mich. 517; Robeson v. Whiteside, 16 S. & E. 320.) The actual damages are not impracticable, or extremely difficult to fix. (Nash v. Hermosella, 9 Cal. 584; Van Buren v. Digges, 11 How. 461; Malone v. Hawley, 46 Cal. 409.) The expressed intention of the parties determines the sum as a penalty, and not as liquidated damages. ( White v. Arleth, 1 Bond. 325; Esmona v. Van Benschoten, 12 Barb. 375; Van Buren v. Digges, 11 How. 461; Stearns v. Barrett, 1 Pick. 443; Salters v. Ralph, 15 Abb. Pr. 273; Colwell v. Lawrence, 38 N. Y. 71.)

MYRICK, J.

The question involved in this appeal is whether a sum named in a contract as a forfeiture is to be regarded as liquidated damages or as a penalty. The plaintiffs and defendant executed a written contract, by which the plaintiffs were to furnish and complete certain improvements on the cemetery lot of defendant in a cemetery in San Francisco, viz., grading, brick-work, stone-work, monument, sarcophagus, etc., in which lot the remains of defendant's deceased husband had been interred. The monument was to be of the best article of hard Ravaccioni Italian marble. The amount to be paid for the whole was $18,788,—four installments, of $1,725 each, to be paid as the work progressed to the point of being ready for the reception of the monument, and the balance, $11,887, on the completion of the whole. The contract contained the following clause:

‘All the work, with the exception of monument, to be completed within four months from date of contract, and the balance in twelve months from the date of this contract, under forfeiture of ten dollars per day for each and every day beyond the stated time for completion.’

The monument was procured in Italy, but was delayed nearly two years in reaching the point of destination for the following reason: The monument was of four large blocks of marble; one of them was of the weight of 20 tons. The marble was transported from the quarry to a sea-port in Italy for shipment, and was there delayed waiting for a vessel. As one of the plaintiffs testified:

‘We had to wait until we got a ship. We got the Ottilio. It was the first vessel that left there for two years for this port. Owing to the size of the blocks the only way to bring them here was by ships directly from Italy; the largest block would not have been allowed on a railroad car.’

As soon as the marble reached San Francisco it was set up, and everything was according to the contract, without question being made, except as to the matter of time; that was the only point of controversy. The plaintiffs claim that defendant is indebted to them in the sum of $11,887, with interest from the day of the completion of the monument, and that the sum of $10 per day mentioned in the contract as a forfeiture is a penalty, and not matter of defense or setoff without proof of actual damage; while the defendant claims that the said sum of $10 per day is to be taken as liquidated damages, and, the same amounting to $7,820, is to be deducted from the sum of $11,887, leaving defendant indebted in the sum of $4,067 only. There is no doubt that parties to a contract may agree upon the amount which shall constitute the damage for its breach. It is declared in section 3301, Civil Code, that ‘no damages can be recovered for a breach of contract which are not clearly ascertainable in both their nature and origin;’ but section 1671 of the same Code declares that ‘the parties to a contract [538] may agree therein upon an amount which shall be presumed to be the amount of damages sustained by a breach thereof, when, from the nature of the case, it would be impracticable, or extremely difficult, to fix the actual damage.’ When parties have endeavored to contract with reference to damages,—when they have explicitly declared that a sum named by them shall be taken as stipulated damages,—it may be that such declaration would be taken as conclusive, and that courts would not attempt to relieve the losing party from his unfortunate or ill-advised engagement. But where it appears on the face of the contract that the sum named was intended by the parties to be considered as a penalty,—a spur,—courts will not enforce another construction, especially when the result would be the payment of a sum largely disproportionate to any reasonable idea of actual damage. The contract reads, ‘under forfeiture of ten dollars per day for each and every day beyond the stated time for completion.’ The general rule is that damages are and ought to be purely compensatory; they should be commensurate with the injury, neither more nor less. There is nothing in this case to indicate that the defendant has suffered any actual damage which can be measured or compensated by money. It is true, she had the right to contract to have the monument erected in memory of her deceased husband, and to have it at a certain time; and possibly the agreement might have been so drawn that her disappointment should have received adequate compensation; but, referring to the words used by the parties, we are not prepared to say that either had thought of compensation as such. The word ‘forfeiture’ is the equivalent of the word ‘penalty;’ it imports a penalty. (Van Buren v. Digges, 11 How. 461; Stearns v. Barrett, 1 Pick. 443; Salters v. Ralph, 15 Abb. Pr. 273.)

It has been held that in an agreement to convey land, and on default to pay a certain sum of money, or where the contractor agreed to do certain work, with a provision to pay a certain sum for each day's delay beyond the day fixed, or an agreement not to carry on a certain business at a named place, with a promise to pay a sum in case of violation of the agreement, (Streeter v. Rush, 25 Cal. 67,) if it appears that the parties intended the sum named to be considered liquidated damages, [540] courts will not interfere with the contract, even if it might seem to have been an improvident agreement. But where it appears that the parties intended the sum named to be a forfeiture or penalty, it has been generally held that the party in whose favor the penalty or forfeiture exists must prove his damage. In the case before us there is no claim of special damage. It might have been quite difficult for the defendant to show any damage of a pecuniary nature for the non-completion of the monument at the time specified, though its completion might have been of great comfort and consolation to her affectionate remembrance.

Upon the subject of liquidated damages and a penalty, we quote from 1 Suth. Dam. 480, as a clear statement of the result of the various decisions:

‘The intention of parties on this subject, under the artificial rules that have been adopted, is determined by very latitudinary construction. To be potential and controlling that a stated sum is liquidated damage, that sum must be fixed as the basis of compensation, and substantially limited to it; for just compensation is recognized as the universal measure of damages not punitory, parties may liquidate the amount by previous agreement. But when a stipulated sum is evidently not based on that principle, the intention to liquidate damages will either be found not to exist, or will be disregarded, and the stated sum treated as a penalty. Contracts are not made to be broken; and hence, when parties provide for consequences of a breach, they proceed with less caution than if that event was certain, and they were fixing a sum actually to be paid. The intention in all such cases is material, but to prevent a stated sum from being treated as a penalty, the intention should be apparent to liquidate damages in the sense of making just compensation; it is not enough that the parties express the intention that the stated sum shall be paid in case of a violation of the contract. A penalty is not converted into liquidated damages by the intention that it be paid; it is intrinsically a different thing, and the intention that it be paid cannot alter its nature. A bond, literally construed, imports an intention that the penalty shall be paid if there be default in the performance of the condition, and formerly that was the legal effect; courts of law [541] now, however, administer the same equity to relieve from penalties in other forms of contract as from those in bonds. The evidence of an intention to measure the damages, therefore, is seldom satisfactory when the amount stated varies materially from a just estimate of the actual loss finally sustained.’

For these reasons we are of opinion that the sum named is to be regarded as a penalty, and that the plaintiffs were entitled to recover the whole of the balance unpaid.

Judgment and order affirmed.

SHARPSTEIN, J. and  THORNTON, J. concurred

Hearing in Bank denied.

[291] Irving Achtenberg, Kansas City, for appellant.

Gresham, Boughan & Whipple, Walter J. Gresham, Kansas City, for respondents.

SAMUEL A. DEW, Special Judge.

Plaintiffs sued to recover damages for alleged breach of a real estate sales contract. A jury was waived and the court rendered a judgment for the plaintiffs in the sum of $7,000 principal, and $700 accrued interest. Defendant has appealed.

Defendant filed a third party petition against a third party defendant, but upon motion of the plaintiffs, a separate trial of the plaintiffs' cause was ordered, resulting in the foregoing judgment and appeal.

[292] In this court the plaintiffs, as respondents, have moved for a dismissal of the appeal for failure to comply with 42 V.A.M.S. Supreme Court Rule 1.08. It is alleged that defendant has failed to furnish a fair statement of the facts and has omitted page references to the transcript, where the rulings complained of appear. The transcript is short and in his reply the defendant has substantially corrected the omissions mentioned. The motion to dismiss is overruled.

It is alleged in the plaintiffs' petition that defendant was the owner of an 825 acre farm in St. Clair County, Missouri; that he listed the same for sale; that he entered into a written contract to sell the farm to the plaintiffs for $19,000, and plaintiffs paid the defendant $1,900 to apply on the contract price; that thereafter defendant breached the contract and sold the farm to third parties to plaintiffs' damage in the sum of $10,000.

Defendant filed a general denial to plaintiffs' petition and also filed a third party petition against one Charles Morgan and the St. Clair Investment Company, a corporation, alleging that they were liable to defendant for any amount adjudged against defendant in favor of the plaintiffs, for the reason that such third party defendants, for the purpose of defeating the performance of his contract with the plaintiffs, fraudulently and willfully represented to defendant that he was not bound on his contract with plaintiffs; that plaintiffs were not bona fide purchasers; that their contract was invalid; that defendant's only liability on his contract with plaintiffs, if any, was $1,900 for a real estate commission, which, when paid, would terminate the plaintiffs' contract; that being inexperienced in such matters and relying upon such representations, defendant was induced to execute a deed to the farm in blank, which Morgan delivered to third parties. Defendant asked judgment against the third party defendants for $500 attorneys' fees, for $5,000 damages, and for any amount adjudged against the defendant on plaintiffs' claim. As stated, the court ordered a separate trial of the original suit. Thereupon the defendant filed an amended answer to plaintiffs' petition, alleging further that the contract between the plaintiffs and defendant was void and unenforceable under the Statute of Frauds, Section 432.010 RSMo 1949, V.A.M.S.

According to the evidence, the defendant Waterfield was the owner of a farm of 825 acres in St. Clair County, Missouri. He owned no other farm in that county. On June 18, 1951, he entered into a written agency agreement with Earl Allen, a real estate agent, for the sale of the above farm. The agreement bore the title of United Farm Agency "Property Listing Agreement" and purported to be entered into at Weaubleau, Missouri. In the first line appeared the words: "Listing No. 611". The form included some seventy questions with blanks for answers thereto. Among the questions and answers tending to identify the property were those stating, in effect, that the post office address of the property was Weaubleau, Missouri; acreage, 825; price, $19,000; located in St. Clair County, Missouri, on a black top road two miles from Highway 54, adjoining Weaubleau creek, and two miles from the Village of Weaubleau, Missouri; sixty-two miles from the City of Springfield; contained a four room frame house, painted yellow; roof, composition; front porch, 6 × 20; maple trees on level site; barn, 36 × 40, frame in fair condition, roofed with shingles; poultry house, size 10 × 20, and "Another six-room house—poor". The listing agreement further provided, among other things, for the payment of a commission of ten per cent to the agent for a sale to a purchaser procured by the latter on the terms stated.

Plaintiffs, being interested in purchasing farm property in the vicinity, and seeing defendant's farm advertised, contacted Earl Allen, agent above mentioned, and entered into a written contract to purchase it. This contract, dated September 5, 1951, recited that it was being made "on property known as No. 611, United Farm Agency list at Weaubleau, Missouri", between the defendant Waterfield and the plaintiffs, recited that the consideration was $19,000, to be [293] fully paid, as provided; that the farm contained 825 acres; that plaintiffs would pay the 1951 taxes and would pay $1,900 in cash on execution of the contract and, upon delivery of deed, would assume a mortgage for $17,100. The contract contained the following printed paragraph: "If either party hereto fails or neglects to perform his part of this agreement, he shall forthwith pay and forfeit as liquidated damages to the other party a sum equal to ten percent of the agreed price of sale, except that if said agreed price is less than $2,000, said sum shall be $200". The contract further provided for a certain division of current crops, the furnishing of title and for delivery of deed and possession on or before February 20, 1952, at the office of the St. Clair Investment Company at Osceola, Missouri. It was signed by defendant Melton V. Waterfield as first party, and Harley E. Wilt and Gladys L. Wilt, as second parties, each signature being witnessed by Earl H. Allen.

After signing the contract to sell to the plaintiffs, defendant took plaintiffs to the bank at Osceola, Missouri to get the abstract. Defendant owed the bank $4,500, secured by mortgage on the farm. Charles Morgan at the bank refused to surrender the abstract until he found out if plaintiffs' check to Allen would clear. Defendant then returned home because, as he testified, "That's all I could do". He said he could not recall telling the plaintiffs their deal was off or that their contract was no good. Some time thereafter, defendant met Earl Allen, but did not tell Allen of the sale of the farm to another party. Allen learned from Clell Windon that Windon had since purchased the farm from defendant. The evidence is that within a few days after the signing of the plaintiffs' contract, defendant, through Mr. Morgan of the bank, had sold the farm to Clell Windon for $26,000, the grantee's name being inserted later by Morgan at Osceola. Defendant testified that Morgan told him the total sale price under the Windon contract was $22,000, but he learned from Windon later that it was in fact $26,000. He also found out from the recorder's office that $19.55 in revenue stamps placed on his deed had to be increased. He could not recall Morgan's explanation for the difference between the reported sale price of $22,000 and the actual sale price of $26,000. Morgan paid Allen $1,900 commission. Defendant paid Morgan $1,900 as a commission for the second sale, and defendant received about $17,000 out of the deal. No accounting appears for the remainder of the $26,000.

Plaintiffs offered the defendant's third party petition in evidence. This was admitted over the defendant's objection that the petition did not constitute admission against interest, and that it was not admissible under the Statute of Frauds. Several witnesses were produced by plaintiffs to establish the reasonable market value of the farm, which defendant contracted to sell to the plaintiffs, and their estimates varied from $18,000 to $26,000. The plaintiff Harley E. Wilt testified that he did not intend to buy the farm for resale, but to live upon it and farm it.

The defendant introduced the deposition of Clell Windon. He testified that he purchased the farm through Charles Morgan, an agent for defendant, on September 17, 1951; that a contract was prepared in written form, but for some reason not known to him it was never signed; that he paid $26,000 for the land, $21,000 in cash, and assumed a loan of $4,500. He said he received a receipt for the checks from Mr. Morgan. He had been shown the farm by one Burl Axom, who said it could be bought for $22,000. Axom contacted Morgan in Osceola, took the witness there and—"Before I got out of there I paid $21,500 and assumed the loan ($4,500)". Morgan told him he was defendant's agent. Witness said he assumed he was buying from recent previous purchasers, whose names he did not then know. Axom was to get five percent commission. Witness said he believed that he had paid $10,000 too much for the farm.

Defendant's first point in this appeal is that the court was in error in overruling defendant's motion for a finding that the plaintiffs' contract was void and [294] unenforceable under the Statute of Frauds, and for judgment. The motion was a request for judgment at the close of plaintiffs' case and upon its denial by the court, the defendant proceeded to introduce evidence on the merits of the case. The request was not renewed at the close of all the testimony. As this court said in Stephens v. Kansas City Gas Co., 354 Mo. 835, 850, 191 S.W.2d 601, 607, when such a motion is made and denied at the close of the plaintiff's testimony the error, if any, of such ruling is waived by the introduction of evidence thereafter by the party making such motion.

Defendant's next two points are, respectively, that the court erred in admitting parol evidence to supply the defective description of the farm in plaintiffs' contract, and in admitting the Listing Agreement for that purpose. It is asserted that the Statute of Frauds, Section 432.010 RSMo 1949, V.A.M.S., requires that the alleged contract for sale of land contain such a description of the property that it may be identified with reasonable certainty. It is urged that the words "Property known as No. 611 United Farm Agency List at Weaubleau, Missouri", and "825 acres", are not sufficient; that the Listing Agreement did not supply the essential description; that it did not refer to the contract nor did the contract refer to the Listing Agreement; nor was any "list" offered in evidence; that in the Listing Agreement only the county and state where the land was located were shown, omitting the section, township and range; that the other data shown does not sufficiently identify the defendant's farm. The facts are that the Listing Agreement contained the identifying "United Farm Agency" listing number "611"; the location as to county and state, the acreage, name of owner, description of the improvements, and distances from named towns and creek. The subsequent contract referred to the property as that "known as No. 611, United Farm Agency list at Weaubleau, Mo." Defendant admitted he owned the same farm and that he owned no other farm in St. Clair County, Missouri; that it contained 825 acres. By his third party petition he admitted that it is the same farm which he later conveyed to Clell Windon because of the false representations of the third party defendants that his previous contract with the plaintiffs was invalid.

If a contract for the sale of land fails to describe the land sufficiently to meet the requirements of the Statute of Frauds, it is not void, but voidable. Huttig v. Brennan, 328 Mo. 471, 490, 41 S.W. 2d 1054. If there is sufficient compliance with the Statute of Frauds, the contract is valid and the statute would not apply. The test is, What is sufficient identification of the property which is the subject matter of the contract? This was answered in Herzog v. Ross, 355 Mo. 406, 409, 196 S.W.2d 268, 270, 167 A.L.R. 407: "`The rule may be stated thus: The land need not be fully and actually described in the paper so as to be identified from a mere reading of the paper; but the writing must afford the means whereby the identification may be made perfect and certain by parol evidence.'"

In Ray v. Wooster, 270 S.W.2d 743, 746, recently handed down by this court, a contract for the sale of a farm described as "`my farm known as Oak Hill Farm,'" was held sufficient in view of the evidence that the defendant's farm was generally known in the community by that name, and that defendant owned no other farm. The court said in that case: "The law does not require that a contract for the sale of land shall in itself be wholly sufficient to identify the property. The writing is sufficient if it clearly reveals the intent of the parties with reference to the particular tract which is the subject matter of the sale and furnishes the means of its identification; or, as some cases hold, if it provides the `key' to the identification— the applicable principle being that that is certain which can be made certain. [Citing cases.]"

We rule that under the record, the parol evidence was proper and sufficient to clarify the description appearing in the contract of sale and that the Listing Agreement was properly admitted in evidence [295] for that purpose. We rule further, under the authorities, that the description in the contract as explained and clarified by the evidence, is sufficient identification of the land intended to be sold to meet the requirements of the Statute of Frauds.

Defendant next assigns as error the failure of the court to find that the plaintiffs are limited to liquidated damages in the amount of $1,900. He insists that the paragraph quoted limits the recovery to liquidated damages, and not to exceed $1,900. Plaintiffs contend that this clause is a penalty provision and does not limit the plaintiffs as to their actual damages.

The courts are not justified in construing a contract plainly fixing a stipulated amount as damages accruing to one party by the violation of the contract by the other party and designating the same to be "liquidated damages", to mean other than what those words purport to mean upon their face, unless the sum fixed is shown to be so disproportionate to the amount of any such damage reasonably to be contemplated as to be oppressive. Morse v. Rathburn, 42 Mo. 594, 603; Long v. Lackawanna Coal & Iron Co., 233 Mo. 713, 741, 136 S.W. 673; Thompson v. St. Charles County, 227 Mo. 220, 240, 126 S. W. 1044. The intention of the parties in each case governs the construction. The provision must be fixed on the basis of compensation, otherwise it is construed as a penalty clause designed primarily to compel performance. Buchanan v. Louisiana Purchase Exposition Co., 245 Mo. 337, 347, 348, 349, 149 S.W. 26. To arrive at the intent of the parties, a court may consider whether the agreement contains various stipulations of various degrees of importance, the breaches of which would be easy to calculate in damages as to some and difficult as to others, in which event the sum specified would be construed as a penalty and not as liquidated damages, "even though the parties in express terms have declared the contrary." Sylvester Watts Smyth Realty Co. v. American Surety Co. of New York, 292 Mo. 423, 441, 238 S.W. 494, 499; Jennings v. First Nat. Bank of Kansas City, 225 Mo.App. 232, 238, 30 S.W.2d 1049. "Where the sum named in a contract to be paid in a breach is held to be a penalty and not liquidated damages, the amount of recovery is only the actual damages sustained." 25 C.J.S., Damages, § 116b, p. 704. The courts tend to construe such stipulations, if doubtful, as punitive in nature. Adams v. Luckaman, Mo.App., 256 S.W. 103.

Plaintiffs point out that under the contract the defendant was bound to convey the full 825 acres; to share the 1951 crops of corn, oil beans and hay; to hold plaintiffs' check until September 19; to cut none of the lespedeza crop; to furnish abstract of title, to deliver deed and possession by February 20. He says these are of varying degrees of importance and would each give cause to a different amount of damages in case of failure to perform, bearing no relation to the amount fixed by the contract.

In the early case of Morse v. Rathburn, supra, the contract was for the sale of a farm to defendant for $21,000, of which $9,000 was to be paid on a date fixed and certain mortgage notes to be executed and delivered for the remainder, whereupon the plaintiff, seller, was to give a good and sufficient deed for the property. The contract provided: "And the said parties to this agreement bind themselves that either party failing to comply with its provisions shall forfeit and pay to the other the sum of two thousand dollars." The defendant refused to comply with the contract when proffered a deed by the plaintiff, and suit was brought to recover the $2,000, plaintiff contending that such sum was agreed upon as liquidated or stipulated damages. This court held that the intent of the parties was to agree on the compensation; that the things agreed to by the parties constituted one entire transaction, and that the amount fixed was not disproportionate either to the actual or presumed damage. The provision was construed as for liquidated damages and not as a penalty. The court, however, pointed out, 42 Mo. at page 601: "The general rule may be formally stated that when the agreement contains several distinct covenants, on which there may [296] be divers breaches, some of an uncertain nature and others certain, with one entire sum to be paid on breach of performance, then the contract will be treated as one for a penalty, and not for liquidated damages".

It seems apparent that if the defendant in the case at bar had failed or neglected to perform that part of his agreement to convey the full acreage of 825 acres, or failed to share a full one-third of all corn, oil beans and wild hay then on the farm, or refused to hold plaintiffs' check until September 19, or failed or refused to deliver his deed and possession on February 20, the damages accruing thereby to the plaintiffs might in some of such instances be entirely disproportionate to the $1,900 stipulated in the contract. Being so, such arbitrary amount would constitute a penalty rather than a provision for the damages sustained.

A very similar set of facts obtained in Adams v. Luckaman, supra, wherein the contract of sale stipulated $300 "as liquidated damages" for breach of any of the vendor's covenants, which included no less than six in number. These included placing a deed in escrow on a certain date, furnishing an abstract certified to a certain date, correction of any defect in title, giving possession on or before a certain date, and keeping the buildings insured for the full amount of insurable value. After setting forth the rules pertaining to the construction of such clauses as hereinabove discussed, the court said, 256 S.W. at page 104: "If we examine the six covenants required of the defendants by the contract in question, it is readily apparent that there could be a breach of one or more of them without in effect damaging the plaintiff more than merely nominally, yet under the ruling of the trial court the plaintiff, upon such a breach, would be entitled to the sum of $300 as liquidated damages. We are of the opinion, and so rule, that the provision in question should be treated as a penalty and not as liquidated damages. See Boulware v. Crohn, 122 Mo. App. 571, 99 S.W. 796, and cases therein cited."

It is our opinion that in the instant case the provision in question pertaining to forfeiture in event of failure or refusal to perform, and fixing $1,900 as liquidated damages therefor, was in the nature of a penalty, and that the plaintiffs are not prevented thereby from recovering their actual damages for the breach established.

Lastly, defendant contends that the court erred in awarding plaintiffs any damages, there being no evidence thereof and plaintiffs having suffered none. The conceded fact is that defendant agreed to sell his farm to the plaintiffs for $19,000 and without legal excuse, failed and refused to do so, but did sell it shortly thereafter to another for $26,000. The plaintiffs were entitled to their bargain. Defendant is in no position to deny that the market value of the farm was $26,000, for which he sold it, pending his contract with the plaintiffs. There is other evidence that the market value of the farm was $26,000. The plaintiffs in such case are entitled to damages in a sum equal to the difference between the unpaid part of their agreed purchase price and the market price of the land. "Under the rule generally prevailing in the United States, however, all these distinctions are unimportant, and the only rule defensible on principle, allowing the purchaser the difference between so much of the contract price as is unpaid and the market price of the land, is applied in every case where the vendor breaks his contract without legal excuse". Williston on Contracts, Vol. 5, page 3906, Section 1399.

Plaintiffs paid $1,900 which would leave $17,100 unpaid on the agreed purchase price. There was substantial evidence that the market value was $26,000. On that basis, the difference between the unpaid part of the purchase price and the actual value was $8,900. The verdict was for $7,000, well within the proper measure of damages. Judgment affirmed.

LEEDY, Acting P. J., ELLISON, J., and ANDERSON, Special Judge, concur.

[1285] [1286] Glen H. Kanwit, Hopkins & Sutter, Chicago, Ill., for defendant-appellant-cross-appellee.

Michael R. Turoff, Arnstein, Gluck, Lehr, Barron & Milligan, Chicago, Ill., for plaintiff-appellee-cross-appellant.

Before ESCHBACH and POSNER, Circuit Judges, and GIBSON, Senior Circuit Judge.^[1]

POSNER, Circuit Judge.

This diversity suit between Lake River Corporation and Carborundum Company requires us to consider questions of Illinois commercial law, and in particular to explore the fuzzy line between penalty clauses and liquidated-damages clauses.

Carborundum manufactures "Ferro Carbo," an abrasive powder used in making steel. To serve its midwestern customers better, Carborundum made a contract with Lake River by which the latter agreed to provide distribution services in its warehouse in Illinois. Lake River would receive Ferro Carbo in bulk from Carborundum, "bag" it, and ship the bagged product to Carborundum's customers. The Ferro Carbo would remain Carborundum's property until delivered to the customers.

Carborundum insisted that Lake River install a new bagging system to handle the contract. In order to be sure of being able to recover the cost of the new system ($89,000) and make a profit of 20 percent of the contract price, Lake River insisted on the following minimum-quantity guarantee:

In consideration of the special equipment [i.e., the new bagging system] to be acquired and furnished by LAKE-RIVER for handling the product, CARBORUNDUM shall, during the initial three-year term of this Agreement, ship to LAKE-RIVER for bagging a minimum quantity of [22,500 tons]. If, at the end of the three-year term, this minimum quantity shall not have been shipped, LAKE-RIVER shall invoice CARBORUNDUM at the then prevailing rates for the difference between the quantity bagged and the minimum guaranteed.

If Carborundum had shipped the full minimum quantity that it guaranteed, it would have owed Lake River roughly $533,000 under the contract.

After the contract was signed in 1979, the demand for domestic steel, and with it the demand for Ferro Carbo, plummeted, and Carborundum failed to ship the guaranteed amount. When the contract expired late in 1982, Carborundum had shipped only 12,000 of the 22,500 tons it had guaranteed. Lake River had bagged the 12,000 tons and had billed Carborundum for this bagging, and Carborundum had paid, but by virtue of the formula in the minimum-guarantee clause Carborundum still owed Lake River $241,000 — the contract price of $533,000 if the full amount of Ferro Carbo had been shipped, minus what Carborundum had paid for the bagging of the quantity it had shipped.

When Lake River demanded payment of this amount, Carborundum refused, on the ground that the formula imposed a penalty. At the time, Lake River had in its warehouse 500 tons of bagged Ferro Carbo, having a market value of $269,000, which it refused to release unless Carborundum paid the $241,000 due under the formula. Lake River did offer to sell the bagged product and place the proceeds in escrow until its dispute with Carborundum over the enforceability of the formula was resolved, but Carborundum rejected the offer and trucked in bagged Ferro Carbo from the East to serve its customers in Illinois, at an additional cost of $31,000.

Lake River brought this suit for $241,000, which it claims as liquidated damages. Carborundum counterclaimed for the value of the bagged Ferro Carbo when Lake River impounded it and the additional cost of serving the customers affected by the impounding. The theory of the counterclaim is that the impounding was a conversion, and not as Lake River contends the assertion of a lien. The district judge, after a [1287] bench trial, gave judgment for both parties. Carborundum ended up roughly $42,000 to the good: $269,000 + $31,000-$241,000-$17,000, the last figure representing prejudgment interest on Lake River's damages. (We have rounded off all dollar figures to the nearest thousand.) Both parties have appealed.

The only issue that is not one of damages is whether Lake River had a valid lien on the bagged Ferro Carbo that it refused to ship to Carborundum's customers — that, indeed, it holds in its warehouse to this day. Although Ferro Carbo does not deteriorate with age, the domestic steel industry remains in the doldrums and the product is worth less than it was in 1982 when Lake River first withheld it. If Lake River did not have a valid lien on the product, then it converted it, and must pay Carborundum the $269,000 that the Ferro Carbo was worth back then.

It might seem that if the minimum-guarantee clause was a penalty clause and hence unenforceable, the lien could not be valid, and therefore that we should discuss the penalty issue first. But this is not correct. If the contractual specification of damages is invalid, Lake River still is entitled to any actual damages caused by Carborundum's breach of contract in failing to deliver the minimum amount of Ferro Carbo called for by the contract. The issue is whether an entitlement to damages, large or small, entitles the victim of the breach to assert a lien on goods that are in its possession though they belong to the other party.

Lake River has not been very specific about the type of lien it asserts. We think it best described as a form of artisan's lien, the "lien of the bailee, who does work upon or adds materials to chattels...." Restatement of Security § 61, comment on clause (a), at p. 165 (1941). Lake River was the bailee of the Ferro Carbo that Carborundum delivered to it, and it did work on the Ferro Carbo — bagging it, and also storing it (storage is a service, too). If Carborundum had refused to pay for the services that Lake River performed on the Ferro Carbo delivered to it, then Lake River would have had a lien on the Ferro Carbo in its possession, to coerce payment. Cf. National Bank of Joliet v. Bergeron Cadillac, Inc., 66 Ill.2d 140, 143-44, 5 Ill.Dec. 588, 589, 361 N.E.2d 1116, 1117 (1977). But in fact, when Lake River impounded the bagged Ferro Carbo, Carborundum had paid in full for all bagging and storage services that Lake River had performed on Ferro Carbo shipped to it by Carborundum. The purpose of impounding was to put pressure on Carborundum to pay for services not performed, Carborundum having failed to ship the Ferro Carbo on which those services would have been performed.

Unlike a contractor who, having done the work contracted for without having been paid, may find himself in a box, owing his employees or suppliers money he does not have — money he was counting on from his customer — Lake River was the victim of a breach of a portion of the contract that remained entirely unexecuted on either side. Carborundum had not shipped the other 10,500 tons, as promised; but on the other hand Lake River had not had to bag those 10,500 tons, as it had promised. It is not as if Lake River had bagged those tons, incurring heavy costs that it expected to recoup from Carborundum, and then Carborundum had said, "Sorry, we won't pay you; go ahead and sue us."

A lien is strong medicine; it clogs up markets, as the facts of this case show. Its purpose is to provide an effective self-help remedy for one who has done work in expectation of payment and then is not paid. The vulnerable position of such a person gives rise to "the artisan's privilege of holding the balance for work done in the past." United States v. Toys of the World Club, Inc., 288 F.2d 89, 94 (2d Cir.1961) (Friendly, J.) (emphasis added). A lien is thus a device for preventing unjust enrichment — not for forcing the other party to accede to your view of a contract dispute. "The right to retain possession of the property to enforce a possessory lien continues until such time as the charges [1288] for such materials, labor and services are paid." Bull v. Mitchell, 114 Ill.App.3d 177, 181, 70 Ill.Dec. 138, 141, 448 N.E.2d 1016, 1019 (1983); cf. Ill.Rev.Stat. ch. 82, § 40. Since here the charges were paid before the lien was asserted, the lien was no good.

Lake River tries to compare its position to that of a conventional lien creditor by pointing out that it made itself particularly vulnerable to a breach of contract by buying specialized equipment at Carborundum's insistence, to the tune of $89,000, before performance under the contract began. It says it insisted on the minimum guarantee in order to be sure of being able to amortize this equipment over a large enough output of bagging services to make the investment worthwhile. But the equipment was not completely useless for other contracts — Lake River having in fact used it for another contract; it was not the major cost of fulfilling the contract; and Lake River received almost $300,000 during the term of the contract, thus enabling it to amortize much of the cost of the special equipment. Although Lake River may have lost money on the contract (but as yet there is no proof it did), it was not in the necessitous position of a contractor who completes his performance without receiving a dime and then is told by his customer to sue for the price. The recognition of a lien in such a case is based on policies akin to those behind the rule that a contract modification procured by duress will not be enforced. See, e.g., Selmer Co. v. Blakeslee-Midwest Co., 704 F.2d 924 (7th Cir.1983). When as a practical matter the legal remedy may be inadequate because it operates too slowly, self-help is allowed. But we can find no case recognizing a lien on facts like these, no ground for thinking that the Illinois Supreme Court would be the first court to recognize such a lien if this case were presented to it, and no reason to believe that the recognition of such a lien would be a good thing. It would impede the marketability of goods without responding to any urgent need of creditors.

Conrow v. Little, 115 N.Y. 387, 393, 22 N.E. 346, 347 (1889), on which Lake River relies heavily because the lien allowed in that case extended to "money expended in the preparation of instrumentalities," is not in point. The plaintiffs, dealers in paper, had made extensive deliveries to the defendants for which they had received no payment. See id. at 390-91, 22 N.E. at 346. If Lake River had bagged several thousand tons of Ferro Carbo without being paid anything, it would have had a lien on the Ferro Carbo; and maybe — if Conrow is good law in Illinois, a question we need not try to answer — the lien would have included not only the contract price for the Ferro Carbo that Lake River had bagged but also the unreimbursed, unsalvageable cost of the special bagging system that Lake River had installed. But that is not this case. Carborundum was fully paid up and Lake River has made no effort to show how much if any money it stood to lose because the bagging system was not fully amortized. The only purpose of the lien was to collect damages which would have been unrelated to — and certainly exceeded — the investment in the bagging system.

It is no answer that the bagging system should be presumed to have been amortized equally over the life of the contract, and therefore to have been only half amortized when Carborundum broke the contract. Amortization is an accounting device; it need not reflect cash flows. There is no evidence that when the contract was broken, Lake River was out of pocket a cent in respect of the bagging system, especially when we consider that the bagging system was still usable, and was used to fulfill another contract.

The hardest issue in the case is whether the formula in the minimum-guarantee clause imposes a penalty for breach of contract or is merely an effort to liquidate damages. Deep as the hostility to penalty clauses runs in the common law, see Loyd, Penalties and Forfeitures, 29 Harv.L.Rev. 117 (1915), we still might be inclined to question, if we thought ourselves free to do so, whether a modern court should refuse to enforce a penalty clause where the signator [1289] is a substantial corporation, well able to avoid improvident commitments. Penalty clauses provide an earnest of performance. The clause here enhanced Carborundum's credibility in promising to ship the minimum amount guaranteed by showing that it was willing to pay the full contract price even if it failed to ship anything. On the other side it can be pointed out that by raising the cost of a breach of contract to the contract breaker, a penalty clause increases the risk to his other creditors; increases (what is the same thing and more, because bankruptcy imposes "deadweight" social costs) the risk of bankruptcy; and could amplify the business cycle by increasing the number of bankruptcies in bad times, which is when contracts are most likely to be broken. But since little effort is made to prevent businessmen from assuming risks, these reasons are no better than makeweights.

A better argument is that a penalty clause may discourage efficient as well as inefficient breaches of contract. Suppose a breach would cost the promisee $12,000 in actual damages but would yield the promisor $20,000 in additional profits. Then there would be a net social gain from breach. After being fully compensated for his loss the promisee would be no worse off than if the contract had been performed, while the promisor would be better off by $8,000. But now suppose the contract contains a penalty clause under which the promisor if he breaks his promise must pay the promisee $25,000. The promisor will be discouraged from breaking the contract, since $25,000, the penalty, is greater than $20,000, the profits of the breach; and a transaction that would have increased value will be forgone.

On this view, since compensatory damages should be sufficient to deter inefficient breaches (that is, breaches that cost the victim more than the gain to the contract breaker), penal damages could have no effect other than to deter some efficient breaches. But this overlooks the earlier point that the willingness to agree to a penalty clause is a way of making the promisor and his promise credible and may therefore be essential to inducing some value-maximizing contracts to be made. It also overlooks the more important point that the parties (always assuming they are fully competent) will, in deciding whether to include a penalty clause in their contract, weigh the gains against the costs — costs that include the possibility of discouraging an efficient breach somewhere down the road — and will include the clause only if the benefits exceed those costs as well as all other costs.

On this view the refusal to enforce penalty clauses is (at best) paternalistic — and it seems odd that courts should display parental solicitude for large corporations. But however this may be, we must be on guard to avoid importing our own ideas of sound public policy into an area where our proper judicial role is more than usually deferential. The responsibility for making innovations in the common law of Illinois rests with the courts of Illinois, and not with the federal courts in Illinois. And like every other state, Illinois, untroubled by academic skepticism of the wisdom of refusing to enforce penalty clauses against sophisticated promisors, see, e.g., Goetz & Scott, Liquidated Damages, Penalties and the Just Compensation Principle, 77 Colum.L.Rev. 554 (1977), continues steadfastly to insist on the distinction between penalties and liquidated damages. See, e.g., Bauer v. Sawyer, 8 Ill.2d 351, 359-61, 134 N.E.2d 329, 333-34 (1956); Stride v. 120 West Madison Bldg. Corp., 132 Ill.App.3d 601, 605-06, 87 Ill.Dec. 790, 793, 477 N.E.2d 1318, 1321 (1985); Builder's Concrete Co. v. Fred Faubel & Sons, Inc., 58 Ill.App.3d 100, 107, 15 Ill.Dec. 517, 524, 373 N.E.2d 863, 869 (1978). To be valid under Illinois law a liquidation of damages must be a reasonable estimate at the time of contracting of the likely damages from breach, and the need for estimation at that time must be shown by reference to the likely difficulty of measuring the actual damages from a breach of contract after the breach occurs. If damages would be easy to determine then, or if the estimate greatly exceeds a reasonable upper estimate [1290] of what the damages are likely to be, it is a penalty. See, e.g., M.I.G. Investments, Inc. v. Marsala, 92 Ill.App.3d 400, 405-06, 47 Ill.Dec. 265, 270, 414 N.E.2d 1381, 1386 (1981).

The distinction between a penalty and liquidated damages is not an easy one to draw in practice but we are required to draw it and can give only limited weight to the district court's determination. Whether a provision for damages is a penalty clause or a liquidated-damages clause is a question of law rather than fact, Weiss v. United States Fidelity & Guaranty Co., 300 Ill. 11, 16, 132 N.E. 749, 751 (1921); M.I.G. Investments, Inc. v. Marsala, supra, 92 Ill.App.3d 400, 406, 47 Ill.Dec. 265, 270, 414 N.E.2d 1381, 1386, and unlike some courts of appeals we do not treat a determination by a federal district judge of an issue of state law as if it were a finding of fact, and reverse only if persuaded that clear error has occurred, though we give his determination respectful consideration. See, e.g., Morin Bldg. Products Co. v. Baystone Construction, Inc., 717 F.2d 413, 416-17 (7th Cir.1983); In re Air Crash Disaster Near Chicago, 701 F.2d 1189, 1195 (7th Cir.1983); 19 Wright, Miller & Cooper, Federal Practice and Procedure § 4507, at pp. 106-110 (1982).

Mindful that Illinois courts resolve doubtful cases in favor of classification as a penalty, see, e.g., Stride v. 120 West Madison Bldg. Corp., supra, 132 Ill.App.3d at 605, 87 Ill.Dec. at 793, 477 N.E.2d at 1321; Pick Fisheries, Inc. v. Burns Electronic Security Services, Inc., 35 Ill.App.3d 467, 472, 342 N.E.2d 105, 108 (1976), we conclude that the damage formula in this case is a penalty and not a liquidation of damages, because it is designed always to assure Lake River more than its actual damages. The formula — full contract price minus the amount already invoiced to Carborundum — is invariant to the gravity of the breach. When a contract specifies a single sum in damages for any and all breaches even though it is apparent that all are not of the same gravity, the specification is not a reasonable effort to estimate damages; and when in addition the fixed sum greatly exceeds the actual damages likely to be inflicted by a minor breach, its character as a penalty becomes unmistakable. See M.I.G. Investments, Inc. v. Marsala, supra, 92 Ill.App.3d at 405-06, 47 Ill.Dec. at 270, 414 N.E.2d at 1386; cf. Arduini v. Board of Educ., 93 Ill.App.3d 925, 931-33, 49 Ill.Dec. 460, 465-66, 418 N.E.2d 104, 109-10 (1981), rev'd on other grounds, 92 Ill.2d 197, 65 Ill.Dec. 281, 441 N.E.2d 73 (1982); 5 Corbin on Contracts § 1066 (1964). This case is within the gravitational field of these principles even though the minimum-guarantee clause does not fix a single sum as damages.

Suppose to begin with that the breach occurs the day after Lake River buys its new bagging system for $89,000 and before Carborundum ships any Ferro Carbo. Carborundum would owe Lake River $533,000. Since Lake River would have incurred at that point a total cost of only $89,000, its net gain from the breach would be $444,000. This is more than four times the profit of $107,000 (20 percent of the contract price of $533,000) that Lake River expected to make from the contract if it had been performed: a huge windfall.

Next suppose (as actually happened here) that breach occurs when 55 percent of the Ferro Carbo has been shipped. Lake River would already have received $293,000 from Carborundum. To see what its costs then would have been (as estimated at the time of contracting), first subtract Lake River's anticipated profit on the contract of $107,000 from the total contract price of $533,000. The difference — Lake River's total cost of performance — is $426,000. Of this, $89,000 is the cost of the new bagging system, a fixed cost. The rest ($426,000-$89,000 = $337,000) presumably consists of variable costs that are roughly proportional to the amount of Ferro Carbo bagged; there is no indication of any other fixed costs. Assume, therefore, that if Lake River bagged 55 percent of the contractually agreed quantity, it incurred in doing so 55 percent of its variable costs, or $185,000. [1291] When this is added to the cost of the new bagging system, assumed for the moment to be worthless except in connection with the contract, the total cost of performance to Lake River is $274,000. Hence a breach that occurred after 55 percent of contractual performance was complete would be expected to yield Lake River a modest profit of $19,000 ($293,000-$274,000). But now add the "liquidated damages" of $241,000 that Lake River claims, and the result is a total gain from the breach of $260,000, which is almost two and a half times the profit that Lake River expected to gain if there was no breach. And this ignores any use value or salvage value of the new bagging system, which is the property of Lake River — though admittedly it also ignores the time value of money; Lake River paid $89,000 for that system before receiving any revenue from the contract.

To complete the picture, assume that the breach had not occurred till performance was 90 percent complete. Then the "liquidated damages" clause would not be so one-sided, but it would be one-sided. Carborundum would have paid $480,000 for bagging. Against this, Lake River would have incurred its fixed cost of $89,000 plus 90 percent of its variable costs of $337,000, or $303,000. Its total costs would thus be $392,000, and its net profit $88,000. But on top of this it would be entitled to "liquidated damages" of $53,000, for a total profit of $141,000 — more than 30 percent more than its expected profit of $107,000 if there was no breach.

The reason for these results is that most of the costs to Lake River of performing the contract are saved if the contract is broken, and this saving is not reflected in the damage formula. As a result, at whatever point in the life of the contract a breach occurs, the damage formula gives Lake River more than its lost profits from the breach — dramatically more if the breach occurs at the beginning of the contract; tapering off at the end, it is true. Still, over the interval between the beginning of Lake River's performance and nearly the end, the clause could be expected to generate profits ranging from 400 percent of the expected contract profits to 130 percent of those profits. And this is on the assumption that the bagging system has no value apart from the contract. If it were worth only $20,000 to Lake River, the range would be 434 percent to 150 percent.

Lake River argues that it would never get as much as the formula suggests, because it would be required to mitigate its damages. This is a dubious argument on several grounds. First, mitigation of damages is a doctrine of the law of court-assessed damages, while the point of a liquidated-damages clause is to substitute party assessment; and that point is blunted, and the certainty that liquidated-damages clauses are designed to give the process of assessing damages impaired, if a defendant can force the plaintiff to take less than the damages specified in the clause, on the ground that the plaintiff could have avoided some of them. It would seem therefore that the clause in this case should be read to eliminate any duty of mitigation, that what Lake River is doing is attempting to rewrite the clause to make it more reasonable, and that since actually the clause is designed to give Lake River the full damages it would incur from breach (and more) even if it made no effort to find a substitute use for the equipment that it bought to perform the contract, this is just one more piece of evidence that it is a penalty clause rather than a liquidated-damages clause. See Northwest Collectors, Inc. v. Enders, 74 Wash.2d 585, 594, 446 P.2d 200, 206 (1968).

But in any event mitigation would not mitigate the penal character of this clause. If Carborundum did not ship the guaranteed minimum quantity, the reason was likely to be — the reason was — that the steel industry had fallen on hard times and the demand for Ferro Carbo was therefore down. In these circumstances Lake River would have little prospect of finding a substitute contract that would yield it significant profits to set off against the full contract price, which is the method by which it proposes to take account of mitigation. At argument Lake River suggested that it [1292] might at least have been able to sell the new bagging equipment to someone for something, and the figure $40,000 was proposed. If the breach occurred on the first day when performance under the contract was due and Lake River promptly sold the bagging equipment for $40,000, its liquidated damages would fall to $493,000. But by the same token its costs would fall to $49,000. Its profit would still be $444,000, which as we said was more than 400 percent of its expected profit on the contract. The penal component would be unaffected.

With the penalty clause in this case compare the liquidated-damages clause in Arduini v. Board of Education, supra, which is representative of such clauses upheld in Illinois. The plaintiff was a public school teacher whose contract provided that if he resigned before the end of the school year he would be docked 4 percent of his salary. This was a modest fraction of the contract price. And the cost to the school of an untimely resignation would be difficult to measure. Since that cost would be greater the more senior and experienced the teacher was, the fact that the liquidated damages would be greater the higher the teacher's salary did not make the clause arbitrary. Even the fact that the liquidated damages were the same whether the teacher resigned at the beginning, the middle, or the end of the school year was not arbitrary, for it was unclear how the amount of actual damages would vary with the time of resignation. Although one might think that the earlier the teacher resigned the greater the damage to the school would be, the school might find it easier to hire a replacement for the whole year or a great part of it than to bring in a replacement at the last minute to grade the exams left behind by the resigning teacher. Here, in contrast, it is apparent from the face of the contract that the damages provided for by the "liquidated damages" clause are grossly disproportionate to any probable loss and penalize some breaches much more heavily than others regardless of relative cost.

We do not mean by this discussion to cast a cloud of doubt over the "take or pay" clauses that are a common feature of contracts between natural gas pipeline companies and their customers. Such clauses require the customer, in consideration of the pipeline's extending its line to his premises, to take a certain amount of gas at a specified price — and if he fails to take it to pay the full price anyway. The resemblance to the minimum-guarantee clause in the present case is obvious, but perhaps quite superficial. Neither party has mentioned take-or-pay clauses, and we can find no case where such a clause was even challenged as a penalty clause — though in one case it was argued that such a clause made the damages unreasonably low. See National Fuel Gas Distribution Corp. v. Pennsylvania Public Utility Comm'n, 76 Pa.Commw. 102, 126-27 n. 8, 464 A.2d 546, 558 n. 8 (1983). If, as appears not to be the case here but would often be the case in supplying natural gas, a supplier's fixed costs were a very large fraction of his total costs, a take-or-pay clause might well be a reasonable liquidation of damages. In the limit, if all the supplier's costs were incurred before he began supplying the customer, the contract revenues would be an excellent measure of the damages from breach. But in this case, the supplier (Lake River, viewed as a supplier of bagging services to Carborundum) incurred only a fraction of its costs before performance began, and the interruption of performance generated a considerable cost saving that is not reflected in the damage formula.

The fact that the damage formula is invalid does not deprive Lake River of a remedy. The parties did not contract explicitly with reference to the measure of damages if the agreed-on damage formula was invalidated, but all this means is that the victim of the breach is entitled to his common law damages. See, e.g., Restatement, Second, Contracts § 356, comment a (1981). In this case that would be the unpaid contract price of $241,000 minus the costs that Lake River saved by not having to complete the contract (the variable costs on the other 45 percent of the Ferro Carbo [1293] that it never had to bag). The case must be remanded to the district judge to fix these damages.

Two damage issues remain. The first concerns Carborundum's expenses of delivering bagged Ferro Carbo to its customers to replace that impounded by Lake River. The district judge gave Carborundum the full market value of the bagged Ferro Carbo. Lake River argues that it should not have to pay for Carborundum's expense of selling additional Ferro Carbo — additional in the sense that Carborundum is being given credit for the full retail value of the product that Lake River withheld. To explain, suppose that Carborundum had an order for $1,000 worth of bagged Ferro Carbo, which Lake River was supposed to deliver; and because it refused, Carborundum incurred a transportation cost of $100 to make a substitute shipment of bagged Ferro Carbo to the customer. Carborundum would still get $1,000 from the customer, and if that price covered the transportation cost it would still make a profit. In what sense, therefore, is that cost a separate item of damage, of loss? On all Ferro Carbo (related to this case) sold by Carborundum in the Midwest, Carborundum received the full market price, either from its customers in the case of Ferro Carbo actually delivered to them, or from Lake River in the case of the Ferro Carbo that Lake River refused to deliver. Having received a price designed to cover all expenses of sale, a seller cannot also get an additional damage award for any of those expenses.

If, however, the additional Ferro Carbo that Carborundum delivered to its midwestern customers in substitution for Ferro Carbo previously delivered to, and impounded by, Lake River would have been sold in the East at the same price but lower cost, Carborundum would have had an additional loss, in the form of reduced profits, for which it could recover additional damages. But it made no effort to prove such a loss. Maybe it had no unsatisfied eastern customers, and expanded rather than shifted output to fulfill its midwestern customers' demand. The damages on the counter-claim must be refigured also.

Finally, Lake River argues that Carborundum failed to mitigate its damages by accepting Lake River's offer to deliver the bagged product and place the proceeds in escrow. But a converter is not entitled to retain the proceeds of the conversion even temporarily. Lake River had an opportunity to limit its exposure by selling the bagged product on Carborundum's account and deducting what it claimed was due it on its "lien." Its failure to follow this course reinforces our conclusion that the assertion of the lien was a naked attempt to hold Carborundum hostage to Lake River's view — an erroneous view, as it has turned out — of the enforceability of the damage formula in the contract.

The judgment of the district court is affirmed in part and reversed in part, and the case is returned to that court to redetermine both parties' damages in accordance with the principles in this opinion. The parties may present additional evidence on remand, and shall bear their own costs in this court. Circuit Rule 18 shall not apply on remand.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

[1] Hon. Floyd R. Gibson of the Eighth Circuit, sitting by designation.

Stephen E. Powers and Mary Jo Reich for appellant-respondent.

Richard N. Runes and Lauri Cohen for respondents-appellants.

Chief Judge WACHTLER and Judges MEYER, SIMONS, TITONE and HANCOCK, JR., concur; Judge ALEXANDER taking no part.

[189] KAYE, J.

Specific performance of a contract to lease "unique" billboard space is properly denied when damages are an adequate remedy to compensate the tenant and equitable relief would impose a disproportionate burden on the defaulting landlord. However, owing to an error in the assessment of damages, the order of the Appellate Division should be modified so as to remit the matter to Supreme Court, New York County, for further proceedings with respect to damages.

By agreement dated December 16, 1981, Barbara Michaels leased to plaintiff, Van Wagner Advertising, for an initial period of three years plus option periods totaling seven additional years space on the eastern exterior wall of a building on East 36th Street in Manhattan. Van Wagner was in the business of erecting and leasing billboards, and the parties anticipated that Van Wagner would erect a sign on the leased space, which faced an exit ramp of the Midtown Tunnel and was therefore visible to vehicles entering Manhattan from that tunnel.

In early 1982 Van Wagner erected an illuminated sign and leased it to Asch Advertising, Inc. for a three-year period commencing March 1, 1982. However, by agreement dated January 22, 1982, Michaels sold the building to defendant S & M Enterprises. Michaels informed Van Wagner of the sale in early August 1982, and on August 19, 1982 S & M sent Van Wagner a letter purporting to cancel the lease as of October 18 pursuant to section 1.05, which provided:

"Notwithstanding anything contained in the foregoing provisions to the contrary, Lessor (or its successor) may terminate [190] and cancel this lease on not less than 60 days prior written notice in the event and only in the event of:

"a) a bona fide sale of the building to a third party unrelated to Lessor".

Van Wagner abandoned the space under protest and in November 1982 commenced this action for declarations that the purported cancellation was ineffective and the lease still in existence, and for specific performance and damages.

In the litigation the parties differed sharply on the meaning of section 1.05 of the lease. Van Wagner contended that the lease granted a right to cancel only to the owner as it was about to sell the building — not to the new purchaser — so that the building could be conveyed without the encumbrance of the lease. S & M, in contrast, contended that the provision clearly gave it, as Michaels' successor by virtue of a bona fide sale, the right to cancel the lease on 60 days' notice. Special Term denied Van Wagner's motion for a preliminary injunction, concluding that the lease by its terms gave S & M the authority to cancel and that Van Wagner was therefore not likely to succeed on the merits.^[1]

At a nonjury trial, both parties introduced parol evidence, in the form of testimony about negotiations, to explain the meaning of section 1.05. Additionally, one of S & M's two partners testified without contradiction that, having already acquired other real estate on the block, S & M purchased the subject building in 1982 for the ultimate purpose of demolishing existing buildings and constructing a mixed residential-commercial development. The project is to begin upon expiration of a lease of the subject building in 1987, if not sooner.

Trial Term concluded that Van Wagner's position on the issue of contract interpretation was correct, either because the lease provision unambiguously so provided or, if the provision were ambiguous, because the parol evidence showed that the "parties to the lease intended that only an owner making a bona fide sale could terminate the lease. They did not intend that once a sale had been made that any future purchaser could terminate the lease at will." Trial Term declared the lease "valid and subsisting" and found that the "demised space is unique as to location for the particular advertising purpose intended by Van Wagner and Michaels, the original [191] parties to the Lease." However, the court declined to order specific performance in light of its finding that Van Wagner "has an adequate remedy at law for damages". Moreover, the court noted that specific performance "would be inequitable in that its effect would be disproportionate in its harm to the defendant and its assistance to plaintiff." Concluding that "[t]he value of the unique qualities of the demised space has been fixed by the contract Van Wagner has with its advertising client, Asch for the period of the contract", the court awarded Van Wagner the lost revenues on the Asch sublease for the period through trial, without prejudice to a new action by Van Wagner for subsequent damages if S & M did not permit Van Wagner to reoccupy the space. On Van Wagner's motion to resettle the judgment to provide for specific performance, the court adhered to its judgment.

On cross appeals the Appellate Division affirmed, without opinion. We granted both parties leave to appeal.

Whether or not a contract provision is ambiguous is a question of law to be resolved by a court (Sutton v East Riv. Sav. Bank, 55 N.Y.2d 550, 554). In our view, section 1.05 is ambiguous. Reasonable minds could differ as to whether the lease granted a purchaser of the property a right to cancel the lease, or limited that right to successive sellers of the property (see, Chimart Assoc. v Paul, 66 N.Y.2d 570, 573). However, Trial Term's alternate finding — that the parol evidence supported Van Wagner's interpretation of the provision — was one of fact. That finding, having been affirmed by the Appellate Division and having support in the record, is beyond the scope of our review (see, Huntley v State of New York, 62 N.Y.2d 134, 137). Thus, S & M's cancellation of Van Wagner's lease constituted a breach of contract.

Given defendant's unexcused failure to perform its contract, we next turn to a consideration of remedy for the breach: Van Wagner seeks specific performance of the contract, S & M urges that money damages are adequate but that the amount of the award was improper.^[2]

Whether or not to award specific performance is a decision [192] that rests in the sound discretion of the trial court, and here that discretion was not abused. Considering first the nature of the transaction, specific performance has been imposed as the remedy for breach of contracts for the sale of real property (Judnick Realty Corp. v 32 W. 32nd St. Corp., 61 N.Y.2d 819, 823; Da Silva v Musso, 53 N.Y.2d 543, 545; S.E.S. Importers v Pappalardo, 53 N.Y.2d 455), but the contract here is to lease rather than sell an interest in real property. While specific performance is available, in appropriate circumstances, for breach of a commercial or residential lease, specific performance of real property leases is not in this State awarded as a matter of course (see, Gardens Nursery School v Columbia Univ., 94 Misc 2d 376, 378).^[3]

Van Wagner argues that specific performance must be granted in light of the trial court's finding that the "demised space is unique as to location for the particular advertising purpose intended". The word "uniqueness" is not, however, a magic door to specific performance. A distinction must be drawn between physical difference and economic interchangeability. The trial court found that the leased property is physically unique, but so is every parcel of real property and so are many consumer goods. Putting aside contracts for the sale of real property, where specific performance has traditionally been the remedy for breach, uniqueness in the sense of physical difference does not itself dictate the propriety of equitable relief.

By the same token, at some level all property may be interchangeable with money. Economic theory is concerned with the degree to which consumers are willing to substitute the use of one good for another (see, Kronman, Specific Performance, 45 U Chi L Rev 351, 359), the underlying assumption [193] being that "every good has substitutes, even if only very poor ones", and that "all goods are ultimately commensurable" (id.). Such a view, however, could strip all meaning from uniqueness, for if all goods are ultimately exchangeable for a price, then all goods may be valued. Even a rare manuscript has an economic substitute in that there is a price for which any purchaser would likely agree to give up a right to buy it, but a court would in all probability order specific performance of such a contract on the ground that the subject matter of the contract is unique.

The point at which breach of a contract will be redressable by specific performance thus must lie not in any inherent physical uniqueness of the property but instead in the uncertainty of valuing it: "What matters, in measuring money damages, is the volume, refinement, and reliability of the available information about substitutes for the subject matter of the breached contract. When the relevant information is thin and unreliable, there is a substantial risk that an award of money damages will either exceed or fall short of the promisee's actual loss. Of course this risk can always be reduced — but only at great cost when reliable information is difficult to obtain. Conversely, when there is a great deal of consumer behavior generating abundant and highly dependable information about substitutes, the risk of error in measuring the promisee's loss may be reduced at much smaller cost. In asserting that the subject matter of a particular contract is unique and has no established market value, a court is really saying that it cannot obtain, at reasonable cost, enough information about substitutes to permit it to calculate an award of money damages without imposing an unacceptably high risk of undercompensation on the injured promisee. Conceived in this way, the uniqueness test seems economically sound." (45 U Chi L Rev, at 362.) This principle is reflected in the case law (see, e.g., Erie R. R. Co. v City of Buffalo, 180 N.Y. 192, 200; St. Regis Paper Co. v Santa Clara Lbr. Co., 173 N.Y. 149, 160; Dailey v City of New York, 170 App Div 267, 276-277, affd 218 N.Y. 665), and is essentially the position of the Restatement (Second) of Contracts, which lists "the difficulty of proving damages with reasonable certainty" as the first factor affecting adequacy of damages (Restatement [Second] of Contracts § 360 [a]).

Thus, the fact that the subject of the contract may be "unique as to location for the particular advertising purpose [194] intended" by the parties does not entitle a plaintiff to the remedy of specific performance.

Here, the trial court correctly concluded that the value of the "unique qualities" of the demised space could be fixed with reasonable certainty and without imposing an unacceptably high risk of undercompensating the injured tenant. Both parties complain: Van Wagner asserts that while lost revenues on the Asch contract may be adequate compensation, that contract expired February 28, 1985, its lease with S & M continues until 1992, and the value of the demised space cannot reasonably be fixed for the balance of the term. S & M urges that future rents and continuing damages are necessarily conjectural, both during and after the Asch contract, and that Van Wagner's damages must be limited to 60 days — the period during which Van Wagner could cancel Asch's contract without consequence in the event Van Wagner lost the demised space. S & M points out that Van Wagner's lease could remain in effect for the full 10-year term, or it could legitimately be extinguished immediately, either in conjunction with a bona fide sale of the property by S & M, or by a reletting of the building if the new tenant required use of the billboard space for its own purposes. Both parties' contentions were properly rejected.

First, it is hardly novel in the law for damages to be projected into the future. Particularly where the value of commercial billboard space can be readily determined by comparisons with similar uses — Van Wagner itself has more than 400 leases — the value of this property between 1985 and 1992 cannot be regarded as speculative. Second, S & M having successfully resisted specific performance on the ground that there is an adequate remedy at law, cannot at the same time be heard to contend that damages beyond 60 days must be denied because they are conjectural. If damages for breach of this lease are indeed conjectural, and cannot be calculated with reasonable certainty, then S & M should be compelled to perform its contractual obligation by restoring Van Wagner to the premises. Moreover, the contingencies to which S & M points do not, as a practical matter, render the calculation of damages speculative. While S & M could terminate the Van Wagner lease in the event of a sale of the building, this building has been sold only once in 40 years; S & M paid several million dollars, and purchased the building in connection with its plan for major development of the block. The theoretical termination right of a future tenant of the existing [195] building also must be viewed in light of these circumstances. If any uncertainty is generated by the two contingencies, then the benefit of that doubt must go to Van Wagner and not the contract violator. Neither contingency allegedly affecting Van Wagner's continued contractual right to the space for the balance of the lease term is within its own control; on the contrary, both are in the interest of S & M (see, by analogy, Amerman v Deane, 132 N.Y. 355). Thus, neither the need to project into the future nor the contingencies allegedly affecting the length of Van Wagner's term render inadequate the remedy of damages for S & M's breach of its lease with Van Wagner.

The trial court, additionally, correctly concluded that specific performance should be denied on the ground that such relief "would be inequitable in that its effect would be disproportionate in its harm to defendant and its assistance to plaintiff" (see, Matter of Burke v Bowen, 40 N.Y.2d 264, 267; Cox v City of New York, 265 N.Y. 411; Restatement [Second] of Contracts § 364 [1] [b]). It is well settled that the imposition of an equitable remedy must not itself work an inequity, and that specific performance should not be an undue hardship (see, Pomeroy and Mann, Specific Performance of Contracts § 185 [3d ed 1926]). This conclusion is "not within the absolute discretion of the Supreme Court" (McClure v Leaycraft, 183 N.Y. 36, 42; see, Trustees of Columbia Col. v Thacher, 87 N.Y. 311; cf. Forstmann v Joray Holding Co., 244 N.Y. 22). Here, however, there was no abuse of discretion; the finding that specific performance would disproportionately harm S & M and benefit Van Wagner has been affirmed by the Appellate Division and has support in the proof regarding S & M's projected development of the property.

While specific performance was properly denied, the court erred in its assessment of damages. Our attention is drawn to two alleged errors.

First, both parties are dissatisfied with the award of lost profits on the Asch contract: Van Wagner contends that the award was too low because it failed to take into account incidental damages such as sign construction, and S & M asserts that it was too high because it failed to take into account offsets against alleged lost profits such as painting costs. Both arguments are precluded. Although the trial was not bifurcated or limited to the issue of liability, the Asch contract was placed in evidence and neither party chose to [196] submit additional proof of incidental damages or other expenses for that period. Nor — as is evident from the judgment — did the trial court understand that any separate presentations would be made as to damages for that period. Based on the Asch contract indicating revenues, and the lease indicating expenses, the trial court properly calculated Van Wagner's lost profits. Having found that the value of the space was fixed by the Asch contract for the entire period of that contract, however, the court erred in awarding the lost revenues only through November 23, 1983. Damages should have been awarded for the duration of the Asch contract.

Second, the court fashioned relief for S & M's breach of contract only to the time of trial, and expressly contemplated that "[i]f defendant continues to exclude plaintiff from the leased space action for continuing damages may be brought." In requiring Van Wagner to bring a multiplicity of suits to recover its damages the court erred. Damages should have been awarded through the expiration of Van Wagner's lease.

Accordingly, the order of the Appellate Division should be modified, with costs to plaintiff, and the case remitted to Supreme Court, New York County, for further proceedings in accordance with this opinion and, as so modified, affirmed.

Order modified, etc.

[1] Contrary to the assertion of S & M, denial of a motion for a preliminary injunction does not "constitute the law of the case or an adjudication on the merits" (Walker Mem. Baptist Church v Saunders, 285 N.Y. 462, 474).

[2] We note that the parties' contentions regarding the remedy of specific performance in general, mirror a scholarly debate that has persisted throughout our judicial history, reflecting fundamentally divergent views about the quality of a bargained-for promise. While the usual remedy in Anglo-American law has been damages, rather than compensation "in kind" (see, Holmes, The Path of the Law, 10 Harv L Rev 457, 462 [1897]; Holmes, The Common Law, at 299-301 [1881]; and Gilmore, The Death of Contract, at 14-15), the current trend among commentators appears to favor the remedy of specific performance (see, Farnsworth, Legal Remedies for Breach of Contract, 70 Colum L Rev 1145, 1156 [1970]; Linzer, On the Amorality of Contract Remedies — Efficiency, Equity, and the Second Restatement, 81 Colum L Rev 111 [1981]; and Schwartz, The Case for Specific Performance, 89 Yale LJ 271 [1979]), but the view is not unanimous (see, Posner, Economic Analysis of Law § 4.9, at 89-90 [2d ed 1977]; Yorio, In Defense of Money Damages for Breach of Contract, 82 Colum L Rev 1365 [1982]).

[3] But see, 5A Corbin, Contracts § 1143, at 131; at 7, n 62 [1971 Pocket Part]; 11 Williston, Contracts § 1418A [3d ed]; Pomeroy and Mann, Specific Performance of Contracts § 9, at 18-19 [3d ed 1926]; Restatement [Second] of Contracts § 360 comment a, illustration 2; Restatement [Second] of Contracts § 360 comment e; cf. City Stores Co. v Ammerman, 266 F Supp 766, affd Per Curiam 394 F.2d 950.

Bill by the Curtice Bros. Company against James E. Catts and others. Decree advised for complainant

Complainant is engaged in the business of canning tomatoes, and seeks the specific performance of a contract wherein defendant agreed to sell to complainant the entire product of certain land planted with tomatoes. Defendant contests the power of this court to grant equitable relief.

J. W. Acton, for complainant W. T. Hilliard, for defendants.

LEAMING, V. C.

The fundamental principles which guide a court of equity in decreeing the specific performance of contracts are essentially the same whether the contracts relate to realty or to personalty. By reason of the fact that damages for the breach of a contract for the sale of personalty are, in most cases, easily ascertainable and recoverable at law, courts of equity in such cases withhold equitable relief. Touching contracts for the sale of land, the reverse is the case. But no inherent difference between real estate and personal property controls the exercise of the jurisdiction. Where no adequate remedy at law exists, specific performance of a contract touching the sale of personal property will be decreed with the same freedom as in the case of a contract for the sale of land. Prof. Pomeroy, in referring to the distinction, says: "In applying these principles, taking into account the discretionary nature of the jurisdiction an agreement for the sale of land is prima facie presumed to come within their operation, so as to be subject to specific performance, but a contrary presumption exists in regard to agreements concerning chattels." Pomeroy on Contracts, Specific Performance, § 11.

Judge Story urges that there is no reasonable objection to allowing the party who is injured by the breach of any contract for the sale of chattels to have an election either to [936] take damages at law or to have a specific performance in equity. 2 Story's Eq. Juris. (13th Ed.) § 717a. While it is probable that the development of this branch of equitable remedies is decidedly toward the logical solution suggested by Judge Story, it is entirely clear that his view cannot at this time be freely adopted without violence to what has long been regarded as accepted principles controlling the discretion of a court of equity in this class of cases. The United States Supreme Court has probably most nearly approached the view suggested by Judge Story. In Mechanics' Bank of Alexandria v. Sexton, 1 Pet. (U. S.) 229, 305, 7 L. Ed. 152, Mr. Justice Thompson, delivering the opinion of that court, says: "But, notwithstanding this distinction between personal contracts for goods and contracts for lands is to be found laid down in the books, as a general rule; yet there are many cases to be found where specific performance of contracts, relating to personalty, have been enforced in chancery; and courts will only view with greater niceity contracts of this description than such as relate to land." See, also, Barr v. Lapoley, 1 Wheat. (U. S.) 151, 4 L. Ed. 58. In our own state contracts for the sale of chattels have been frequently enforced and the inadequacy of the remedy at law, based on the characteristic features of the contract or peculiar situation and needs of the parties, have been the principal grounds of relief. Furman v. Clark, 11 N. J. Eq. 306; Cutting v. Dana, 25 N. J. Eq. 205, 271; Rothholz v. Schwartz, 46 N. J. Eq. 477, 481, 19 Atl. 312; Gannon v. Toole (),32 Atl. 702; Hurd v. Groch (),51 Atl. 278, Duffy v. Kelly, 55 N. J. Eq. 627, 629, 37 Atl. 597; Law v. Smith, 59 Atl. 327, 68 N. J. Eq. 81.

I think it clear that the present case falls well within the principles defined by the cases already cited from our own state. Complainants' factory has a capacity of about 1,000,000 cans of tomatoes. The season for packing lasts about six weeks. The preparations made for this six weeks of active work must be carried out in all features to enable the business to succeed. These preparations are primarily based upon the capacity of the plant., Cans and other necessary equipments, including labor, must be provided and secured in advance with reference to the capacity of the plant during the packing period. With this known capacity and an estimated average yield of tomatoes per acre the acreage of land necessary to supply the plant is calculated. To that end, the contract now in question was made, with other like contracts, covering a sufficient acreage to insure the essential pack. It seems immaterial whether the entire acreage is contracted for to insure the full pack, or whether a more limited acreage is contracted for and an estimated available open market depended upon for the balance of the pack. In either case a refusal of the parties who contract to supply a given acreage to comply with their contracts leaves the factory helpless, except to whatever extent an uncertain market may perchance supply the deficiency. The condition which arises from the breach of the contracts is not merely a question of the factory being compelled to pay a higher price for the product. Losses sustained in that manner could, with some degree of accuracy, be estimated. The condition which occasions the irreparable injury by reason of the breaches of the contracts is the inability to procure at any price at the time needed and of the quality needed, the necessary tomatoes to insure the successful operation of the plant if it should be assumed as a fact that upon the breach of contracts of this nature other tomatoes of like quality and quantity could be procured in the open market without serious interference with the economic arrangements of the plant, a court of equity would hesitate to assume to interfere; but the very existence of such contracts proclaims their necessity to the economic management of the factory. The aspect of the situation bears no resemblance to that of an ordinary contract for the sale of merchandise in the course of an ordinary business. The business and its needs are extraordinary in that the maintenance of all of the conditions prearranged to secure the pack are a necessity to insure the successful operation of the plant. The breach of the contract by one planter differs but in degree from a breach by all.

The objection that to specifically perform the contract personal services are required will not divest the court of its powers to preserve the benefits of the contract Defendant may be restrained from selling the crop to others, and, if necessary, a receiver can be appointed to harvest the crop.

A decree may be advised pursuant to the prayer of the bill.

By reason of the manner in which the facts on which this opinion is based were stipulated, no costs will be taxed.

[378]

Appeal from Circuit Court of Baltimore City; Eugene O'Dunne, Judge.

Suit by Simon Michlovitz and others, copartners trading as Michlovitz & Co., against the Eastern Rolling Mill Company. Decree for plaintiffs, and defendant appeals. Affirmed.

Argued before BOND, C. J., and URNER, ADKINS, OFFUTT, DIGGES, PARKE, and SLOAN, JJ.

Charles Markell, of Baltimore, for appellant.

Edgar Allen Poe, of Baltimore (Bartlett, Poe & Claggett, of Baltimore, on the brief), for appellees.

PARKE, J.

The plaintiffs, Simon Michlovitz, Abram Michlovitz, and David Furman, are copartners trading as Michlovitz & Co., and carry on an extensive wholesale business in buying and selling iron, steel, and other scrap at Harrisburg, Pa., where their office and two of their yards are located. They have two other yards at Lebanon, which is in the same state, and 25 miles from Harrisburg. The defendant, the Eastern Rolling Mill Company, an incorporation of the state of Maryland, with its principal office in Baltimore and its plant either in that city or in its environs, is a manufacturer of sheet steel, and its processes leave for disposal a large quantity of what is known to the trade as "crop end scrap" and "bundled [379] steel scrap." The first is the ends of steel bars, which are the raw material of the industry; and the second is the ends of steel sheets, which the defendant hydraulically compresses into bundles for sale as scrap. The steel sheets constitute 98 per centum of the gross money value of the corporate business, and the other two per centum is, practically, the two kinds of scrap mentioned.

Since the defendant began operation in 1920, the defendant has exclusively disposed of this scrap to the plaintiffs. The yearly output of scrap was large, the transactions between the parties satisfactory, but periodic contracts for more than three months for the entire accumulation of both kinds of scrap began, apparently, on December 1, 1922, when the parties agreed to a sale and purchase of an entire thirteen months' production at a flat rate per ton for each kind as delivered by the defendant on gondola railway cars at its plant when it was to be removed without delay by the plaintiffs. However, the prices agreed did not remain in force throughout the period, as they were voluntarily increased by the plaintiffs after a conference, for the deliveries during the second and third quarters of that year. On November 30, 1923, the parties again agreed in writing. The contracts were similar to those for 1923, except that the term was for five years, beginning on January 1, 1924, and ending on December 31, 1928, and that the prices were not specified, but were to be agreed upon by the parties at the beginning of every period of three months during the life of the contract. Before the expiration of these contracts, the parties canceled them on September 15, 1927; and superseded them by two new written contracts, each for the period of five years from the 1st day of October, 1927, to the 30th day of September, 1932, inclusive. The only practical difference between the two contracts is that the subject-matter of one is crop end scrap and of the other is bundle steel scrap, so only the terms of one need be stated.

By these contracts, the defendant agreed to sell its entire accumulation of the two kinds of scrap during the period of five years at prices to be fixed at the beginning of every quarter for the next succeeding three months in the following manner: The plaintiffs were to accept delivery of the scrap as it accumulated, and its price, when loaded by defendant on gondola cars at its plant, was, (a) with respect to the pressed bundled sheet steel scrap, $3 a ton less than what was quoted in the "Iron Age," a trade publication, at the beginning of every quarter, as the Philadelphia market for bundled steel sheets; and (b) with respect to the crop end scrap, $3 a ton less than what was quoted in said Journal, at the beginning of every quarter, as the Philadelphia market for No. 1 heavy melting steel. The contracts required the plaintiffs to pay $5,000 on account of both contracts at the time of their formation; and the defendant agreed to give credit to this amount on the scrap to be delivered, the plaintiffs promising to pay whatever was in excess of this sum in accordance with the terms then in force between the parties.

These contracts went into effect according to their stipulations; the plaintiffs paid to the defendant the required $5,000; the prices for bundled sheet steel scrap and for crop end scrap were fixed on September 29. 1927, in accordance with the provisions of the contracts, for the ensuing last quarter, October, November, and December of 1927; and the scrap for this quarter was regularly delivered by the defendant and paid for by the plaintiffs. No controversy of any kind arose until the death of John M. Jones, who had been the president and general manager of the defendant from its inception, and who, in these capacities, had made with the plaintiffs all the contracts for the sale of scrap to the plaintiffs. Jones died about November 1, 1927, and in the following month, under the direction of A. J. Hazlett, the new president, an effort was made to induce the plaintiffs to agree to a rescission of the contracts. The defendant's objection to the contracts was their duration and the prices, but it was willing to enter into new contracts for not over a year, upon the other terms, including the prices, of the original contracts. The defendant charges, but the plaintiffs deny, that the plaintiffs assured the defendant of their willingness to rescind the subsisting contracts and to enter into similar ones for a short period. The defendant's contention is not supported by the weight of the evidence; and there can be no doubt that there never was any agreement between the parties for any modification of the contracts in controversy. In performance of these contracts, the defendant and plaintiffs agreed in December, 1927, upon the prices for scrap for the ensuing first quarter of the year; and, similarly, agreed in March, 1928, upon the price basis for the second quarter; and, accordingly, the defendant delivered, and the plaintiffs received and paid for, all the scrap which accumulated during the first six months of 1928.

Since the June, 1928, deliveries, the defendant has refused to comply with its contracts, although the plaintiffs have demanded their performance, and the defendant does not question plaintiffs' willingness and ability to complete and discharge fully their obligations. Under these circumstances, and, because of the alleged irreparable loss and injury to the plaintiffs resulting from the defendant's refusal to fulfill its continuing contracts, the plaintiffs brought a bill to enforce specifically the contracts. After answer and the taking of proof by the parties in open [380] court the chancellor decreed the relief prayed for; and this appeal raises the question of the right of the plaintiffs to relief.

When the defendant determined in November or December, 1927, to obtain a termination of the contracts by cancellation or by the reduction of their term, it was aware of all the grounds upon which it now relies to avoid the contracts, so all the successive acts of performance on the part of the plaintiffs and of the defendant, respectively, were alike referable to the subsisting contracts; and, even if it be conceded that these acts were done pending an abortive effort to cancel the contracts or to secure a modification of the period of the contracts by way of compromise, it is nevertheless difficult to see how—under the evidence and the absence of any agreement between the parties to the contrary—these facts did not amount to an election on the part of the defendant to abide by and perform the contracts; there being no conduct nor other circumstances which would estop the plaintiffs from asserting the election to have been then made.

The defendant, however, makes the first point that the contracts sought to be enforced are ultra vires and void, and if this contention be sound, the corporate defendant could not make the contracts intra vires by electing to perform them. It will therefore be necessary to consider the theory that the contracts were ultra vires, and with it all the other defenses interposed will now be examined.

The defendant's argument involves the maintenance of a number of propositions. In the first place, the right to a specific performance is denied because the contracts of September, 1927, are either (a) ultra vires; or (b) are not within the authority of the defendant's president and general manager to make; or (c) are fraudulent; or (d) so unconscionable as not to be specifically enforceable. And, secondly, the defendant asserts (e) that the plaintiffs have an adequate remedy at law, and (f) that the defendant would be harmed more by being required to perform the contracts than the plaintiffs would be benefited.

In the defendant's certificate of incorporation, the first of the declared corporate objects and business is the manufacture and sale and dealing in any way in "steel sheets and all by-products resulting from the manufacture thereof." So there can be no question that the sale of not only the steel sheets, but also the scrap, a by-product of the manufacture of steel sheets, is fulfilling one of the prime purposes of the incorporation of the defendant, and, therefore, wholly and irrefutably intra vires. Nor is there any limitation in the charter of the defendant with respect to the period its contracts may run, nor any prescription as to their content. It follows that the duration and other terms of a contract of sale by the defendant of a product of its business will not generally render the contract ultra vires, although it is conceivable that, under special circumstances, the length or other terms of a particular contract of sale might make it ultra vires. But certainly lack of judgment in writing a contract for a period of five years instead of less and in agreeing on one price, instead of a higher, for the period, will not render a contract ultra vires. And any contract which is intra vires as to the corporation is assuredly none the less so when made by its duly constituted agent within the scope of his authority, whether expressly given or duly implied.

The general management and control of the affairs of the corporation were vested by the certificate of incorporation in its board of directors, who exercised all of the powers of the corporation, except such as are expressly limited by law to the stockholders. The corporate by-laws provided for a president and that he should be the chief executive officer of the corporation, having general and active control of its affairs and business, subject to the authority of the board of directors. The by-laws specified that the general manager of the corporation should perform such duties as may be prescribed by the board of directors or executive committee, or as might be fixed by special contract, and that he, as well as the other corporate officers, should perform such duties and exercise such further powers as may be delegated to him by the board of directors or by the executive committee. There was a further provision of the by-laws that all contracts made in the conduct of the ordinary business of the company, for purchases and sales, may be signed by the officer having authority to transact the business, or within the scope of whose duty the transaction may in each particular instance fall.

From its beginning, the president and general manager of the defendant was J. M. Jones, whose services began under a contract of employment which ran for eight years, and which imposed upon him, subject only to the direction of the board of directors, the initiation, operation, and general management and control of the organization and business of the company. Jones successfully launched and managed the corporate affairs in accordance with this contract, which expired on July 2, 1927; and, before its expiration, he and the defendant entered into another contract for a like period of eight years from July 2, 1927, whereby he continued in the corporation's service and agreed to assume as theretofore full charge of the business of the defendant and the operation and control of its plant, and of its organization as president and general manager thereof, subject only to the direction of the board of directors of the company.

[381] In the performance of his duties, the board of directors imposed neither restrictions nor limitations upon the sales of its products; neither did the board require that any contract of sale should be subject to the condition of its approval, nor did it abridge in any particular the manager's general and universal power of sale. From the time the defendant began its operations, the general manager had sold and delivered to the plaintiffs all of the scrap here involved under successive contracts, whose length was, at first, for periods of three months; then for thirteen months; and next for five years. The prices agreed to be paid for the scrap in these several contracts were usually fixed at a constant figure for every ton, but in the first contract for five years it was stipulated that the price should be agreed upon by the parties, at the beginning of every quarter, for the ensuing three months. So far as the defendant was concerned, the agreement with respect to the duration, the price of the scrap, and all the other terms of every contract, were not submitted to the directors of the company, but were left exclusively to the judgment, discretion, and decision of the president and general manager, who, after agreeing on the stipulations of the contracts, executed them in the name of the company; and any change or modification of their provisions was recognized to be his province.

When, therefore, the president and general manager proposed to the plaintiffs that the defendant enter into the two contracts here in question for a like period of five years at prices which were to be determined, at the beginning of every quarter, for the ensuing three months, by deducting $3 from the prices for the Philadelphia market as quoted in the Iron Age, for bundled steel sheets and for heavy melting steel as determinative of the contract prices, respectively, of defendant's production of hydraulic compressed bundled steel scrap and crop end scrap, the proposition was apparently a normal transaction within the scope of a general manager's authority. The new contract superseded a contract of five years, Williston on Sales (2d Ed.) § 167, which would soon expire, and under which the prices paid by the plaintiff to the defendant for its scrap averaged $3.37 less than the specified quotations on the Philadelphia market, so there was nothing in the duration or prices of the proposed contracts, or the manner of their submission and execution, which was unusual, or which would put the plaintiffs on notice that this new contract must be negotiated and executed in any manner different from those of the past. As was said in Carrington v. Turner, 101 Md. 437, 443, 61 A. 324, 326: "It is well settled that a corporation may confer upon its officers or agents larger powers than ordinarily belong to them by holding them out to the public as possessing such powers by habitually permitting them to exercise them." Santa Clara Mining Ass'n v. Meredith, 49 Md. 389, 400 (33 Am. Rep. 264); Equitable Endowment Ass'n v. Fisher, 71 Md. 439, 18 A. 808; Hadden v. Linville, 86 Md. 210, 230-233, 38 A. 37, 900; Md. Trust Co. v. Mechanic's Bank, 102 Md. 608, 634, 635, 63 A. 70.

So, under the facts and circumstances of this case, it is plain that the president and general manager, in making the assailed contracts, was acting within the scope of his duties, and for the benefit of the defendant, in a matter which arose in the course of the ordinary business of the corporation. The following quotation in the case of Eastern Shore Brokerage & Commission Co. v. Harrison, 141 Md. 91, at page 100, 118 A. 192, 196, is apposite to the facts of this record:

"Unless his authority is specially restricted, the authority and power of a general or managing officer or agent are co-extensive with the powers of the corporation itself, and he has authority to do any act on its behalf which is usual and necessary in the ordinary course of the Company's business, or which he is held out to the public as having authority to do, and may exercise all the powers which the board of directors could exercise or authorize under the same circumstances in the general management of the corporation business."

As has been seen, the board of directors gave the general manager no direction, and placed upon him no limitation, with respect to the contracts of sale for its products, but customarily left these matters to his sole discretion and decision without ever exercising any supervision, much less control. Under these circumstances, the corporation is not in a position to set up a want of authority in its general manager. It was charged with the knowledge of the extent of the power commonly exercised by its general manager in the conduct and management of its business, even though such power had not been expressly delegated to the manager. Supra, and Buchwald Transfer Co. v. Hurst, 111 Md. 577, 75 A. 111, 19 Ann. Cas. 619; Sun Printing & Publishing Ass'n v. Moore, 183 U. S. 642, 650, 22 S. Ct. 240, 46 L. Ed. 366, 373; Hagerstown Brewing Co. v. Gates, 117 Md. 348, 358-361, 83 A. 570; Md. & Del. R. R. Co. v. Porter, 19 Md. 458, 469; Northern Central Ry. Co. v. Bastian, 15 Md. 494, 500, 501; Singer Const. Co. v. Goldsborough, 147 Md. 628, 632, 633, 128 A. 754; Williston on Contracts, § 277.

Since the general manager, while acting within the scope of his authority, made the contracts in the name of the principal, and in its behalf, the latter is bound to perform the contracts according to their terms, unless the contracts were fraudulent, as the defendant now maintains. The reason for this rule is expressed in the maxim qui facit [382] per alium facit per se. So, no matter if the terms of the contracts be improvident, the principal is bound as if the errors of judgment of the agent had been made by the principal, unless the agent were guilty of fraud in making the contracts.

The evidence is clear and convincing that there was no fraud. The direct testimony is that the general manager, Jones, had no ulterior interest in the formation of the contracts, and that he derived no personal benefit from their making or performance other than which inured to him as a large stockholder in the company. It was not until after his death that defendant attempted to annul the contracts. For a number of years, and until his death, he had been the defendant's trusted and efficient chief executive officer, and his conduct of its affairs had been thoroughly satisfactory and profitable; and it is no more than just to state that this record presents no facts affecting his integrity. In the absence of direct evidence, the defendant relies upon an inference of fraud from what is claimed to be the patent unfairness of the contracts so far as the defendant is concerned. The charge of fraud rests, in last analysis, upon the duration of the contracts and the prices agreed to be paid for the scrap. The argument that the length of the contracts in dispute is abnormal and unprecedented, and, so, unfair, loses some of its force, in view of the fact that the executed contracts between the same parties that immediately preceded them were for a like term of five years. Again, the prices for the scrap were not at a specified and constant figure during the life of the contracts, but were variable units, which depended upon the quarterly changes in the market value of certain scrap and fluctuated with, and always $3 less than, the market prices as they reflected, from quarter to quarter, the current worth of the materials. So, as the plaintiffs are financially responsible, and have demonstrated for many years their ability and dependableness in the performance of their obligations to pay and to remove quickly the scrap, the length of the contracts becomes immaterial, and the charge of fraud is seen to rest, finally, upon the prices of the scrap being determined by the quarterly reduction of the two specified market quotations by $3. The defendant contends that this secures to the plaintiffs such an unconscionable and extraordinary profit as to be fraudulent in law.

The defendant's production of scrap was from one to two carloads a day, and its switch facilities required the prompt removal of the loaded cars. For many years the defendant, through its general manager, had bargained and sold its scrap to the plaintiffs, who had uniformly moved the cars away without delay and had paid for the scrap promptly, so, from an operative and financial standpoint, the business relations with the plaintiffs had been satisfactory. In order to secure the continuance of this service with respect to the regular removal of the scrap and the certain and prompt use of the purchase price in the business, whether the plaintiffs had a ready market for the scrap or had to put it in storage, the general manager proposed contracts for five years, and the method of determining in advance the prices for the succeeding quarter. The average prices which had been paid for the preceding four years were $3.37 less than the prevailing quotations from quarter to quarter, so the offer was made for new contracts under which $3 should be the amount to be subtracted from the quotations at the beginning of the quarter. This was a gain of 37 cents a ton for the defendant. The deduction of $3 to be made was to cover a minimum freight charge of $2.27 a ton to its yards and to every market within the territory known as the "Philadelphia Market," except to the Bethlehem Steel Company at Sparrows Point; and to take care of the plaintiffs' overhead, probable unloading and loading charges, and freight in reshipment after storage, and the risks incident to the business, and a net profit to the plaintiffs.

At the time of the contracts, the Bethlehem Steel Company was not taking any scrap from the plaintiffs, but the plaintiffs and the general manager knew that, if the latter company did buy the scrap of the plaintiffs, their chances of profit would be materially increased, as the freight rate per ton to Sparrows Point was but 90 cents. As against the probability of the Bethlehem Steel Company buying some or all of the scrap, there was the chance that it would not do so, and that the plaintiffs would, during the period of five years, have markets where the delivery would be $2.27 per ton or more for freight, or, perhaps have to store the scrap at great loss because of no demand. Furthermore, while the steel company would likely have to pay the plaintiffs the market price for the scrap, yet there was then no assurance that, if the defendant refused to sell to the plaintiffs, the steel company would buy all the scrap of the defendant, remove it promptly, and bind itself to pay defendant the full market price for five years. In addition to this, the defendant was buying its steel bars of the steel company, and the defendant's general manager did not consider it sound business policy to sell defendant's scrap to the manufacturer from which it bought its raw material. He thought it best for his company not to be dependent upon the steel company for the sale and removal of the scrap. There were obvious advantages and disadvantages to the defendant, no matter which choice the general manager made. It was his duty to act, and in this he necessarily exercised his judgment, and his decision must be weighed [383] in the light of the circumstances at the time and not by the subsequent developments.

The witnesses who testified held different opinions of the advisability of the contracts, which illustrates that there was ground for an honest difference of opinion. The terms of the contracts have yielded thus far a handsome profit to the plaintiffs, yet these same terms would not have been near so profitable, if at all, had the Bethlehem Steel Company not resumed its buying of scrap. Moreover, it is not impossible for the plaintiffs to lose heavily, if, in the future, their market for the scrap should fail, and they would have to store it on their yards. Upon such a contingency, and others which could be used for the purpose of illustration, the sound business judgment of the general manager would be vindicated, and the acumen with which the plaintiffs are now credited would vanish. Where so many uncertain and contingent factors entered into the equation, a court cannot find any justification for declaring that the prices agreed, in connection with all the circumstances, were so unconscionable as to establish constructive fraud of which the third party had notice. The prices were the result of negotiations, untainted by collusion or fraud, and, at worst, they were a default or error of judgment of one or the other of the parties accordingly as the future would determine the conditions under which the contract would be performed.

The testimony has convinced the court that the general manager cannot be charged with anything more serious than an error of judgment, and that he and the plaintiffs were in a position, and had the knowledge, power, and ability, to agree, and did agree, through the exercise of their independent judgment, as to the value of the scrap, and how it was to be measured. If any mistake were made, it was an honest one, for which the defendant is responsible as principal. See Penna. R. R. v. Minis, 120 Md. 496, 502, 503, 505, 87 A. 1062; Matthews v. Headley Chocolate Co., 130 Md. 523, 535, 100 A. 645; Foutz v. Miller, 112 Md. 458, 461, 76 A. 1111. It follows that the defendant has not met the burden of proving fraud on the part of its general manager in the making of the contracts in question nor that the contracts were unconscionable in their terms. Booth v. Robinson, 55 Md. 419, 436-441; Penna. R. R. Co. v. Minis, 120 Md. 461, 485, 486, 87 A. 1062.

The present appeal does not fall within that class of cases where the inadequacy of consideration, either alone or in association with other inequitable circumstances, is so gross as to shock the conscience and furnish satisfactory and decisive evidence of fraud. Pomeroy's Equitable Juris. (4th Ed.) §§ 925-928. On the contrary, the evidence, in our opinion, establishes it as a case where a corporation, through its agent acting within the scope of his employment and in behalf of his principal, has made contracts, without mistake, misapprehension, of fraud, and because the defendant thought best to enter into it, and meant to enjoy the full benefits of it; but now, conceiving the terms of the contracts to be to the disadvantage of the defendant, seeks to be rid of their performance. The law, however, enforces a contract without concern whether the valid promises of contracting parties were wisely made or will result profitably or unprofitably.

The nature of the contracts attacked has been disclosed by the preceding discussion, so, without stopping to set out the points made by the defendant why the relief of specific performance should not be granted, and presenting and analyzing the pertinent evidence on this question, it will be sufficient to say that, in the court's judgment, the contracts are shown to have been fair, equal, and just at the time of their inception, when the parties, with equal knowledge and means of obtaining knowledge of all the material facts, and with a common opportunity of judging their consequences, must be assumed to have contemplated and provided against all possible contingencies. Nor does the evidence prove that the enforcement of the contracts for the residue of its term would be oppressive. Rogers v. Dorrance, 140 Md. 419, 426, 117 A. 564; Lucas v. Long, 125 Md. 420. 427, 94 A. 12; Liggett Co. v. Rose, 152 Md. 146, 168, 169, 136 A. 651; Willard v. Tayloe, 8 Wall. 571, 19 L. Ed. 501; Fry on Specific Performance (6th Ed.) §§ 389, 418; Franklin Tel. Co. v. Harrison, 145 U. S. 459, 472, 473, 12 S. Ct. 900, 36 L. Ed. 776; Morley v. Clancy, 29 Beav. 84, 54 Eng. Reprint, 558.

In the present case section 246 of article 16 of the Code has no application, since the defendant's proof satisfactorily showed that the defendant has property from which the plaintiffs may recover any damages and costs which might be adjudged for a breach of the contracts, therefore, apart from statute, Code, art. 83, § 89, the court, as a general rule, will refuse to decree specific performance in respect of chattels because damages are a sufficient remedy. This principle does not apply in all cases of chattels, so there are many exceptions to this rule, because, principally, of the inadequacy of the remedy at law in the particular case or of the special nature and value of the subject-matter of the contract. Passing by other illustrations of the exceptions to one more clearly in point, Pomeroy on Specific Performance (3d Ed.) § 15, puts it thus: "Again contracts for the delivery of goods will be specifically enforced, when by their terms the deliveries are to be made and the purchase price paid in installments running through a considerable number of years. Such contracts 'differ from those that are immediately to be executed.' Their profits depending upon future event? cannot be estimated in present damages, which must, of necessity, be almost wholly [384] conjectural. To compel a party to accept damages under such circumstances is to compel him to sell his possible profits at a price depending upon a mere guess." This statement of the law is supported by the Maryland decisions. Equitable Gas Light Co. v. Baltimore Coal Tar Co., 63 Md. 285, 299, 300; Gottschalk v. Stein, 69 Md. 51, 13 A. 625; Ady v. Jenkins, 133 Md. 36, 40, 104 A. 178; Baltimore Process Co. v. My-Coca Co., 144 Md. 439, 449, 450, 125 A. 179; Thompson v. Winterbottom, 154 Md. 581, 141 A. 343; Sullivan v. Tuck, 1 Md. Ch. 59. Compare Thorn v. Commissioners of Works, 32 Beav. 490; Taylor v. Neville, cited, 3 Atk. 484; Ball v. Coggs, 1 Bro. P. C. 140 (Toml. Ed.); Furman v. Clark, 11 N. J. Eq. 306; Omaha Lumber Co. v. Co-operative Inv. Co., 55 Colo. 271, 133 P. 1112.

Under the cases, the right to specific performance turns upon whether the plaintiffs can be properly compensated at law. The plaintiffs are entitled to compensatory damages, and, if an action at law cannot afford them adequate redress, equity will specifically enforce the contracts, which would not impose upon the court any difficulties in enforcement, as the subject-matter of the contracts is the accumulated scrap at the plant of the defendant. The defendant relied upon the case of Fothergill v. Rowland, L. R.,17 Eq. 132, but there the contract was one whose performance involved the working of a coal mine, which required personal skill, and this with its different facts distinguishes that case from the one at bar. The goods which the parties here had* bargained for were not procurable in the neighborhood, and, moreover, they possessed a quality and concentrated weight which could not be secured anywhere within the extensive region covered by the "Philadelphia Market." In addition, the delivery of the scrap at Baltimore was one of the valuable incidents of the purchase. It follows that the right to these specific goods is a consideration of great importance, and this and the difficulty of securing scrap of the same commercial utility are factors making for the inadequacy of damages.

The scrap is not to be delivered according to specified tonnage, but as it accumulates, which in the past has been at the rate of one and two, and occasionally three, carloads of scrap a day, so the quantities vary from quarter to quarter. If the plant should cease to operate or suffer an interruption, there would be no scrap accumulating for delivery under the contracts, and its deliveries would end or be lessened. Neither are the prices for the scrap constant during the period of the contracts, but change from quarter to quarter according to the quotations of two specified materials on the Philadelphia market whose quarterly prices are accepted as the standards upon which the contract prices are quarterly computed. The contracts run to September 30, 1932. By what method would a jury determine the future quarterly tonnage, the quarterly contract price, and quarterly market price during these coming years? How could it possibly arrive at any fair ascertainment of damages? Any estimate would be speculative and conjectural, and not, therefore, compensatory. It follows that the defendant's breach of its contracts is not susceptible of fair and proper compensation by damages; and that to refuse to compel the defendant to do merely what it bound itself to do, and to remit the plaintiff's to their action at law, is to permit the defendant to relieve itself of the contracts and to force the plaintiffs to sell their profits at a conjectural price. To substitute damages by guess for due performance of contract could only be because "there's no equity stirring."

The equitable remedy of specific performance is indicated by the facts and circumstances; and would seem to be authorized by section 89 of article 83 of the Code, providing as follows:

"89. Where the seller has broken a contract to deliver specific or ascertained goods, a court having the powers of a court of equity may, if it thinks fit, on the application of the buyer, by its judgment or decree, direct that the contract shall be performed specifically without giving the seller the option of retaining the goods on payment of damages. The judgment or decree may be unconditional, or upon such terms and conditions as to damages, payment of the price and otherwise, as to the court may seem just."

The goods in the instant case are all of the daily by-product of the raw materials used in the manufacturing processes of a particular plant. The goods assume their distinctive form of scrap and are of a known quantity and quality when the raw material has been made into the commercial product; and they are identified by reason of their location in the plant where they were manufactured. The defendant does not perform its contracts by delivering any scrap other than that agreed upon; that is, the scrap made and accumulated by a particular manufacturer as the by-product of the operations of a specified manufacturing plant. If the contract had been for generic goods, the defendant could deliver any goods which answer to the description. The term "specific goods" is defined to mean goods identified and agreed upon at the time a contract to sell or a sale is made. Code, art. 83, § 97. It is not necessarily confined to existing goods, but may embrace future goods which were unascertainable at the date of the contract, if they be so susceptible of identification and appropriation by description as to be clearly ascertainable when the contract comes to be enforced. So "specific" has been held to apply to future and unascertained goods, if they are the product of what is specific. This principle is illustrated by Howell v. Coupland [1876] 1 Q. B. Div. 258, where defendant agreed to sell [385] plaintiff 200 tons of potatoes grown on land belonging to defendant at a particular place. At the time of the agreement, the ground had been prepared, but the potatoes had not been planted, but were put out, and should have produced the agreed quantity. Without any default of the defendant, disease reduced the crop to about 80 tons. The question was whether the defendant had performed his contract by the delivery of the 80 tons, and its solution hinged on whether this agreement for the delivery of future goods was a sale of specific goods. The court held that, inasmuch as the contract was for potatoes off specific land, it was therefore a contract for a part of a specific crop, although it was not planted at the time of the contract; and that, because the specific goods had perished without the fault of the seller, he was not bound to deliver the 200 tons, as he would have been if the sale had not been of specific goods. Benjamin on Sales (5th Ed.) 142, 143; Fry on Specific Performance (6th Ed.) § 82; Dexter v. Norton, 47 N. Y. 62, 7 Am. Rep. 415; Holroyd v. Marshall, 10 H. L. C. 191; Tailby v. Official Receiver, L. R., 13 App. Cases, 523, 543. Compare In re Wait (1927) L. R. 1 Ch. 606. So here the obligation is to deliver a particular chattel, not to deliver any proper chattel. The scrap becomes specific property by reason of its manufacture in a special manner, at a certain plant, by a designated manufacturer, during a given period, and for a single purchaser of the whole quantity produced; and, as soon as the scrap is made, it is ascertained goods, appropriated to the contract by force of its fulfilling the description of the chattel sold through its complete identification with the subject-matter.

Thus the property about which the parties to this appeal bargained is not an undistinguished portion of a quantity of similar goods. Agri Mfg. Co. v. Atlantic Fertilizer Co., 129 Md. 42, 98 A. 365, Ann. Cas. 1918D, 396. From the time the scrap is produced and pressed into bundles, it is identified, and nothing further remains to be done to put it in condition for delivery. This scrap, and none other, is the exclusive subject-matter of the contracts. A sale of a pound of it to a third party is a breach of the contracts; and not until every pound of this scrap—and none other—is delivered to the plaintiffs, is the contract fulfilled.

Under the special circumstances of this case, the scrap sold is "specific or ascertained goods" within the meaning of section 89 of the Sale of Goods Act; and the chancellor was empowered to pass the decree for specific performance. The logic of the facts leads to this conclusion, which was anticipated by eminent authority. 2 Williston on Sales (2d Ed.) § 601; Benjamin on Sales (6th Ed.) pp. 165, 1120, 1122; Fry's Specific Perf. § 82; Cassinelli v. Humphrey Supply Co., 43 Nev. 208, 183 P. 523.

For the reasons given, the decree will be affirmed.

Decree affirmed, with costs.

1 DeG., M & G. 604, 42 Eng. Rep. 687 (Ch. 1852)
BENJAMIN LUMLEY
v.
JOHANNA WAGNER, ALBERT WAGNER and FREDERICK GYE
Before the Lord Chancellor Lord St. Leonards.
May 22, 26, 1852.

[604] [S. C. 5 De G. & Sm. 485; 21 L. J. Ch. 898; 16 Jur. 871. See Adamson v. Gill, 1868, 17 L. T. 466 ; Catt v. Tourle, 1868, L. R. 4 Ch. 660 ; Merchants’' Trading Co. v. Banner, 1871, L. R. 12 Eg. 23. Observed upon, Montague v. Flockon, 1873, L. R. 16 Eq. 189. Considered, Wolverhampton and Walsal Railway v. London and Northwestern Railway, 1873, L. R. 16 Eq. 433. See Fothergill v. Rowland, 1873, L. R. 17 Eq. 141; Warne v. Routledge, 1873, L. R. 18 Eq. 499 ; Leech v. Schweder, L. R. 9 Ch. 468 (n.);j Bowen v. Hall, 1881, 6 Q. B. D. 341 ; Alderson v. Maddison, 1881, 7 Q. B. D. 181 ; 8 App. Cas. 467; Donnell v. Bennett, 1883, 22 Ch. D. 838. Discussed, Whitwood Chemical Co. v. Hardman [1891], 2 Ch. 416. See Ryan v. Mutual tontine, &c., Association [1893], 1 Ch. 127. Distinguished, Davis v. Foreman [1894], 3 Ch. 654. See Robinson V. Heuer [1898], 2 Ch. 458; Manchester Ship Canal Co. v. Manchester Racecourse Go. [1901], 2 Ch. 37;  Formby v. Baker [1903], 2 Ch. 553.]

J. W. agreed with B. L. that she, J. W., would sing at B. L.'s theatre during certain period of time, and would not sing elsewhere without his written authority. Held, on a bill filed to restrain J. W. from singing for a third party, and granting an injunction for that purpose, that the positive and negative stipulations of the agreement formed but one contract, and that the Court would interfere to prevent the violation of the negative stipulation, although it could not enforce the specific performance of the entire contract.

Kemble v. Kean, 6 Sim. 333, and Kimberley v. Jennings, 6 Sim. 340, overruled.

The Plaintiff relied on the Defendants' knowledge of a fact said to be communicated to them in a letter, of which no copy was kept, but the receipt of which the Defendants admitted. The Defendants denied that it contained the statement alleged, but did not produce the letter, or satisfactorily account for its nonproduction. Held, under these circumstances, that the Plaintiff's representation must be taken to be true.

The bill in this suit was filed on the 22d April 1852, by Benjamin Lumley, the lessee of Her Majesty's Theatre, against Johanna Wagner, Albert Wagner, her father, and Frederick Gye, the lessee of Covent Garden Theatre: it stated that in November 1851 Joseph Bacher, as the agent of the Defendants Albert Wagner and Johanna Wagner, came to and concluded at Berlin an agreement in writing in the French language, bearing date the 9th November 1851, and which agreement, being translated into English, was as follows :—

" The undersigned Mr. Benjamin Lumley, possessor of Her Majesty's Theatre at London, and of the Italian Opera at Paris, of the one part, and Mademoiselle Johanna [688 Wagner, cantatrice of the Court of His Majesty the King of Prussia, with the consent of her father, Mr. A. Wagner, residing at Berlin, of the other part, have concerted and concluded the following contract :—First, Mademoiselle Johanna Wagner binds herself to sing three months at the theatre of Mr. Lumley, Her Majesty's, at London, to date from the 1st of April 1852 (the [605] time necessary for the journey comprised therein), and to give the parts following:  1st, Romeo, Montecchi; 2d, Fides, Prophete ; 3d, Valentine, Huguenots ; 4th, Anna, Don Juan; 5th, Alice, Robert le Diable; 6th, an opera chosen by common accord.—Second, The three first parts must necessarily be, 1st, Romeo, 2d, Fides, 3d, Valentine; these parts once sung, and then only she will appear, if Mr. Lumley desires it, in the three other operas mentioned aforesaid.—Third, These six parts belong exclusively to Mademoiselle Wagner, and any other cantatrice shall not presume to sing them during the three months of her engagement. If Mr. Lumley happens to be prevented by any cause soever from giving these operas, he is, nevertheless, held to pay Mademoiselle Johanna Wagner the salary stipulated lower down for the number of her parts as if she had sung them.-—Fourth, In the case where Mademoiselle Wagner should be prevented by reason of illness from singing in the course of a month as often as it has been stipulated, Mr. Lumley is bound to pay the salary only for the parts sung.—Fifth, Mademoiselle Johanna Wagner binds herself to sing twice a week during the run of the three months; however, if she herself was hindered from singing twice in any week whatever, she will have the right to give at a later period the omitted representation.—Sixth, If Mademoiselle Wagner, fulfilling the wishes of the direction, consent to sing more than twice a week in the course of three months, this last will give to Mademoiselle Wagner £50 sterling for each representation extra. —-Seventh, Mr. Lumley engages to pay Mademoiselle Wagner a salary of £400 sterling per month, and payment will take place in such manner that she will receive £100 sterling each week.—Eighth, Mr. Lumley will pay, by letters of exchange, to Mademoiselle Wagner at Berlin, the 15th of March 1852, the sum of £300 sterling, a sum which will be deducted from her engagement in his [606] retaining £100 each month.—Ninth, In all cases except that where a verified illness would place upon her a hindrance, if Mademoiselle Wagner shall not arrive in London eight days after that from whence dates her engagement, Mr. Lumley will have the right to regard the non-appearance as a rupture of the contract, and will be able to demand an indemnification.— Tenth, In the case where Mr. Lumley should cede his enterprise to another, he has the right to transfer this contract to his successor, and in that case Mademoiselle Wagner has the same obligations and the same rights towards the last as towards Mr. Lumley.

" JOHANNA WAGNER.
"ALBERT WAGNER."

"Berlin, the 9th November 1851."

The bill then stated that in November 1851 Joseph Bacher met the Plaintiff in Paris, when the Plaintiff objected to the agreement as not containing an usual and necessary clause, preventing the Defendant Johanna Wagner from exercising her professional abilities in England without the consent of the Plaintiff, whereupon Joseph Bacher, as the agent of the Defendants Johanna Wagner and Albert Wagner, and being fully authorized by them for the purpose, added an article in writing in the French language to the agreement, and which, being translated into English, was as follows:—

"Mademoiselle Wagner engages herself not to use her talents at any other theatre, nor in any concert or reunion, public or private, without the written authorization of Mr. Lumley.

"Dr. JOSEPH BACHER,
"For Mademoiselle Johanna Wagner,
and authorized by her."

The bill then stated that J. and A. Wagner subsequently made another engagement with the [607] Defendant F. Gye, by which it was agreed that the Defendant J. Wagner should, for a larger sum than that stipulated by the agreement with the Plaintiff, sing at the Royal Italian Opera, Covent Garden, and abandon the agreement with the Plaintiff. The bill then stated that the Defendant F. Gye had full knowledge of the previous agreement with the Plaintiff, and that the Plaintiff had received a protest from the Defendants J. and A. Wagner, repudiating the agreement on the allegation that the Plaintiff had failed to fulfil the pecuniary portion of the agreement.

The bill prayed that the Defendants Johanna Wagner and Albert Wagner might restrained from violating or committing any breach of the last article of the agreement; that the Defendant Johanna Wagner might be restrained from singing and performing or singing at the Royal Italian Opera, Covent Garden, or at any other theatre or place without the sanction or permission in writing of the Plaintiff during the existence of the agreement with the Plaintiff; and that the Defendant Albert 'Wagner might be restrained from permitting or sanctioning the Defendant Johanna "Wagner singing and performing or singing as aforesaid; that the Defendant Frederick Gye might be restrained from accepting the professional services of the Defendant Johanna Wagner as a singer and performer or singer at the said Royal Italian Opera, Covent Garden, or at any other theatre or place, and from permitting her to sing and perform or to sing at the Royal Italian Opera, Covent Garden, during the existence of the agreement with the Plaintiff, without the permission or sanction of the Plaintiff.

The answer of the Defendants A. and J. Wagner attempted to show that Joseph Bacher was not their authorized agent, at least for the purpose of adding the restrictive clause, and that the Plaintiff had failed to make the stipu-[608]-lated payment by the time mentioned in the agreement. The Plaintiff having obtained an injunction from the Vice-Chancellor, Sir James Parker, on the 9th May 1852, the Defendants now moved by way of appeal before the Vice-Chancellor (1) to discharge His Honour's order.

Mr. Bethell, Mr. Malins and Mr. Martindale, in support of the appeal motion. We submit that the agreement in the present case being one of which the Court cannot decree specific performance, the jurisdiction by injunction does not attach. The Vice-Chancellor has rested his decision mainly on the authority of Dietrichsen v. Cabburn (2 Phil. 52), but there the decision was founded on the special circumstances of the case tending to establish a partnership, which clearly does not exist here, nor does it warrant such an extension of the principle as has been assumed to be there established ; this is shewn by the observations of Lord Cottenham himself in the subsequent case of Heathcote v. The North Staffordshire Railway Company (2 Mac. & G. 100). In that case, on dissolving an injunction which had been granted by the Vice-Chancellor of England, restraining the company from applying to Parliament for powers to relieve them from the performance of their contract, his Lordship said, "The covenant is a mere legal contract which the Act asked for may prevent the Defendant from performing, but that is all: if A. contract with B. to deliver goods at a certain time and place, will equity interfere to prevent A. from doing anything which may or can prevent him from so delivering the goods?  If, indeed, A. had agreed to sell an estate to B. and then proposed to deal [609] with the estate so as to prevent him from performing his contract, equity would interfere; because in that case B. would, by the contract, have obtained an interest in the estate itself, which, in the case of the goods, he would not." We contend that the agreement is a purely personal contract, for the infraction of which damages are a complete and ample remedy: the agreement is, in fact, nothing more than a contract of hiring and service, and whatever the relation between the employer and employed may be, whether master or 'servant, or principal and agent, or manager and actor, this Court will, in all such cases, abstain from interfering, either directly or indirectly; Kemble v. Kean (6 Sim. 333), Kimberley v. Jennings (6 Sim. 340), Stocker• v. Brockelbank (3 Mac. & G. 250).

[THE LORD CHANOELLOR. In the case of Stocker v. Brockelbank there was no negative covenant.]

The general principle upon which we rely is, that this Court never interferes to restrain the breach of the negative part of a contract in any case where it cannot specifically enforce the performance of the positive part of the contract ; Baldwin v. The Society for the Diffusion of Useful Knowledge (9 Sim. 393), Hooper v. Brodrick (11 Sim. 47), Hills v. Croll (2 Phil. 60). The earlier authorities cited by the Plaintiff in the Court below, namely, Martin v. Nutkin (2 P. W. 266), Barret v. Blagrave (5 Ves. 555), Martin v. Colman (18 Ves. 437), are all distinguishable. In the case of Martin v . .Nutkin (2 P. W. 266) the ringing of the bells was restrained, because not only was there no adequate remedy at law, but the contract was one clearly falling within the ordinary jurisdiction of the Court for specific performance. The same remark applies also to the case of Barrett v. Bla-[610]-grave (5 Ves. 555), which involved the doctrine of part performance, the tenant having enjoyed the benefits of the lease. In Morris v. Colman (18 Ves. 437), the injunction was granted upon the ground of partnership, as shewn by Lord Eldon in the case of Clarke v. Price (2 Wils. 157); and, applying'the language of his Lordship in that case to the present, we say that if the agreement is one which the Court will not carry into execution (and this must be admitted) the Court cannot indirectly enforce it.

[THE LORD CHANOELLOR observed that in the case of Blakemore v. The Glamorganshire Canal Navigation (1 Myl. & K. 154) Lord Eldon had got over his scruples ; for he there granted an injunction, the effect of which was indirectly to compel the company to restore certain works to the state in which they originally stood, His. Lordship added that he had always felt some difficulty in acquiescing in the propriety of that decision.]

The utmost extent to which the Court ought to go in granting such prohibitory injunctions, when a proper case is shewn for its interference, is in the form adopted in the case of Robinson v. Lord Byron (1 Bro. C. C. 588), where the Defendant was restrained from preventing the flow of water in the usual quantities; but it is to be observed that, wherever there is a clear legal remedy, as exists in the present instance, this Court will decline to interfere in cases arising out of the doctrine of specific performance, Collins v. Plumb ( 16 Ves. 454).

[THE LORD CHANCELLOR. This Court interferes by injunction in the case of articled clerks, surgeons' apprentices, &c., who have covenanted, after they leave their masters not to practise within certain limits, although no question of specific performance is involved.]

The utmost extent to which the Court ought to go in granting such prohibitory injunctions, when a proper case is shewn for its interference, is in the form adopted in the case of Robinson v. Lord Byron (1 Bro. C. C. 588), where the Defendant was restrained from preventing the flow of water in the usual quantities; but it is to be observed that, wherever there is a clear legal remedy, as exists in the present instance, this Court will decline to interfere in cases arising out of the doctrine of specific performance, Collins v. Plumb ( 16 Ves. 454).

[THE LORD CHANCELLOR. This Court interferes by injunction in the case of articled clerks, surgeons' apprentices, &c., who have covenanted, after they leave their masters not to practise within certain limits, although no question of specific performance is involved.]

[611] Those cases, of which Swallow v. Wallingfond (12 Jur. 403) is an example, are in the nature of concluded contracts, and where the jurisdiction of this Court is only exercised with the view of effectuating the whole contract by preventing the party, who has received a valuable consideration for his covenant, from infringing that covenant. On the same principle, as well as to prevent the commission of irreparable damage, a tenant was restrained from violating a covenant he had entered into with his landlord not to burn the demised lands, Gervais v. Edwands (2 Dru. & War. 80).

Mr. Bacon and Mr. H. Clarke, contra, in support of the injunction. The prayer of the bill in the present case is not for specific performance and for an injunction as ancillary to that relief, but for an injunction simply, to prevent the violation of the negative stipulation in the Defendants' agreement. With respect to the alleged distinction in the case of Morris v. Colman (18 Ves. 437), on the ground of a partnership, that was in fact no distinction, nor did it form an element in the decision of the case, which was based solely on the existence of the negative stipulation; and the case of Clarke v. Price (2 Wils. 157), which was relied upon by the Appellants, serves clearly to illustrate this position, for in that case not only was there a prayer for specific performance, but the agreement contained no negative stipulation. The cases of Kemble v. Kean (6 Sim. 333) and Kimberley v. Jennings (6 Sim. 340) are the only two cases which are at all opposed to the uniform current of authority, which establishes the Plaintiff's right to the injunction; but it is to be observed that Sir L. Shadwell, who decided these [612] two cases, was himself the Judge who, in the subsequent case of Rolfe v. Rolfe (15 Sim 88), recognized and acted upon the distinction for which we contend, thereby virtually if not actually overruling his previous decisions. We rely upon the decision of Lord Cottenham in Dietrichsen v .. Cabburn (2 Phil. 52; see p. 58); he there says, "If the bill states a right or title in the Plaintiff to the benefit of the negative agreement of the Defendant, or of his abstaining from the contemplated act, it is not as I conceive material whether the right be at law or under an agreement which cannot be otherwise brought under the jurisdiction of a Court of Equity." On this principle the Court acts in restraining the violation of covenants in a lease, by a tenant, French v. Macale (2 Dru. & War. 269). The same doctrine was also recognised by Lord Langdale, in the case of Whittaker v. Howe (3 Beav. 383;  see p. 395), where he says :—" I do not think that this Court can refuse to grant an injunction to restrain the violation of a contract or covenant, because there may be some part of the agreement which the Court could not compel the Defendant specifically to perform." It was said that this Court would, at all events, only interfere in cases where there had been part performance, but such a construction would exclude all executory contracts. In' the present case, however, there has been a part performance, inasmuch as the Plaintiff has incurred considerable expense in preparing operas in which the Defendant J. Wagner was to sing. It was further said that the Court never interferes in cases like the present, which was alleged to be one of personal service; but in the case of articled clerks, &c., the Court has continually restrained them from practising within certain limits, in violation of their agreements.

Mr. Bethell, in reply, [613] The jurisdiction of the Court in granting injunctions may be said to be limited to four classes of cases. The first class includes those where its aid is sought to obtain preventive relief, and where, if not granted, irreparable mischief would ensue, as in the cases of nuisances and infringement of patents. The second class includes those in which the injunction is ancillary to the relief prayed, as in Whittaker v. Howe (3 Beav. 383), which being a case of partnership the injunction was auxiliary for the purpose of preserving the status quo: in the present instance, however, the injunction, so far from being in the nature of ancillary relief, prejudges the whole case. The third class of cases embraces those where the Court, being able to give direct and full relief, has restrained the breach of unilateral agreements when only one part remains to be performed, and the effect of the injunction is to afford a complete remedy, and to leave no part of the agreement unperformed: thus, for example, in the case of restraining a tenant from committing a breach of his covenant, the whole contract is directly and positively performed; and the same remark is applicable to the decision in Rolfe v. Rolfe (15 Sim. 88), where the whole of the agreement had been completed, with the exception of the part which remained to be performed by the operation of the injunction; besides the question there resulted out of a partnership transaction: Where, however, the Court by its interference cannot do the complete act which was the subject of the agreement between the parties, it has declined to interfere, Smith v. Fromont (2 Swanst. 330). In the case now under discussion, the Court is called upon to deal indirectly with part of an agreement, in which the negative portion is so involved with the positive as to be only subservient to the whole agreement. There is also a fourth class of cases, namely, bills of peace, in which the Court is in the [614] habit of granting a perpetual injunction to quiet the possession of the Plaintiff, but those are inapplicable to the present.

THE LORD CHANCELLOR. The question which I have to decide in the present case arises out of a very simple contract, the effect of which is, that the Defendant Johanna Wagner should sing at Her Majesty's Theatre for a certain number of nights, and that she should not sing elsewhere (for that is the true construction) during that period. As I understand the points taken by the Defendants' counsel in support of this appeal they in effect come to this, namely, that a Court of Equity ought not to grant an injunction except in cases connected with specific performance, or where the injunction being to compel a party to forbear from committing an act (and not to perform an act), that injunction will complete the whole of the agreement remaining unexecuted.

I have then to consider how the question stands on principle and on authority, and in so doing I shall observe upon some of the cases which have been referred to and commented upon by the Defendants in support of their contention. The first was that of Martin v. Nutkin (2 P. W. 266), in which the Court issued an injunction restraining an act from being done where it clearly could not have granted any specific performance; but then it was said that that case fell within one of the exceptions which the Defendants admit are proper cases for the interference of the Court, because there the ringing of the bells, sought to be restrained, had been agreed to be suspended by the Defendant in consideration of the erection by the Plaintiffs of a cupola and clock, the agreement being in effect the price stipulated for the Defendant's relinquishing bell-ringing at stated periods; the Defendant having accepted the [615] benefit, but rejected the corresponding obligation, Lord Macclesfield first granted the injunction which the Lords Commissioners, at the hearing of the cause, continued for the lives of the Plaintiffs. That case therefore, however it may be explained as one of the exceptional cases, is nevertheless a clear authority shewing that this Court has granted an injunction prohibiting the commission of an act in respect of which the Court could never have interfered by way of specific performance.

The next case referred to was that of Barrett v. Blagrave (5 Ves. 555), which came first before Lord Loughborough, and afterwards before Lord Eldon (6 Ves. 104). There, a lease had originally been granted by the Plaintiffs, the proprietors of Vauxhall Gardens, of an adjoining house, under an express covenant that the lessee would not carryon the trade of a victualler or retailer of wines, or generally any employment that would be to the damage of the proprietors of Vauxhall Gardens ; an underlease having been made to the Defendants, who were violating the covenant by the sale of liquors, the proprietors of Vauxhall Gardens filed a bill for an injunction, which was granted by Lord Loughborough. It has been observed in the argument here, that in granting the injunction Lord Loughborough said :—" It is in the nature of specific performance," and that, therefore, that case also falls under one of the exceptional cases. When that case came before Lord Eldon, he dissolved the injunction, but upon a different ground, namely, on that of acquiescence for many years, and in a sense he treated it as a case of specific performance. As far as the words go, the observations of those two eminent Judges would seem to justify the argument which has been addressed to me; in effect, however, it was only specific performance, because a prohibition, pre-[616]-venting the commission of an act may as effectually perform an agreement as an order for the performance of the act agreed to be done. The agreement in that case being, that the house should not be opened for the purposes of entertainment to the detriment of Vauxhall Gardens, the Court granted the injunction; that was the performance of the agreement in substance, and the term “ specific performance" is aptly applied in such a case, but not in the sense in which it has been used before me.

It was also contended that the Plaintiff's remedy, if any, was at law; but it is no objection to the exercise of the jurisdiction by injunction that the Plaintiff may have a legal remedy. The case of Robinson v. Lord Byron (I Bro. C. C. 588), before Lord Thurlow, so very often commented upon by succeeding Judges, is a clear illustration of that proposition, because in that case the Defendant, Lord Byron, who had large pieces of water in his park which supplied the Plaintiff's mills, was abusing his right by preventing a regular supply to the Plaintiff's mill, and, although the Plaintiff had a remedy at law, yet this Court felt no difficulty in restraining Lord Byron by injunction from preventing the regular flow of the water. Undoubtedly, there are cases such as that cited for the Defendants, of Collins v. Plumb (16 Ves. 454), before Lord Eldon, in which this Court has declined to exercise the power (which in that instance it was assumed to have had) of preventing the commission of an Act, because such power could not be properly and beneficially exercised. In that case the negative covenant, not to sell water to the prejudice of the Plaintiffs, was not enforced by Lord Eldon, not because he had any doubt about the jurisdiction of the Court (for upon that point he had no doubt), but because it was impossible to ascertain every time the water was supplied by the Defendants whether it was or not [617] to the damage of the Plaintiffs; but whether right or wrong, that learned Judge, in refusing to exercise the jurisdiction on very sufficient grounds, meant in no respect to break in on the general rules deducible from the previous authorities.

At an early stage of the argument I adverted to the familiar cases of attorneys' clerks, and surgeons' and apothecaries' apprentices, and the like, in which this Court has constantly interfered, simply to prevent the violation of negative covenants; but it was said that in such cases the Court only acted on the principle that the clerk or apprentice had received all the benefit, and that the prohibition operated upon a concluded contract, and that, therefore, the injunction fell within one of the exceptional cases. I do not, however, apprehend that the jurisdiction of the Court depends upon any such principle : it is obvious that in those cases the negative covenant does not come into operation until the servitude is ended, and, therefore, that the injunction cannot be required or applied for before that period.

The familiar case of a tenant covenanting not to do a particular act was also put during the argument; but it was said that in such a case the jurisdiction springs out of the relation of landlord and tenant, and that the tenant having received the benefit of an executed lease, the injunction operates only so as to give effect to the whole contract; that, however, cannot be the principle on which this Court interferes, for, beyond all doubt, where a lease is executed containing affirmative and negative covenants, this Court will not attempt to enforce the execution of the affirmative covenants either on the part of the landlord or the tenant, but will leave it entirely to a Court of law to measure the damages ; though with respect to the negative covenants, if the tenant, for example, has sti-[618]-pulated not to cut or lop timber, or any other given act of forbearance, the Court does not ask how many of the affirmative covenants on either side remain to be performed under the lease, but acts. at once by giving effect to the negative covenant, specifically executing it by prohibiting the commission of acts which have been stipulated not to be done. So far, then, each of the cases to which I have referred appears to me to be in direct contravention of the rules which have been so elaborately pressed upon me by the Defendants' counsel.

The present is a mixed case, consisting not of two correlative acts to be done—one by the Plaintiff, and the other by the Defendants, which state of facts may have and in some cases has introduced a very important difference—but of an act to be done by J. Wagner alone, to which is superadded a negative stipulation on her part to abstain from the commission of any act which will break in upon her affirmative covenant ; the one being ancillary to, concurrent and operating together with, the, other. The agreement to sing for the Plaintiff during three months at his theatre, and during that time not to sing for anybody else, is not a correlative contract, it is. in effect one contract; and though beyond all doubt this Court could not interfere. to enforce the specific performance of the whole of this contract, yet in all sound. construction, and according to the true spirit of the agreement, the engagement to perform for three months at one theatre must necessarily exclude the right to perform at the same time at another theatre. It was clearly intended that J. Wagner was to exert her vocal abilities to the utmost to aid the theatre to which she agreed to attach herself. I am of opinion that if she had attempted, even in the absence of any negative stipulation, to perform at another theatre, she would have broken the spirit and [619] true meaning of the contract as much as she would now do with reference to the contract into which she has actually entered.

Wherever this Court has not proper jurisdiction to enforce specific performance, it operates to bind men's consciences, as far as they can be bound, to a true and literal performance of their agreements ; and it will not suffer them to depart from their contracts at their pleasure, leaving the party with whom they have contracted to the mere chance of any damages which a jury may give. The exercise of this: jurisdiction has, I believe, had a wholesome tendency towards the maintenance of that good faith which exists in this country to a much greater degree perhaps than in any other; and although the jurisdiction is not to be extended, yet a Judge would desert his duty who did not act up to what his predecessors have handed down as the rule for his guidance in the administration of such an equity.

It was objected that the operation of the injunction in the present case was mischievous, excluding the Defendant J. Wagner from performing at any other theatre while this Court had no power to compel her to perform at Her Majesty's Theatre .. It is true that I have not the means of compelling her to sing, but she has no cause of complaint if I compel her to abstain from the commission of an act which she has, bound herself not to do, and thus possibly cause her to fulfill her engagement. The jurisdiction which I now exercise is wholly within the power of the Court, and being of opinion that it is a proper case for interfering, I shall leave nothing unsatisfied by the judgment I pronounce. The effect, too, of the injunction in restraining J. Wagner from singing elsewhere may, in the event of an action being brought against. her by the Plaintiff, prevent any such amount of vindictive damages being given against her as a jury might probably be [620] inclined to give if she had carried her talents and exercised them at the rival theatre: the injunction may also; as I have. said, tend to the fulfillment of her engagement; though, in continuing the injunction, I disclaim doing indirectly what I cannot do directly.

Referring again to the authorities, I am well aware that they have not been uniform, and that there undoubtedly has been a difference of decision on the question now revived before me; but, after the best consideration which I have been enabled to give to the subject, the conclusion at which I have arrived is, I conceive, supported by the greatest weight of authority. The earliest case most directly bearing on the point is that Morris v. Colman (18 Ves. 437): there Mr. Colman was a part proprietor with Mr. Morris of the Haymarket Theatre, and they were partners in that concern, and by the deed of partnership Mr. Colman agreed that he would not exercise his dramatic abilities for any other theatre than the Haymarket; he did not, however, covenant that he would write for the Haymarket, but it was merely a negative Covenant that he would not write for any other theatre than the Haymarket. Lord Eldon granted an injunction against Mr. Colman writing for any other theatre than the Haymarket; and the ground on which Lord Eldon assumed that jurisdiction was the subject of some discussion at the Bar. It was truly said for the Defendants that that was a case of partnership; and it was said, moreover, that Lord Cottenham was mistaken in the case of Dickersen v. Cabburn (2 Phil. 52), when he said that Lord Eldon had not decided Morris v. Colman on the ground of there being a partnership. I agree that the observations which fell from Lord Eldon in the subsequent case of Clarke v. Price (2 Wils. 157) shew that he did mainly decide it on the ground of partnership; [621] but he did not decide it exclusively on that ground. In the argument of Morris v. Colman (18 Ves. 437) Sir Samuel Romily suggested a case almost identical with the present: he contended that the clause restraining Mr. Colman from writing for any other theatre was no more against public policy than a stipulation that Mr. Garrick should not perform at any other theatre than that at which he was engaged would have been. Lord Eldon, adverting in his judgment to the case put at the Bar, said—" If Mr. Garrick was now living would it be unreasonable that he should contract with Mr. Colman to perform only at the Haymarket Theatre, and Mr. Colman with him to write for the theatre alone? Why should they not thus engage for the talents of each other ? " He gives the clearest enunciation of his opinion that that would be an agreement which this Court would enforce by way of injunction.

The late Vice-Chancellor Shadwell, of whom I always wish to be understood to speak with the greatest respect, decided in a different way in the cases of Kemble v. Kean (6 Sim. 333) and Kimberley v. Jennings (6 Sim. 340), on which I shall presently make a few observations. In the former case he observed that Lord Eldon must be understood, in the case of Morris v. Colman (18 Ves. 437), to have spoken according to the subject-matter before him, and must there be considered to be addressing himself to a case in which Colman and Garrick would both have bad a partnership interest in the theatre. I must however, entirely dissent from that interpretation. Lord Eldon's words are perfectly plain, they want no comment upon them, they speak for themselves. He was alluding to a case in which Garrick, as a performer, would have had nothing to do with the theatre beyond the implied engagement that he would not perform anywhere else; and I have [622] come to a very clear conclusion that Lord Eldon would have granted the injunction in that case although there had been no partnership.

The authority of Clarke v. Price (2 Wils. 157) was much pressed upon me by the learned counsel for the Defendants; but that is a case which does not properly belong to their argument, because there there was no negative stipulation, and I quite admit that this Court cannot enforce the performance of such an affirmative stipulation as is to be found in that case; there the Defendant having agreed to take notes of cases in the Court of Exchequer, and compose reports for the Plaintiff, and having failed to do so, the Plaintiff, Mr. Clarke, filed a bill for an injunction, and Lord Eldon, when refusing the injunction, in effect, said, I cannot compel Mr. Price to sit in the Court of Exchequer and take notes and compose reports; and the whole of his judgment shews that he proceeded (and so it has been considered in later cases) on the ground that there was no covenant, on the part of the Defendant, that he would not compose reports for any other person. The expressions in the judgment are :—" I cannot, as in the other case" (referring to Morris v. Colman (18 Ves. 437)), " say that I will induce him to write for the Plaintiff by preventing him from writing for any other person;" and then come these important words" for that is not the nature of the agreement." Lord Eldon, therefore, was of opinion, upon the construction of that agreement, that it would be against its meaning to affix to it a negative quality and import a covenant into it by implication, and he, therefore, very properly, as I conceive, refused that injunction; that case, therefore, in no respect touches the question now before me, and I may at once declare that if I had only to deal with the affirmative covenant of the Defendant J. Wagner that she would perform at Her Majesty's Theatre, I should not have granted any injunction.

[623] Thus far, I think, the authorities are very strong against the Defendants' contention ; but the case of Kemble v. Kean (6 Sim. 333), to which I have already alluded, is the first case which has in point of fact introduced all the difficulties on this part of the law. There Mr. Kean entered into an agreement precisely similar to the present: he agreed that he would perform for Mr. Kemble at Drury Lane, and that he would not perform anywhere else during the time that he had stipulated to perform for Mr. Kemble. Mr. Kean broke his engagement, a bill was filed, and the Vice-Chancellor Shadwell was of opinion that he could not grant an injunction to restrain Mr. Kean from performing elsewhere, which he was either about to do or actually doing, because the Court could not enforce the performance of the affirmative covenant that he would perform at Drury Lane for Mr. Kemble. Being pressed by that passage which I have read from in the Lord Chancellor's judgment in Morris v. Colman (18 Ves. 437), he put that paraphrase or commentary upon it which I have referred to :  that is, he says: "Lord Eldon is speaking of a case where the parties are in partnership together." I have come to a different conclusion : and I am bound to say that, in my apprehension, the case of Kemble v. Kean was wrongly decided and cannot be maintained.

The same learned Judge followed up his decision in that case in the subsequent one of Kimberly v. Jennings (6 Sim. 340) ; that was a case of hiring and service, and the Vice-Chancellor there virtually admitted that a negative covenant might be enforced in this Court, and quoted an instance to that effect within his own knowledge. He said: "I remember a case in which a nephew wished to go on the stage, and his uncle gave him a large sum of money in consideration of his covenanting not to [624] perform within a particular district ; the Court would execute such a covenant, on the ground that a valuable consideration had been given for it." He admits, therefore, the jurisdiction of the Court, if nothing but that covenant remained to be executed. The learned Judge, however, adds, "but here the negative covenant does not stand by itself: it is coupled with the agreement for service for a certain number of years, and then for taking the Defendant into partnership: . . . this agreement cannot be performed in the whole, and, therefore, this Court cannot perform any part of it." Whatever may have been the mutual obligations in that case, which prevented the Court from giving effect to the negative covenant, I am not embarrassed with any such difficulties here, because, as I have already shewn, both the covenants are on the part of the Defendants.

The case of Hooper v. Brodrick (11 Sim. 47) was cited, as an instance in which the Court had refused an injunction under circumstances like the present; but, in that case, the lessee of an inn had covenanted to use and keep it open as an inn during a certain time, and not to do any act whereby the licence might become forfeited. In point of fact, the application was that he might be compelled to keep it open, and the Vice-Chancellor makes this observation: "The Court ought not to have restrained the Defendant from discontinuing to use and keep open the demised premises as an inn, which is the same in effect as ordering him to carryon the business of an innkeeper; but it might have restrained him from doing, or causing or permitting to be done, any act which would have put it out of his power, or the power of any other person, to carryon that business on the premises. It is not, however, shewn that the Defendant has threatened, or intends to do, or to cause or permit to be done, any act whereby the [625] licences may become forfeited or be refused; and, therefore, the injunction must be dissolved." That, therefore, is an authority directly against the Defendants, because it shews that if there had been an intention to break the negative covenant, this Court would have granted the injunction.

The case of Smith v. Fromont (2 Swanst. 330) was also relied upon by the Defendants, as an instance where the injunction had been refused, but there there was no negative covenant; it was an attempt to restrain, by injunction, a man from supplying horses to a coach for a part of a road, when the party who was applying for the injunction was himself incapable of performing his obligation to horse his part of the road. Lord Eldon, in refusing the injunction and deprecating the interference of the Court in such cases, there said: "The only instance I recollect of an application to this Court to restrain the driving of coaches occurred in the case of a person who, having sold the business of a coach proprietor from Reading to London, and undertaking to drive no coach on that road, afterwards established one. 'With some doubt, whether I was not degrading the dignity of this Court by interfering, I saw my way in that case; because one party had there covenanted absolutely against interfering with the business which he had sold to the other." That again is a direct authority, therefore, against the Defendants, as Lord Eldon expressly says he had interfered in the case of a negative covenant, although he could not interfere on that, occasion because there was no such covenant.

Some observations have been made upon a decision of my own in Ireland, in the, case of Gevais v. Edwarcls (2 Dru. & War. 80); [626] that decision I believe to be, right, but it is quoted to shew that I was of opinion that this Court cannot interfere to enforce specific performance, unless it can execute the whole of an agreement. I abide by the opinion I there expressed, and I mean to do nothing in this case which shall in any manner interfere with that opinion. That was properly a case for specific performance, but from the nature of the contract itself there was a portion of it which could not be executed. I said, in effect: I cannot execute this contract which is intended to be binding on both parties; I cannot execute a portion of this contract for one, and leave the other portion of the contract unexecuted for the other; and, therefore, as I cannot execute the whole of the contract, I am bound to execute no part of it: that, however, has no bearing on the present case, for here I leave nothing unperformed which the Court can ever be called upon to perform.

In Hills v. Croll (2 Phil. 60), Lord Lyndhurst refused to enforce an injunction to restrain the violation of a negative covenant. It was a case in which A. had given to B. a sum of money, and B. covenanted that he would buy all the acids he wanted from the manufactory of A., who covenanted that he would supply the acids, and B. also covenanted that he would buy his acids from no other person. Lord Lyndhurst refused to prohibit B. from obtaining acids from any other quarter, both because the covenants were correlative, and because he could not compel A. to supply B. with acids; and if, therefore, he had restrained B. from taking acids from any other quarter, he might have ruined him in the event of A. breaking his affirmative covenant to supply the acids. That case has never been rightly understood. [627] It is supposed that Lord Lyndhurst's decision was based upon a. wrong principle; that he followed the authority of Gervais v. Edwards and such cases, and that he improperly applied the' rule which was in that class of cases properly applied, but under the circumstances of the case before him, I think the rule was not improperly applied.(2)

[628] The next case which has been so much observed upon was that before Lord Cottenham, of Dietrichsen v. Gabburn (2 Phil. 52). That was a very simple case, and the [629] question upon what principle it was decided formed the subject of discussion before me. A man, in order to obtain a great circulation of his patent medicine, entered [630] into a contract with a vendor of such articles, giving him a general agency for the sale of the medicine, with 40 per cent discount, and stipulating that he would not supply anybody else at a larger discount than 25 per cent. ; he violated his contract, and was proceeding to employ other agents with a larger discount than 25 per cent ; an injunction was applied for and was granted: it was. said that it was properly granted, because it was a case of partnership. This, however, was not the fact; it was not a case of partnership, but was strictly one of principal and agent; and it was only because there was the negative covenant that the Court gave effect to it. It is impossible to read Lord Cottenham's judgment, without being satisfied that he did not consider it to be a part-[631]-nership, though he said it was in the nature of a partnership; and in a popular sense it might. be so called, because the parties were there both dealing with respect to the same subject, from which each was to have a benefit, but in no legal sense was it a partnership.

Up to the period when Dietrichsen v. Cabburn (2 Phil. 52) was decided, I apprehend that there could have been no doubt on the law as applicable to this case, except for the authority of Vice-Chancellor Shadwell; but with great submission it appears to me that the whole of that learned Judge's authority is removed by himself by his decision in the later case of Rolfe v. Rolfe (15 Sim. 88). In that case A. B. and C. were partners as tailors. A. and B. went out of the trade on consideration of receiving £1000 each, and C. was to continue the business on his own account. A. entered into a covenant that he would not carryon the trade of a tailor which he had just sold, within certain limits, and C. entered into a covenant that he would employ A . as cutter at a certain allowance. The bill was filed simply for an injunction to prevent A. from setting up as a tailor within the prescribed limits, and the Vice-Chancellor granted that injunction. It was objected that this Court could not grant the injunction when there was something remaining to be performed, for that A. had a right to be employed as a cutter, which right this Court would not even attempt to deal with or enforce as against C. That case, therefore, was open to a difficulty which does not occur here; in fact, the same difficulty which might have arisen in Hills v. Croll (2 Phil. 60) before Lord Lyndhurst. But the Vice-Chancellor held that to be no difficulty at all; observing that the bill simply asked for an injunction which he would grant; although he could not give effect to the [632] affirmative covenant to do the act in respect of which no specific performance was asked: his own decisions in Kemble v Kean (6 Sim. 333), and in Kimberley v. Jennings (6 Sim. 340), were pressed upon him; but he observed "that the bills in the cases cited asked for specific performance of the agreement, and that the injunctions were sought as only ancillary to that relief ; but the bill in the present case asked merely for an injunction." He no longer put it on the inability of the Court to enforce a negative covenant, but he put it on the form of the pleadings. Whether that form was sufficient to justify his opinion is a question with which I need not deal; but I am very clearly of opinion that the case of Rolfe v. Rolfe (15 Sim. 88) does remove the whole weight of that learned Judge's authority on this subject.

It was said in argument that the injunction prayed in Rolfe v. Rolfe (15 Sim. 88) was merely ancillary to the relief; but it will be seen that that was not so, and that the prayer extended only to the injunction, and had nothing to do with relief in the shape of specific performance; and the learned Judge himself stated that, if it had gone to that extent, he, following his former decisions, would not have granted the injunction.

From a careful examination of all these authorities I am of opinion that the principles and rules deducible from them are in direct contravention of those principles and rules which were so elaborately pressed upon me during the argument; and I wish it to be distinctly understood that I entertain no doubt whatever that the point of law has been properly decided in the Court below. It was, nevertheless, and with some reason, said that although the point of law should be decided in the [633] Plaintiff's favour, still he might be excluded from having the benefit of it on the merits of the case.

His Lordship here entered into a minute examination of the statements in the answers and affidavits as to the unauthorized addition of the restrictive clause, and as to the non-fulfillment by the Plaintiff of his portion of the agreement. In reference to those points he observed that, whether the clause was originally added with or without authority, the evidence shewed a clear acquiescence on the part of the Defendants to its remaining in the agreement ; that the operation of the agreement had been in the first instance postponed to suit the convenience of the Defendants; and that as to the payment of the £300, although the Plaintiff could not have come into a Court of Equity to enforce the contract without having tendered the amount stipulated to be paid, yet it was distinctly proved that it had in fact been paid to the common agent of both parties for the purpose of being handed to the Defendants. His Lordship concluded by saying that, looking at the merits and circumstances of the case, as well as at the point of law raised, he must refuse this motion, with costs. In the course of the argument, and in order to prove the Plaintiff's readiness to perform his part of the contract, an affidavit made by Dr. Bacher was read, which was to the effect that he had written and sent a letter to the Defendant J. Wagner, informing her of his having received from the Plaintiff the £300, and offering to pay that sum according to her instructions. A letter of the same date as that referred to in the affidavit was admitted to have been received by the Defendant J. Wag-[634]ner, but it was positively denied that it contained any such offer. The letter itself was not forthcoming, and its non-production was not accounted for. No copy was kept by Dr. Bacher.

THE LORD CHANCELLOR observed that, when the affidavit, as to the contents of the letter, was made, Dr. Bacher could not have known that the letter would not be produced; that the affidavit, therefore, if untrue, was at the imminent peril of exposure by the production of the letter; and that under such circumstances the representation in the affidavit must be taken to be true.

NOTES

[1] The case was heard by the Lord Chancellor on a representation that it was intended to confine the argument to the legal :question alone, which, it was said, involved an important point of equity jurisdiction, on which the authorities were conflicting.

[2] The following, containing all the material portions of Lord Lyndhurst's judgment in Hills y. Croll, is taken from the shorthand writer's notes, and has been kindly furnished to the reporters by one of the counsel who was engaged in that cause, and by whom a very full report of the case will be found published in "Reports of Cases in the Law of Real Property and Conveyancing," Vol. i. p. 541 :—

" THE LORD CHANCELLOR. In this case of Hills v. Croll, Croll had obtained two patents for the purpose of purifying gas, and the result of the purification of gas was the manufacture of muriate of ammonia and sulphate of ammonia. He entered into a contract with Hills, who is the Plaintiff in this suit, and the contract was to this effect: Mr. Croll was to purchase all the acids that he was to use in his process, under his patent, from Mr. Hills: Mr. Hills, on his side, was to have the right of purchasing all the ammonia that should be produced as the result of those processes, at certain prices as to the one and as to the other. In addition to this, there was a. stipulation that, in all the licences that were granted for using those patents, the parties to whom those licences were to be granted should be bound to purchase all the acids which were used in the processes from Mr. Hills, and that Mr. Hills should have the same option that he had in the case of Croll, of purchasing from them all the ammonia that should be produced in the course of the processes. It was also stipulated that Mr. Hills should have the option to supply either muriatic acid or sulphuric acid, as he should think proper, regulating his option by the market prices of the muriate of ammonia and the sulphate of ammonia. I think this is the substance of the original agreement between these parties. The agreement was entered into in the month of March 1841. It was found, on the part of Mr. Croll, that the mode of payment and other arrangements, with respect to this agreement, were inconvenient, in consequence of which a correspondence takes place between him and Mr. Hills, in the month of September 1842, and the agreement was modified according to the terms of a letter, dated, I think, in September, written by him. One of the stipulations in the original agreement was, that Mr. Hills should be a signing party in all the licences that were granted by Mr. Croll for the use of the patent. The first stipulation, in the letter of September, was that he should not be required to be a signing party; but it provided that there should be a covenant in all those agreements, a covenant to the effect stated in the original agreement, namely, that the parties to whom the licences were granted should purchase their acids from Hills, and give Hills the right to purchase the ammonia. Regulations were also made altering the terms on which the acids were to be purchased and the ammonia to be sold. There were some other subordinate stipulations to which it is not necessary at present to advert. The letter, however, concluded with a stipulation to this effect, that if Mr. Croll was in any particular to depart from the agreement so modified, the original agreement was to be enforced, I think those two documents, the original agreement and the letter, formed the substance of the contract between the parties as it existed after September 1842.

"Some doubt was expressed as to whether or not the contract so modified has been acted upon in that shape. It appears beyond all doubt that it was so acted upon, because the accounts were, from time to time, rendered on the 'footing of the Modified agreement, and it is also clear from the letter of Mr. Hills of the 8th of December, in which he refers expressly to the prices that were regulated by the letter of September 1842."

His Lordship here referred to another question raised in the course of the discussion, namely, whether the second or modified agreement had been put an end to by the operation of the clause providing for the enforcement of the first or original agreement; and, after remarking that it was unnecessary for him, for the purpose of the present question, to come to any conclusive decision on that point, proceeded as follows :—

"Those are the facts of the case for the purpose of raising the narrow question, as it appears to me, which the Court has to decide. The bill was filed for the purpose of calling on' the Court to declare that that agreement should be specifically performed.

"Now, there is no principle of the Court which I understand to be more dearly established than this, that the Court will not decree an agreement to be specifically performed, unless it can execute the whole of the agreement. The question, therefore, in this case will be whether the Court has power, from the nature of this agreement, to execute the whole of it, every part of it. Part of the prayer which is consequent upon a specific performance is, that' the Defendant should be restrained from purchasing acids from anybody but Mr. Hills, and also, that he should be restrained from granting licences, except according to the agreement that was in force between the parties.

"Now, then, with respect to the first of these points, there is a stipulation on the part of Hills that he will supply the acids; there is a stipulation on the part of Mr. Croll that he will purchase acids from Hills, and from no other person. Has the Court any power whatever to compel Mr. Hills to comply with that? Can the Court order Mr. Hills to continue the manufacture of acids for the purpose of supplying Mr. Croll? Can the Court call upon him, if he should not manufacture acids, and require him to purchase acids for the purpose of supplying Mr. Cron ? It is clear, I apprehend, that the Court has no such power. There are cases in which the Court, will do indirectly what it cannot do directly. A case commonly cited for that purpose is the case of a nuisance. The Court would not compel a party who had erected a wall to the nuisance of another–would not compel the party by any direct order to pull down that wall; but the Court can make an order requiring him not to continue the nuisance, which would have the effect of compelling him to pull down the wall. In the case of Morris v. Colman, the Court restrained Mr. Colman from writing for any other theatre, inferring from that that the order would compel Mr. Colman, or have the tendency to compel Mr. Colman, to write for the Haymarket Theatre; but in this case the Court has no power to compel Mr. Hills to supply acids by ordering him not to supply acids to any other person; that is not the agreement, nor was it ever intended that it should be the agreement. Therefore, unless the Court can compel him, by a direct order, to supply Mr. Croll, from time to time, with the acids that Mr. Croll requires, it is quite clear that this Court cannot execute all the parts of this contract; the Court cannot, therefore, compel the party specifically to perform the contract.

"It was thrown out, in the course of the argument, that this Court might compel one party to perform his part of the contract, and leave the other party to his remedy at law. No such principle has ever been acted on in this Court; it has been so laid down over and over again, and in a recent case that was cited at the Bar (Gervais v. Edwards, 2 Dru. & War. 80), Sir Edward Sugden held that, unless this Court can execute every part of the contract, this Court will not compel a specific performance, of a part. When 'this cause, therefore, comes to a hearing, I am of opinion that, according to the facts as they at present stand, and according to the statement of the principle I have mentioned, this Court cannot restrain Mr. Croll from purchasing acids elsewhere, because it cannot compel Mr. Hills, on his side, to furnish all the acids that may be necessary for the manufacture carried on by Mr. Croll. If the Court cannot do this, it cannot restrain the parties at the hearing. It is quite clear that, upon this interlocutory application, the Court cannot restrain Mr. Croll from purchasing acids elsewhere. I apprehend, therefore, that the decision of the Vice-Chancellor, which proceeded on the principle I have stated, and rightly, on the grounds I have stated, and which I believe is the principle of this Court, and the principle on which the Vice-Chancellor acted as to that part of the case, is correct ; and equally applies, as it appears to me it does, to that part of the notice of motion with respect to the licences, because that forms a part of the contract, the generaI contract. If the Court cannot execute the whole of the contract, it cannot execute the contract in part; therefore I am of opinion that, in this case, the motion must be refused, and refused with costs."

2 E & B 216

Lumley
v
Gye

QUEEN'S BENCH
1st January 1853

Cases Argued and Determined in the Queen's Bench, in Trinity Term, XVI. Victoria.

The Judges who usually sat in Banc in this Term were:

Lord Campbell C. J.
Coleridge J.
Erle J.
Crompton J.

Lumley against Gye. 1853. 1st and 2d counts of declaration, by lessee of a theatre: for maliciously procuring W. (who had agreed with plaintiff to perform and sing at his theatre and no where else for a certain term) to break her contract and not to perform or sing at plaintiff's theatre, and to continue away during the term for which W. was engaged. 3d count, averring that W. had engaged with plaintiff to be, and had become and was, plaintiff's dramatic artiste for a certain term, and complaining that plaintiff maliciously procured her to depart out of her said employment during the term. On demurrer: — Held, by Wightman, Erle and Crompton Js., that the counts were all good, and that an action lies for maliciously procuring a breach of contract to give exclusive personal services for a time certain, equally whether the employment has commenced or is only in fieri, provided the procurement be during the subsistence of the contract, and produces damage: and that, to sustain such an action, it is not necessary that the employer and employed should stand in the strict relation of master and servant. Semble, by the same Judges, that the action would lie for the malicious procurement of the breach of any contract, though not for personal services, if by the procurement damage was intended to result and did result to the plaintiff. — Coleridge J. dissentiente, and holding that the action for procuring a third person to depart from his engagement is founded on the Statute of Labourers, and is strictly confined to cases where the employer and employed stand in such relation of master and servant as was within that statute; and that, in all other eases, the remedy for a breach of contract is only on the contract, and against those privy to it. And that, as a dramatic performer is not a servant, therefore the counts were all bad. — The defendant had, under stat. 15 & 16 Vict. c. 76, s. 80, obtained leave to plead and demur also. On an application to postpone the trial of the issues in fact till the issue in law had been finally disposed of in a Court of Error: —Held: that the Court had no power to make such an order; inasmuch as the judgment on the demurrer had disposed of the issue in law, finally as far as regarded this Court.

[S. C. 22 L J. Q. B. 463; 17 Jur. 827; 1 W. R. 432. Dictum approved,
Cattle v. Stockton Waterworks, 1875, L. E. 10 Q. B. 457. Applied,
Bowen v. Hall, 1881, 6 Q. B. D. 39;
Mogul Steamship Company v. M'Gregor, 1889-91, 23 Q. B. D. 608; [1892] A. C. 25;
De Francesco v. Barnum, 1890, 63 L. T. 515. Followed,
Temperton v. Russell, [1893] 1 Q. B. 727. Commented on,
Allen v. Flood, [1898] A. C. 1. Referred to,
Lyons v. Wilkins, [1899] 1 Ch. 272. Approved,
Quinn v. Leathem, [1901] A. C. 510. Applied,
Bead v. Friendly Society of Operative Stonemasons, [1902] 2 K. B. 97, 737. Discussed,
Glamorgan Coal Company v. South Wales Miners' Federation, [1903] 1 K. B. 131; [1903] 2 K. B. 576; [1905] A. C. 253;
National Phonograph Company, Limited v. Edison-Bell Consolidated Phonograph Company, Limited, [1908] 1 Ch. 348, 359;
Conway v. Wade, [1908] 2 K. B. 849; [1909] A. C. 510.]

The 1st count of the declaration stated that plaintiff was lessee and manager of the Queen's Theatre, for [217] performing operas for gain to him; and that he had contracted and agreed with Johanna Wagner to perform in the theatre for a certain time, with a condition, amongst others, that she should not sing nor use her talents elsewhere during the term without plaintiff's consent in writing: Yet defendant, knowing the premises, and maliciously intending to injure plaintiff as lessee and manager of the theatre, whilst the agreement with Wagner was in force, and before the expiration of the term, enticed and procured Wagner to refuse to perform: by means of which enticement and procurement of defendant, Wagner wrongfully refused to perform, and did not perform during the term.

Count 2, for enticing and procuring Johanna Wagner to continue to refuse to perform during the term, after the order of Vice Chancellor Parker, affirmed by Lord St. Leonards ^[1], restraining her from performing at a theatre of defendants.

Count 3. That Johanna Wagner bad been and was hired by plaintiff to sing and perform at his theatre for a certain time, as the dramatic artiste of plaintiff, for reward to her, and had become and was such dramatic artiste of plaintiff at his theatre: Yet defendant, well knowing &c., maliciously enticed and procured her, then being such dramatic artiste, to depart from the said employment.

In each count special damage was alleged.

[218] Demurrer. Joinder.

The demurrer was argued in the sittings after Hilary Term last ^[2].

Willes, for the defendant. The counts disclose a breach of contract on the part of Wagner, for which the plaintiff's remedy is by an action on the contract against her. The relation of master and servant is peculiar; and, though it originates in a contract between the employer and the employed, it gives rise to rights and liabilities, on the part of the master, different from those which would result from any other contract. Thus the master is liable for the negligence of his servant, whilst an ordinary contractor is not liable for that of the person with whom he contracts. And a master may lawfully defend his servant when a contractor may not defend his contractee. And so a master may bring an action for enticing away his servant. But these are anomalies, having their origin in times when slavery existed: they are intelligible on the supposition that the servant is the property of his master: and, though they have been continued long after all but free service has ceased, they are still confined to cases where the relation of master and servant in the strict sense, exists. In the present case Wagner is a dramatic artiste, not a servant in any sense. (It is unnecessary to report the argument for the defendant further in detail, as the points made in it, and the authorities relied upon, are fully stated in the judgments of Crompton J. and Wightman J. )

Cowlng, contrà. The general principle is laid down [219] in Comyns's Digest, Action upon the Case (A). "In all cases, where a man has a temporal loss, or damage by the wrong of another, he may have an action upon the case, to be repaired in damages. " In Comyns's Digest, Action upon the Case for Misfeasance (A 6), an instance is given; " If he threaten the tenants of another, whereby they depart from their tenures, " citing 1 Rol. Abr. 108, Action sur Case (N) pl. 21. An action lies for procuring plaintiffs wife to remain absent; Winsmore v. Greenbank (Willes, 577). An action lay for ravishment of ward; and, if " a man procureth a ward to go from his guardian, this is a ravishment in law; " 2 Inst. 440. Now, as neither the tenants, the wife nor the ward are servants, it cannot be said that the action for procurement is an anomaly confined to the case of master and servant. "Every master has by his contract purchased for a valuable consideration the services of his domestics for a limited time.: the inveigling or hiring his servant, which induces a breach of this contract, is therefore an injury to the master; and for that injury the law has given a remedy by a special action on the case: and he may also have an action against the servant for the nonperformance of his agreement. " 3 Bl. Com. 142, Blackstone thus treats the action by a master as an example of a general rule that "inducing a breach of contract" is an injury for which an action lies. And surely any one, not a lawyer, would agree that the malicious and intentional procurement of a breach of contract was a wrong, and that the breach of contract intended to be procured was the direct consequence of that wrongful procurement. Green v. Button (2 C. M. & R. 707) is apparently an authority for that larger proposition; and [220] so is Sheperd v. Wake man (1 Sid. 79). It is not accurate to say that the remedy for breach of contract is confined to those privy to the contract; Levy v. Langridge ^[3]. In that ease the son recovered though the warranty was to the father. It is true that the damage to the plaintiff must be the natural and immediate consequence of the wrong of the defendant, and that it is not often that the unjustifiable act of an independent party is the natural consequence of that wrong; but, when, as on this demurrer must be taken to be the fact, the defendant uses the contracting party as his tool to break the contract to the damage of the plaintiff, why should he not be answerable for the damage he thus intentionally produces? The procurement may in some cases be privileged, just as a libel or slander may be: but here it is malicious. It is, however, unnecessary to go so far in this case, as the contract is for exclusive personal services, and the authorities are clear that in such cases the action lies. (The arguments for the plaintiff on this part of the ease, and the authorities cited, are so fully stated in the judgments that it is unnecessary to repeat them here. )

"Willes, in reply. The averment of malice can make no difference. If the action does not lie without malice, it does not lie with it; and malice is never averred in actions for seducing servants. The passage cited from Comyns's Digest, Action upon the Case (A), does not throw much light on the matter. It is not disputed that damage resulting from a wrong gives a cause of [221] action; but the defendant's point is that the act complained of is not a wrong within the technical meaning of the word: and this is an instance of the rule, ex damno sine injuriâ non oritur actio. The instances cited, as supporting the general proposition, all range themselves under some well known, class of wrongs. The reference in Comyns's Digest, Action upon the Case for Misfeasance (A 6), is to 1 Roll. Ab. 108. Action sur Case, (N) pl. 21; where it appears that the menaces were to " tenants at will, of life and limb. " The tenants therefore were not bound to remain; and the threats of life and limb must have been an interference with the plaintiffs property. Ravishment of ward also proceeds on the ground that the guardian had a property in his ward. Winsmore v. Greenbank (Willes, 577) extends the law as to enticing servants to enticing a wife; but the principle is the same. The common law considers the wife the property and servant of the husband. In Sheperd v. Wakeman (1 Sid. 79) the action was for asserting that the plaintiff was already married, per quod she lost her marriage: but to assert that a woman is about to commit bigamy is actionable per se. Levy v. Langridge (4 M. & W. 337) was decided on the ground that there was what was equivalent to a fraudulent representation to the plaintiff as to an article which he was to use. The act complained of in Green v. Button, (2 C. M. & R. 707) was also a wrong in itself. The injury done was analogous to slander of title. (The argument in reply, as to the effect of the contract being for exclusive service, is sufficiently shewn by the judgments. )

Cur. adv. vult.

[222] In this term (June 3) the learned Judges, being divided in opinion, delivered their judgments seriatim.

Crompton J. The declaration in this case consisted of three counts. The two first stated a contract between the plaintiff, the proprietor of the Queen's Theatre, and Miss Wagner, for the performance by her for a period of three months at the plaintiff's theatre; and it then stated that the defendant, knowing the premises and with a malicious intention, whilst the agreement was in full force, and before the expiration of the period for which Miss Wagner was engaged, wrongfully and maliciously enticed and procured Miss Wagner to refuse to sing or perform at the theatre, and to depart from and abandon her contract with the plaintiff and all service thereunder, whereby Miss Wagner wrongfully, during the full period of the engagement, refused and made default in performing at the theatre; and special damage arising from the breach of Miss Wagner's engagement was then stated. The third count stated that Miss Wagner had been hired and engaged by the plaintiff, then being the owner of Her Majesty's Theatre, to perform at the said theatre for a certain specified period as the dramatic artiste of the plaintiff for reward to her in that behalf, and had become and was such dramatic artiste for the plaintiff at his said theatre for profit to the plaintiff in that behalf; and that the defendant, well knowing the premises and with a malicious intention, whilst Miss Wagner was such artiste of the plaintiff, wrongfully and maliciously enticed and procured her, so being such artiste of the plaintiff, to depart from and out of the said employment of the plaintiff, whereby [223] she wrongfully departed from and out of the said service and employment of the plaintiff, and remained and continued absent from such service and employment until the expiration of her said hiring and engagement to the plaintiff by effluxion of time; and special damage arising from the breach of Miss Wagner's engagement was then stated. To this declaration the defendant demurred: and the question for our decision is, Whether all or any of the counts are good in substance?

The effect of the two first counts is, that a person, under a binding contract to perform at a theatre, is induced by the malicious act of the defendant to refuse to perform and entirely to abandon her contract; whereby damage arises to the plaintiff, the proprietor of the theatre. The third count differs, in stating expressly that the performer had agreed to perform as the dramatic artiste of the plaintiff, and had become and was the dramatic artiste of the plaintiff for reward to her; and that the defendant maliciously procured her to depart out of the employment of the plaintiff as such dramatic artiste; whereby she did depart out of the employment and service of the plaintiff; whereby damage was suffered by the plaintiff. It was said, in support of the demurrer, that it did not appear in the declaration that the relation of master and servant ever subsisted between the plaintiff and Miss Wagner; that Miss Wagner was not averred, especially in the two first counts, to have entered upon the service of the plaintiff; and that the engagement of a theatrical performer, even if the performer has entered upon the duties, is not of such a nature as to make the performer a servant, within the rule of law which gives an action to the master for the wrongful enticing away of his [224] servant. And it was laid down broadly, as a general proposition of law, that no action will lie for procuring a person to break a contract, although such procuring is with a malicious intention and causes great and immediate injury. And the law as to enticing servants was said to be contrary to the general rule and principle of law, and to be anomalous, and probably to have had its origin from the state of society when serfdom existed, and to be founded upon, or upon the equity of, the Statute of Labourers. It was said that it would be dangerous to hold that an action was maintainable for persuading a third party to break a contract, unless some boundary or limits could be pointed out; and that the remedy for enticing away servants was confined to cases where the relation of master and servant, in a strict sense, subsisted between the parties; and that, in all other cases of contract, the only remedy was against the party breaking the contract.

Whatever may have been the origin or foundation of the law as to enticing of servants, and whether it be, as contended by the plaintiff, an instance and branch of a wider rule, or whether it be, as contended by the defendant, an anomaly and an exception from the general rule of law on such subjects, it must now be considered clear law that a person who wrongfully and maliciously, or, which is the same thing, with notice, interrupts the relation subsisting between master and servant by procuring the servant to depart from the master's service, or by harbouring and keeping him as servant after he has quitted it and during the time stipulated for as the period of service, whereby the master is injured, commits a wrongful act for which he is responsible at law. I think that the rule applies wherever [225] the wrongful interruption operates to prevent the service during the time for which the parties have contracted that the service shall continue: and I think that the relation of master and servant subsists, sufficiently for the purpose of such action, during the time for which there is in existence a binding contract of hiring and service between the parties; and I think that it is a fanciful and technical and unjust distinction to say that the not having actually entered into the service, or that the service not actually continuing, can make any difference. The wrong and injury are surely the same, whether the wrong doer entices away the gardener, who has hired himself for a year, the night before he is to go to his work, or after he has planted the first cabbage on the first morning of his service; and I should be sorry to support a distinction so unjust, and so repugnant to common sense, unless bound to do so by some rule or authority of law plainly shewing that such distinction exists. The proposition of the defendant, that there must be a service actually subsisting, seems to be inconsistent with the authorities that shew these actions to be maintainable for receiving or harbouring servants after they have left the actual service of the master. In Blake v. Lanyon (6 T. R. 221) it was held by the Court of King's Bench, in accordance with the opinion of Gawdy J. in Adams v. Bafeald (1 Leon. 240), and against the opinion of the two other Judges who delivered their opinions in that case, that an action will lie for continuing to employ the servant of another after notice, without having enticed him away, and although the defendant had received the servant innocently. It is [226] there said that " a person who contracts with another to do certain work for him is the servant of that other till the work is finished, and no other person can employ such servant to the prejudice of the first master; the very act of giving him employment is affording him the means of keeping him out of his former service. " This appears to me to shew that we are to look to the time during which the contract of service exists, and not to the question whether an actual service subsists at the time. In Blake v. Lanyon (6 T. R. 221) the party, so far from being in the actual service of the plaintiff, had abandoned that service, and entered into the service of the defendant in which he actually was; but, inasmuch as there was a binding contract of service with the plaintiffs, and the defendant kept the party after notice, he was held liable to an action. Since this decision, actions for wrongfully hiring or harbouring servants after the first actual service had been put an end to have been frequent; see Pilkington v. Scott (15 M. & W. 657), Hartley v. Cummings (5 Com. B. 247). In Sykes v. Dixon (9 A. & E. 693), where the distinction as to the actual service having been put an end to was relied upon for another purpose, it does not seem to have occurred to the bar or the Court that the action would fail on account of there having been no actual service at the time of the second hiring or the harbouring; but the question as to there being, or not being, a binding contract of service in existence at the time seems to have been regarded as the real question.

The objection as to the actual employment not having commenced would not apply in the present ease to the third count, which states that Miss Wagner had become [227] the artiste of the plaintiff, and that the defendant had indueed her to depart from the employment. But it was further said that the engagement, employment or service, in the present case, was not of such a nature as to constitute the relation of master and servant, so as to warrant the application of the usual rule of law giving a remedy in ease of enticing away servants. The nature of the injury and of the damage being the same, and the supposed right of action being in strict analogy to the ordinary ease of master and servant, I see no reason for confining the case to services or engagements under contracts for services of any particular description; and I think that the remedy, in the absence of any legal reason to the contrary, may well apply to all cases where there is an unlawful and malicious enticing away of any person employed to give his personal labour or service for a given time under the direction of a master or employer who is injured by the wrongful act; more especially when the party is bound to give such personal services exclusively to the master or employer; though I by no means say that the service need be exclusive. Two Nisi priùs decisions were cited by the counsel for the defendant in support of this part of the argument. One of these, cases, Ashley v. Harrison (1 Peake's N. P. C. 194. 1 Esp. N. P. C. 48), was an action against the defendant for having published a libel against a performer, whereby she was deterred from appearing on the stage: and Lord Kenyon held the action not maintainable. This decision appears, especially from the report of the case in Espinasse, to have proceeded on the ground that the damage was too remote to be connected with the defendant's act. This [228] was pointed out as the real reason of the decision by Mr. Erskine in the case of Tarleton v. M'Gawley (1 Peake's N. P. C. 207), tried at the same sittings as Ashley v. Harrison (1 Peake's N. P. C. 194. 1 Esp. N. P. C. 48). The other case, Taylor v. Neri (1 Esp. N. P.. C. 386), was an action for an assault on a performer, whereby the plaintiff lost the benefit of his services; and Lord Chief Justice Eyre said that he did not think that the Court had ever gone further than the case of a menial servant; for that, if a daughter had left the service of her father, no action per quod servitium amisit would lie. He afterwards observed that, if such action would lie, every man whose servant, whether domestic or not, was kept away a day from his business could maintain an action; and he said that the record stated that Breda was a servant hired to sing, and in his judgment he was not a servant at all; and he nonsuited the plaintiff. Whatever may be the law as to the class of actions referred to, for assaulting or debauching daughters or servants per quod servitium amisit, and which differ from actions of the present nature for the wrongful enticing or harbouring with notice, as pointed out by Lord Kenyon in Fores v. Wilson (1 Peake's N. P. C. 55), it is clear from Blake v. Lanyon (6 T. R. 221) and other subsequent cases, Sykes v. Dixon (9 A. & E. 693), Pilkington v. Scott (15 M. & W. 657) and Hartley v. Cummings (5 Com. B. 247), that the action for maliciously interfering with persons in the employment of another is not confined to menial servants, as suggested in Taylor v. Neri (1 Esp. N. P. C. 386). In Blake v. Lanyon (6 T. R. 221) a journeyman who was to work by the piece, and who had left his work [229] unfinished, was held to be a servant for the purposes of such an action; and I think that it was most properly laid down by the Court in that ease, that a person who contracts to do certain work for another is the servant of that other (of course with reference to such an action) until the work be finished. It appears to me that Miss Wagner had contracted to do work for the plaintiff within the meaning of this rule; and I think that, where a party has contracted to give his personal services for a certain time to another, the parties are in the relation of employer and employed, or master and servant, within the meaning of this rule. And I see no reason for narrowing such a rule; but I should rather, if necessary, apply such a remedy to a case "new in its instance, but" " not new in the reason and principle of it" ^[4], that is, to a case where the wrong and damage are strictly analogous to the wrong and damage in a well recognised class of cases. In deciding this case on the narrower ground, I wish by no means to be considered as deciding that the larger ground taken by Mr. Cowling is not tenable, or as saying that in no case except that of master and servant is an action maintainable for maliciously inducing another to break a contract to the injury of the person with whom such contract has been made. It does not appear to me to be a sound answer, to say that the act in such cases is the act of the party who breaks the contract; for that reason would apply in the acknowledged case of master and servant. Nor is it an answer, to say that there is a remedy against the contractor, and that the party relies on the contract; for, besides that reason also applying to the case of master and servant, the action on the contract [230] and the action against the malicious wrong-doer may be for a different matter; and the damages occasioned by such malicious injury might be calculated on a very different principle from the amount of the debt which might be the only sum recoverable on the contract. Suppose a trader, with a malicious intent to ruin a rival trader, goes to a banker or other party who owes money to his rival, and begs him not to pay the money which he owes him, and by that means ruins or greatly prejudices the party: I am by no means prepared to say that an action could not be maintained, and that damages, beyond the amount of the debt if the injury were great, or much less than such amount if the injury were less serious, might not be recovered. Where two or more parties were concerned in inflicting such injury, an indictment, or a writ of conspiracy at common law, might perhaps have been maintainable; and, where a writ of conspiracy would lie for an injury inflicted by two, an action on the ease in the nature of conspiracy will generally lie; and in such action on the case the plaintiff is entitled to recover against one defendant without proof of any conspiracy, the malicious injury and not the conspiracy being the gist of the action ^[5]. In this class of cases it must be assumed that it is the malicious act of the defendant, and that malicious act only, which causes the servant or contractor not to perform the work or contract which he would otherwise have done. The servant or contractor may be utterly unable to pay anything like the amount of the damage sustained entirely from the wrongful act of the defendant: and it would seem unjust, and contrary to the general princi-[231]-ples of law, if such wrongdoer were not responsible for the damage caused by his wrongful and malicious act. Several of the cases cited by Mr. Cowling on this part of the case seem well worthy of attention.

Without however deciding any such more general question, I think that we are justified in applying the principle of the action for enticing away servants to a case where the defendant maliciously procures a party, who is under a valid contract to give her exclusive personal services to the plaintiff for a specified period, to refuse to give such services during the period for which she had so contracted, whereby the plaintiff was injured.

I think, therefore, that our judgment should be for the plaintiff.

Erle J. The question raised upon this demurrer is, Whether an action will lie by the proprietor of a theatre against a person who maliciously procures an entire abandonment of a contract to perform exclusively at that theatre for a certain time; whereby damage was sustained? And it seems to me that it will. The authorities are numerous and uniform, that an action will lie by a master against a person who procures that a servant should unlawfully leave his service. The principle involved in these cases comprises the present; for, there, the right of action in the master arises from the wrongful act of the defendant in procuring that the person hired should break his contract, by putting an end to the relation of employer and employed; and the present case is the same. If it is objected that this class of actions for procuring a breach of contract of hiring rests upon no principle, and ought not to be extended beyond the cases heretofore decided, and that, as those have related [232] to contracts respecting trade, manufactures or household service, and not to performance at a theatre, therefore they are no authority for an action in respect of a contract for such performance; the answer appears to me to be, that the class of cases referred to rests upon the principle that the procurement of the violation of the right is a cause of action, and that, when this principle is applied to a violation of a right arising upon a contract of hiring, the nature of the service contracted for is immaterial. It is clear that the procurement of the violation of a right is a cause of action in all instances where the violation is an actionable wrong, as in violations of a right to property, whether real or personal, or to personal security: he who procures the wrong is a joint wrong-doer, and may be sued, either alone or jointly with the agent, in the appropriate action for the wrong complained of. Where a right to the performance of a contract has been violated by a breach thereof, the remedy is upon the contract against the contracting party; and, if he is made to indemnify for such breach, no further recourse is allowed; and, as in case of the procurement of a breach of contract the action is for a wrong and cannot be joined with the action on the contract, and as the act itself is not likely to be of frequent occurrence nor easy of proof, therefore the action for this wrong, in respect of other contracts than those of hiring, are not numerous; but still they seem to me sufficient to shew that the principle has been recognised. In Winsmore v. Greenbank (Willes, 577) it was decided that the procuring of a breach of the contract of a wife is a cause of action. The only distinction in principle between this case and [233] other cases of contracts is, that the wife is not liable to be sued: but the judgment rests on no such grounds; the procuring a violation of the plaintiff's right under the marriage contract is held to be an actionable wrong. In Green v. Button (2 C. M. & R. 707) it was decided that the procuring a breach of a contract of sale of goods by a false claim of lien is an actionable wrong. Sheperd v. Wakeman (1 Sid. 79) is to the same effect, where the defendant procured a breach of a contract of marriage by asserting that the woman was already married. In Ashley v. Harrison (1 Peake's N. P. C. 194. 1 Esp. N. P. C. 48) and in Taylor v. Neri (1 Esp. N. P. C. 386) it was properly decided that the action did not lie, because the battery, in the first case, and the libel, in the second case, upon the contracting parties were not shewn to be with intent to cause those persons to break their contracts, and so the defendants by their wrongful acts did not procure the breaches of contract which were complained of. If they had so acted for the purpose of procuring those breaches, it seems to me they would have been liable to the plaintiffs. To these decisions, founded on the principle now relied upon, the cases for procuring breaches of contracts of hiring should be added; at least Lord Mansfield's judgment in Bird v. Randall (3 Burr. 1345) is to that effect. This principle is supported by good reason. He who maliciously procures a damage to another by violation of his right ought to be made to indemnify; and that, whether he procures an actionable wrong or a breach of contract. He who procures the non-delivery of goods according to contract may inflict an injury, the same as he who procures the abstraction of goods after delivery; and both ought on the same ground to be made [234] responsible. The remedy on the contract may be inadequate, as where the measures of damages is restricted; or in the ease of non-payment of a debt where the damage may be bankruptcy to the creditor who is disappointed, but the measure of damages against the debtor is interest only; or, in the case of the non-delivery of the goods, the disappointment may lead to a heavy forfeiture under a contract to complete a work within a time, but the measure of damages against the vendor of the goods for non-delivery may be only the difference between the contract price and the market value of the goods in question at the time of the breach. In such cases, he who procures the damage maliciously might justly be made responsible beyond the liability of the contractor.

With respect to the objection that the contracting party had not begun the performance of the contract, I do not think it a tenable ground of defence. The procurement of the breach of the contract may be equally injurious, whether the service has begun or not, and in my judgment ought to be equally actionable, as the relation of employer and employed is constituted by the contract alone, and no act of service is necessary thereto.

The result is that there ought to be, in my opinion, judgment for the plaintiff.

Wightman J. ^[6]. This was a demurrer to a declaration in an action against the defendant for, maliciously, and with intent to injure the plaintiff, causing, procuring and enticing Miss Wagner, who had contracted with the plaintiff to sing at his theatre, to break her contract and refuse to sing, by which he sustained damage.

[235] The declaration contained three counts. The two first are for, wrongfully and maliciously, enticing and procuring Miss Wagner to refuse and make default in the performance of an executory contract, entered into by her with the plaintiff to sing and otherwise perform at his theatre, and to depart from and abandon her contract with the plaintiff and all service thereunder, without alleging that Miss Wagner was in the service and employ of the plaintiff, and that she left such service and employ by the procurement and enticement of the defendant. The third count states that Miss Wagner, before the committing the grievances complained of by the plaintiff, had been and was hired and engaged by the plaintiff to sign and perform at his theatre, from the 15th April 1852 to the 15th July following, as the dramatic artiste of the plaintiff, and that she had become and was such dramatic artiste of the plaintiff, and that the defendant, well knowing the premises, wrongfully and maliciously enticed and procured the said Miss Wagner to depart from and out of the said employment of the plaintiff, and to continue absent from it until the end of the period for which she was engaged. The two first counts are for maliciously procuring Miss Wagner to break a contract for service, and to refuse to perform it; and the third is for maliciously procuring her to depart from the employment of the plaintiff.

It was contended, for the defendant, that an action is not maintainable for inducing another to break a contract, though the inducement is malicious and with intent to injure; and that the breach of contract complained of is, in contemplation of law, the wrongful act of the contracting party, and not the consequence of the malieious persuasion of the party charged; which ought [236] not to have had any effect or influence; and that the damage is not the legal consequence of the acts of the defendant. It was further urged, that the cases in which actions have been held maintainable for seducing servants and apprentices from the employ of their masters are exceptions to the general rule, and are not to be extended; and that the present case, as it appears upon the declaration, is not within any of the excepted cases.

With respect to the first and second counts of the declaration, it was contended, for the plaintiff, that an action on the case is maintainable for maliciously procuring a person to refuse to perform a contract, into which he has entered, and by which refusal the plaintiff has sustained an injury; and, though no case was cited upon the argument in which such an action had been brought, or directly held to be maintainable, it was said that on principle such action was maintainable; and the authority of Lord Chief Baron Comyns was cited, that in all cases where a man has a temporal loss or damage by the wrong of another he may have an action on the ease. In the present case there is the malicious procurement of Miss Wagner to break her contract, and the consequent loss to the plaintiff. Why then may not the plaintiff maintain an action on the case? Because, as it is said, the loss or damage is not the natural or legal consequence of the acts of the defendant. There is the injuria, and the damnum; but it is contended that the damnum is neither the natural nor legal consequence of the injuria, and that, consequently, the action is not maintainable, as the breaking her contract was the spontaneous act of Miss Wagner herself, who was under no obligation to yield to the persuasion or procurement of the defendant. [237] And the case of Vickers v. Wilcocks (8 East, 1), which though it has been much brought into question has never been directly overruled, was relied upon as an authority upon this point for the defendant. That case, however, is clearly distinguishable from the present upon the ground, suggested by Lord Chief Justice Tindal in Ward v. Weeks (7 Bing. 211, 215), that the damage in that case, as well as in Vickers v. Wilcocks (8 East, 1), was not the necessary consequence of the original slander uttered by the defendants, but the result of spontaneous and unauthorized communications made by those to whom the words were uttered by the defendants. The distinction is taken in Green v. Button (2 C. M. & R. 707), in which it was held that an action was maintainable against the defendant for maliciously and wrongfully causing certain persons to refuse to deliver goods to the plaintiff, by asserting that he had a lien upon them and ordering these persons to retain the goods until further orders from him. It was urged for the defendant in that case, that, as the persons in whose custody the goods were were under no legal obligation to obey the orders of the defendant, it was the mere spontaneous act of these persons which occasioned the damage to the plaintiff: but the Court held the action to be maintainable, though the defendant did make the claim as of right, he having done so maliciously and without any reasonable cause, and the damage accruing thereby. In Winsmore v. Greenbank (Willes, 577) the plaintiff in his first count alleged that, his wife having unlawfully left him and lived apart from him, during which time a considerable fortune was left for her separate use, and she being willing to return to the plaintiff, whereby he [238] would have had the benefit of her fortune, the defendant, in order to prevent the plaintiff from receiving any benefit from the wife's fortune and the wife from being reconciled to him, unlawfully and unjustly persuaded, procured and enticed the wife to continue absent from the plaintiff, and she did by means thereof continue absent from him, whereby he lost the comfort and society of the wife and her aid in his domestic affairs, and the profit and advantage he would have had from her fortune. Upon motion in arrest of judgment this count was held good, and that it sufficiently appeared that there was both damnum and injuria: it was prima facie an unlawful act of the wife to live apart from her husband; and it was unlawful, and therefore tortious, in the defendant to procure and persuade her to do an unlawful act: and, as the damage to the plaintiff was occasioned thereby, an action on the ease was maintainable. This case appears to me to be an exceedingly strong authority in the plaintiff's favour in the present case. It was undoubtedly prima facie an unlawful act on the part of Miss Wagner to break her contract, and therefore a tortious act of the defendant maliciously to procure her to do so; and, if damage to the plaintiff followed in consequence of that tortious act of the defendant, it would seem, upon the authority of the two cases referred to, of Green v. Button (2 C. M. & R. 707) and Winsmore v. Greenbank (Willes, 577), as well as upon general principle, that an action on the case is maintainable. A doubt was expressed by Lord Eldon, in Morris v. Langdale (2 Bos. & Pul. 284, 289), whether in an action on the case for slander the plaintiff could succeed upon an allegation of special damage, that, [239] by reason of the speaking of the words, other persons refused to perform their contracts with him; Lord Eldon observing that that was a damage which might be compensated in actions by the plaintiff against such persons. It has, however, been remarked with much force by Mr. Starkie, in his Treatise on the Law of Libel, vol. 1, p. 205 (2nd edition), that such a doctrine would be productive of much hardship in many oases, as a mere right of action for damages for non-performance of a contract can hardly be considered a full compensation to a person who has lost the immediate benefit of the performance of it. The doubt indeed is hardly sustainable on principle; and there are many cases in which actions have been maintained for slanderous words, not in themselves actionable, on the ground of the speaking of the words having induced other persons to act wrongfully towards the plaintiffs; as in the case of Newman v. Zachary (Aleyn, 3), where an action on the case was held to be maintainable for wrongfully representing to the bailiff of a manor that a sheep was an estray, in consequence of which it was wrongfully seized. Upon the whole, therefore, I am of opinion that, upon the general principles upon which actions upon the case are founded, as well as upon authority, the present action is maintainable.

It is not, however, necessary, for the maintenance of the third count of the declaration at least, to rely upon so general a principle; for the case, at all events, appears to me to fall within the cases which the defendant considers are exceptions to a general rule, and in which actions have been held maintainable, for procuring persons to quit the service in which they have been retained and employed. The defendant con-[240]- tends that the exception is limited to the cases of apprentices and menial servants and others to whom the provisions of the Statutes of Labourers would be applicable. It appears to me however, upon consideration of the cases cited upon the argument, that the right of an employer to maintain an action on the case for procuring or inducing persons in his service to abandon their employment is not so limited; but that it extends to the case of persons who have contracted for personal service for a time, and who during the period have been wrongfully procured and incited to abandon such service, to the loss of the persons whom they had contracted to serve. The right to maintain such an action is by the common law, and not by the Statute of Labourers, which however gives a remedy, which the common law did not, in cases where persons, within the purview of the Statute, have voluntarily left the service in which they were engaged, and have been retained by another who knew of their previous employment. In Brooke's Abridgement, tit. Laborers, pl. 21 ^[7], it is said: In trespass it was agreed that at common law, if a man had taken my servant from me, trespass lay vi et armis; but if he had procured the servant to depart and he retained him, action lay not at common law vi et armis, but it lay upon the case upon the departure by procurement. In the case of Adams v. Bafeald (1 Leo. 240), where the plaintiff declared that his servant departed his service without cause and the defendant knowing him to be his servant retained him, two Judges out of three held that the action did not lie at common [241] law unless the defendant procured him to leave the service. In all these cases the words "servant" and "service" are used; but there is nothing to indicate the kind of servant or of service in respect of which the dicta and decisions occurred. There is a case in the Yearb. Mich. 10 H. 6, pl. 30, fol. 8 B., in which it is said that an action does not lie against a chaplain upon the Statute of Labourers for not chaunting the mass; for it is said he may not be always disposed to sing, and can no more be coerced by force of the statute than a knight, esquire or gentleman. There is no doubt but that the Statute of Labourers only applied to persons whose only means of living was by the labour of their hands. It was passed in the 25th year of Edward the 3rd (stat. 1), and recites that so many of the people, especially workmen and servants, had died of the plague that those that remained required excessive wages, and that there was lack of ploughmen and such labourers, and then obliged every person within the age of sixty, not living in merchandise, nor exercising any craft, nor having of his own whereof he may live, nor proper land which he may till himself, to serve whoever might require him at such wages as were paid in the twentieth year of the King's reign or five or six other years before. The remedies and penalties given by this and the next subsequent Statute of Labourers were limited to the persons described in them; but the remedies given by the common law are not in terms limited to any description of servant or service. The more modern cases give instances, and contain dicta of Judges, which appear to warrant a more extended application of the right of action for [242] procuring a servant to leave his employment than that contended for by the defendant. In Hart v. Aldridge (1 Cowp. 54) the plaintiff brought an action for enticing away the plaintiff's servants who worked for him as journeymen shoemakers. It appeared that they worked for the plaintiff for no determinate time, but only by the piece, and had, at the time of the enticing away, each a pair of shoes of the plaintiff unfinished. It was contended that a journeyman hired not for time but by the piece was not a servant; but Lord Mansfield said that by being found to be the plaintiff's " journeymen " they were found to be the plaintiff's servants. "The point turns upon the jury finding that the persons enticed away were employed by the plaintiff as Ms journeymen. It might perhaps have been different if the men had taken work for every body. " In the present case, Miss Wagner was, as stated in the third count and admitted by the demurrer, employed by the plaintiff as his dramatic artiste. Can it make any real difference that in Hart v. Aldridge (1 Cowp. 54) the persons enticed were employed by the plaintiff as his journeymen shoemakers, and that in the present case Miss Wagner was employed by the plaintiff as his dramatic artiste? In both cases the services were the personal services of the persons engaged; and, though the description of the services was very different, the personal service being in the one case to make shoes, and in the other to sing songs, it seems to me difficult to distinguish the oases upon any principle: it is the exclusive personal service that gives the right. In Blake v, Lanyon (6 T. R. 221), which was a case very similar in respect to the nature of the service to that of Hart v. Aldridge (1 Cowp. 54), it was stated by the Court, [243] as a general proposition, that " a person who contracts with another to do certain work for him is the servant of that other till the work is finished. " These cases appear to me to be very strong authorities in favour of the plaintiff, as far at least as regards the third count. Two cases however were cited for the defendant, as direct authorities against the maintenance of the present action. The first was that of Ashley v. Harrison (1 Peake's N. P. C. 194. 1 Esp. N. P. C. 48), in which the plaintiff declared that he had retained Madam Mara to sing publickly for him in certain musical performances which he exhibited for profit at Covent Garden Theatre, but that the defendant, contriving to lessen his profits and to deter Madam Mara from singing, published a libel concerning her which deterred her from singing, as she could not sing without danger of being assaulted and ill treated in consequence of the libel. Lord Kenyon held, at Nisi priùs, that the action was not maintainable, as the injury was too remote. The case does not appear to have undergone much discussion; it was only a decision at Nisi priùs; but it is clearly distinguishable from the present, as Madam Mara was deterred from singing, not directly in consequence of any thing done by the defendant, but in consequence of her fear that what he did might induce somebody else to assault and ill treat her. The injury in that ease may have been well held to be too remote; but it does not at all resemble this, where the loss is the direct consequence of the defendant's act. The other case was that of Taylor v. Neri (1 Esp. N. P. C. 386), which certainly bears more directly upon the present. The declaration stated that the plaintiff, being manager [244] of the Opera house, had engaged Breda to sing; that the defendant beat him; whereby the plaintiff lost his service. Lord Chief Justice Eyre expressed a doubt whether the action was maintainable, observing that, if such an action could be supported, every person whose servant, whether domestic or not, was kept away a day from his business could maintain an action. He was of opinion that Breda was not a servant at all. The case was very little discussed, was a decision at Nisi priùs, and does not appear to have undergone much consideration; and, without adverting to some distinctions between that and the present case, it can hardly be considered as an authority of much weight for the defendant.

I am therefore of opinion that upon the whole case, as it appears upon these pleadings, the plaintiff is entitled to our judgment.

Coleridge J. The plaintiff in this case, by the first count of his declaration, shapes his case in substance as follows: he alleges a contract made between himself and Johanna Wagner for her to perform in his theatre in operas for a specified time, i.e. from the 15th April to the 15th July, on certain terms, and, among these, one that she was not during the time to sing or use her talents elsewhere than in his theatre without his written authority. He then complains that the defendant, knowing the premises, and maliciously intending to injure him and to prevent Johanna Wagner from performing according to her contract, whilst the agreement was in full force, but before the commencement of the term, on the 8th April, enticed and procured her to make default in singing or performing at the theatre, [245] and to depart from and abandon her contract, against his will and without his written authority, by means of which enticement and procurement she unlawfully and wrongfully wholly refused to perform her contract, and he sustained special damage. The 2d count applies to an enticement, after certain proceedings in equity, to Johanna Wagner to continue her default for the residue of the term. The 3d count states that Johanna Wagner was hired and engaged by the plaintiff to sing and perform at his theatre, for a certain time, as his dramatic artiste for reward, and had become and was such dramatic artiste, and complains that defendant, maliciously intending to injure him, enticed and procured her to depart from and out of his said employment. These counts are demurred to; and the demurrers raise the questions, Whether an action will lie against a third party for maliciously and injuriously enticing and procuring another to break a contract for exclusive service as a singer and theatrical performer: in the first place, while the contract is merely executory; in the second, after it is in course of execution? I make no distinction between the counts, and am of opinion that it will not in either case, and that the defendant is entitled to our judgment generally.

In order to maintain this action, one of two propositions must be maintained; either that an action will lie against any one by whose persuasions one party to a contract is induced to break it to the damage of the other party, or that the action, for seducing a servant from the master or persuading one who has contracted for service from entering into the employ, is of so wide application as to embrace the case of one in the position and profession of Johanna Wagner. After, much consi-[246]- deration and enquiry I am of opinion that neither of these propositions is true; and they are both of them so important, and, if established by judicial decision, will lead to consequences so general, that, though I regret the necessity, I must not abstain from entering into remarks of some length in support of my view of the law.

It may simplify what I have to say, if I first state what are the conclusions which I seek to establish. They are these: that in respect of breach of contract the general rule of our law is to confine its remedies by action to the contracting parties, and to damages directly and proximately consequential on the act of him who is sued; that, as between master and servant, there is an admitted exception; that this exception dates from the Statute of Labourers, 23 Edw. 3, and both on principle and according to authority is limited by it. If I am right in these positions, the conclusion will be for the defendant, because enough appears on this record to shew, as to the first, that he, and, as to the second, that Johanna Wagner, is not within the limits so drawn.

First then, that the remedy for breach of contract is by the general rule of our law confined to the contracting parties. I need not argue that, if there be any remedy by action against a stranger, it must be by action on the ease. Now, to found this, there must be both injury in the strict sense of the word (that is a wrong done), and loss resulting from that injury: the injury or wrong done must be the act of the defendant; and the loss must be a direct and natural, not a remote and indirect, consequence of the defendant's act. Unless there be a loss thus directly and proximately connected with the act, the mere intention, or even the endeavour, to [247] produce it will not found the action. The existence of the intention, that is the malice, will in some cases be an essential ingredient in order to constitute the wrongfulness or injurious nature of the act; but it will neither supply the want of the act itself, or its hurtful consequence: however complete the injuria, and whether with malice or without, if the act be after all sine damno, no action on the case will lie. The distinction between civil and criminal proceedings in this respect is clear and material; and a recollection of the different objects of the two will dispose of any argument founded merely on the allegation of malice in this declaration, if I shall be found right in thinking that the defendant's act has not been the direct or proximate cause of the damage which the plaintiff alleges he has sustained. If a contract has been made between A. and B. that the latter should go supercargo for the former on a voyage to China, and C., however maliciously, persuades B. to break his contract, but in vain, no one, I suppose, would contend that any action would lie against C. On the other hand, suppose a contract of the same kind made between the same parties to go to Sierra Leone, and C. urgently and bonâ fide advises B. to abandon his contract, which on consideration B. does, whereby loss results to A.; I think no one will be found bold enough to maintain that an action would lie against C. In the first case no loss has resulted; the malice has been ineffectual; in the second, though a loss has resulted from the act, that act was not C.'s, but entirely and exclusively B. 's own. If so, let malice be added, and let C. have persuaded, not bonâ fide but malâ fide and maliciously, still, all other circumstances remaining the same, the same reason applies; for it is malitia sine [248] damno, if the hurtful act is entirely and exclusively B.'s, which last circumstance cannot be affected by the presence or absence of malice in C. Thus far I do not apprehend much difference of opinion: there would be such a manifest absurdity in attempting to trace up the act of a free agent breaking a contract to all the advisers who may have influenced his mind, more or less honestly, more or less powerfully, and to make them responsible civilly for the consequences of what after all is his own act, and for the whole of the hurtful consequences of which the law makes him directly and fully responsible, that I believe it will never be contended for seriously. This was the principle on which Lord Kenyon proceeded in Ashley v. Harrison (1 Peake's N. P. C. 194. 1 Esp. N. P. C. 48). There the defendant libelled Madame Mara: the plaintiff alleged that, in consequence, she, from apprehension of being hissed and ill treated, forbore to sing for him, though engaged, whereby he lost great profits. Lord Kenyon nonsuited the plaintiff: he thought the defendant's act too remote from the damage assigned. But it will be said that this declaration charges more than is stated in the case last supposed, because it alleges, not merely a persuasion or enticement, but a procuring. In Wins- more v. Greenbank (Willes, 577) the same word was used in the first count of the declaration, which alone is material to the present case; and the Chief Justice who relied on it, and distinguished it from enticing, defined it to mean "persuading with effect; " and he held that the husband might sue a stranger for persuading with effect his wife to do a wrongful act directly hurtful to himself. Although I should hesitate to be [249] bound by every word of the judgment, yet I am not called on to question this definition or the decision of the case. Persuading with effect, or effectually or successfully persuading, may no doubt sometimes be actionable — as in trespass — even where it is used towards a free agent: the maxims, qui facit per alium facit per se, and respondeat superior, are unquestionable; but, where they apply, the wrongful act done is properly charged to be the act of him who has procured it to be done. He is sued as a principal trespasser, and the damage, if proved, flows directly and immediately from his act, though it was the hand of another, and he a free agent, that was employed. But, when you apply the term of effectual persuasion to the breach of a contract, it has obviously a different meaning; the persuader has not broken and could not break the contract, for he had never entered into any; he cannot be sued upon the contract; and yet it is the breach of the contract only that is the cause of damage. Neither can it be said that in breaking the contract the contractor is the agent of him who procures him to do so; it is still his own act; he is principal in so doing, and is the only principal. This answer may seem technical; but it really goes to the root of the matter. It shews that the procurer has not done the hurtful act; what he has done is too remote from the damage to make him answerable for it. The case itself of Winsmore v. Greenbank (Willes, 577) seems to me to have little or no bearing on the present: a wife is not, as regards her husband, a free agent or separate person; if to be considered so for the present purpose, she is [250] rather in the character of a servant, with this important peculiarity, that, if she be induced to withdraw from his society and cohabit with another or do him any wrong, no action is maintainable by him against her. In the case of criminal conversation, trespass lies against the adulterer as for an assault on her, however she may in fact have been a willing party to all that the defendant had done. No doubt, therefore, effectual persuasion to the wife to withdraw and conceal herself from her husband is in the eye of the law an actual withdrawing and concealing her; and so, in other counts of the declaration, was it charged in this very ease of Winsmore v. Greenbank (Willes, 577). A case explainable and explained on the same principle is that of ravishment of ward. The writ for this lay against one who procured a man's ward to depart from him; and, where this was urged in a case hereafter to be cited ^[8], Judge Hankford ^[9] gives the answer: the reason is, he says, because the ward is a chattel, and vests in him who has the right. None of this reasoning applies to the case of a breach of contract: if it does, I should be glad to know how any treatise on the law of contract could be complete without a chapter on this head, or how it happens that we have no decisions upon it. Certainly no subject could well be more fruitful or important; important contracts are more commonly broken with than without persuaders or procurers, and these often responsible persons when the principals may not be so. I am aware that with respect to an action on the case the argument primæ impressionis is sometimes of no weight. If the circumstances under which the action would be brought have not before arisen, or are of rare occurrence, it will be of none, or only of inconsiderable weight; but, if the circumstances have been common, if there has been frequently occasion for the action, I apprehend it is important to find that the action has yet never been tried. Now we find a plentiful supply both of text and decision in the case of seduction of servants: and what inference does this lead to, contrasted with the silence of the books and the absence of decisions on the case of breach of ordinary contracts? Let this too be considered: that, if by the common law it was actionable effectually to persuade another to break his contract to the damage of the contractor, it would seem on principle to be equally so to uphold him, after the breach, in continuing it. Now upon this the two conflicting cases of Adams v. Bafeald (1 Leon. 240) and Blake v. Lanyon (6 T. E. 221) are worth considering. In the first, two Judges against one decided that an action does not lie for retaining the servant of another, unless the defendant has first procured the servant to leave his master; in the second, this was overruled; and, although it was taken as a fact that the defendant had hired the servant in ignorance and, as soon as he knew that he had left his former master with work unfinished, requested him to return, which we must understand to have been a real, earnest request, and only continued him after his refusal, which we must take to have been his independent refusal, it was held that the action lay: and this reason is given: " the very act of giving him employment is [252] affording him the means of keeping out of his former service. " Would the Judges who laid this down have held it actionable to give a stray servant food or clothing or lodging out of charity? Yet these would have been equally means of keeping him out of his former service. The true ground on which this action was maintainable, if at all, was the Statute of Labourers, to which no reference was made. But I mention this case now as shewing how far courts of justice may be led if they allow themselves, in the pursuit of perfectly complete remedies for all wrongful acts, to transgress the bounds which our law, in a wise consciousness as I conceive of its limited powers, has imposed on itself, of redressing only the proximate and direct consequences of wrongful acts. To draw a line between advice, persuasion, enticement and procurement is practically impossible in a court of justice; w. ho shall say how much of a free agents' resolution flows from the interference of other minds, or the independent resolution of his own? This is a matter for the casuist rather than the jurist; still less is it for the juryman. Again, why draw the line between bad and good faith? If advice given malâ fide, and loss sustained, entitle me to damages, why, though the advice be given honestly, but under wrong information, with a loss sustained, am I not entitled to them. According to all legal analogies, the bona fides of him who, by a conscious wilful act, directly injures me will not relieve him from the obligation to compensate me in damages for my loss. Again, where several persons happen to persuade to the same effect, and in the result the party persuaded acts upon the advice, how is it to be determined against whom the action may be brought, whether they are to be sued [253] jointly or severally, in what proportions damages are to recovered? Again, if, instead of limiting our recourse to the agent, actual or constructive, we will go back to the person who immediately persuades or procures him one step, why are we to stop there? The first mover, and the malicious mover too, may be removed several steps backward from the party actually induced to break the contract: why are we not to trace him out? Morally he may be the most guilty. I adopt the arguments of Lord Abinger and my brother Alderson in the case of Winterbottom v. Wright (10 M. & W. 109); if we go the first step, we can shew no good reason for not going fifty. And, again, I ask how is it that, if the law really be as the plaintiff contends, we have no discussions upon such questions as these in our books, no decisions in our reports ? Surely such cases would not have been of rare occurrence: they are not of slight importance, and could hardly have been decided without reference to the Courts in Banc. Not one was cited in the argument bearing closely enough upon this point to warrant me in any further detailed examination of them. I conclude therefore what occurs to me on the first proposition on which the plaintiffs case rests.

I come now to the second proposition, that the decisions in respect of master and servant, and the seducing of the latter from the employ of the former, are exceptions grafted on the general law traceable up to the Statute of Labourers. This is of course distinct from the question of the extent of the exception, that is, to what classes of servants it applies: [254] but the enquiries are so connected together in fact, and the latter has so obvious a bearing in support of the former, that it will be better to take them both together.

Now, in the first place, I cannot find any instance of this action having been brought before the statute passed; the weight of which fact is much increased by finding that it was of common occurrence very soon after. The evidence for it is not merely negative; for the mischief and the cause of action appear to have been well known before, and the want of the remedy felt. The common law did give a remedy in certain cases; and Judges are found pointing out what that remedy was, and to what cases it applied. From the cases collected in Fitzherbert's Abridgement, tit. Laborers, it appears that the distinction between the action at common law and the action upon the statute was well known: wherever the former action lay it was in trespass, and not on the case: in saying which I do not rely merely on the words, — writ of trespass, — which might be applicable to trespass on the case; but I rely on the operative words of the writ, which stated a taking vi et armis: it might be joined with trespass quare clausum fregit or trespass for the asportation of chattels or false imprisonment. The count necessarily charged the taking of the servant out of the service of the plaintiff; whereas the writ upon the statute, as appears from Fitzherbert's Natura Brevium, 167 B, charges the retainer and admission of the servant into the defendant's service after he has been induced to withdraw, or has withdrawn without reasonable cause, from that of the plaintiff. I do not wish unnecessarily to multiply citations from the Year Books; but it will [255] be necessary to refer to some, and at greater length than they are found in the abridgments. I begin with one out of the order of time, because it is so full to the purpose, and because it may be referred to as abridged by Brooke (Abridgement, tit. Laborers, pl. 21), I think incorrectly in a material point. He says that it was agreed in it, that case lay for the departure by procurement, but not where the servant departed without procurement and was afterwards retained. The case is Year Book Mich. 11 H. 4 (a. d. 1409), fol. 23 A, pl. 46. Not, as he cites it with a slight inaccuracy, 21, 22. "Thomas Frome brings writ of trespass at the common law against defendant for his close broken, and one J. his servant taken out of his service (pris hors de son service), and certain sheep driven away with force and arms. " There were different pleadings and much discussion as to the separate causes of action, which introduces some confusion into the case. As to the servant, Tremain pleaded: " we found him wandering in a certain place in another county; and there he came and offered his service to us, and made covenant with us to serve us; and so demands judgment." Skrene, for the plaintiff, replies: "he has admitted that the servant was in our service, and that he has received him into his service; and so he has admitted our action. " Hankford ^[10] says, however: "When the servant was wandering, if the defendant had not cognizance that he was in your service, then this first receiver cannot be adjudged a wrong done by the defendant but by the servant. " Upon this Skrene amends his pleading, and says that the servant made a covenant with the plaintiff to serve him [256] in the office of "Berchier" ^[11] "for a whole year, within which year the defendant procured our servant to go out of our service, by force of which procurement he went out of our service within the year, and the defendant retains him in his service; which matter we wish to aver; " and demands judgment: on which Hill ^[12] says: " his writ of trespass as to the servant does not lie upon the matter shewn; for the plaintiff says that the defendant did nothing but procure the servant to go out of his service, by which procurement he went out of his service, and was retained with the defendant, in which ease action on the Statute of Labourers is given, and not this action. " Skrene argues: " If a man procures my servant to go out of my service, and retains him upon that, he does me wrong. " Hankford and Hill both say, " True it is that he does you wrong: but you shall not have a remedy on this manner of writ as it is here. " Culpeper ^[13]: " This action is taken upon an action at the common law; " " and the actions which were at the common law before the Statute of Labourers are not taken away by that statute; and, if a man procure and abet my servant to go with him in his service, action at common law lies well. Hill: No certes, action at common law of trespass does not lie on such a case; for such a procurement cannot be said in any manner to be against the peace. Thirning ^[14]: If my servant before the statute went out of my service, I suppose well that no action is given to the master; but if a man took my servant out of my service, there action of trespass lay at the common law, and still lies; and, if [257] I am beaten by the abettment and command of a man, the commander is guilty of trespass: so in the case here, when he shall procure the servant to depart and retains him with him, he seems guilty of trespass. " But Hill answers him: " Sir, in your case there is no marvel, because the principal actor in your case is guilty of trespass: but the case at bar is different; for the procurement only is not a trespass against the peace, nor is the departure of the servant a trespass against the peace; then, if the cause of action is not against the peace, the remainder which follows after it is not trespass against the peace: and I well agree that the defendant in this case is guilty, as of a thing done against the provisions of the statute; and this matter is as clearly within the statute as it could be, both as to the servant, who has departed from his service, and as to the defendant, who has presumed to retain him in his service against the statute. Hankford: I am of the same opinion, as my master has expressed, that, if my servant depart out of my service, at common law I have no action, and the cause was for that between my servant and me the contract sounds in the manner of a covenant in itself (en luy meme), upon which no action was given at the common law without a specialty; and for this mischief was the statute ordained and action given on it; wherefore, if you will not say that he took your servant out of your service, as you have supposed by your writ, this writ is not maintainable. Culpeper, says: "if a man procure my ward to go from me, and he goes by his procurement, I shall have ravishment of ward against him. " Hankford admits this, and says: the reason is, because the ward " is a chattel and vests in him who has the right. " After some more discussion, Skrene amends, and says: " he came to our house, and procured our [258] servant, and took him, as we have supposed by our writ. " And Tremain, being ordered to answer, pleads: " he was wandering, and offered his service to us; and we received him: without this that we took him in manner as he has alleged. " And upon this, in the end, they seem to have gone to the country. There were several points in this case: and it is not clear whether on this part the Court was ultimately divided or not: but it is clear that the judges who argued in support of the count as first pleaded contended only that it shewed a trespass. Thirning admits that, before the statute, if a servant went out of the service no action lay, but if he was taken trespass did; and then contends that the procuring in the case at bar was a taking and made the party guilty of trespass; in which he was clearly wrong. Now, if at this time case lay at common law for procuring the servant to depart, what becomes of the argument of the necessity for the statute. Or if, where one party broke a covenant at the instigation of another, ease lay, why was not that applicable to the ease of a covenanted servant. But it is clear that all agreed in this: if the defendant has taken the servant under such circumstances, you may have trespass at common law now as before the statute; but, if you cannot lay it as a trespass, your only remedy is under the statute. I may as well add Fitzherbert's Abridgement (tit. Laborers, pl. 16), which is fuller, and I think more accurate, than Brooke's. " Trespass at common law of his servant taken out of his service with force. Tremain: We found him vagrant in a certain place in another county, and there he came and proffered his service to us, and made covenant with us to serve. Judgment if action &c. Skrene: He was retained with us to serve us in the office of a bergier for a year, [259] within which the defendant procured him to go out of our service; by reason of which he went out of our service within the year and hired himself with the defendant. Hill: This action does not lie on the matter. Skrene: If a man procure my servant to go out of my service, and retains him, he does me wrong. Hill and Hankford: That is true; but you shall not have remedy on such a writ as this is. Culpeper: The action which was at common law is not taken away by the Statute of Labourers. Thirning: At common law, before the statute, if my servant went out of my service, no action was given me; but, if a man took him out of my service, an action was given at the common law, and still is; and, if I am beaten by the command of another, the commander is a trespasser. Hill: The procurement only is not trespass against the peace, nor the departure of the servant: then, if the cause of the action is not against the peace, the remnant, to wit the retainer, cannot be: but this case here is openly within the statute, as it may be against the servant upon the departure, and against the master upon the retainer. Hankford and Hill ^[15]: There was no action at the common law upon the departure, because the contract between the servant and me sounds in covenant in a manner; and for that mischief was the statute made; wherefore, if you will not say that he took your servant, this action does not lie. Whereupon the plaintiff said that the defendant procured his servant &c. and took him: and the other side traversed this: et alii e contra. " But, says Fitzherbert, it seems that the defendant should have traversed the taking at first in his plea in bar. In a case (A. D. 1373) in Yearb. Mich. 47 E. 3, fol. 14 A, pl. 15, which was, on the Statute [260] of Labourers, against a servant for departing within the term for which he was retained, the plea was " we were never in your service; " and the question was whether that was good without a traverse of the retainer; and Fincheden ^[16] said this, which was agreed to by the whole Court: " At common law, before the statute, if a man took my servant out of my service, I should have writ of trespass there, where he was in my service bodily: now the statute was made for this mischief, that if he never comes into my service, after he has made covenant to serve me, but he eloignes himself from me, I shall have such writ and suggest that he was retained in my service and departed, as here is: wherefore it is necessary to traverse the retainer; " which accordingly was done by the defendant, issue taken, and sic ad patriam.

Any one, I am certain, who will go through the cases abstracted by Fitzherbert under the title Laborers, will be satisfied that at common law, before the Statute, such an action as the present could not be maintained. Under that title 61 cases are abridged: many of them are for the seduction of servants; but there is no instance of any one in which the action at common law was sustained, unless an actual trespass was charged: and it is clear, from the case which I have cited at so much length, that the distinction between taking and procuring to go was familiar to the lawyers of that day. I can hardly imagine that this could have been said, if the common law would have given relief in such a case: and, if it could, the rapid growth of the action after the Statute of Labourers had passed would be difficult to account for.

I come then to the Statute of Labourers (23 Ed. 3); [261] and my object now is to shew that nothing in the provisions or policy of that statute will warrant the action under the circumstances of this case; and that the older authorities are decidedly against it. As we learn from the preamble, it was enacted in consequence of the great mortality among the lower classes, especially workmen and servants, in a pestilence which had prevailed in 1348-9. This pestilence will be found mentioned in our historians. And in the preamble it is said: " Many seeing the necessity of masters, and great scarcity of servants, will not serve unless they may receive excessive wages, and some rather willing to beg in idleness, than by labour to get their living; we considering the grievous incommodities, which of the lack especially of ploughmen and such labourers may hereafter come, have" &c. "ordained. " This preamble is followed by an enactment, that every person of whatever condition, free or bond, able in body, and under the age of sixty, not living by merchandise nor having any certain craft, nor having of his own wherewith to live, nor land of his own on the cultivation of which he may occupy himself, and not being in service, shall be compelled to enter into service when required on customary wages. By the second section it is made penal by imprisonment for any mower, reaper, or other labourer or servant of whatsoever state or condition he shall be, to depart from service before the expiration of the term agreed on; and no one is to receive or retain such offender in his service under like pain of imprisonment. This ordinance is the foundation of the action for the seduction of a hired servant. Upon reference to Fitzherbert, Natura Brevium, 167 B, it will be seen that the writ in such an action always recited the statute. Now it will be observed that, in order to bring a person within the first section, he must have been one [262] who was not living by merchandise, nor having any certain craft, "certum habens artificium, " nor having of his own wherewith to live, "habens de suo proprio unde vivere possit, " or land of his own in the culture of which he can occupy himself: and these limitations are more pointed by the second chapter, which speaks of " messor falcator aut alius operator vel serviens. " Looking at these words, and the language of the preamble, it is clear that mechanics and labourers in husbandry were the principal objects of the statute: and the decisions were accordingly. Fitzherbert (Natura Brevium, 168 E) says: "And so a gentleman by his covenant shall be bound to serve, although he were not compellable to serve. For if a gentleman, or chaplain, or carpenter, or such which should not be compelled to serve, &c. covenant to serve, they shall be bound by their covenant, and an action will lie against them for departing from their service. " And Lord Hale in a note refers to Yearb. Mich. 10 H. 6 (a. d. 1431), fol. 8 B, pl. 30, as shewing that a writ does not lie on the statute for the departure of a chaplain who is retained to say the mass. Several cases will be found earlier in the Year Books to the same effect. In Yearb. Trin. 50 E. 3 (a. d. 1376), fol. 13 A, pl. 3, is a case in which the parson of B. sued Thomas F., a chaplain, on the Statute of Labourers, and counted of a covenant made with him to serve in the office of seneschal, and to be his parochial chaplain for a certain term, and complained of a departure within the term. As to the office of seneschal, the defendant traversed the covenant; and, as to the residue, contended that the statute was only made for labourers and artificers, and he was neither the one nor the other, but the servant of God, and so was not bound by the statute. Clopton, for the plaintiffs, took a distinction between a [263] parochial and a private chaplain, contending that the former, from the variety and daily pressure of his duties, was in many respects to be regarded as a labourer, and within the Statute " as any other person of the people" (an early authority by the way for the modern distinction of the working clergy) ^[17]. The case was adjourned, and the Judges of the King's Bench were consulted: and the decision was that a chaplain was not bound by the statute; and as to that part of the writ he was discharged. The same law will be found in Yearb. Mich. 4 H. 4 (a. d. 1402), fol, 2 B, pl. 7, where the count on the statute, against a chaplain, was that he was retained by the plaintiff to be [264] bis chaplain, and also his proctor, and collector of tithes, and to serve him "as pees et as maines" for a certain time. The retainer to be proctor and collector was specially traversed: and it was pleaded that his retainer as chaplain was only to do divine service. The decision is not very clearly stated: but Fitzherbert (Abridgement tit. Laborers, pl. 51) appears to have understood that it was against the defendant; for he abstracts the case very shortly, and adds: " quod mirum, for he shall not be compelled to serve, but the statute is in servitio congruo. " Immediately after this he abstracts Pasch. 12 H. 6 ^[18] thus — " Action on the Statute of Labourers is not maintainable against an esquire. " And in Yearb. Hil. 19 H. 6, fol. 53 B, pl. 15 (ad. 1441) is a case on the Statute, where the count charged a retainer in the office of labourer; and the plea was: he retained us to collect his rents in a certain place, without this that we were retained with him in the office of labourer. Newton ^[19] says: " he cannot be required to serve him in the office of collecting his rents, nor to be his seneschal; which proves that he cannot be punished by this action; for this action lies only against those who can be required to serve the party as a labourer. " And then, by the advice of all, the issue was held well tendered.

I am tempted to add one case more from Yearb. Mich. 10 H. 6 (A. D. 1431), fol. 8 B, pl. 30. The Prior of W. brings writ on the Statute of Labourers against a chaplain, and counts that he was retained in his service with him for a year to do divine service, and that he departed within the year &c. Defendant's counsel demands judgment [265] of the writ: " for you see well how he brings this action against a chaplain upon the Statute of Labourers; and the statute is only to be understood against Labourers in Husbandry. Strange ^[20]: The writ is not maintainable by the statute; for you cannot compel a chaplain to sing in mass; for that at one time he is disposed to sing it, and at another not; wherefore you cannot compel him by the statute. Cottesmore ^[21]: To the same intent; for it was not made but for labourers in husbandry: as in case of a knight, an esquire, or gentleman, you cannot compel them to be in your service by the statute, for that the statute is not to be understood but of labourers, who are vagrant, and have nothing whereby to live; these shall be compelled to be in service; but a chaplain hath whereof he may live in common understanding as a gentleman: " wherefore the writ is abated, by the whole Court. Brooke (Abridgement, fol. 57, tit. Laborers, pl. 47), abstracting this, gives, as the reason of the judgment, "for it is to be understood that he hath whereof he may live, and is not always disposed to celebrate divine service. " It will be observed that many of these cases are with respect to chaplains: in one of them it is said that a chaplain is the servant of God; in another that the service for which the retainer is alleged must be a service congruous to his condition. At this distance of time, it may be difficult, without more inquiry into history, to assign a reason why there should be such a majority of eases relating to chaplains. It must be referable of course to some circumstances in the state of society at those periods. It may be collected, from a [266] royal mandate to the Archbishops and Bishops, that the services of stipendiary chaplains were at the date of the statute much in request; the Bishops are required to enforce their serving for their accustomed salary under pain of suspension and interdict. This mandate is printed in the Statutes at Large at the end of the statute: but none of the cases refer to it. But it is clear that the Courts were not laying down any rule of law applicable to chaplains only. They are repeatedly put in the same category with knights, squires, gentlemen, all who must be understood to have means of living of their own. The Courts construed the statute, and as it seems to me quite correctly. They said: if any of these covenants to serve, he will be bound by his covenant, and an action will lie at common law for the breach; but, if you rely on the compulsion of the statute, such persons are not within it. These authorities, of a date when the statute must have been well understood, might be multiplied: and, whatever may be said of the uncertainty and often conflicting nature of decisions from the Year Books, and, however we may now smile at some of the reasonings of the Judges, probably not without their weight when uttered, they seem to me satisfactorily to establish the principle, that actions framed on the statute were governed by a consideration of the object and language of the statute, and that these pointed only to the compulsion of labourers, handicraftsmen, and people of low degree who had no means of their own to live upon, and who, if they did not live by wages earned by their labour, would be vagrants, mendicants or worse. If this be so, I apprehend it is quite clear that Johanna Wagner could not have been compelled, while the statute was unrepealed, to serve the plaintiff in any of the capacities stated in this declaration. Nor, I think, can [267] it be successfully contended that we may not take judicial cognisance of the nature of the service spoken of in the declaration. Judges are not necessarily to be ignorant in Court of what every one else, and they themselves out of Court, are familiar with; nor was that unreal ignorance considered to be an attribute of the Bench in early and strict times. We find in the Year Books the Judges reasoning about the ability of knights, esquires and gentlemen to maintain themselves without wages: distinguishing between private chaplains and parochial chaplains from the nature of their employments: and in later days we have ventured to take judicial cognisance of the moral qualities of Robinson Crusoe's " man Friday " ^[22] and Esop's "frozen snake" ^[23]. We may certainly therefore take upon ourselves to pronounce that a singer at operas, or a dramatic artiste to the owner and manager of Her Majesty's theatre, is not a messor, falcator, aut alius operarius vel serviens, within either the letter or the spirit of the Statute of Labourers. And, if we were to hold to the contrary, as to the profession of Garrick and Siddons, we could not refuse to hold the same with regard to the sister arts of Painting, Sculpture and Architecture. We must lay it down that Reynolds when he agreed to paint a picture, or Flaxman when he agreed to model a statue, had entered into a contract of service, and stood in the relation of servant to him with whom he had made the agreement. But here we are not without authority. In Taylor v. Neri (1 Esp. N. P. C. 386), where the declaration in case stated that the plaintiff, being manager of the Opera House, had engaged [268] one Breda as a public singer during the season at a salary, that the defendant had assaulted and beaten Breda, by which plaintiff lost his service as a public performer, Eyre C. J. nonsuited the plaintiff, saying the record stated Breda was a servant hired to sing, and he was of opinion he was not a servant at all. It seems to me that this is the language of common sense; and no case has been cited which conflicts with it. But, if Johanna Wagner be not within the statute, and could only have been sued, as at common law, upon her contract for the breach of it, it will follow, I conceive, that the present action could not have been maintained against the defendant while the statute was in force, and of course cannot now, if, as I contend, the action arises from and is limited by the purview of the statute. Under the statute the one depended on the other: if a party sued on the second branch of the second section, he was bound to shew the servant, received or retained wrongfully, was such a one as was spoken of in the first branch; for so were the words, talem in servitio suo recipere vel retinere presumat. In the action accordingly against the seducer, the condition of the servant seduced, and the character of the service, were always material; if not stated in the count, the defendant introduced them in his plea, where they were such as were thought to take the servant out of the statute.

I conclude then that this action cannot be maintained, because: 1st. Merely to induce or procure a free contracting party to break his covenant, whether done maliciously or not, to the damage of another, for the reasons I have stated, is not actionable; 2d. That the law with regard to seduction of servants from their* masters' employ, in breach of their contract, is an ex-[269]-ception, the origin of which is known, and that that exception does not reach the case of a theatrical performer.

I know not whether it may be objected that this judgment is conceived in a narrow spirit, and tends unnecessarily to restrain the remedial powers of the law. In my opinion it is not open to this objection. It seems to me wiser to ascertain the powers of the instrument with which you work, and employ it only on subjects to which they are equal and suited; and that, if you go beyond this, you strain and weaken it, and attain but imperfect and unsatisfactory, often only unjust, results. But, whether this be so or not, we are limited by the principles and analogies which we find laid down for us, and are to declare, not to make, the rule of law.

I think, therefore, with the greatest and most real deference for the opinions of my Brethren, and with all the doubt as to the correctness of my own which those opinions, added to the novelty and difficulty of the case itself, cannot but occasion, that our judgment ought to be for the defendant: though it must be pronounced for the plaintiff.

Judgment for plaintiff.

The defendant had obtained leave to plead, as well as demur.

Creasy, on a subsequent day (June 6th), moved, on behalf of the defendant, for a rule to shew cause why the trial of the issues in fact should not be postponed till the issue in law was finally disposed of in a Court of [270] Error. He referred to stat, 15 & 16 Vict. c. 76, s. 80. [Lord Campbell C. J. The meaning of sect. 80 is that it shall be in the discretion of the Court to direct which issue shall be first disposed of in that Court. The issue in law has been, as far as this Court is concerned, finally disposed of by the judgment on the demurrer. Crompton J. Sect. 80 was framed to meet a point which might have been raised on the practice, when there were issues of law and fact, to leave to the plaintiff to determine which should be disposed of first. There is a note on that subject in Williams's Saunders ^[24]. But it would be very strong if we were to construe the words in sect. 80 so as to give a writ of error before the whole of the issues were finally disposed of in this Court.]

Per Curiam ^[25]. There will be no rule.

Rule refused.

[1]Note 1 See Lumley v. Wagner, 1 De G. McN. & G. 604.

[2]Note 2 2 February 4 and 5, 1853; before Coleridge, Wightman, Erle and Crompton Js

[3]Note 3 4 M. & W. 337; affirming the judgment of the Exchequer in Langridge v. Levy, 519

[4]Note 4 Per Holt C. J., in Keeble v. Hickeringill, 11 East, 573, 575, note (a) to Carrington v. Taylor, 11 East 571

[5]Note 5 See note (4) to Skinner v. Gunton, 1 Wms. Saund. 230.

[6]Note 6 Lord Campbell C. J. read this judgment, Wightman J, being absent in consequence of indisposition.

[7]Note 7 See the ease more fully stated in the judgment of Coleridge J., post, p. 255.

[8]Note 8 Mich. 11 H. 4, fol. 23 A, pl. 46, post, p. 255.

[9]Note 9 William Hankford, Justice of the Common Pleas in 1398, afterwards, in 1414 (1 H. 5), Chief Justice of England.

[10]Note 10 Then Justiee of Common Pleas. See ante, p. 250, note (c).

[11]Note 11 Shepherd.

[12]Note 12 Robert Hill, Justice of the Common Pleas in 1408.

[13]Note 13 John Colepeper, Justice of the Common Pleas in 1406.

[14]Note 14 William Thiring, Chief Justice of the Common Pleas in 1396.

[15]Note 15 Qe. "as Hill has said?"

[16]Note 16 William de Fincheden, Chief Justice of the Common Pleas; April 14, 1372.

[17]Note 17 This part of the case is as follows:

Hanimer [counsel]: And as to what he has surmised: that we made covenant with him to be parochial chaplain, and that we departed out of his service: we apprehend that the statute was not to any other intent than as to those who are labourers artificers; and this is neither one nor other, but the servant of God; so he is not bound by the statute: so we apprehend not that this action lies against us; for every one of the other sorts of servants (chescun auter servant), if he be in health and bodily power, he is bound to do his service, and his work from day to day; but the Chaplain is not bound to sing every day, if he will not, for divers causes which lie in his conscience (i. e. to judge of the sufficiency of which causes is left to his conscience): and so he may cease to sing for one day or two, so that he is in quite a different degree from a labourer or artificer. Clopton [counsel]: This man, who is his parochial chaplain, may more readily be adjudged a labourer than another chaplain who is to serve only as private priest (ou parson singuler). For a parochial priest has many other things to do besides to sing the mass and other divine services; for it behoves him to visit the siek of the parish in their houses, to administer to them the rights of Holy Church, and so it behoves that Parsons of the Holy Church should have their needful assistance, for they cannot do it themselves. Wherefore it seems in divers respects that he is as much within the statute as any other person of the people. Belknap [Robert Bilknap, Chief Justice of Common Pleas, October 10, 1375]: This was a case and the matter was adjourned, in the other term, till now: and it is our opinion, and that of our fellows of the King's Bench also, that he is not bound by the statute as another person is: wherefore as to this point we dismiss you; and, as to the remainder on which you are at issue, keep your day, &c

[18]Note 18 A, D. 1434. There is no Yearbook of this term.

[19]Note 19 Richard Newton, Justice of Common Pleas; 3d November 1439.

[20]Note 20 James Strangeways, Justice of the Common Pleas; February 6, 1426.

[21]Note 21 John Cottesmore, Justice of the Common Pleas; 15 October 1430: afterwards, in 1439 (17 H. 6), Chief Justice of the Common Pleas.

[22]Note 22 See Forbes v. King, 1 Dowl. P. C. 672.

[23]Note 23 See Hoare v. Silverlock, 12 Q. B. 624.

[24]Note 24 See note (3) toThe Dean and Chapter of Windsor v. Gover, 2 Wms. Saund, 300.

[25]Note 25 Lord Campbell C.J., Erle and Crompton Js.