Hammond v. Hannin , 1870 Mich. LEXIS 103 ( 1870 )

Cooley, J.

The material facts in this case are as follows: On September 10, 1864, Hammond contracted to sell to Hannin an eighty acre lot in the County of Yan Burén, for the sum of five hundred dollars, of which one hundred and twenty dollars were to be paid down, and the balance in subsequent installments. The contract was in writing, and was signed and sealed on behalf of Hannin, by Bartly Hannin, her husband, who had oral authority for the purpose. Hannin took possession and cut and sold off considerable timber, paid taxes for two years, and gave contracts to two persons for the sale to them of different parcels of the premises.

The legal title to the land appears to have been, at the time the contract was entered into, in one John M. Gordon, an insane person, of whom one Mickle was committee. T. W. Mizner, Esq., of Detroit, was acting as agent for Mickle, and as such sold the lands to Hammond, who appears to have purchased in good faith, and in the belief that he was to obtain a good title. The conveyance, however, was not yet made. Hannin paid Hammond the whole amount of the purchase money agreed to be paid by her, except one hundred and three dollars, and on September 14, 1866, tendered payment of this sum and demanded title; but Hammond having at that time discovered that Mickle had no authority, as committee, to make sale of lands in Michigan, declined to execute a deed on this ground, and Hannin then brought action against him to recover damages for breach of his contract to convey.

The main question which has been discussed upon this record, regards the proper measure of damages; but there are some questions of minor importance which may properly be considered first. The defendant objected to oral proofs of the authority by the plaintiff to her husband to sign the contract on her behalf, but the objection was overruled. If this evidence had been all that appeared to connect the plaintiff with the contract, I should not be satisfied of the correctness of this ruling. Our statute of frauds requires the authority of the agent acting for another in the sale of lands to be in writing (Comp. L., $8180); and though, perhaps a strict construction of the section would confine its operation to the agent of the vendor alone, I am inclined to think that by necessary implication, the authority of the agent of the vendee is to be evidenced in the same manner. — Bro. Slat. Ft., § 268. It was not essential, however, that the contract should be under seal, and an oral ratification of it afterwards was sufficient.—Maclean v. Dunn, 4 Bing., 722; Hunter v. Parker, 7 M. & W., 322; Worrall v. Munn, 5 N. Y., 229; Bank of Metropolis v. Guttschlick, 14 Pet., 29. The subsequent ratification was so abundantly proved in the present case that I am inclined to treat this error of the Court — if such it was — as immaterial. The subsequent payment by the plaintiff of nearly all the purchase price, and her contracts for the sale of portions of the land, were undisputed, and were such unequivocal acts of ratification as to put that fact beyond controversy. We ought not, I think, to reverse a judgment for an error which could not possibly have been productive of injury.

The second error complained of is • that the plaintiff was allowed to prove by parol that she had paid certain taxes upon the premises, against' the objection of the defendant, that the receipts for these payments were the better evidence. We think, however, that the. fact of payment of money may always be proved by parol, whether a receipt was taken for it at the time or not. It is true it has been held that if a receipt is given it is an official document which may be used as primary evidence; Johnstone v. Scott, 11 Mich., 232; but this does not preclude other proof. On the contrary, the receipt itself, if put in evidence, would be open to contradiction or explanation, by the evidence of persons having personal knowledge of the facts; and the parol evidence can therefore in no sense be regarded as secondary. The receipt,. if proved, might save the necessity for calling witnesses, but it could not render them incompetent.

An objection which was taken to evidence by the plaintiff to show sales of the land made by herself, is equally untenable. The Court received this evidence for the sole purpose of showing a ratification by the plaintiff of the purchase made in her name by her husband. For this purpose it was unobjectionable.

Another objection was taken to a ruling by the Court excluding evidence of a deed given upon an auction sale of the same lands made afterwards by the guardian of the owner under an order of the Probate Court. The evidence was offered in order to show that the value of the land, as determined by the public sale, was much less than that testified to by the plaintiff’s witnesses, but it appears that the defendant was afterwards allowed to put in evidence the files and records of the Probate Court to show the same facts proposed to be shown by the guardian’s deed, and the error, if any, was thereby cured.

Upon the principal question, the Court below ruled that the plaintiff was entitled to recover "compensation for the loss and injury sustained by the plaintiff in consequence of defendant’s breach of contract, and that in estimating the damages upon this principle of compensation, the jury had the entire range from the amount that was paid on the contract, to the highest value of the land that was proven at the time of the breach, less the amount unpaid upon the same.” In other words, that the plaintiff was entitled to recover the profits which she would have made by the good bargain she had lost, if such it proved to be.

There is po doubt that the instruction given by the Court is correct as a general rule. Where a breach of contract occurs, the law aims to make compensation adequate to the real injury sustained, and to place the injured party, so far as money can do it, in the same position he would have occupied if the contract had been fulfilled.—Sedg. on Dams, 174; Robinson v. Harman, 1 Exch., 855; Lock v. Furze, L. R., 1 C. P., 441; Hill v. Hobart, 16 Me., 164; Lewis v. Lee, 15 Ind., 499.

And where the carrying out of the contract would have given one of the contracting parties the enjoyment of a particular thing, and he has lost it, the damages he will be entitled to, are the value of that which he has lost.—Ibid., and see Engel v. Fitch., Law R., 3 Q. B., 314.

To this general rule, which is so entirely undisputed as to make further citation of authorities superfluous, an exception was introduced in the case of contracts for the sale of land, by the decision in Flureau v. Thornhill, 2 Wm. Bl., 1078. That case is not so fully stated nor so completely reasoned as would be desirable,, but though often criticised on this account, and sometimes questioned, it has stood the test to the present time, and is the law of England at this day. “ Upon a contract for purchase,” said Chief Justice De Grey, “if the title proves bad, and the vendor is, without fraud, incapable of making a good one, I do not think that the purchaser can be entitled to any damages for the intended goodness of the bargain which he supposes he has lost.” And Blackstone, J., added, “These contracts are merely upon conditions, frequently expressed but always implied, that the vendor has a good title. If he has not, the return of the deposit with interest and costs, is all that can be expected.”

Upon this exception to the general rule, subsequent cases have engrafted some other exceptions. The leading one of these cases is Hopkins v. Grazebrook; 6 B. & C., 31. In that case it appeared that Hill & Co. had contracted to sell certain premises to one Harwood, and Harwood had contracted to sell to the defendant. A difficulty had sprung up between Hill & Co. and Harwood, but defendant disregarding this fact, and assuming that the difficulty would be arranged and the contract with himself performed, put the premises up at auction, and sold them to the plaintiff. The difficulties, however, were not arranged, and he was sued for breach of his contract. Abbott, Ch. J., said “the defendant should not have taken such a step without ascertaining that he would be in a situation to offer some title j and having entered into a contract to sell without the power to confer even the shadow of a title, I think he must be responsible for the damage sustained by a breach of his contract.”

In Lock v. Furze, L. R., 1 C. B., 441, the defendant, who had a right to grant leases in possession only, made a contract to give one in reversion, and it was held that the plaintiff was entitled to recover for a breach of this contract damages measured by the value of the lease bargained for.

In Engel v. Fitch, L. R., 3 Q. B., 314, the defendants, being mortgagees of a lease, sold it to the plaintiff, undertaking to give possession.' The mortgagor refused to surrender possession, and the defendants, though entitled to put him out by ejectment, declined to exercise that right. The Court hold the plaintiff entitled to recover full damages, and the Exchequer chamber afterwards affirmed the judgment.—L. R., 4 Q. B., 659.

In Bush v. Cole, 28 N. Y., 261, auctioneers, having authority to sell at not less than $2,800, sold to the plaintiff at $2,250. The Court was of opinion that although their principal was not bound by the contract of sale, the auctioneers were, and that the measure of damages was the value of that which the contract, if performed, would have assured to the vendee.

Pumpelly v. Phelps, 40 N. Y., 59, was a case where a trustee, having power to sell on the written consent of the cestui que trust, contracted in his own name without such consent. The cestui que trust, refusing to affirm the sale, the purchaser was held entitled to full damages.

The principle underlying these cases is, that if a party enters into a contract to sell, knowing that he cannot make a title, he is remitted to his general liability, and the exception introduced by Flureau v. Thornhill does not apply. So if a person undertakes that a third party shall convey, and is unable to fulfill his contract, the authorities are that he shall pay full damages. Such contracts are speculative in character, and the party giving them understands the risk he assumes when the covenant is entered into.—Dyer v. Dorsey, 1 Gill & J., 440; Pinkston v. Huie, 9 Ala., 252; Gibbs v. Jemison, 12 Ala., 820; Gale v. Dean, 20 Ill., 320.

There are also numerous cases which decide that if the vendor acts in bad faith, — as, if having title he refuses to convey, or disable himself from conveying, — the proper measure of damages is the value of the land at the time of the breach; the rule in such case being the same in relation to real as to personal property.—McConnell’s heirs v. Dunlap’s devisees, Hardin, 41; Gerault v. Anderson, 2 Bibb., 543; Davis v. Lewis, 4 Bibb., 456; Driggs v. Dwight, 17 Wend., 71; Dustin v. Newcomer, 8 Ohio, 49; Adams v. M’Millan, 7 Port., 73; Trull v. Granger, 8 N. Y., 115; Martin v. Wright, 21 Geo., 504; Cox v. Henry, 32 Penn. St., 18; Burr v. Todd, 41 Penn. St., 206. And the cases before referred to in which a party undertook to sell that which he did not own, and knew he could not control, may also, where the other party is not informed of the defect, be considered as involving a degree of bad faith, and have generally been so regarded by the courts.

But, on the other hand, if the contract of sale was made in good faith, and the vendor for any reason is unable to perform it, and is guilty of no fraud, the clear weight of authority is, that the vendee is limited in his recovery to the consideration money and interest, with perhaps, in addition, the costs of investigating the title.— Walker v. Moore, 10 B. & C., 416; Sikes v. Wild, 1 B. & S., 587; Same case, 4 B. & S., 421; Baldwin v. Munn, 2 Wend., 399; Peters v. McKeon, 4 Denio, 546; Conger v. Weaver, 20 N. Y., 140; Allen v. Anderson, 2 Bibb., 415; Goff v. Hawks, 5 J. J. Marsh, 341; Combs v. Tarlton’s Admr., 2 Dana, 464; Seamore v. Harlan’s heirs, 3 Dana, 410; Herndon v. Venable, 7 Dana, 371; Hall v. Delaplaine, 5 Wis., 206; Foley v. McKeegan, 4 Iowa, 1; Sweem v. Steele, 5 Iowa, 352; Blackwell v. Lawrence Co., 2 Blackf., 143; Thompson v. Guthrie, 9 Leigh, 101; Loomis v. Wadhams, 8 Gray, 557; Dunnica v. Sharp, 7 Mo., 71; McClowry v. Croghan, 31 Penn. St., 22; Dumars v. Miller, 34 Penn. St., 319; Hertzog v. Hertzog’s Admr., Ibid., 418; McNair v. Compton, 35 Penn. St., 23; Saulters v. Victory, 35 Vt., 351.

There are some cases which disregard the exception introduced by Flureau v. Thornhill, and which, treating the question of good or bad faith in the vendor as an unimportant circumstance, hold that the measure of damages on breach of a contract to convey lands should be the same as on breach of a contract for a sale of personalty. It is remarkable that, though this general subject has been very fully discussed in the English cases, and in many of the American cases referred to, the cases opposed to them appear generally to have entirely overlooked that discussion, and are evidently decided on first impression and without that investigation and reflection which so important a subject usually receives. The cases of Hopkins v. Lee, 6 Wheat., 109; Wells v. Abernethy, 5 Conn., 222; Buckmaster v. Grundy, 1 Scam., 310; McKee v. Brandon, 2 Scam., 339; Gale v. Dean, 20 Ill., 320; Cannell v. M’Clean, 6 H. & J., 297; Bryant v. Hambrick, 9 Geo., 133; Whiteside v. Jennings, 19 Ala., 784; Hill v. Hobart, 16 Me., 164; Warren v. Wheeler, 21 Me., 484; Hopkins v. Yowell, 5 Yerg., 305; Barbour v. Nichols, 3 R. I., 187; Nichols v. Freeman, 11 Ired., 99, are here referred to, and the weight of authority opposed to them is so overwhelming, and rests upon decisions so fully and so carefully considered, that even those who are dissatisfied with the doctrine declare the 'principle too firmly settled to be disturbed.—See Engel v. Fitch, L. R., 3 Q. B., 314; Sedg. on Dams,, 3d Ed., 188, marg. note

One very strong reason for limiting the recovery to the consideration money and interest in cases free from bad faith is, that the measure of damages is thus made to conform to the rule where the party assumes to convey land which he does not-own, and an action is brought against him on the covenants of title, contained in his deed. This reason is made specially prominent in many of the cases, and it cannot be denied that it is an anomaly if the vendee is restricted to the recovery of one sum, when an ineffectual deed is given, but allowed to recover a larger compensation in case the vendor, when he discovers the defect in his title, has the manliness to inform the vendee of the fact, and to decline to execute worthless papers. Had Hammond executed and delivered a deed when it was called for, the present controversy could not have arisen; and his failure to do so, which worked no additional wrong to the vendee, and was all that he could do consistent with good faith and honorable conduct, is the only ground upon which the plaintiff can claim to retain the large damages for the loss of her bargain, which were awarded her in the present case. So long as the rule stands which thus limits the damages in suits upon the covenants of title, so long ought we, also, I think, to adhere to the decisions which restrict the recovery, as above stated, in actions upon contracts to convey.

It remains to inquire whether the vendee in the present case is entitled, under the decisions, to recover damages for the loss of her bargain, either on the ground that the vendor assumed to sell what he knew he did not own, or that he has acted in bad faith. The vendor’s good faith in the whole transaction was fully conceded on the trial, and was assumed by the Circuit Judge in his rulings. And the instructions the Judge gave are not based on any supposition that the vendor had knowingly bargained to sell what he did not own. The contrary is clearly inferable from the evidence. It is true the vendor understood that he had not yet obtained the legal title, but he is assumed to have supposed he had the equitable title, and a right to compel the conveyance of a legal title; and the contract was, therefore, no more of a speculative character than if he had supposed the legal title to have been already vested in him. The general principle does not depend on whether the vendor’s supposed title was a legal one or not.—See Pounsett v. Fuller, 17 C. B., 660. When, therefore, the Circuit Judge laid down a general rule which made the belief or good faith of the defendant unimportant, and which would give the vendee in every case a compensation for the loss of Ms bargain, where for any reason the vendor-fails to perform, I think he erred, and that the judgment should be reversed and a new trial ordered.

The other Justices concurred.