Alderson v. Houston

The plaintiffs appeal from a judgment and from an order denying their motion for a new trial.

The complaint states a cause of action for the breach of a contract on the part of defendant, as owner of forty-three lots in the city of Los Angeles, empowering the plaintiffs as real estate brokers to sell the said lots.

The contract is dated May 17, 1904. It declares that the defendant is the owner of forty-three lots, describing them, and gives to plaintiffs the right to the exclusive sale thereof for the period of eighteen months from its date. It contained the following provision:

“All sales are to be made with delivery of certificates of title for each lot as sold or passes title under the terms of this agreement, drawn by the Title Insurance & Trust Co. of Los Angeles, and shall show clear of encumbrances, except building restriction, and such taxes that may be assessed but are not due and payable.”

The discount mentioned referred to certain discounts to be allowed on sales -of certain lots upon which plaintiffs were to build houses. It was agreed that they should erect on the lots six houses within twelve months and four within fifteen months from the date of the contract. Time was made of the essence of the agreement and it was agreed that any failure of the parties thereto to comply with the terms thereof should forfeit the contract upon thirty days’ written notice. The sales of the respective lots were to be made at prices stated in a schedule attached to the contract. It is alleged that the plaintiffs proceeded to place the lots on the market for sale, advertise them in the newspapers, place sign boards advertising that the same were for sale by plaintiffs, and in all the usual ways, and in various ways, endeavored to procure purchasers, built houses on several of the lots in pursuance of the terms of the agreement and made sales of a number of the lots at the prices agreed upon, for which they received advance commissions and discounts amounting to two thousand three hundred and twenty dollars. It is further alleged that certain street assessments for the improving and opening of streets abutting on the lots became a lien upon a number of the lots, that the plaintiffs procured purchasers for some of these lots ready, able, and willing to buy the same, and demanded of defendant that he procure a certificate of title showing the same to be free from encumbrances; that thereupon the defendant refused to remove the liens of said assessments from said lots, and refused to furnish the certificates of title as demanded and denied his obligation under the terms of the contract to clear any lots of the lien of said assessments, whereby the said sales so made by the plaintiffs were prevented and defeated and the plaintiffs were prevented from performing their part of the contract. It is claimed that, by reason of the conduct of the defendant in preventing the performance of the contract by plaintiffs, the plaintiffs are entitled to recover the

The court found that the plaintiffs placed the lots on the market, advertised them and made the effort to sell the same as alleged in the complaint, and that they procured purchasers for twelve of the lots not encumbered by assessment-liens, for which certificates of title were furnished and deeds made to the satisfaction of the purchasers, and upon which the two thousand three hundred and twenty dollars advance commissions and discounts were received by the plaintiffs. The dispute arises concerning lots 13,16, 54, 55, and 56. As to lots 54 and 55 the court finds that the plaintiffs found purchasers therefor and that defendant hindered and prevented the sales thereof, but that after February 23, 1905, he did not refuse to clear the title of said lots of the assessment-lien, or refuse to furnish the certificate of title provided in the contract, nor insist that the purchasers should pay the assessment or accept title to the lots subject thereto. As to lot 56 the finding is to the same effect, except that it is found that the defendant did not hinder or prevent the sale thereof. As to lots 13 and 16 the court finds that the plaintiffs found purchasers therefor, but that the defendant did not refuse to furnish clear certificates nor hinder or prevent the sales. The plaintiffs found purchasers for lots 54 and 55 at the agreed price of one thousand one hundred dollars each. Under the terms of the contract there was a discount of twenty-five per cent upon the price of lot 55, to which the plaintiffs would have been entitled, as part of the commission, if they had made the sale. They would also have been entitled to one hundred and ten dollars, as ten per cent advance commission on the sale of lot 54, if such sale had been accomplished, making a total of three hundred and eighty-five dollars on the two lots.

The plaintiffs claim that the judgment in favor of the defendant is not supported by the findings and that many of the findings are not supported by the evidence.

The evidence shows that at the time the contract was made the assessment-liens on lots 54, 55, and 56 had not accrued and

In this connection another contention of defendant may be considered. The proceeding for improving the street in question was made under the general street improvement law and the so-called Bond Act. (See General Laws, Pony ed. 1906, pp. 1279, 1330; Stats. 1885, p. 147, and amendment thereto; Bond Act, Stats. 1893, p. 33; Stats. 1899, p. 40.) At the trial Houston claimed that ten-year bonds had been issued on these assessments which were not due and payable except in annual

After his refusal of October 20th to pay the liens, or furnish clear certificates therefor, a correspondence on the subject ensued between plaintiffs and defendant. The plaintiffs steadily insisted that Houston was bound to furnish clear certificates and remove the liens, declared that the sales made would fall through if their demands were not promptly met, and urged immediate action. They also stated that it was useless to try to sell the lots at the schedule prices with the assessment-liens upon them and that in order to enable them to carry out their contract they must have the question settled. The defendant steadily persisted in his refusal' and in his denial of any obligation to pay the liens or furnish certificates clear of such liens. During this correspondence and because of the delay in clearing the title, the buyer of lot 54 withdrew his offer and claimed and obtained a return of his deposit. A certificate of title was ordered for lot 55, but further proceedings upon that sale were delayed by the plaintiffs because of the existing controversy concerning the assessment-

A formal demand for a clear deed and certificate for lot 56 was made on January 20, 1905, and was definitely refused by the defendant on January 24, 1905. On February 23, 1905, the defendant served on plaintiffs a written notice stating that he had executed and deposited in escrow a deed of lot 56, clear of liens, and that he would thereafter, until he should give written notice to the contrary, execute deeds and procure certificates of title clear of encumbrance, for all lots sold by the plaintiffs under the contract, but that he contended and would continue to contend, until he gave written notice otherwise, that he was not bound by the contract to give deeds or procure certificates free from the lien of street assessments, and that he reserved all his rights under the contract, that he did this in order to remove any excuse claimed by plaintiffs for not performing the contract on their part, and to protect himself in case his construction of the contract was finally determined to be wrong, and not as a compromise or with any concession that his construction of the contract was not correct. The deed referred to in this notice did not on its face purport to convey a clear title, but declared that it was made “subject to all taxes and assessments levied or assessed against the property after the 17th day of May, 1904,” which made it subject to the street bond thereon amounting to $483.40. He had, however, deposited with the deed his check to the city treasurer for the amount of the bond, with instructions to the escrow holder to deliver the check to the city treasurer when the deed was taken up. The holder of the bond had agreed to accept full payment in that way and cancel the bond, but plaintiffs were not informed of that fact until the trial of the cause. The plaintiffs did not accept the propositions made in the notice of February 23d, but replied thereto on March 2, 1905, saying that it came too late, that they had been prevented from making sales by his delay and refusal to conform to the contract, and that unless he would give a reasonable extension of time for the performance of the contract by them and would agree thereafter to pay or remove all- street

Although the contract in question provides for the sale of forty-three lots at a separate price for each lot, yet in view of its provisions with respect to the payment of the eight thousand dollars commissions it must be considered as an entire contract. The total price of all the lots according to the schedule prices was forty-seven thousand two hundred and seventy-five dollars. The eight thousand dollars commissions provided for was evidently not calculated upon any percentage of the prices fixed. By the terms of the contract if plaintiffs failed to make a sale of all the lots they would receive nothing excepting the advance commissions and discounts, which would not amount to eight thousand dollars. It is similar in this respect to the contract considered in Cox v. Western Pac. R. R. Co., 44 Cal. 18 . There a contractor agreed to grade and construct a section of a railroad at a fixed sum for the entire work, to be paid from time to time in installments as the work progressed, and it was held that the contract was entire and that the provision for payments from time to time as the work progressed did not make it severable. In the present ease the plaintiffs are not entitled to anything except the advance commissions and discounts until the entire contract is performed, and there is no scale furnished by the contract whereby the whole amount they are entitled to for each lot can be apportioned. See, also, the following authorities: Sterling v. Gregory, 149 Cal. 117 , [ 85 Pac. 305 ]; Potter v. Potter, 43 Or. 154 , [ 72 Pac. 704 ]; Horseman v. Horseman, 43 Or. 94 , [ 72 Pac. 698 ]; 2 Parsons on Contracts, 519; 3 Page on Contract, secs. 1484, 1487, 1493.

“The agent has the election of two remedies by which he may obtain the redress for the wrongful discharge: (1) He may treat the contract as rescinded and sue at once, on a quantum meruit for the service actually rendered by him prior to the revocation and notice thereof; or (2) he may treat the contract of employment as continuing, though broken by the principal, and sue on the breach, for damages. In the latter case he may either sue, for damages, at once upon the breach of the contract, or wait until the expiration of the time of service fixed by the contract and then sue for damages.” . . . (p. 828) “If he elects to treat the contract as continuing and sues at once for the breach, he is entitled to recover the amount of compensation, if any, earned by him prior to the breach, and remaining unpaid, and, in addition to this, the probable damages sustained by him by reason of the breach. Such damages are prima facie the whole amount of unearned compensation which he would have earned if allowed to carry out the contract; but the principal may reduce such amount of damage by showing affirmatively, the burden of proof being on him, that the agent will probably find similar employment

It is claimed on behalf of the defendant that the conduct of the defendant, although contrary to the terms of the contract, did not constitute a sufficient prevention of performance by plaintiffs to justify them in declaring the contract terminated and suing to recover the entire compensation allowed therein. We think this claim cannot be sustained. The question was elaborately discussed in Lake Shore etc. Ry. Co. v. Richards, 152 Ill. 59 , [ 33 N. E. 773 ]. After quoting from the decision in Palm v. Ohio etc. Ry. Co., 18 Ill. 217 , the following passage: “I have examined all the authorities referred to by counsel, and have made diligent search myself, but have found no case where the plaintiff has been allowed to recover for losses sustained by not being permitted to complete the contract, unless he has been prevented from going on with his work by the positive affirmative act of the other party, or where the other party has neglected to do some act without which the plaintiff could not, in the nature of things, go'on with his contract”; the court proceeds to discuss the question, and in the course of the discussion says: “Stress is laid by counsel upon the words ‘prevented from going on.’ . . . The same language— i. e., that the party suing must be ‘prevented’ from performance, has been used in numerous cases, but wherever the attention of the court has been directly called to the sense in which the word has been used, it has been held not to mean that there must be physical prevention, but that any acts, conduct or declarations of the party evincing a clear intention to repudiate the contract and to treat it as no longer binding are a legal prevention of performance.” After some further discussion the opinion proceeds: “Without further quotation from cases, it seems clear, both upon principle and by authority, that where one party to an executory contract refuses to treat it as subsisting and binding upon him, or by his acts and conduct shows that he has renounced it and no longer considers himself bound by it, there is, in legal effect, a prevention of performance by the other party, and it can make no difference

The same principle is stated in De Prosse v. Royal Eagle Co., 135 Cal. 411 , [ 67 Pac. 502 ], where the court says, referring

The defendant claims that the case falls within the rule stated in Cox v. McLaughlin, 54 Cal. 608 , and Cox v. McLaughlin, 76 Cal. 60 , [ 9 Am. St. Rep. 164 , 18 Pac. 100 ], where it was held that where a contract was entire, and the consideration. for the work to be done by plaintiff was to be paid in installments as the work progressed, the mere failure or refusal of the defendant to pay an installment when it became due did not constitute such a prevention of performance as to authorize the plaintiff to sue for the entire contract price without performing all the work, but that it was a sufficient breach to warrant the plaintiff in treating the contract as rescinded, refusing to go on with the work and suing upon a quantum meruit for the value of the work already done. But, as is pointed out in Porter v. Arrowhead R. Co., 100 Cal. 500 , [ 35 Pac. 146 ], those eases were so decided for the reason and upon the ground that the payment of an installment upon the contract price was not a condition precedent to the doing of the work, and that a breach cannot be a “prevention” of performance by the other party, unless it is a breach of a condition precedent, that is, of something which the defendant must do before the plaintiff can perform. In the case at bar we find that the condition broken by Houston, the part of the contract which he repudiated, was a condition precedent to the performance by plaintiffs. The defendant was to furnish certificates showing clear titles to the satisfaction of buyers. The plaintiffs could not complete the sale of any lot upon the contract terms until this was done. It is not for the defendant to say that purchasers might have been found who were willing to take the lots and pay or assume the liens in addition to the contract prices if the plaintiffs had continued to make efforts to that end. The plaintiffs owed him no duty to find such buyers. They had a right to stand upon the contract. The refusal of the defendant to clear the lots of the liens effectually prevented the plaintiffs from completing the making of the sales above mentioned and also from the performance of their part of the contract.

As the case must be reversed for a new trial, it is proper to discuss the question of the measure of damages. The rule applicable to such breach of contract is stated generally in section 3300 of the Civil Code whereby the damages allowed are said to be “the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which in the ordinary course of things would be likely to result therefrom.” There are a few cases, involving the future performance of a broken contract, wherein it has been held that the possibility that the plaintiff would have been able to perform if he had not been prevented, was, from the nature of the undertaking, so remote and speculative that the contract price for full performance could not be allowed as damages. Contracts of agency to sell goods in unlimited quantities on commission have been held to be in this class. (Union R. Co. v. Barton, 77 Ala. 148 ; Brigham v. Carlisle, 78 Ala. 248 , [ 56 Am. Rep. 28 ]; Washburn v. Hubbard, 6 Lans. 11 .) These, however, are exceptions. The general rule is thus stated in 1 Sutherland on Damages, sec. 121: “The decided cases which relate to prospective damages warrant the statement that the injured party is entitled to recover compensation for such elements of damage as are likely to occur; the jury may proceed upon reasonable probabilities, and accept as sufficiently proved those results which, under like circumstances, generally come to pass. It is not, however, to be hence inferred that prospective damages may be recovered on every plausible anticipation, nor that no allowance is to be made for the uncertainties which affect all conclusions depending on future events; it is only intended

There was uncontradicted evidence in the case at bar showing that it was extremely probable that plaintiffs could and would have sold all the lots within the time limited in the contract, if the defendant had been willing to clear the title. It was amply sufficient to support a finding to that effect. The court below made no finding on the point, being evidently of the opinion that no finding was required, inasmuch as it concluded that there had been no prevention of performance. The question whether or not the contract could have been performed was a question of fact to be determined from the evidence, in case the court had concluded that the defendant was liable.

In mitigation of damages the defendant would have been entitled to deduct from the contract price the amount which the plaintiffs would have had to expend in the future performance of the contract and which they were excused from expending by reason of the defendant’s breach and their election to treat the contract as terminated. (1 Sutherland on Damages, sec. 120, p. 340; United States v. Speed, 75 U. S. 84 ; Masterton v. Mayor etc. of Brooklyn, 7 Hill 62 , [ 42 Am. Dec. 38 ]; McMasters v. State, 108 N. Y. 556 , [ 15 N. E. 417 ].) The defendant did not introduce any evidence in mitigation of damages.

We are of the opinion that the court erred in its conclusions of law, first, that the defendant did not prevent the performance by plaintiffs of the contract; and, second, that plaintiffs were not entitled to the agreed commission less the amounts previously paid thereon, and that the motion for new trial should have been granted.

The judgment and order are reversed.

Angellotti, J., and Sloss, J., concurred.