Waco Tap Railroad v. Shirley , 45 Tex. 355 ( 1876 )

Moore, Associate Justice.

On the 26th day of July, 1870, Thomas M.. Shirley, the defendant in error, brought suit against the Waco Tap Railroad Company for the recovery of damages for alleged violation of a contract made on the 29th day of July, 1869, wherein he, said Shirley, undertook and bound himself to construct said company’s road, from its junction with the Houston and Texas Central Bail-way to the city of Waco. On the trial of the cause a judgment was rendered against the plaintiff in error for the sum of one hundred and seven thousand six hundred and eighty dollars and ninety-five cents, in American coin, and for the foreclosures of a lien on the road, road-bed, and franchises of said company, to which said Shirley was adjudged to be entitled, to secure the payment of said damages so found to be due him.

Many errors are assigned for the reversal of the judgment. We need consider, however, only such of them as are relied upon and discussed by counsel for plaintiff in error. These in effect present the following propositions:

First. Plaintiff’ in error was induced to enter into said contract through fraud and imposition of said Shirley, and it was therefore null and void.

Second. Plaintiff’ in error was entitled to annul said contract by reason of the insolvency of Shirley, and want of means to comply with and perform it.

Third. The court erred in excluding the testimony offered by said railroad company tending to prove the insolvency of Shirley at the date of the contract, and also when it was annulled, which was relied upon to show that said contract was void for fraud, and also that said company was entitled to cancel and annul it on account of the insolvency of said Shirley.

Fourth. The court should have admitted said testimony on the question of damages.

Fifth. The objection to the evidence offered by Shirley to show the damages sustained by breach of the contract should have been sustained, and the charge of the court on the measure of damages was erroneous; and the finding of the jury in this respect was not warranted by the law or evidence.

Sixth. Thfe decree giving Shirley a lien on the road, roadbed, and franchises of said company was not authorized by the law or facts.

Seventh. The decree directing the enforcement of said lien by the sale of said road, road-bed, and franchises is illegal and erroneous:

In respect to the first two of these propositions, it will suffice to say that it is a plain inference from the contract that the plaintiff in error was not induced to enter into it from any supposed confidence as to, or belief of, Shirley’s solvency or individual pecuniary ability to perform it. Satisfactory stipulations to secure plaintiff against his failure or inability to comply with the contract were embodied in it. We muff infer that plaintiff was satisfied with and relied upon these stipulations, instead of belief in, or dependence upon, representations by Shirley as to his pecuniary condition. The charge of the court on the question of Shirley’s solvency and his representations in regard to his pecuniary condition, and that of his bondsmen, was unquestionably as favorable to plaintiff as could be asked. The testimony in the records is certainly amply sufficient to justify the finding of the jury on these points, in favor of defendant in error, if indeed it would have admitted of any other conclusion than that which they drew from it.

If, as we have already said, the contract was not made on the faith of Shirley’s solvency, or upon any representations of his, as to his own or his bondsmen’s pecuniary condition, there was certainly no error in rejecting the testimony offered to prove that he was insolvent and had no means or property. If such testimony could, under any circumstances, have been received, for the purpose for which it is said in the bill of exceptions it was proffered, it only could have been on the predicate that plaintiff in error had shown or proposed to show that the contract had been in fact made on the faith of Shirley’s representations. But no such predicate was laid, nor was there any proof to do so at a subsequent stage of the case. On the contrary, it was shown that the president of the company was fully informed of Shirley’s pecuniary condition, and he and the company expressed full and entire satisfaction with the bond given by him, as stipulated in the contract.

The point is made in this court that the testimony excluded was relevant, and should have been admitted, on the question of damages; for it is said if Shirley was insolvent and unable to carry on and fullffl the contract, although up to the date of its annulment he had not been in default, and the company may not have been authorized to treat it as void for fraud in its execution, or cancel it for a breach on his part, still, if he was unable to consummate and complete it, he would not be entitled to the same amount of damages as otherwise he might recover. We fully admit the force of this suggestion in cases to which it is applicable. Certainly where suit is brought by a party for the wrongful breaking up and annulling of a contract on which it is claimed large profits would have been realized, it is admissible to show, if it can be clearly made to appear, that it was impossible for the party to have completed the contract had he not have been interfered "with, for the purpose of showing that the loss of the profits which would have been realized by the completion of the contract was attributable, in part at least, to his own inability to have fulfilled it, and not altogether to its breach by the other party. The prompt and due execution of the contract may be of the utmost importance, and surely one is not in all cases bound to wait until it is too late to have it completed within the desired time for the contractor to demonstrate his inability to do this, on peril of paying him all the profits to be realized from a performance as stipulated, if it can be shown beyond question that he was unable to complete it; and especially where the contractor cannot respond in damages for a breach on his part. But when evidence is offered merely on the hypothesis that although the plaintiff had not violated the contract he evidently would have been unable to complete it, it must be shown beyond all reasonable doubt, in view of all the facts of the case, that the anticipated result must have ensued in the near future if it had not been anticipated by the termination put to the contract. In view of the facts of this case, was the evidence rejected of such a character as that it should have been admitted on the ground here insisted on ? We think not. The contract gave the company full control over the progress of the work, and enabled the company to terminate it certainly in a month’s time, if the contractor should for any cause fail to make satisfactory progress with the work. It is a matter of common observation that contracts of this sort are frequently made with parties whose integrity, energy, and business capacity give the only security for their due and prompt fulfillment, and that these qualities are, indeed, regarded as far better assurance for a compliance with the contract than the mere solvency of the contractor. Aside from these considerations, it is a sufficient answer to the objection to say that this was not the ground upon which the evidence was offered. It has been often held, if evidence is not admissible for the purpose for which it is offered, this court will not reverse the judgment if the evidence would have been admissible on some other ground.

The subsequent failure of the sureties in the bond, given when the contract was executed, unquestionably, gave the plaintiff no right to annul it without, at least, affording Shirley the opportunity to substitute other sufficient sureties in their place.

It is shown hy the ruling on the exceptions to the evidence, as well as the instructions given to the jury, that the court held, if the company wrongfully declared the contract null and void, and had taken it out of his hands, thereby preventing him from completing it, in addition to his special damages Shirley was entitled to recover the difference between the price stipulated in the contract to be paid for the work, and the actual cost of the work done on the road after the first day of April, 1870, the date when the contract was annulled. The plaintiff in error complains that the proposition set forth by the rulings of the court on this branch of the ease is in violation of a well established principle, concurred in as it is insisted both in the English and American courts, that future profits cannot be allowed in estimating the damages whether the action is in the form of contract or tort. (Sedg. Meas. Dam., p. 69.) Ho doubt abundant authority can he easily found to sustain this general proposition, but while this is so, it is also true that it is the tendency in common law courts to approximate the rule of the civil law, which in general refuses to compensate in damages for the loss of perspective profits. The profits, however, in the case announcing this general rule will most generally be found to be of a collateral or contingent character, or too uncertain and speculative to furnish ground for a reasonable and just compensation. It is certainly as firmly established as the general rule to which we are cited by the plaintiff, that in a certain class of cases future profits are allowed. The distinction in the two classes of cases is well drawn by Chief Justice Helson in the leading and well considered case of Masterton v. The Mayor, &c., of. Brooklyn. (7 Hill, 61.) He says: “It is not to be denied that there are profits or gains derivable from a contract which are uniformly rejected as too uncertain and speculative in their nature, and too dependant on the fluctuations of markets, and the chances of business, to enter into a safe or reasonable estimate of damages. Thus, any supposed successful operation the party might have made, if he had not been prevented from realizing the proceeds of the contract at the time stipulated, is a consideration not to be taken into the estimate; besides the uncertain and contingent issue of such an operation in itself considered, it has no legal or necessary connection with the stipulations between the parties, and cannot therefore be presumed to have entered into their consideration at the time of contracting. It has accordingly been held that the loss on any speculation or enterprise in which a party may have been embarked, relying on the proceeds to be derived from the fulfillment of an existing contract, constitutes no part of the damages to be recovered in ease of breach. So a good bargain made by a vendor, in anticipation of the price of the article sold, or an advantageous contract of resale made by a vendee, confiding in the vendor’s promise to deliver the article, are considerations always excluded as too remote and contingent to affect the question of damages. * * * Where the books and cases speak of the profits anticipated from a good bargain, as matters too remote and uncertain to be taken into account in ascertaining the measure of damages, they usually have reference to dependant and collateral engagements, entered into on the faith and expectation of the performance of the principal contract.

“But profits or advantages which are the direct and immediate fruits of the contract entered into between the parties, stand upon a different footing. These are part and parcel of the contract itself, entering into and constituting a portion of its very elements, something stipulated for, the right to the enjoyment of which is just as clear and plain as to the fulfillment of any other stipulation. They are presumed to have been taken into consideration and deliberated upon before the contract was made, formed perhaps the only inducement to the arrangement.”

The distinction drawn in this case, and the general principle laid down in it, that future profits are to be considered in ascertaining the damages sustained for the breach of such contracts as are here under discussion has been recognized and followed in numerous cases in almost every State of the Union; and, so far as we are aware, without a single dissent.

In the case of Burrell v. Hew York and Saginaw Solar Salt Company, 14 Mich., 34, the rule is directly and forcibly stated: “ Where labor is to be performed, from which profit is to spring as the direct result of work done at the contract price, and one party is prevented from earning such profit by the wrongful act of the other, the law will presume that such loss is the direct and natural result of the breach of the contract.” (The Philadelphia, Wilmington, and Baltimore Railroad Company v. Sebre Howard, 13 How., 307; Gilbert v. Kennedy, 22 Mo., 117; Richmond v. Dubuque, &c., R. R. Co., 26 Iowa, 191.) In some cases the rule has been extended even further than here stated. (Hale v. Front, 35 Cal., 229, and cases cited.)

We are referred by the plaintiff to several cases from the Supreme Comt of Kentucky which, it is insisted, decided the contrary. But an examination shows that this is a mistake. The point decided in these cases is, that a proffer to perform a condition precedent, and a refusal by the other party to accept, will exonerate the party making the tender from liability for non-performance. But the refusal of such an offer will not always entitle the party mating it to the same recovery that actual performance would have given; that is, the measure of damages is not the contract price to be paid for the work or .labor when performed. This does not negative, but rather goes in support of the rule, that the profits on the contract is the price to be paid, less the expenses of every kind to be incurred in fulfilling it, as held in the case previously cited, furnish the proper measure by which the damages are to be ascertained.

But while we concede the correctness of the proposition announced in the case cited, as well as many others to which we might have referred, that future profits are to be taken into consideration in estimating the damages sustained by a breach of contract like that in this case, it is necessary, to avoid misconception, to say that the mere statement of the brief formula — that the measure of damages in such cases is the profits or difference in what it would cost to complete the work as stipulated in the contract and the price to be paid — might, if not accompanied by proper explanations and qualifications, mislead, and in some cases result in injustice. It is the purpose of the law to compensate the party injured by damages for the loss which he has sustained by the wrong done him. In estimating this loss, as the cases cited plainly show, the difference in what it costs to do the work and the price to be paid for it, is to be taken into the estimate, and is no doubt the leading and most important feature from which the amount of such loss is to be ascertained. But it is not the sole guide or only fact to be considered in doing this. The contract shows the amount to be paid for the entire work, and the probable cost of completing it may be satisfactorily established by proof of the value of the material, labor, and skill required to do it. If some of the facts to be considered are not susceptible to direct and positive proof, resort can be had to the opinion and judgment of men who are shown to have information and experience which qualify them to testify as to such matters.

The cause of action accrues immediately on the breach; suit may be' brought at once; witnesses have therefore to estimate the cost of labor and material at that date. Subsequent fluctuations are not to be taken into account. (7 Hill, 62.) And in tins particular, the charge of the court seems slightly indefinite or inaccurate. It may be several years before the contract was to have been completed and payment made. The contractor is relieved from all anxiety, trouble, and labor about its completion. It is attended with no further risk on his part. He has to make no additional outlay, and is entitled to his damages immediately. These things should be considered. And, guided by the rule just indicated for ascertaining their value, due allowance should be made for them in determining the amount of real loss by the breach of contract and the just compensation to be made for it. The rule, that the difference between the cost of doing the work and what was to be paid for it is not to be taken an the literal and absolute standard by which to measure the damages, is fully sanctioned by the Supreme Court of the United States. (United States v. Speed, 8 Wall, 77; see also Seaton v. Second Municipality, 3 La. Ann., 44.)

It remains to be considered whether there was any error in the verdict of the jury and the judgment of the court as to the alleged mistake in the contract, whereby a lien is established-in favor of plaintiff below for entire damages adjudged him. It is insisted by the counsel of the defendant in this court, though the point does not appear to have been made below, that he has an equitable lien, by the terms of the contract as it stands, for the whole amount of damages to which he was entitled. In this we in part agreeX^For the amount found by the verdict to be due, for which it was stipulated that a mortgage should be given, the contract, we admit, has, in equity, the effect of a mortgagey/But we cannot agree that it can be held to operate as an equitable lien to any further or greater extent. The stipulation for mortgages at the time, and for such sums as are specially mentioned in the contract, raises an implication that no other or different mortgage or lien was intended to be given. The charge in the amended petition, that, by mistake and oversight in drawing the contract, a clause was omitted, whereby a lien was to have been given to secure Mm against loss, if there was a breach of the contract by the company, seems to us somewhat incon-. sistent with the proposition now insisted on, and to urge that the contract as drawn, gives Mm the same lien as that wMch was to have been.

If it can be shown that a mortgage was to have been given Shirley for such damages as he might sustain in the event of a breach of contract by the company, and that such stipulation was omitted from the contract by oversight and mistake, undoubtedly, as between the parties, the mistake may be corrected, and the contract, as in fact made and agreed upon, enforced. It is, however, a well-established elementary principle, that, he “who seeks to rectify an instrument, on the ground of mistake, must be able to prove not only that there has been a mistake, but must be able to show exactly and precisely the form to which the deed ought to be brought, in order that it may be set right according to what was really intended, and must be able to establish, in the clearest and most satisfactory manner, that the alleged intention of the parties to which he desires to make it conformable, continued concurrently to the minds of all parties down to the time of its execution. The evidence must be such as to leave no fair and reasonable doubt upon the mind that the deed does not embody the final intention of the parties.” (Kerr on Mort, 421.)

It is quite obvious, we think, that there was a failure of defendant to meet and satisfy almost every one of these essential requisites. The only evidence found in the record having the slightest allusion to the alleged mistake in the contract, is that of SMrley himself, of Speight, the president of the company when the contract was made, and one of his attorneys by whom the original petition was filed, and of-Lang, one of Ms witnesses. SMrley says: “We were several days consulting about the terms of the contract, and drawing up a memorandum of the provisions. We concluded the memorandum of the provisions, and gave it to Messrs. Eussel & Hicks, attorneys, to draw the contract. I have not seen it since. * * * The company had notMng to secure me, and we stipulated in the memorandum that I was to have a lien on all the property of the railroad to secure me in my rights under the contract.” “ Speight,” says tire statement of facts, “testified as to the drawing of the contract, and what occurred subsequently, as stated by SMrley. His recollection was that it was read over to Mm and Shirley by the attorney, and that it embraced what was in the memorandum. The intention was to give Shirley a lien to protect him in his rights.” Lang says: “ I do not now recollect the construction and understanding of the contract with Shirley hy the board. The impression made on my mind was that it was a mortgage on the road to secure Shirley for his work, for I recollect distinctly that I stated to the members of the board, and the engineer, I think, that under that contract the Central Railroad would get our franchise.” Certainly, no comment is necessary to show that this testimony, vague, indefinite, and loose, and to some extent contradictory, is altogether insufficient to authorize the malting such an addition to the contract as is here sought. Especially as there are stipulations in it to which the language of the witnesses may refer fully as appropriately as to that charged to have been omitted. It is also to be noted that no allusion is made to the alleged omission in the original petition, drawn hut recently after the execution of the contract, and signed by Speight as one of Shirley’s attorneys, and that it was nearly four years after the bringing of the suit before the amendment was filed in which the mistake in drawing the contract is first set up.

There is, however, another view of the matter which still more conclusively shows that the defendant is not entitled to the relief asked in the amended petition, and, on the facts as they appear in the record, the verdict and judgment cannot be sustained. The authority given Speight to contract for the building of the road was limited hy the qualification that any contract made by him should be subject to the ratification and approval of the company. If the memorandum contained the stipulation alleged, there is not the slightest reason to suppose that the company had any knowledge of it. Speight says he “thinks the contract embraces what was in the memorandum.” It cannot therefore be supposed that he informed the company that so important a stipulation was omitted. The company had before them, as we must infer, merely the contract as drawn hy the attorneys and signed by Shirley and Speight. This instrument contains all the stipulations of the agreement to which it can be said the parties mutually agreed, and is the only contract which was ratified by the board of directors, and, as we must conclude, contains all for which the company is bound. If anything is omitted from it, which by the agreement with Speight should have been, and as Shirley supposed was, inserted in it, this might be sufficient to justify bis asking the court to cancel and annul the contract. But it certainly does not entitle him to have it corrected, so as to conform to such an agreement or his understanding of it, and then enforce it, as thus corrected, against the company. To do so would be to bind the company for that to which they had never agreed. Shirley was fully aware that Speight had no authority to contract or bind the company without its ratification and approval.

We see no reason why the court might not appoint the sheriff as well as any one else commissioned to' carry into effect its judgment foreclosing the mortgage lien. Tins was the legal effect of the judgment. It is of no consequence that the order of sale is directed to the person to whom the court confides the duty of selling the property by his official title, or even in his official character, instead of that of commissioner. It is to the nature and character of the act to be done under the order that we must look, and not to the mere form and style of the order, to determine as to its validity or that of whatever may be done under its authority. Whether the sheriff, under the authority conferred by the order of sale, should apply the money received and execute a conveyance, unless he is especially ordered to do so in the order, until his report is confirmed, and the application of the one and the execution of the other is ordered by the court, has not here been discussed and need not be considered.

The judgment is reversed and the cause remanded.

Ebversed and remanded.

Note. — This case was taken from the Austin Term, and decided at Tyler December 28, 1875.