Branning Manufacturing Co. v. Norfolk-Southern Railroad , 138 Va. 43 ( 1924 )

Sims, J.,

after making the foregoing statement, delivered the following opinion of the court;

All of the questions presented for decision arise upon the assignment that the trial court erred in overruling-the motion of the defendants in the court below to set-aside the verdict, and grant a new trial on the grounds that the verdict was contrary to the -law and the evidence. We find it unnecessary to deal with a number-of these questions. Those we deal with will be disposed of in their order as stated below.

1. Should the verdict have been set aside-because there was no consideration alleged in the declaration?

The question must be answered in the negative, for three reasons:

(a) The defect, if it exists, rendered the declaration ■demurrable. Burks PI. & Pr. 129, 130. There was, .however, no demurrer to the declaration. It is true that if the declaration contained no allegation of consideration, upon evidence being tendered by the plaintiff of consideration, such evidence might have been successfully objected to by the defendant as not being within the allegations of the declaration. But there was no such objection, and the testimony for the plaintiff relied on to show consideration to support the alleged contract was admitted without objection on the part of the defendants. They thereby waived all objection to any failure of the declaration to allege consideration.

(b) In the next place, the contract alleged in the declaration is a bilateral contract, containing mutual promises — on the part of the plaintiff to lease (i. e. demise) the real estate mentioned to the defendants, and on the part of the defendants to pay the rent therefor mentioned. The promises are of such character that their performance respectively by the one party would have been of advantage in law to the other party. In such ease the mutual promises furnish a sufficient consideration to support the contract. 1 Williston on Contracts, sec. 103-e, 103-d, 103-f, 2 Idem, sec. 873. Hence, as the declaration by alleging such a contract alleged such mutual promises, it alleged sufficient consideration.

(c) Upon elementary principles, the allegations contained in the- declaration of detriment suffered by the plaintiff because of plaintiff’s action in cancelling prior leases, in reliance upon the alleged contract of the defendants, is an allegation of sufficient consideration to support the contract.

2. Was the verdict for $1,200.00 damages contrary to law and without sufficient evidence to support it?

The question must be answered in the affirmative.

This being an action by the owner of the property' against the prospective tenant, not upon the lease, bub for damages for breach of the contract for a lease, the measure of damages, as is well settled, is the difference-between the agreed rent under the contract for the whole term covered by the contract and the rental value to the plaintiff of the property during the whole-term — which latter value, of course, consists, where the property is not used and could not have been used to advantage by the plaintiff himself, of [such rent as. the plaintiff, by the exercise of reasonable diligence, after the breach of the contract, could have obtained, from others during the whole term. James v. Kibler’s Adm’r, 94 Va. 165, 25 S. E. 417, and authorities therein cited; 3 Williston on Contracts, sec. 1405, pp. 2495-6; Massie v. Bank, 11 Tex. Civ. App. 280, 32 S. W. 797; Tiffany on Landlord and Tenant, see. 67, p. 393.

As said in the work last cited (see. 67, p. 393): “In ease the lessee refuses to comply with the terms off the agreement, by which he is bound to execute an instrument of lease, he is liable in damages to the-amount of the excess of the total rent which he agreed to pay during the term, over and above what the owner-is able to obtain.from others after such refusal.” Citing' authorities.

In effect, the measure of damages stated minimizes the damages of the plaintiff in such case, which is a duty which rests upon the plaintiff in all such cases. James v. Kibler’s Adm’r, supra, 94 Va. 165, 26 S. E. 417.

; The aforesaid rental value may be shown by the market value of the lease (James v. Kibler’s Adm’r); or by the rent which was actually obtained by the plaintiff, if he exercised reasonable diligence in obtaining all the rent possible, 3 Williston on Contracts, see. 1405, pp. 2495-6.

The measure of damages mentioned is practically the same as that which is applicable in actions by the seller against the buyer for nonacceptance of goods which remain in the possession of the seller. In such case “the burden is upon the plaintiff to show what damage, if any, he has suffered;” and “it is incumbent upon him, in order to make out a ease for recovery of more than nominal damages, to show that the market value of the goods is less than the contract priced” (3 Williston on Contracts, sec. 1378, p. 2453). So, in the ease of a breach of a contract for a lease by a prospective tenant, the burden is upon the plaintiff owner, in order to make'out a case for more than nominal damages, to show that the rental value of the property was less than the contract rental.

The plaintiff did not introduce, or offer in evidence, nor is there any evidence in the record to sustain the burden of proof just mentioned resting upon the plaintiff.

According to the evidence, the breach of the contract for the lease occurred either in March or June, 1921, certainly not later than the last named date. Although notified to vacate, it seems that none of the tenants occupying the property actually vacated it, save one. And there is no evidence to show what, at the time of the breach of the contract, was the market value of the lease (which would have carried with it the right of the lessee to collect from the tenants actually having occupied the property a fair rental for such use and occupation); or whether there was any new lease after the breach of the contract;' or whether, by the use of reasonable diligence, the plaintiff might not have obtained, after the breach of the contract, rent from the actual tenants and from others which in the aggregate would have saved the plaintiff from loss by reason of any difference between the contract rental and the rental the plaintiff might have thus obtained during the whole term; nor is there any evidence that the plaintiff made any effort whatever to minimize the damages after the breach of the contract for the.lease.

There was no instruction given to the jury as to the measure of damages. They were left without any standard to guide them on this subject. The amount of the verdict, $1,200.00, is approximately the amount of the agreed rent which had accrued under the contract, up to March 12, 1921, without any credit for rent which might have been obtained for the actual use and occupation of the property by the former tenants, who in fact remained in the actual occupation of the property, and it seems evident that the jury based their verdict upon the erroneous view that the agreed rent up to the breach of the contract was the proper measure of the plaintiff’s damages. Such a verdict is contrary to the law in two aspects — one doing injustice to the plaintiff, in not taking into consideration the agreed rent for the whole term of the expected leased, and the other doing injustice to the defendants, in not taking into consideration as credits rent which might have been obtained from those actually having occupied the property, as aforesaid, and rent which might have been obtained by the plaintiff, by reasonable diligence, in re-renting the property for the residue of the term after the breach of contract for the lease. The defendants, of course, cannot be heard to object to the verdict because of its former aspect, as it is evident that they were not injured thereby, and the plaintiff is not making any such complaint; but the defendants have just ground to object, as they do, to the verdict because of the latter aspect of it. Moreover, as aforesaid, even if the verdict was based on the consideration of the matters involved in the latter aspect of it, there was not sufficient evidence bearing thereon to support the verdict.

3. Were the defendants so far as disclosed by the evidence in the record liable to the plaintiff for damages for breach of contract for the lease mentioned in such contract?

The question must be answered in the negative.

The evidence shows, without conflict, that no credit was at any time extended to the defendants personally; that the only connection the defendants had with the contract in question was in conducting, through the defendant Baker, the negotiations with the plaintiff leading up to the contract for the lease. These negotiations were begun and conducted by Baker, acting for himself and associates solely as promoters of an unnamed corporation intended to be formed, to which corporation the credit was solely extended, and before the negotiations were completed and before the minds of the parties met upon all of the features of the contract for the lease, the name of the corporation, to-wit, the “Edenton Manufacturing Company, a corporation chartered under the laws of North Carolina,” was disclosed and given by Baker to the plaintiff as the principal for whom he and his associates through him had been conducting the negotiations, and the plaintiff accepted this principal as the party to the contract for the lease, in lieu of the aforesaid promoters, as evidenced by the letters of the assistant to the president of the plaintiff to Baker of June 17, 1920, asking for the name of the principal, “with whom the contract should be made;” the letter of Baker to such assistant, in response, of June 18, 1920, disclosing the aforesaid principal as aforesaid; and the letter of sneh assistant to Baker of June 25, 1920, accepting such principal as aforesaid. On this last named date, and not before, the minds of the parties for the first time met upon all of the features of the contract for the lease, including the feature that the Edenton Manufacturing Company, a corporation, etc., was to be the lessee.

It is argued in behalf of the plaintiff that the contract for the lease was definitely closed on June 16th by conversation between Baker and the assistant to the president of the plaintiff, in which Baker accepted the terms of the intended lease as stated in the letter of the former to Baker of June 14th. But this position overlooks the fact that, as appears from the letter of such assistant to- Baker of June 17th, the important element of the contract, consisting of the meeting of minds upon the intended lessee, was still open and undetermined; and it was not until the above mentioned letters of June 18th and 25th were written that the contract for the lease was definitely closed, and the contract as closed was between the plaintiff and the Edenton Manufacturing Company, and not between plaintiff and the defendants.

In accepting such corporation as- such party, as aforesaid, and in subsequent correspondence of the plaintiff with this corporation, demanding payment of rent, the plaintiff extended credit solely to such corporation, and in making the contract for the lease, dealt with it as a de facto corporation. Under such circum-'S stances, whether such corporation had then come into actual existence was immaterial, if it did in fact after-wards and before this action was brought come into actual existence so that it could be sued.

As said in Carle v. Corhan, 127 Va. 223, at p. 234, 103 S. E. 699, 702: “There is a general rule that persons dealing with, promotion of corporations to be thereafter formed are allowed the double security of the promoters and the corporation when it comes into being; but where it appears * * * that the contract was made solely on behalf of, and that the credit was extended solely to, a corporation which was then in process of formation, and which shortly thereafter procured its charter, the rule does not apply. Strause v. Richmond, etc., Co., 109 Va. 724, 729, 65 S. E. 659, 132 Am. St. Rep. 937.”

Upon the question whether the Edenton Manufacturing Company had come into existence before the action was instituted in the instant case, the testimony is directed solely to the question of whether the company had obtained a charter in the State of North Carolina. It was a concessum in the case that if it had obtained a charter the company thereupon came into -existence. We need not stop therefore to set out the well settled rules as to when a corporation comes into ■existence and can sue and be. sued when it obtains its charter, without more, and when it does not come into -existence until it organizes. We deem it sufficient to say that we think that it appears from a preponderance of the evidence on the subject (which is set forth in the •statement preceding this opinion), that while the Eden-ton Manufacturing Company had not in fact obtained its charter at the time the contract for the lease was ■entered into in the instant case, it did afterwards obtain such charter before this action was brought in September, 1921. It is true that neither the charter nor a certified copy of it (which was the best evidence of the fact of the existence of the charter) was produced in •evidence on the trial, although called for by the plaintiff by counsel. But there was secondary evidence contained in the testimony of Baker, which was admitted without objection, which shows by a preponderance of the evidence, as we think, that the charter in question was applied for and obtained before this action was instituted.

4. Our conclusion, therefore, is that the case must be reversed, both on the ground that the verdict for $1,200.00 damages was contrary to law and without evidence to support it, and on the ground that the defendants are not liable in the instant case so far as appears from the evidence in the record. But the evidence on both of these subjects was but imperfectly developed on the trial. For this reason we do not think that there was sufficient evidence before the trial court to enable it, under section 6251 of the Code, to decide the ease upon its merits, nor is there sufficient evidence before us to enable us to feel that we would attain the ends of justice by entering a final order under section 6365 of the Code. We will, therefore, remand the case for a new trial.

As the evidence on a new trial may be different, we shall not deal with the question of what covenants, under the authorities on the subject, may be inserted'in a formal draft of a lease which have not been expressly agreed upon in the contract for the lease, which is 'the chief question involved in the assignments of error which we do not pass upon.

Reversed and a new trial awarded.