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.

8 F. 463 (C.C.W.D. Pa 1881)
MISSOURI FURNACE CO.
v.
COCHRAN, Adm'x, etc.
Circuit Court, W. D. Pennsylvania.
August 26, 1881.

1. FORWARD CONTRACT TO FURNISH COKE TO PROPRIETOR OF BLAST FURNACES—BREACH BY VENDOR, AND NOTICE THAT HE WILL NOT DELIVER—NEW FORWARD CONTRACT BY VENDEE—MEASURE OF DAMAGES.

Defendant's intestate sold and agreed to deliver to plaintiff, the proprietor of blast furnaces for smelting iron, 36,621 tons of Connellsville coke, at $1.20 per ton, deliverable, in equal daily quantities, on each working day during the year 1880. After delivering 3,765 tons, the vendor, without valid excuse, notified plaintiff, on February 13, 1880, that he rescinded the contract, and thereafter delivered no coke. The vendor persisting in his refusal to deliver, the plaintiff, on February 27, 1880, made a substantially similar forward contract with H. for the delivery, during the balance of the year, of 29,587 tons of such coke at four dollars per ton, which was the 'then market rate for such a forward contract, and rather below the market price for present deliveries. The market price of coke declined in May, 1880, to $1.30 per ton. The plaintiff brought suit on February 26, 1880. Held, (1) that the plaintiff was not entitled to recover the difference between the price stipulated in the contract sued on and the price which the plaintiff agreed to pay H. under the contract of February 27,1880; (2) that the measure of damages was the sum of the differences between the price stipulated in the contract sued on and the market price of Connellsville coke, at the place of delivery, on the several days when the several deliveries should have been made under the contract.

Sur motion ex parte plaintiff for a new trial.

Henry Hitchcock, George Shims, and S. Sehoyer, Jr., for plaintiff. G. E. Boyle and D. T. Watson, for defendant.

ACHESON, D.J. This suit, brought February 26, 1880, was to recover damages for the breach by John M. Cochran of a contract for the sale and delivery by him to the plaintiff of 86,621 tons of Standard Connellsville coke, at the price of $1.20 per ton, (subject to an [464] advance in case of a rise in wages,) deliverable on cars at his works, at the rate of nine cars of 13 tons each per day on each working day during the year 1880. After 3,765 tons were delivered, Cochran, on February 13, 1880, notified the plaintiff that he had rescinded the contract, and thereafter delivered no coke. After Cochran's refusal further to deliver coke, the plaintiff made a substantially similar contract with one Hutchinson for the delivery during the balance of the year of 29,587 tons of Connellsville coke at four dollars per ton, which was the market rate for such a forward contract, and rather below the market price for present deliveries on February 27, 1880, the date of the Hutchinson contract. The plaintiff claimed to recover the difference between the price stipulated in the contract sued on, and the price which the plaintiff agreed to pay Hutchinson under the contract of February 27, 1880. But the court refused to adopt this standard of damages, and instructed the jury that the plaintiff was

"entitled to recover, upon the coke which John M. Cochran contracted to deliver and refused to deliver to the plaintiff, the sum of the difference between the contract price — that is, the price Cochran was to receive — and the market price of standard Connellsville coke, at the place of delivery, at the several dates when the several deliveries should have been made under the contract."

Under this instruction there was a verdict for the plaintiff, for $22,171.49. As the plaintiff had in its hands $1,521.10 coming to the defendant for coke delivered, the damages as found by the jury amounted to the sum of $23,692.50.

The plaintiff moved the court for a new trial; and, in support of the motion, an earnest and certainly very able argument has been made by plaintiff's counsel. But we are not convinced that the instruction complained of was erroneous.

Undoubtedly it is well settled, as a general rule, that when contracts for the sale of chattels are broken by the vendor failing to deliver, the measure of damages is the difference between the contract price and the market value of the article at the time it should be delivered. Sedgwick on the Measure of Damages, (7th Ed.) 552. In Shepherd v. Hampton, 3 Wheat. 200, this rule was distinctly sanctioned. Chief Justice Marshall there says: "The unanimous opinion of the court is that the price of the article at the time it was to be delivered is the measure of damages." Id. 204. Nor does the case of Hopkins v. Lee, 6 Wheat. 118, promulgate a different doctrine; for, clearly, "the time of the breach" there spoken of is the time when delivery should have been made under the contract.

[465] It is said in Sedgwick on the Measure of Damages, (7th Ed.) 558, note b: "Where delivery is required to be made by instalments, the measure of damages will be estimated by the value at the time each delivery should have been made." In accordance with this principle the damages were assessed in Broun v. Muller, Law Rep. 7 Ex. 319, and Roper v. Johnson, Law Rep. 8 G. P. 167, which were suits by vendee against vendor for damages for failure to deliver iron, in the one case, and coal, in the other, deliverable in monthly instalments. In one of these cases suit was brought after the contract period had expired; in the other case before its expiration; but in both cases the vendor had given notice to the plaintiff that he did not intend to fulfil his contract. To the argument, there urged on behalf of the vendor, that upon receiving such notice it is the duty of the vendee to go into the market and provide himself with a new forward contract, Kelly, C. B., in Brown v. Muller, said:

He is not bound to enter into such a contract, which might be to his advantage or detriment, according as the market might fall or rise. If it fell, the defendant might fairly say that the plaintiff had no right to enter into a speculative contract, and insist that he was not called upon to pay a greater difference than would have existed had the plaintiff held his hand.

Where the breach is on the part of the vendee, it seems to be settled law that he cannot have the damages assessed as of the date of his notice that he will not accept the goods. Sedgwick on Measure of Damages, 601. The date at which the contract is considered to have been broken by the buyer is that at which the goods were to have been delivered, not that at which he may give notice that he intends to break the contract. Benjamin on Sales, § 759. And, indeed, it is a most rational doctrine that a party, whether vendor or vendee, may stand upon his contract and disregard a notice from the other party of any intended repudiation of it. If this were not so, the party desiring to be off from a contract might choose his own time to discharge himself from further liability.

The law as to the effect of such notice is clearly and most satisfactorily stated by Cockburn, C. J., in Frost v. Knight, Law Kep. 7 Ex. 112.

The promisee, if he pleases, may treat the notice of intention as inoperative, and wait the time when the contract is to be executed, and then hold the other party responsible for all the consequences of non-performance; but in that case he keeps the contract alive for the benefit of the other party as well as his own; he remains subject to all his own obligations and liabilities under it, and enables the other party not only to complete the contract, if so [466] advised, notwithstanding his previous repudiation of it, but also to take advantage of any supervening circumstances which would justify him to decline to complete it. On the other hand, the promisee may, if he thinks proper, treat the repudiation of the other party as a wrongful putting an end to the contract, and may at once bring his action as on a breach of it; and in such action he will be entitled to such damages as would have arisen from the nonperformance of the contract at the appointed time, subject,"however, to abatement in respect of any circumstances which may have afforded him the means of mitigating his loss.

We do not think the force of the English cases referred to has been at all weakened by that of the Dunkirk Colliery v. Lever, 41 Law Times Rep. (U. S.) 632, so much relied on by the plaintiff's counsel. Nor are the facts of that case similar to those of the case in hand. There the controlling fact was that at the time the vendee definitively refused to accept, there was no regular market for cannel coal, and the vendors resold as soon as they found a purchaser according to the ordinary course of their business, and without unreasonable delay. Therefore, it was held that the plaintiffs were entitled to the full amount of the difference between the contract price and that which they obtained.

Our attention has been called to Masterton v. Brooklyn, 7 Hill, 61. Undoubtedly this is a leading case in this branch of the law, and especially upon the subject of the profits allowable as damages, and the principles upon which they are to be ascertained. The suit, however, was upon a contract to procure, manufacture, and deliver marble for a building, and involved an investigation into the constituent elements of the cost to which the contractor might have been subjected had the contract been carried out, such as the price of rough material in the quarry, expenses of dressing, etc. Upon the question as to the time at which the cost of labor and materials was to be estimated the court was divided, and I do not find that the views of the majority upon this precise point have been followed. The case, however, lacked the element of market value, (Id. 70;) and as Judge Nelson cited with approbation Boorman. Nash, 9 Barn. & C. 145, and Leigh v. Paterson, 8 Taunt. 540, it cannot be supposed that the court intended, in a case of a marketable article having a market value, to sanction the principle contended for here.

I see nothing in the present case to distinguish it from the ordinary case of a breach by the vendor of a forward contract to supply a manufacturer with an article necessary to his business. For such breach what is the true measure of damages? Says Kelly, C. B., in Brown v. Muller: "The proper measure of damages is that sum which [467] the purchaser requires to put himself in the same condition as if the contract had been performed." That result — which is compensation — is secured, it seems to me, by the rule given to the jury here, unless the case is exceptional. The vendee's real loss, whether delivery is to be made at one time or in instalments, ordinarily is the difference between the contract price and the market value at the times the goods should be delivered. If, however, the article is of limited production, and cannot, for that or other reason, be obtained in the market, and the vendee suffers damage beyond that difference, the measure of damages may be the actual loss he sustains. McHose v. Fulmer, 73 Pa. St. 367; Richardson v. Chynoweth, 26 Wis. 656; Sedgwick on Dam. 554. With this qualification to meet exceptional cases, the rule that the damages are to be assessed with reference to the times the contract should be performed, furnishes, I think, a safe and just standard from which it Would be hazardous to depart.

In this case I fail to perceive anything to call for a departure from that standard. There was no evidence of any special damage to the plaintiff by the stoppage of its furnaces or otherwise. Furthermore, the contract with Hudson, February 27, 1880, was made at a time when the coke market was excited and in an extraordinary condition. Unexpectedly and suddenly coke had risen to the unprecedented price of four dollars per ton; but this rate was of brief duration. The market declined about May 1, 1880, and by the middle of that month the price had fallen to one dollar and thirty cents per ton. The good faith of the plaintiff in entering into the new contract cannot be questioned, but it proved a most unfortunate venture. By the last of May the plaintiff had in its hands more coke than was required in its business, and it procured — at what precise loss does not clearly appear — the cancellation of contracts with Hutchinson to the extent of 20,000 tons. As the plaintiff was not bound to enter into the new forward contract, it seems to me it did so at its own risk, and cannot fairly claim that the damages chargeable against the defendant shall be assessed on the basis of that contract.

The motion for a new trial is denied.

[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.

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.

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.

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.

178 F.2d 182 (1949)

L. ALBERT & SON
v.
ARMSTRONG RUBBER CO.

No. 6, Docket 21183.
United States Court of Appeals Second Circuit.
Argued October 5, 1949.
Decided November 29, 1949.

[178 F.2d 184]

Abraham S. Ullman, Irving Sweedler and William L. Beers, New Haven, Conn., for plaintiff.

Albert H. Barclay and William L. Hadden, New Haven, Conn., with whom on the brief were Albert H. Barclay, Jr. and John W. Barclay, New Haven, Conn., for defendant.

Before L. HAND, Chief Judge and SWAN and CLARK, Circuit Judges.

L. HAND, Chief Judge.

Both sides appeal from the judgment in an action brought by the Albert Company, which we shall speak of as the Seller, against the Armstrong Company, which we shall call the Buyer. The action was to recover the agreed price of four "Refiners," machines designed to recondition old rubber; the contract of sale was by an exchange of letters in December, 1942, and the Seller delivered two of the four "Refiners" in August, 1943, and the other two on either August 31st or September 8th, 1945. Because of the delay in delivery of the second two, the Buyer refused to accept all four in October, 1945 — the exact day not being fixed — and it counterclaimed for the Seller's breach. The judge dismissed both the complaint and the counterclaim; but he gave judgment to the Seller for the value without interest of a part of the equipment delivered — a 300 horse-power motor and accessories — which the Buyer put into use on February 20th, 1946. On the appeal the Seller's position is that its delay was not too long; that in any event the Buyer accepted delivery of the four "Refiners"; and that they were in accordance with the specifications. As an alternative it insists that the Buyer is liable, not only for the value of the motor, but for interest upon it; and, as to the counterclaim, that the Buyer proved no damages, assuming that there was a breach. The judge found that all four "Refiners" conformed to the specifications, or could have been made to do so with slight trouble and expense; that the contract was inseparable and called for four not two and two; that the delivery of the second two was too late; and that, as the Buyer rejected all four, it was not liable on the contract at all. On the [178 F.2d 185] other hand, as we have said, he found that the Buyer's use for its own purposes of the motor, although not an acceptance of the "Refiners," made it liable for the value of the motor in quasi contract, but without interest. He dismissed the Buyer's counterclaim because it had failed to prove any damages.

The first issue is whether the Seller's delivery of the second two "Refiners" was too late, and justified the Buyer's rejection of all four in October of that year. The Seller does not — at least on this appeal — seek to recover the purchase price of the first two "Refiners" on the ground that the parties had at any time severed the contract into two separate ones, each for two. It follows that the Buyer was entitled in October, 1945, to reject the four, if the delivery of the second two was too late. The evidence as to this was as follows. Although the Buyer had suggested cancellation of the contract in the spring of 1943, by April first of that year it was pressing for delivery, and, when the Seller wrote at the end of July that it would ship the first two in "a couple of weeks," and the other two probably within four weeks, the Buyer not only did not protest against the delay, but in August accepted the two which the Seller did deliver. Moreover, when the Seller did not ship the other two within the time mentioned, the Buyer on October first, 1943, recognized the contract as still in existence. True, by the end of that year it began to complain of the performance of the two machines delivered, and it suggested that the Seller take them back; but, when the Seller answered by offering to put these two in proper condition, an active correspondence followed, resulting in a personal interview between the heads of the two parties in July, 1944. At this there was an inconclusive discussion of settlement, after which in August the Buyer agreed to install the two; and in September the Seller recognized the original contract as still in existence. Although in December the Buyer did declare its doubts whether it would be able "to keep these machines in production without considerable maintenance expense," and proposed a resale of them to the Seller, apparently the Seller did not reply; and in any event this proposal lapsed, for on February 23d, 1945, the Buyer wrote that it "would like to have you ship the two remaining Refiners at once." This demand the Seller answered by complaining that the two already delivered had never been paid for, to which on March 28th the Buyer rejoined that nothing was due on the contract until "30 days after the delivery of the complete order." It continued: "We want to complete the installation of this refiner line and are again requesting you to ship the two remaining refiners if they are in good operating condition."

Thus it appears that, whatever may have been the Seller's delay up to that time, the Buyer would have been bound to accept a delivery of the second two within a reasonable time after March 28th, and to pay for the four, assuming that they conformed to the specifications, as the judge found that they did. As we understand it, the parties are not at variance so far, except for the finding as to conformity, just mentioned, which turns out to be irrelevant, as will appear. Since the Seller did not deliver the second two machines until five months after the demand of March 28th, the first question is whether the judge was right in holding that that was too late. When the Seller in July, 1943, said that it would ship the second two machines within four weeks, we will assume that that was the proper measure of a reasonable time for their delivery, and would have been conclusive, had it not been for the conduct of the parties during the following eighteen months. However, although during that period the Buyer had been in doubt whether it could make operative the two already delivered, it had never even intimated an objection to the delay in the delivery of the second two. If the circumstances had not changed as much as they did during the five months after March 28th, it might therefore be plausibly argued that the long drawn negotiations showed that further delay was not of vital consequence, in spite of the fact that in mercantile contracts, time is ordinarily "of the essence."^[1] Nevertheless, we [178 F.2d 186] think it impossible to excuse the delay, because the circumstances did greatly change after March 28th, 1945. The judge found that "the great demand at the time of the commencement of this program for lowgrade reclaimed rubber was of a temporary nature"; it could not compete with any other rubber if that appeared in "sufficient" quantities. That did not mean that rubber was not still "reclaimed" and sold in the open market; but "obviously market conditions for second-hand rubber-machinery changed between the days of acute shortage in which the contract was made and the time of delivery." We accept his summing up of the situation in the following words: "at approximately the date of delivery * * * the fighting war came to an end, the prospect of future availability of rubber was altered, and any loss from change in conditions in that period may well fall upon the party whose unexcused delay prevented prompt delivery on the final demand." We agree that the delivery was too late.

The Seller answers that in any event the Buyer accepted the "Refiners" because (1) it "intimated" that it had done so; (2) it had done an "act in relation to them * * * inconsistent with the ownership of the seller"; and (3) it had without objection retained them for more than "a reasonable time."^[2] The supposed intimation was a letter of the Buyer on October 11th, 1945, in which it asked the Seller to confirm to the Buyer's accountants the amount of the Seller's claim against it as of September 30th, 1945; and in which it stated that claim as $25,500; the full purchase-price. It must be conceded that this was a most unhappy statement, vis-à-vis the Buyer, for, taken at its face, it surely presupposed acceptance of the "Refiners." Nor would it be any excuse that the Buyer's practise was to charge itself upon its books with the cost of goods as soon as they were delivered, and by way of precaution to check its figures with those with whom it dealt. Nevertheless, although the Buyer could not excuse the letter by any undisclosed practice or intent of its own, and although judged by itself it might have constituted an "intimation" of acceptance, we think that, when it is read with what had passed between the parties before it was written, it is not susceptible of that understanding. These were the facts. After the Seller had delivered the first two "Refiners" in August, 1943, the Buyer on October 1st, 1943, complained that the Seller had billed it for four machines, although it had delivered only two, and asked for "corrected invoices covering only the portion you have shipped." A year later, on October 24th, 1944, after the Seller had on September 2d, 1944, made it clear that it was going on with the contract, in a letter in precisely the same terms, mutatis mutandis, as the letter of October 11th, 1945, the Buyer asked the Seller to confirm the charge in its favor on the Buyer's books of $15,500, the price of the first two "Refiners." While matters stood in this posture it could be argued with considerable plausibility that the contract had been severed, or "split," into two contracts, each for two machines, and that the letter of October 24th, 1944, was an acceptance of the first two. However, it soon transpired, if it was not already known, that the Buyer had no such intent, and that not only did the contract remain single as it had been at the start; but that the inquiry of October 24th, 1944, was not an acceptance of anything, but had been made because of the way the Buyer kept its books. Hence, when the Seller received the letter of October 11th, 1945, couched in the same terms, it had no warrant for assuming that its meaning was different from its predecessor of a year before.

Besides, the issue is irrelevant for another reason. It does not appear whether the telephone talk in which the Buyer repudiated the contract was before or after October 11th, 1945. If the letter was after the talk, it would not have affected the rights of the parties because, however broadly one may construe it, it certainly could not be understood as a retraction of the express repudiation; only in case it came before the talk, could it be deemed an acceptance. If the Seller had [178 F.2d 187] the burden of proof, it failed, for the issue remains undecided; and it is plain that it did have the burden, for the delivery, being too late, had to be excused by showing that some conduct of the Buyer condoned it.

Second, as an act inconsistent with its "ownership," the Seller puts forward the Buyer's write-off on its books — as a loss deductible from its income tax — of a depreciation in value of the "Refiners." Whether this was done before or after the telephone talk, also does not appear; and, as in the case of the letter of October 11th, 1945, the question is irrelevant for that reason; but it is insufficient on the merits as well. It is of course true that, as an indication of the Buyer's state of mind, the entry was unequivocal, and could not be reconciled with any other conclusion than that the Buyer regarded the machines as its own — unless it was preparing a fraud on the Treasury which is not to be presumed. Yet that did not make the entry an act "inconsistent" with the rights of the Seller, as we understand that word in the statute. It is true that two decisions of the intermediate court of appeals of Illinois^[3] have held that it is an acceptance for a buyer to collect insurance on the delivered goods, and it may be that that is a sufficient act of dominion. At any rate it is not the same as the Buyer's conduct here. The decisions are not very helpful; for the most part they concern situations where the buyer has done something to the goods themselves, which would be an invasion of some interest of the seller, although apparently it is enough to offer them for sale, since that asserts a right to dispose of them.^[4] Be that as it may, it does not interfere with a seller's ownership to make an entry upon the buyer's books that the goods are the buyer's. Nor would it be so, though the buyer were to claim a deduction for depreciation in his income tax return, or were even to succeed in getting the claim allowed.

A much more doubtful question arises from the Buyer's use of the motor and its accessories which began on February 20th, 1946. Had that been before the telephone talk, instead of four months later, it would have brought the situation strictly within the Act; but it does not follow that the result is the same when the use follows an unequivocal rejection of all the goods. In the case at bar the use of the motor was no basis for inferring that the Buyer in fact meant to retract its rejection and to accept the goods; and that is true whether we regard as controlling the private intent of the Buyer, or the assumed intent of a "reasonable" buyer in his circumstances. If use of the motor is to be treated as an acceptance, it is not because the Buyer so intended, but because otherwise the use was an unlawful invasion of the Seller's rights. In Connecticut two decisions^[5] have dealt with situations which, though closely akin, did not involve the point. The buyer had received the goods, had found them unsatisfactory, but had continued to use a part of them — all before he rejected them as eventually he did. In such cases the use of the goods is merely one circumstance — perhaps enough in itself — among those facts which together constitute acceptance. However, in Modern Home Utilities, Inc. v. Garrity,^[6] although the buyer had rejected a beer cooling apparatus as not in conformity with the contract, she continued to make use of one part of it — a beer pump — and she was held for the price of the whole apparatus. This was on two grounds: that her original rejection was in any event unjustified; and, as an alternate, that, even if it had not been, the rejection made her a bailee, and, "if she used the equipment or a part of it she ceased to be bailee and made that part her own and could not claim rescission."

[178 F.2d 188] The contract being indivisible, the buyer "had no right to accept one part and to reject the rest." It must be owned that, if this is to be understood to lay down an absolute doctrine, the Buyer's use of the motor in the case at bar constituted a retraction of its rejection.

The Uniform Sales Act^[7] has somewhat modified the consequences of a buyer's acceptance of any part of the goods^[8]; and we are disposed to believe that there may be situations, in which the buyer's eventual use of a part, even though it may be strictly a violation of his duties as bailee, will not impose upon him in invitum a retraction of an earlier rejection. In the case at bar any other result would be to the last degree harsh; for, as has already appeared, the Seller had delayed delivery until the "Refiners" had lost the greater part of their value anyway; and after the Buyer had unequivocally rejected them the Seller had allowed them to lie unclaimed for four months. When the Buyer finally did use the motor, it was not for its intended purpose, but in salvage of what would otherwise have been a total loss. Finally, the Seller's indifference for the four months, although it may not have altogether justified the inference that it had abandoned the property, at least gave some color for that conclusion. Considering that the retraction of a buyer's rejection is not derived from his consent, but is a legal duty imposed upon him as a consequence of the wrong of meddling with goods of which he is only a bailee, we hold that in the circumstances at bar that consequence should not follow. To impose a liability of $25,500 for goods which had certainly by February 20th, 1946, become substantially valueless, seems to us to impose a penalty.

Third, is the question whether the Buyer should have allowed the "Refiners" to remain in its possession for a month "without intimating" that it had "rejected them." We limit the time to a month because, as we have said, the Seller had the burden, because the "Refiners" were delivered at least not before the end of August, and because the repudiation may have been at the beginning of October. On the whole we are disposed to agree with the judge that the Buyer's delay in declaring its position did not prejudice, and could not have prejudiced, the Seller, because, the prime market for the "Refiners" having already gone when delivery was made, with it disappeared any immediate call upon the Buyer to declare itself. We hold therefore that the Seller failed to excuse its breach under any of the three statutory grounds for imputing acceptance to the Buyer. The dismissal of its complaint upon the contract was correct.

Upon the Seller's appeal there remains only the question whether it was entitled to interest upon the value of the motor and its accessories, which the judge denied. The Buyer's use of this property was indeed a conversion, for which the Seller might sue in quasi-contract, as it did; and the judge found that the motor, although it was secondhand machinery originally, had a "fair market value of $4,590." We follow the law of Connecticut upon the point, and we read Regan v. New York & New England R. Co.^[9] and Healy v. Fallon^[10] as establishing the principle that, when the value of goods can be "ascertained with reasonable certainty as of a definite time," interest should be recovered. Hence we hold that the Seller should have been awarded interest on the value of the motor and its accessories from the date of the Buyer's appropriation — February 20th, 1946.

Coming next to the Buyer's appeal, it does not claim any loss of profit, but it does claim the expenses which it incurred in reliance upon the Seller's promise. These were of three kinds: its whole investment in its "reclaim department," $118,478; the cost of its "rubber scrap," $27,555.63; the cost of the foundation which it laid for the "Refiners," $3,000. The judge in his opinion held that the Buyer had not proved that "the lack of production" of the [178 F.2d 189] reclaim department "was caused by the delay in delivery of plaintiffs' refiners"; but that that was "only one of several possible causes. Such a possibility is not sufficient proof of causation to impose liability on the plaintiffs for the cost of all machinery and supplies for the reclaim department." The record certainly would not warrant our holding that this holding was "clearly erroneous"; indeed, the evidence preponderates in its favor. The Buyer disposed of all its "scrap rubber" in April and May, 1945; and, so far as appears, until it filed its counterclaim in May, 1947, it never suggested that the failure to deliver two of the four "Refiners" was the cause of the collapse of its "reclaim department." The counterclaim for these items has every appearance of being an afterthought, which can scarcely have been put forward with any hope of success.

The claim for the cost of the foundation which the Buyer built for the "Refiners," stands upon a different footing. Normally a promisee's damages for breach of contract are the value of the promised performance, less his outlay, which includes, not only what he must pay to the promisor, but any expenses necessary to prepare for the performance; and in the case at bar the cost of the foundation was such an expense. The sum which would restore the Buyer to the position it would have been in, had the Seller performed, would therefore be the prospective net earnings of the "Refiners" while they were used (together with any value they might have as scrap after they were discarded), less their price — $25,500 — together with $3,000, the cost of installing them. The Buyer did not indeed prove the net earnings of the "Refiners" or their scrap value; but it asserts that it is nonetheless entitled to recover the cost of the foundation upon the theory that what it expended in reliance upon the Seller's performance was a recoverable loss. In cases where the venture would have proved profitable to the promisee, there is no reason why he should not recover his expenses. On the other hand, on those occasions in which the performance would not have covered the promisee's outlay, such a result imposes the risk of the promisee's contract upon the promisor. We cannot agree that the promisor's default in performance should under this guise make him an insurer of the promisee's venture; yet it does not follow that the breach should not throw upon him the duty of showing that the value of the performance would in fact have been less than the promisee's outlay. It is often very hard to learn what the value of the performance would have been; and it is a common expedient, and a just one, in such situations to put the peril of the answer upon that party who by his wrong has made the issue relevant to the rights of the other.^[11] On principle therefore the proper solution would seem to be that the promisee may recover his outlay in preparation for the performance, subject to the privilege of the promisor to reduce it by as much as he can show that the promisee would have lost, if the contract had been performed.

The decisions leave much to be desired. There is language in United States v. Behan^[12] which, read literally, would allow the promisee to recover his outlay in all cases: the promisor is said to be "estopped" to deny that the value of the performance would not equal it. We doubt whether the Supreme Court would today accept the explanation, although the result was right under the rule which we propose. Moreover, in spite of the authority properly accorded to any decision of that court, we are here concerned only with Connecticut law; and the decisions in that state do not seem to be in entire accord. In the early case of Bush v. Canfield^[13] the buyer sued to recover a payment of $5,000 made in advance for the purchase of 2,000 barrels of flour at $7.00 a barrel. Although at the time set for delivery the value of the flour had fallen to $5.50, the seller for some undisclosed reason failed to perform. The action was on the case for the breach, not in indebitatus [178 F.2d 190] assumpsit, and the court, Hosmer, J., dissenting, allowed the buyer to recover the full amount of his payment over the seller's objection that recovery should be reduced by the buyer's loss. The chief justice gave the following reason for his decision which we take to be that of the court, 2 Conn. page 488: "The defendant has violated his contract; and it is not for him to say that if he had fulfilled it, the plaintiffs would have sustained a great loss, and that this ought to be deducted from the money advanced." If there is no difference between the recovery of money received by a promisor who later defaults, and a promisee's outlay preparatory to performance, this decision is in the Buyer's favor. However, when the promisor has received any benefit, the promisee's recovery always depends upon whether the promisor has been "unjustly enriched"; and, judged by that nebulous standard, there may be a distinction between imposing the promisee's loss on the promisor by compelling him to disgorge what he has received and compelling him to pay what he never has received. It is quite true that the only difference is between allowing the promisee to recover what he has paid to the promisor and what he has paid to others; but many persons would probably think that difference vital.

In any event, unless this be a valid distinction, it appears to us that Santoro v. Mack^[14] must be read as taking the opposite view. The plaintiff, the vendee under a contract for the sale of land, had paid an electrician and an architect whom he had employed in reliance upon the promised conveyance. These payments he sought to recover, and was unsuccessful on the ground that they had not benefited the vendor, and that they had been incurred without the vendor's knowledge or consent. Yet it would seem that such expenses were as much in reasonable preparation for the use of the land, as the cost of the foundation was for the use of the "Refiners." The point now before us was apparently not raised, but the decision, as it stands, seems to deny any recovery whatever. Three other Connecticut decisions — the only ones which at all approach the question — do not throw any light upon the point.^[15]

The result is equally inconclusive if we consider the few decisions in other jurisdictions. The New Jersey Court of Errors and Appeals in Holt v. United Security Life Insurance & Trust Co.^[16] recognized as the proper rule that, although the promisor had the burden of proving that the value of the performance was less than the promisee's outlay, if he succeeded in doing so, the recovery would be correspondingly limited. In Bernstein v. Meech^[17] the promisee recovered his full outlay, and no limitation upon it appears to have been recognized, as may be inferred from the following sentence: "It cannot be assumed that any part of this loss would have been sustained by the plaintiff if he had been permitted to perform his contract." In Reynolds v. Levi^[18] the promisee was a well digger, who had made three unsuccessful efforts to reach water, and the promisor — a farmer — stopped him before he had completed his fourth. The court limited the recovery to the amount earned on the fourth attempt, but for reasons that are not apparent. It appears to us therefore that the reported decisions leave it open to us to adopt the rule we have stated. Moreover, there is support for this result in the writings of scholars. The Restatement of Contracts^[19] allows recovery of the promisee's outlay "in necessary preparation" for the performance, subject to several limitations, of which one is that the promisor may deduct whatever he can prove the promisee would have lost, if the contract had been fully performed. Professor McCormick [178 F.2d 191] thinks^[20] that "the jury should be instructed not to go beyond the probable yield" of the performance to the promisee, but he does not consider the burden of proof. Much the fullest discussion of the whole subject is Professor Fuller's in the Yale Law Journal.^[21] The situation at bar was among those which he calls cases of "essential reliance," and for which he favors the rule we are adopting. It is one instance of his "very simple formula: We will not in a suit for reimbursement of losses incurred in reliance on a contract knowingly put the plaintiff in a better position than he would have occupied, had the contract been fully performed."

The judgment will therefore be affirmed with the following modifications. To the allowance for the motor and accessories will be added interest from February 20th, 1946. The Buyer will be allowed to set off $3,000 against the Seller's recovery with interest from October, 1945, subject to the Seller's privilege to deduct from that amount any sum which upon a further hearing it can prove would have been the Buyer's loss upon the contract, had the "Refiners" been delivered on or before May 1st, 1945.

Judgment modified as above, and affirmed as so modified.

[1] Restatement of Contracts, § 276 (b).

[2] § 48, Uniform Sales Act; § 4668, General Statutes of Connecticut, Revision of 1930.

[3] Telford v. Albro, 60 Ill.App. 359; Foley & Co. v. Excelsior Stove & Mfg. Co., 265 Ill.App. 78.

[4] Ostman v. Lee, 91 Conn. 731, 101 A. 23; Lilly White v. Devereux, 15 Meeson & Welsly, 285; Brown v. Foster, 108 N.Y. 387, 393, 15 N.E. 608; Eagle Manufacturing Co. v. Arkell & Douglas, Inc., 197 App.Div. 788, 189 N.Y.S. 140.

[5] Thompson Machines & Supply Co. v. Graves, 91 Conn. 71, 98 A. 331; Loveland v. Aymett's Auto Arcade, Inc., 121 Conn. 231, 184 A. 376.

[6] 121 Conn. 651, 186 A. 639.

[7] § 44, subd. 3.

[8] Portfolio v. Rubin, 233 N.Y. 439, 135 N.E. 843.

[9] 60 Conn. 124, 22 A. 503, 25 Am.St.Rep. 306.

[10] 69 Conn. 228, 37 A. 495.

[11] Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 563, 51 S.Ct. 248, 75 L.Ed. 544.

[12] 110 U.S. 338, 345, 346, 4 S.Ct. 81, 28 L.Ed. 168.

[13] 2 Conn. 485.

[14] 108 Conn. 683, 145 A. 273.

[15] Edward DeV. Tompkins, Inc., v. City of Bridgeport, 94 Conn. 659, 110 A. 183, 191; Kastner v. Beacon Oil Co., 114 Conn. 190, 158 A. 214, 81 A.L.R. 97; Jordan v. Patterson, 67 Conn. 473, 35 A. 521.

[16] 76 N.J.L. 585, 72 A. 301, 21 L.R.A., N.S., 691;

[17] 130 N.Y. 354, 360, 29 N.E. 255, 257.

[18] 122 Mich. 115, 80 N.W. 999.

[19] § 333 (d).

[20] McCormick on Damages, § 142, p. 584.

[21] 46 Yale Law Journal, 752, pp. 75-80.

[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.

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.

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.

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.

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."