Nelson v. Hatch , 75 N.Y.S. 389 ( 1902 )

Hatch, J.:

When this case was before this court upon the former appeal, it - was held that the action was one to recover damages for a breach of the contract, the subject of the action, and it having been determined by the referee before whom it was tried that it was an action to rescind the contract, we reversed the judgment and ordered a new trial. (56 App. Div. 149.) Upon the new trial, the plain tiff has recovered judgment for the damages demanded in his complaint.. The facts which appear upon the present trial are not essentially different from those which appeared upon the first trial, and as they have been fully stated in the case as reported upon that appeal, it is not essential that we again restate them in detail.

The. obligation which the plaintiff assumed by the terms of his Contract was to advance for the purposes specified therein the sum. of $10,000, $5,000 of which was to be paid to Hatch & Warren between March 1, 1891, and May fifteenth of the same year, and of the remaining $5,000 it was to be advanced in such “ sums as may. be desired by the parties of the first part,” but no sum greater in amount than $1,000 of the last $5,000 at a time should be required to be paid by the plaintiff, and he was entitled to a notice of thirty days of an intention to draw such sum. Taking into consideration the object sought to be accomplished by the contract and the purpose of the parties thereunder, it is evident that it was contemplated that the first $5,000 .would create a fund, by virtue of which- the, defendants would be enabled to make necessary advances for the diligent prosecution of the action, which had then been begun and was pending in Colorado. We think the fair, construction of this contract, relating to the- payment to be made by the plaintiff thereunder, required the payment of the $5,000 within the time expressly stipulated, but that the second $5,000 was not required to be paid upon the mere arbitrary desire of Hatch & Warren, but that it: intended to provide that as the necessity of the ■ litigation required, Hatch & Warren had the right .to demand of the plaintiff payment of the additional $5,000 in sums of $1,000 each as should be required for the diligent prosecution of the action, and unless such sums were required for that purpose, there was no right upon .the part of Hatch & Warren to demand the same and no obligation on the part of the plaintiff to pay the same, although demand was made therefor, unless it was required to discharge proper obligations in connection with the prosecution of the action.

Concluding that this is the proper construction of this contract, the testimony is to be examined for the purpose of seeing if Hatch & Warren, or either of them, was guilty of any acts which constituted a breach of the same prior to the plaintiff’s refusal to make further payments thereunder, and whether he was excused from so doing. The testimony is undisputed that prior to November 23, 1891, the plaintiff had paid to Hatch & Warren the first $5,000 within the stipulated time, and had also advanced, upon the demand of the defendant Hatch, $2,000 of the second $5,000. At this time it appeared without dispute that the action brought by Mrs. Daniels was pending in the Colorado court and that the same, by reason of default in taking the proper proceeding and necessary steps, was in a condition where it could be dismissed, and was only saved from such result by the consideration and stipulation of the attorneys for the defendant therein ; that the reason for this condition rested in the fact that the attorneys representing Mrs. Daniels in Colorado had not been-furnished with sufficient funds to enable them to take the proper and necessary steps in protection of Mrs. Daniels’rights therein. . Of these facts the defendants were informed by the attorneys in Colorado, and one of them, Mr. Donnolly, had a personal interview with the defendant Hatch and requested that he make payment in the sum of $500 in order that such attorney might proceed with the action. Hatch refused at that time to make payment of such sum, or any other, and only paid in immediate' connection with the lawsuit, a small sum for clerk’s fees, and declined to pay more. As appears by the books of Hatch & Warren, there had been paid out up to and including the 30th day of September, 1892, the sum of $2,148.95. This sum was made up in part of $200 in cash for some undisclosed purpose, $423.04 to Warren and $1,0'T5 to Mrs. Daniels. There was at this time in the hands of Hatch, of the payments made by the plaintiffs herein, $4,851.05, ■ and there was no immediate pressing necessity for the advance of this sum at that time. On the contrary, a small proportion only was necessary to relieve the default of Mrs. Daniels in her action and for the orderly prosecution of the same. Under such circumstances, it is perfectly clear that it was the duty of Hatch & Warren to make the necessary advances; and.that the plaintiff could not be called upon to pay further sums until there was a necessity therefor. This being the .relative condition of the. parties at this time, Mr. Hatch*,, under date of thó '27th of February, 1891, made a demand, upon'the plaintiff for a. further payment of $1,000. The plaintiff was excused, from ■making this payment.and could not be-played in default, by refusal to.comply with the demand "for two. reasons, first, .there was no right in the defendants to demand the payment, under the terms of ■the contract, and, second, the plaintiff after the demand saw the ■défendant Warren and was informed by him that the money was not then wanted, and.that he need not make the payment at that time. In the face of. this condition, however, the defendants, under date of November 23, 1891, wrote that the plaintiff .was .in default by failing to pay the last sum demanded, and that.by reason thereof the contract with him. “ is canceled-—-has becomevoid and' of no further effect.” It is clear, therefore, that Hatch & Warren oh that date were guilty of a clear breach of the contract. First, for the reason that the defendant Hatch, who had the custody of the money, had refused to advance'the same for the'purposes for which it had been paid, and ■such refusal was in violation of the terms of the contract; second, for the reason that in violation- of its terms and when the plaintiff . was not in default, they notified him that they canceled the same and. elected'to treat it as: void and of no effect. These acts constituted. clear breaches of the contract by the defendants, and the plaintiff, by reason thereof, was absolved from a further fulfillment of the same.

The latter act constituting the breach is averred in the complaint as one of the grounds for the maintenance of this action. The complaint does not in terms aver a breach of the contract in the refusal by Hatch to pay the money as necessity required for the proper prosecution of Mrs. Daniels’ action. The' evidence, however, of such breach was given and stands undisputed in the record, and no objection was taken that it . was not admissible under the complaint; consequently, it may be considered by this court, and the ■complaint be deemed to be amended in order to give effect to the proof - as nobody is prejudiced or misled thereby. (Drexel v. Pease, 37 N. Y. St. Repr. 166; Bate v. Graham, 11 N. Y. 237.) It seems clear, therefore, that a breach of this contract was established by undisputed proof prior to the time when Warren withdrew from the prosecution of the action. But we are also of the opinion that this .action in withdrawing and refusing to perform his contract with Mrs. Daniels constituted a breach of the contract with . the plaintiff, and that by reason of it the latter was absolved from further fulfillment of its terms. The contract between the parties to this action is to be construed in connection with the contract between Hatch & Warren and Mrs. Daniels. By the terms of the latter, it was stipulated that Mrs. Daniels should have the personal service of Warren in the conduct of the litigation. It is clear that it could not be fulfilled in conformity with its terms unless Warren gave his personal service. The consideration for the plaintiff’s contract was the assignment of one-half of the interest possessed by Hatch & Warren therein; consequently, the plaintiff had the right to demand that that contract be fulfilled according to its terms. It may well have been the personal service of Warren in the conduct of that litigation, which was the inducing cause of plaintiff’s executing the" contract and entering into the engagement which he made. He was entitled to insist that it be performed in accordance.with its terms, and Hatch & Warren had contracted with him that it would.be so performed. The only way in which Hatch & Warren could avoid this result would be by the plaintiff’s consenting that it be otherwise performed. It was competent for him to waive performance by Warren; it was within his right to insist upon it. It is clear that he never waived any of his rights and at all times stood upon the fulfillment of the contract which he made. The defendant Hatch had no right to insist that the plaintiff accept performance by any other person. It may be his misfortune that without his fault Warren withdrew from the fulfillment of the contract and thereby made it impossible for him to perform the same, but the plaintiff is not to be prejudiced in any of his rights by such fact, nor can Hatch complain of such result because the plaintiff stands insisting upon his legal rights in the premises. It is entirely immaterial to any question which concerns the legal rights of the parties to this action that Hatch subsequently procured Mrs. Daniels’ lawsuit to be tried and conducted with vigor and skill. That was no concern of the plaintiffs as such act was not in fulfillment of the terms of his contract and he was not- bound to •accept the same as performance. Under date of October 1,. 1892, the plaintiff notified the defendants of their breach of the contract and ■demanded a return of the money which he had paid thereunder! At this time Hatch was in default under the contract in failing to advance the moneys as required thereby and his letter to the plaintiff canceling the same remained of record, unrevoked, and it was after that time that Hatch attempted to make fulfillment of the contract with .Mrs. Daniels. In no view, therefore, upon the undisputed proof, •can we escape the conclusion that Hatch and Warren were both guilty of a breach of the contract with the plaintiff at the time when he made his demand for the return of the money paid thereunder, and elected to treat the contract as terminated on account of the defendants’ breaches of the same. This was clearly within his legal rights, and by reason of the then condition he became entitled to have and recover such damages as he had sustained which might be properly recoverable.

It is earnestly insisted, however, that if there was a breach of the contract, névertheless, the proof shows that no damages beyond such ás are nominal have been sustained by the plaintiff. It is the claim of the learned counsel for the defendant Hatch that the measure of ' plaintiff’s damages is the “ benefit to him of having the contract performed,” and that this constitutes the measure of damage. On this hypothesis the claim is advanced that the actual result showed that Mrs. Daniels in fact had no cause of action or right in her husband’s estate, and that, therefore, the plaintiff could by no possi- ' Ibility take anything of advantage under his contract. It may be ■conceded that such rule of damage is the true rule if the means ■exist by which the measurement can be" applied. The rule, however, fails as applied to this action, for the reason that by the defendants’ acts the contract never could be performed, in consequence of which all basis for the measurement of damages upon any consideration of result which might have flowed therefrom is futile, and under such circumstances application of the rule is rendered impossible. In Friedland v. Myers (139 N. Y. 433) an action was brought for a breach -of contract in the lease of a building for a special purpose. The court held that ordinarily in case of lease the measure of damage would be the difference between the rent reserved and the actual value of the lease, but- that the damages were not limited to that sum, and the lease being for a special purpose, proof of damage under the rule would be practically impossible of ascertainment, and that á recovery could be had for other damages that were the proximate effect of the breach of the covenant so far as they were not speculative or uncertain .in character, and might be deemed to be within the fair contemplation of the parties when the lease was made and might have been foreseen as a, consequence of a breach of the covenant." The plaintiff therein was permitted to recover for his actual and necessary expenses incurred in preparing for the occupation of the premises, and that such item-properly embraced architect’s fees in making drawings for cases, counters and other necessary features required in the business, it appearing that this work was.done with the knowledge and assent of the defendant, and that his conduct throughout was such as to invite the expenditure. To the same effect is ' Bernstein v. Meech (130 N. Y. 354). That was an action to recover damages for the breach' of .a theatrical contract, where the compensation of the plaintiff was ■ to be fifty per cent of the gross receipts realized from the performances to be given. It was impossible to. determine what those' receipts would have been, and plaintiff was permitted to prove his expenses .in preparing for the fulfillment of the contract.. Hr. Justice Bradley, writing for the court, said: “ His loss also consistéd - of the expenses by him incurred to prepare and provide for such performance. While the plaintiff was unable to prove the value in profits of his contract, he was properly permitted to recover the amount of such loss as it appeared he had suffered by the defendants’.breach.” This rule has been uniformly recognized. (Dickinson v. Hart, 142 N. Y. 183.) The present case falls within the same principle. Here it was impossible to establish what the plaintiff’s damages were or would have been had the contract been fulfilled as it was rendered absolutely impossible of performance. But the plaintiff was permitted to prove the moneys which he advanced, and the expense which he incurred in connection with it." These defendants had knowledge of such expense and extent of the same because they received the money. Consequently the case falls squarely within the rule of the cases we have cited.

There is no other question which requires consideration. It follows, therefore, that the judgment should be affirmed, with costs.

Yak Brunt, P. J., O’Brien and Laughlin, JJ., concurred; Ingraham, J., dissented.