« AnteriorContinuar »
tures have been made by the contractor in the construction and repair of river dams, bridges, and roads belonging to the corporation, for the driving and hauling of timber, and upon timber partially prepared for delivery under the contract, and a sale of the corporate property, free and discharged from the contract, is made under a decree of the court, directing it to be offered for sale both subject to and free from the contract, the contractor is entitled to compensation and reimbursement as aforesaid out of the assets of the company, although he afterwards purchases the corporate property and obtains the benefit of such improvements.
4. When a contract is broken, it is the duty of the injured party to minimize the loss and injury, when it is practicable to do so, by a reasonable outlay of money;
this series, to wit, the note on Recovery for services on contract interrupted by sickness or death, appended to the case of Parker v. Macomber, 16 L. R. A. 858, and the note on Effect on contract of the death of a party thereto, appended to the case of Drummond v. Crane, 23 L. R. A. 707.
In addition to these notes, the reader also should consult the note to Lenoir v. Linville Improv. Co. 51 L. R. A. 146, on Effect of the appointment of a receiver or an assignee for creditors of a corporation on the compensation of officers, agents, or employees for unexpired term of employment, to which this note is, in a sense, supplementary.
II. Breaches of contracts in general.
if a survey of the decisions as to what in general constitutes a breach of contract calling for the performance of services with incidental expenditure on the part of the employing party, ignoring the circumstance that such employer was a corporation and the contract came to an end by its insolvency and civil death, be made, the following citations will exemplify the current of the authorities, and disclose the underlying principles which prevail.
It is familiar law that "if, at the time of making the contract, the thing promised be possible in itself, it is no excuse for nonperformance that its performance became subsequently impossible from causes beyond the control of the promisor." Southern Bldg. & L. Asso. v. Price, 88 Md. 155, 42 L. R. A. 206, 41 Atl. 53.
Where the obligation of a contractor requires an expenditure of a large sum in preparation to enable him to perform his contract, and a continuous readiness to perform it, the law implies a duty in the other party to do whatever is necessary to enable him to comply with his promise or covenant. United States v. Speed, 8 Wall. 77, 19 L. ed. 449.
If a construction contract requires payments to be made on account from time to time as the work progresses, and such payments are not made, the contractor is justified in stopping work, and may recover for what he has done. Stringtown & B. Turnp. Road Co. v. Riley, 8 Ky. L. Rep. 267.
Where one agrees to perform a service or work for another, which necessarily requires time and progress in its performance, and is to
but such outlay is to be allowed him as a part of his damages.
5. When a contractor, by reason of the termination of a partly executed contract, is entitled to compensation for services and outlay, part of which have been made in effecting permanent improvements, the services and expenditures relating to such improvements are not apportioned between the executed and unexecuted parts of the contract.
6. When, in the prosecution of work under his contract for cutting logs and hauling and driving them to a mill by means of a railroad, tramroads, and booms and dams in a river, constructed by him for the purpose, the contractor puts in timber to the same mill, by means of the same improvements, for others, not keeping separate accounts of the expenditures, it is not error to allow him, upon an inquiry as to
receive compensation therefor if that other puts an end to the performance either before it begins or while it is in progress, the first party, though able and willing to proceed, cannot recover the stipulated compensation, but only damages for a breach of the contract; and such damages will, in general, consist of his outlay already incurred and the profits he would have realized had he been permitted to finish the work; or, in case the compensation is divisible, he may recover for the work already performed, and damages for being prevented from completing his contract. Hambly v. Delaware, M. & V. R. Co. 21 Fed. 541.
It is a misapprehension of law to suppose that the death of one of the contracting parties puts an end to a contract in course of performance. For a breach after, as well as before, the death of such party, his estate will be liable to respond in damages. Smith v. Wilmington Coal Min. & Mfg. Co. 83 Ill. 498.
Generally speaking, contracts bind executors and administrators, though not named. Where, however, personal considerations are of the foundation of a contract, as in cases of principal and agent, master and servant, the death of either party puts an end to the relation, and, in respect of service after death, the contract is dissolved, unless there is a stipulation to the contrary. Farrow v. Wilson, L. R. 4 C. P. 744.
It is the general rule that death does not absolve one from his contracts; but an exception to this rule is that, when performance of a contract depends upon the continued existence of a person or thing, if such person or thing perish before the contract is performed, the impossibility of performance terminates the contract. Yerrington v. Greene, 7 R. I. 589, 84 Am. Dec. 578.
Where a contract creates between the parties to it merely a personal relation, the death of either party dissolves that relation. Howe Sewing Mach. Co. v. Rosensteel, 24 Fed. 583.
When the performance of a contract depends upon the continued existence of a person or thing, and such continued existence is assumed as the basis of the agreement, the death of the person, or destruction of the thing, terminates the obligation. P'eople v. O'Brien, 111 N. Y. 1, 2 L. R. A. 266, 7 Am. St. Rep. 684, 18 N. E. 692; Lorillard v. Clyde, 142 N. Y. 456, 24 L. R. A. 113, 37 N. E. 489.
Death, or a disability which renders perform
the amount necessary to compensate him for his services and outlay, when he has been prevented from completing his contract, to charge up his entire outlay on all the work done, and credit all sums received on account thereof, when it is shown that all the work was profitable so far as executed, and that the accounts cannot be separated.
(Dent, J., dissents.)
(April 1, 1904.)
PPEALS by plaintiffs and defendant Thompson from a decree of the Circuit Court for Tucker County overruling exceptions to a commissioner's report settling the amounts which should be allowed under a contract of the defendant corporation, which
ance impossible, discharges a contract to capitalize an enterprise and look to it for reimbursement when the capitalist is to manage the undertaking, since it involves his personal service and skill. Marvel v. Phillips, 162 Mass. 399, 26 L. R. A. 416, 44 Am. St. Rep. 370, 38 N. E. 1117.
Contracts for personal services must be treated as entire, and not divisible; hence, there can be but one breach and one recovery upon default, no matter if the wages are payable by instalments or at stated periods. Barnes Bros. v. Black Diamond Coal Co. 101 Tenn. 354, 47 S. W. 498.
A servant wrongfully dismissed in the middle of his term may either treat his contract of employment as rescinded and bring indebitatus assumpsit, or he may sue on the contract; but he cannot do both. Goodman v. Pocock, 15 Q. B. 576.
One employed by a mercantile firm for a year upon a fixed salary, and whose employment is terminated within the year by the insolvency and bankruptcy of his employers, is entitled to prove his claim for damages against the estate in bankruptcy, and to participate in the dis tribution thereof, for his right of action is immediate upon the breach of his contract, and the bankruptcy is no defense. Re Silverman, 101 Fed. 219.
had been annulled by the court. Modified and affirmed.
The case sufficiently appears in the opin
For admission to proof in bankruptcy a claim necd not arise before the adjudication, nor need the contract upon which it arises be broken before the bankruptcy; it is sufficient that the breach and the bankruptcy be coincident. To some extent, bankruptcy operates as a breach of the bankrupt's contracts. Bankruptcy may be treated as a breach of the bankrupt's contracts analogous to a complete repudiation of a contract before the time to perform arises, or to a complete disablement from performing the contract. The test of provability is this: If the bankrupt at the time of his bankruptcy, by disabling himself from performing the contract, or by repudiating its obligation, could give the other party the right to sue at once for damages, to be assessed either at law or in equity, then such other party may prove his damages in bankruptcy on the ground that the bankruptcy is equivalent to disablement and repudiation. Re Pettingill, 137 Fed. 143.
An assignment by an insolvent contractor to trustees for creditors of all his effects, including the contract, is not per se an abandonment
III. The measure of damages in such cases.
It is frequently difficult, in administering the law, to apply a proper rule of damages, and the decisions upon the subject are not harmonious. The cardinal rule undoubtedly is that the one party shall recover all the damages which have been occasioned by the breach of the contract by the other party. But this rule is modified by two others: The damages must flow directly and naturally from the breach, and they must be certain both in their nature and in respect of the cause from which they proceed. Speculative, contingent, and remote damages, not directly traceable to the breach, are excluded,-damages only are allowed which the parties are fairly supposed to have contemplated on contracting as naturally flowing from its violaRochester Lantern Co. v. Stiles & P. tion. Press Co. 135 N. Y. 209, 31 N. E. 1018.
The safest rule of damage, and the one supported by the general current of authorities, in cases where a contractor is prevented by the acts of the other party from performing his contract, is the difference between the cost of doing the work and what the contractor was to receive for it, making reasonable deduction for the less time engaged, and for release from the care, trouble, risk, and responsibility attending a full execution of the contract. United States v. Speed, 8 Wall. 77, 19 L. ed. 449.
But this rule is but one aspect of a more general one. The primary measure of damages is the amount of the contractor's loss, and that loss falls under two heads.-actual outlay and anticipated profits. United States v. Behan, 110 U. S. 338, 28 L. ed. 168, 4 Sup. Ct. Rep. 81.
Where a contractor injured by the stoppage of a contract elects to rescind it, he can recover only the value of his services actually performed as upon a quantum meruit, not dam
E. 125, where the nature of the controversy | statement of such expenditures under the and the history of the transactions out of contract until the entry of the decree of Auwhich it arose are substantially set forth. gust 4, 1893, showing allowances to him for It was impossible there, as it is here, to his time, labor, and all sums paid by him give in detail, or even enumerate, all that for the time and labor of others, and exis contained in the old record of more than pended by him in equipment and material 700 pages, to which nearly 300 pages have necessary to carry out such contracts, all since been added. sums paid for cutting, hauling, skidding. and driving logs, timber, and tanbark, all reasonable sums paid subcontractors by reason of the obligation of their contract, and all other items reasonably and necessarily paid by him in part performance of the contract, allowing him interest upon the sums so expended, and crediting said account with all sums paid to him by said company or its receiver, or realized from the sale of any materials or equipments; and, third, the
After the case was remanded to the circuit court for further proceedings according to the principles announced by this court upon the former appeal, it was referred to a commissioner with directions to report, first, what would be a just and reasonable compensation to Albert Thompson for labor and money necessarily expended in part performance of his contract; second, upon the request of any interested party, to make a
ages for a breach of the contract either for outlay or loss of profits; but, when he elects to go for damages for the breach of the contract, the first and most obvious damage to be shown is the amount which he has expended on the faith of the contract, including a fair allowance for his own time and services. If he chooses to go further, he may claim for the loss of anticipated profits, subject to the rules of law as to the character of the profits which may be thus claimed. Ibid.
The general rule is well settled that a party to a contract where labor is to be performed, upon the breach of that contract by the other party, has two remedies open to him. He may sue upon the contract and recover damages for its breach, or he may ignore the contract and sue for labor and services rendered and expenses incurred from which he has derived no benefit. Hemminger v. Western Assur. Co. 95 Mich. 355, 54 N. W. 949.
When by the act of the other party one who has contracted to cut, haul, and deliver logs is prevented from proceeding with his contract, the rule of damages for the breach is to ascertain the profits he would have earned had he gone on and completed his contract. If, however, this rule cannot be applied from the peculiar nature of the contract, as, for instance, where a fixed time for its continuance is not agreed upon, nor is a definite quantity of logs to be delivered under it, a different rule of damage applies. In such a case preparatory work, done as a necessary preliminary to the performance of the contract, may be allowed for to the extent of its reasonable cost. Brent v. Parker, 23 Fla. 200, 1 So. 780.
In what was pronounced a leading case upon the subject of damages for breach of contract by preventing performance (Vide, United States • v. Speed, 8 Wall. 77, 19 L. ed. 449; United States v. Behan, 110 U. S. 338, 28 L. ed. 168, 4 Sup. Ct. Rep. 81) Beardsley, J., stated the rule of damage in the case of a construction contract where the defendants stopped the work in the midst of its performance from lack of funds to pay. I think, he says, the plaintiffs are entitled to recover the amount they would have realized had they been allowed fully to execute their contract. The defendants are not to gain by their wrongful act, nor is that to deprive the plaintiffs of the advantages they had secured by the contract, and which would have resulted to them from its performance. The
jury must, therefore, ascertain what it would probably have cost them to complete the contract over and above the materials on hand; including the value of the marble required, the labor of quarrying and preparing it for use, the expense of transportation, superintendence, and insurance against all hazards, with every other expense incident to the fulfilment of the undertaking. The aggregate of these expendi tures is to be deducted from the amount which would be payable for the performance of this part of the contract according to the prices therein stipulated, and the balance will be the damages which the jury should allow. Masterton v. Brooklyn, 7 Hill, 61, 42 Am. Dec. 38.
The rule which precludes the allowance of profits by way of damages for the breach of an executory contract is not a primary rule, but a deduction from the more general and fundamental rule which requires damages in all cases to be shown by clear and satisfactory evidence to have been actually sustained. By the common law damages for a breach of contract must be proved to a certainty, not left to speculation or conjecture; and this excludes anticipated profits, although there is nothing in their nature which per se prevents their allowance. Profits which would certainly have been realized but for the breach are recoverable; those which are contingent or speculative are not. Griffin v. Colver, 16 N. Y. 489, 69 Am. Dec. 718.
A plaintiff is entitled to recover the expenses incurred by him in preparing to perform a contract which without his fault the defendant has put an end to, where the expected profits under the contract are too speculative to admit of clear and direct proof. O'Connell v. Rosso, 56 Ark. 603, 20 S. W. 531.
The general rule in regard to damages which may be recovered for a breach of a contract is that remote or consequential damages are not allowed if not traceable solely to the breach, or if incapable of exact computation; but any necessary expense which one of the contractors incurs in complying with the contract is recoverable. Bryan v. Southwestern R. Co. 41 Ga. 71.
Where two parties lawfully contract upon good consideration, and one is ready and willing, and makes preparation, to perform on his part, but is prevented from so doing by the other, he can recover all damages sustained in consequence of that other's default, including his necessary expenses in making preparation.
amount due Thompson for work and labor | sales of property used by him in the perperformed and money expended in the pros- formance of said work as equipments, such ecution of the contract under the direction as horses, wagons, locomotives, cars, steel of the receiver until June 23, 1893, when the rails, etc. Upon exceptions sustained by work was suspended by order of the court, the court, the amount so found was reduced and the amount due him for expenditures, to $84,794.91 and a decree entered therefor. work, and labor from the 23d day of June, Of this amount, about $48,000 is principal, 1893, until the 4th day of August, 1893, and the balance interest. Numerous excepwhen the sale of the property of the Black- tions to the report, urged in the court water Boom & Lumber Company was con- below and overruled, are insisted upon here, firmed. and there is much difference of opinion as to the true interpretation of the former decision of this court. For the appellants it is insisted that, under the principles so announced, the item of $14,749.34, mentioned in the opinion at page 65 of 46 W. Va., page 128, 33 S. E., which, without interest, was originally $12,399.63, for work done on
The commissioner reported that there was due Thompson as of the 12th day of June, 1901, $85,642.02, returning with his report a full statement of all sums paid out and expended by Thompson in the prosecution of said work, and all sums paid to him on account thereof, as well as the proceeds of the
Kenwood Bridge Co. v. Dunderdale, 50 Ill. App. 581.
Where loss of profits cannot be proved, the plaintiff in an action upon the breach of a contract is entitled to recover the expenses and outlay he incurred in preparing to perform on his part. Athletic Baseball Asso. v. St. Louis Sportsman's Park & Club Asso. 67 Mo. App.
One who contracts with another to furnish materials and build therewith a structure at a stipulated price, and who is prevented from completing his work by the acts of the other, is entitled to recover, inter alia items of damage, the expense of preparing such materials for their destined places in the structure. Shulte v. Hennessy, 40 Iowa, 352.
Where anticipated profits are too speculative and uncertain to be shown by competent proof, he who is entitled to recover for the breach of a contract to furnish an ample supply of natural gas wherewith to run his enterprise is entitled to recover his expenses in attempting to run it and the rental value, or, in lieu thereof, the interest on the cost of his plant. Paola Gas Co. v. Paola Glass Co. 56 Kan. 614, 54 Am. St. Rep. 598, 44 Pac. 621.
Where one contracts with a railroad to provide a water supply at a designated station at a stipulated monthly compensation, he undertaking to build and maintain a tank and apparatus for the purpose, upon a breach of the contract by the railroad by abandoning its station at that point, he may recover as damages the difference between the cost of such tank and apparatus and their actual value after the departure of the road, if he retains the property, or the difference between such cost and the sum realized, if he sells for the best obtainable price. New Orleans, J. & G. N. R. Co. v. Echols, 54 Miss. 264.
When, by the terms of a contract for work and labor, the full price is not to be paid until the completion of the work, and that becomes impossible by the act of the law, the contractor is entitled to recover for the amount of his labor. Jones v. Judd, 4 N. Y. 411, Approved in Wolfe v. Howes, 20 N. Y. 197, 75 Am. Dec. 388.
Referring to the case of a person who has contracted to labor for a definite term and is prevented by sickness from fulfilling his contract, Balcom, J., of the New York court of appeals, says: He should have the amount of his
recovery reduced from the contract price by the damages sustained by the employer in consequence of his inability to complete the full term of service. This rule, he says, is equitable, and should be applied in such cases. The servant is not to be regarded as violating his contract because sickness or death prevents his fulfilling it. His failure is his misfortune, not his fault. The employer should neither gain nor lose by it. The rule is just to both. It needs no vindication, for it is so well grounded in good sense as to commend itself. It is a commonsense rule, and common sense is the basis of all just law. Clark v. Gilbert, 26 N. Y. 279, 84 Am. Dec. 189.
If the performance of a building contract be suspended by the financial embarrassment of the owner, and not afterwards resumed, the contractor may recover, among other items of damage, the expense he has incurred in making articles necessary to enable him to perform his contract. O'Connell v. Main & T. Streets Hotel Co. 90 Cal. 515, 27 Pac. 273.
A contractor for the construction of a road, whose contract entitles him to payment in instalments from time to time as his work progresses, is justified, upon default in paying the instalments, in stopping further work, and has a right to recover in quantum meruit for the work he has performed. Porter v. Arrowhead Reservoir Co. 100 Cal. 500, 35 Pac. 146.
IV. How corporations are dissolved.
A corporation may go out of existence in one of four ways: (1) By expiration of its term of life as limited in its charter; (2) by act of the legislature repealing or annulling its charter : (3) by the judgment or decree of a court of competent jurisdiction dissolving it for nonuser or misuse of its franchise, or because of some act or omission working a forfeiture; and (4) by voluntary surrender of its charter.
When the time limited by the charter of a corporation expires the corporation is dead de facto, and no judicial determination of the fact is needful; the dissolution in such a case is declared by the act of the legislature itself. Sturges v. Vanderbilt, 73 N. Y. 384.
It is a well-settled principle that a dissolution by forfeiture is effected only by judicial proceedings against the corporation, taken for the purpose, followed by a hearing, or an opportunity to be heard, and a judgment rendered
logs cut by Thompson, but not delivered so as to entitle him to demand payment therefor at the time the decree of sale was entered, is the only sum that can now be allowed him.
Counsel for the appellee say this court regarded and treated the contract as having been rescinded, and declared it to be so, and ordered that Thompson be put in statu quo, reimbursed for all his outlay, and made whole. The court say, in the opinion: "A partly executed executory contract could be avoided before its final execution, but the executing party thereto should be placed in statu quo, in absence of fraud, by compensation in the nature of a quantum meruit for money and labor expended under such contract." In conclu
thereon. National Pahquioque Bank v. First Nat. Bank, 36 Conn. 325, 4 Am. Rep. 80.
In cases of dissolution of a corporation as a consequence of insolvency, nonuser, misuser, or some other cause of forfeiture of the corporate franchises, it is well settled that dissolution does not take effect until judicially decreed. Sturges v. Vanderbilt, 73 N. Y. 384.
In the absence of a governing statute a corporation aggregate, chartered for an unlimited time, may, by the concurrent consent of the state which created it and its stockholders, be dissolved. Revere v. Boston Copper Co. 15 Pick. 351.
A company not incorporated for any determinate time, and in its nature perpetual, cannot dissolve itself, and terminate its own existence at its own will, by a bare notice to the executive department of the state which chartered it. Ibid.
A corporation does not cease to exist until its dissolution is effected in a manner provided by law. Taylor v. Holmes, 14 Fed. 498.
A corporation may surrender its charter to the sovereign power, but there must be some definite act of surrender and an acceptance by the sovereign. Mere nonuser of its powers is no surrender of them, nor does it warrant a court in presuming an abandonment of its franchise. Ibid.
The adoption by stockholders of a resolution that the corporation be dissolved does not terminate the corporate existence. New York Marbled Iron Works v. Smith, 4 Duer, 362.
To effect the dissolution of a corporation by resolution of stockholders, either the state must accept a surrender of the charter, or else a court must decree dissolution. Ibid.
A corporation may dissolve itself and end its corporate existence by voluntarily surrendering its franchise to the state, but the state must accept to complete the dissolution. Combes v. Keyes (Combes v. Milwaukee & M. R. Co.) 89 Wis. 297, 27 L. R. A. 369, 46 Am. St. Rep. 839, 62 N. W. 89.
sion the court said: "Having partly executed his contracts, Albert Thompson is entitled to recover a just and reasonable compensation for the necessary expenditure of labor and money under his stocking contract, less the sums paid him; but he is not entitled to recover the large profits claimed by him. As the sum of $14,749.34 is an alleged part of such expenditure, it should not have been decreed until the true amount thereof had been ascertained and determined. This amount, when ascertained and determined by reason of the adoption of the stocking contract by the receiver, under direction of the court, and thereby preventing Albert Thompson from perfecting his statutory lien therefor, under § 8, chap. 75, Code , will be a prior lien
and franchises of a corporation by consent and authority of the legislature, and the subsequent foreclosure of such mortgage, and sale of the mortgaged property and franchise, work a dissolution of the corporation. Combes v. Keyes (Combes v. Milwaukee & M. R. Co.) 89 Wis. 297, 27 L. R. A. 369, 46 Am. St. Rep. 839, 62 N. W. 89.
A transfer by a corporation, although it is not shown to be insolvent, of all its property, which suspends and terminates the regular business of the grantor, and is made and accepted with that purpose and intention, has the practical effect to dissolve such corporation, and subject it to a forfeiture of its charter at the instance of the state, since it voluntarily strips itself of all its property and assets, and becomes incapable, and intends to be and stay unable, to perform its corporate duties. Cole v. Millerton Iron Co. 133 N. Y. 164, 28 Am. St. Rep. 615, 30 N. E. 847.
When the charter of a corporation gives its cerditors a direct action against its stockholders, but only after its dissolution, the courts will treat such dissolution as effected so as to give a creditor his remedy against a shareholder if the stockholders have done all in their power to dissolve the corporation. Slee v. Bloom, 19 Johns. 475, 10 Am. Dec. 273.
After a corporation has been stripped of all its property, and for a quarter of a century has failed to exercise any corporate franchise, elect any officers, or maintain any office, a surrender of its franchise will be presumed. Combes v. Keyes (Combes v. Milwaukee & M. R. Co.) 89 Wis. 297, 27 L. R. A. 369, 46 Am. St. Rep. 839, 62 N. W. 89, Citing Brandon Iron Co. v. Gleason, 24 Vt. 228.
V. When dissolution is not effected.
The only modes known to the common law of dissolving a corporation were, by the death of all its members; by the act of the legislature; by a surrender of the charter accepted by the government; or by a forfeiture of the franchise, which could only take place upon a judgment of a competent tribunal in a proceeding in behalf of the state. Neither a court of law, nor a court of equity, had jurisdiction to decree the forfeiture of a corporate charter, or the dissolution of a corporation at the suit of an individual. Folger v. Columbian Ins. Co. 99 Mass.
The dissolution of a corporation is not voluntary when, becoming embarrassed and unable to continue business, its creditors force a receivership, and the corporate assets turn out to be insufficient to meet its liabilities, merely because its officers consent to such dissolution. Griffith v. Blackwater Boom & Lumber Co. 46 W. Va. 56, 33 S. E. 125.
The mortgaging of all the property, assets, 267, 96 Am. Dec. 747.