Porter v. the Arrow Head Reservoir Co. , 100 Cal. 500 ( 1893 )

CONTRACTS — CONSTRUCTION OF ROAD — NONPAYMENT OF INSTALLMENTS — RESCISSION — QUANTUM MERUIT. — Where, by the terms of a con-tract for the construction of a wagon-road, payments were to be made to the contractors upon the first of each month for the proportion of the road completed, the failure to make the payments as provided in the contract is a substantial breach of the contract, and gives the con-tractor the right to rescind the contract, cease work, and recover the value of the work already performed in an action of quantum meruit. Appellants brought an action of quantum meruit to recover four thousand two hundred and seven dollars and four cents for labor performed in the building of a wagon-road. The defendant filed an answer denying the allegations of the complaint, and also filed a cross-complaint alleging among other things that plaintiffs had entered into a contract in writing to build a certain wagon-road for the sum of six thousand dollars; that plaintiffs entered upon the construction of said road under the contract and performed labor there-under until about September 3, 1891; that at such time plaintiffs, without right, and without the consent of the defendant company, ceased work and abandoned said contract, and defendant asked for damages for such alleged breach. Plaintiffs answered the cross-complaint admitting the contract, and that the labor performed was done there under, but alleged a rescission thereof by them upon the third day of September, 1891, by reason of default on the part of defendant in making a partial payment upon the work as covenanted in said contract. As disclosed by the writing, the contract price of six thousand dollars was to be paid as follows: "On the first day of each and every month after beginning of work on said road in the following manner and proportions, to wit, that as the amount of work done previous to said first day of the month shall bear according to the lineal feet of the construction of said road to the whole distance between the terminal points mentioned in this contract, which amount is to be ascertained by the engineer of the company, and the payments to be made in such proportion less ten per cent of said sum due on the first day of each and every month." Judgment was rendered for defendant in the sum of six hundred and ten dollars and eighteen cents and costs of suit, and this appeal is from such judgment and the order denying a new trial.

The brief of respondent is composed to a great extent of the opinion of the learned judge of the trail court, and his position as to the law of the case is there fully and forcibly set forth. We will not enter into a detailed review of the alleged errors relied upon for a reversal of the judgment, for we think the views of the trial court upon the principles of law here involved are not sound, and that a new trial must be ordered for that reason. The error of the court has arisen from a misconception of the legal principles declared in the some-what historical case of Cox v. McLaughlin, reported in various volumes of our reports, among others, 84 Cal. 605, and 76 Cal. 60, 9 Am. St. Rep. 164. We quote from the views of the trial judge, as indicated in his opinion, found in the respondent's brief: "It is evident, without citation of authority, that the plaintiffs' right to maintain this action on aquantum meruit depends on the abrogation of the contract referred to between the plaintiffs and the defendant corporation. If that con-tract existed and was in force it would be a direct answer to plaintiffs' claim to recover in the present form of action. To affect the abrogation of the contract in the light of the facts presented in this case there must have been some such substantial violation of its terms on the part of the defendant as would have authorized the plaintiffs to rescind, and such violation must, under the authority of Cox v. McLaughlin,76 Cal. 60, 9 Am. St. Rep. 164, have amounted to either actual or technical prevention." And again: "After a careful review of the testimony I am of the opinion that there was no showing of any prevention, either actual or technical, on the part of the defendant as regards the plaintiff.

Prior to the decision of Cox v. McLaughlin, reported in 76 Cal. 60,9 Am. St. Rep. 164, this court repeatedly and always held that unless McLaughlin's prevention of the execution of the contract by Cox was alleged and found as a fact, plaintiff was not entitled to recoveron the contract, and the court further held that a mere failure or refusal to pay an installment upon the contract price as it became due was not a condition precedent in the con-tract; was not prevention; and did not authorize the plaintiff to abandon the work, and recover the profits he would have made if the work had been completed under the contract. Under the last decision (Cox v. McLaughlin, 76 Cal. 60, 9 Am. St. Rep. 164) the com-plaint had been amended, the contract was no longer relied upon, and for the first time the action was before the court upon a quantummeruit, and it was then sustained. There was no question of "prevention" involved in the case upon that appeal. That element is not considered in the opinion of the court; but a failure to pay an installment of the money due was necessarily held a breach of the contract, for without a breach there could have been no action of quantum meruit, and necessarily no recovery had thereon. There is a wide distinction between "prevention" upon the part of the employer of the further carrying on the work, and other breaches of the contract. The law says breaches amounting to prevention must be of conditions precedent, and the payment of an installment upon the contract price is not such a condition, asCox v. McLaughlin, 76 Cal. 60, 9 Am. St. Rep. 164, repeatedly decides. At the same time that case conclusively holds that a default in payment is such a breach as to justify a rescission and an action of quantummeruit, and that long litigation was concluded upon that principle. There is no question but that nonpayment as agreed upon is a breach of the contract of some character, and Justice McKinstry said inCox v. McLaughlin, 54 Cal. 605: "Assuming that the failure to pay as alleged constituted a breach of the contract, the plaintiff could have treated the specific contract as rescinded, and have brought suit upon the implied promise of defendant to pay the value of the work actually done." And in the very case of Palm et al. v. Ohio and Mississippi R. R.Co., 18 Cal. 219, from which justice McKinstry quotes in extenso to establish that nonpayment does not amount to prevention, the Illinois court said: "The contract provides for no other penalty or liability, and the law imposes no other, except, perhaps, that this violation of the contract by the defendant in failing to make the payment may justify the plaintiff in treating the contract as rescinded, and in suing for the amount due in an action for goods sold and delivered."

In Schwariz v. Saunders, 46 Ill. 18, the owner failed to pay the contractor in the erection of a building an installment of the contract price when due, and the court said: "That he had a right to abandon the work under the circumstances seems a proposition so plain as to require no argument." A failure to pay an installment of the contract price, as provided in the con-tract, is a substantial breach of the contract, and gives the contractor the right to consider the contract at an end, cease work, and recover the value of the work already performed. As we have seen, Cox v. McLaughlin, 54 Cal. 605, is authority to support this principle, and there is also ample precedent from the decisions of the courts of other states. (Conal Co. v. Gordon, 6 Wall. 561;Evans v. Chicago etc. R. R. Co., 26 Ill. 189; Preble v. Bottom,27 Cal. 249; Dobbins v. Higgins, 78 Ill. 440; Shaw v. The Turnpilce, 3 Penr. W. 445; Reybold v. Voorhees, 30 Pa. St. 116; School District v.Hayne, 46 Wis. 511.)

From the foregoing views it follows that, to entitle the plaintiffs to recover in the present action, it is only necessary that they prove a substantial failure upon the part of the defendant to comply with its agreement as to the payment of an installment upon the contract price, and in addition thereto that they rescinded the contract by reason of such failure; and upon these lines a new trial should be had.

It is ordered that the judgment and order be reversed, and the cause remanded.

PATERSON, J., and HARRISON, J., concurred.