Greenwall Theatrical Circuit Co. v. Markowitz

This action was brought by Markowitz against the Greenwall Theatrical Circuit Company on the 23d day of January, 1902, to recover damages for breach of a written contract attached to the petition. This contract was executed between the parties July 16, 1901, and, by it, defendant, in consideration of the payment of $3000 in cash (called "bonus"), agreed to give to plaintiff the position of business manager of the Kyle Opera House in Beaumont during the term of defendant's lease thereof from its owner, Kyle, for five years, to begin October 1, 1901, and to pay plaintiff for his services $20 per week during the theatrical season, and one-half of the net profits, payable at the end of each theatrical season, about May 1st each year. But defendant reserved the right, if it should "feel that the interests of all concerned are not thoroughly taken care of," to remove plaintiff from the position of business manager and replace him by another, in which event plaintiff should receive only the half of the net profits. The losses of the business were to be borne equally by the parties. Plaintiff bound himself to act as business manager and give the business his personal attention in the best possible manner, and, in addition to the $3000 bonus, agreed to pay on the 1st day of October each year $1000, the half of the yearly rent of the opera house; and the contract expressly stipulated that his failure to meet this payment when due "makes this contract null and void." The petition after stating the terms of the contract contained the following allegations and prayer:

"That said defendant, although plaintiff has in all things kept and performed the obligations of his said contract, a substantial copy of which marked `A' is hereto annexed and made a part hereof as fully as if incorporated herein, regardless of its obligations, violated and repudiated said contract on or about September 10, 1901, and refused to carry it out in any particular; wherefore and whereby a cause of action accrued to this plaintiff to recover damages for the breach of said agreement by defendant.

"Plaintiff also shows that defendant, without the knowledge or consent of plaintiff and in disregard of his rights, sold and disposed of the lease of said opera house and other rights and assets, for the sum of fifteen thousand dollars ($15,000), which said lease was by defendant, or its representative, transferred to W.W. Kyle, at Beaumont, Texas, in or about the month of November, 1901.

"Plaintiff shows that said lease and the business of said opera house are and would in all probability continue to be profitable during the full period of said lease and would be worth the sum of not less than fifteen thousand dollars ($15,000) per year net, to which plaintiff, by virtue of said contract, was or would be entitled to one-half, and under any circumstances, would be entitled to one-half of the value of said lease, which value he alleges to be not less than $30,000.

"Premises considered, plaintiff sues and prays due process to defendant, and upon hearing, judgment for his said damages, present and prospective, but in the alternative, for one-half the value of said lease and for interest, costs of suit, and general relief."

The evidence shows the following state of facts: In lieu of the cash payment required by the contract the note of plaintiff for the amount, indorsed by I.H. Kempner, was accepted by defendant. At the time of the execution of this contract defendant held the agreement of W.W. Kyle to build the opera house and to lease it to defendant for five years, beginning October 1, 1901, at a rental of $2000 per annum. Shortly after the contract between plaintiff and defendant was concluded, Kyle raised objection to the proposed connection of plaintiff with the theater, and conversations and correspondence ensued between plaintiff, defendant and Kempner concerning an adjustment. Finally on September 10, 1901, Greenwall, the president of defendant company, asserted to plaintiff that the contract was invalid; that plaintiff had no contract, and, upon the latter insisting upon the validity of the agreement, declared to him that, if he insisted upon the contract, he had a law suit. After this Kempner, under the impression that the contract was at an end by mutual consent, without plaintiff's knowledge, demanded of defendant the return of the note for $3000, and it was returned to him. Plaintiff continued to insist upon the observance of the contract and his rights under it, and, upon learning of the return of the note, protested against it. Kempner thereupon explained to defendant the error under which he had acted and offered to return the note, but the latter continued to ignore the contract with plaintiff and to treat it as ended. Plaintiff, while insisting, as we understand his attitude and as it is defined by the Court of Civil Appeals, upon the maintenance of the contract, did not pay or offer to pay the $1000 due on the first day of October. He was able and willing to do so, but did not signify this to the defendant before or at the time the money became due otherwise than by insisting upon the preservation of the contract; and he claims that he was relieved of the necessity of performing this undertaking by defendant's previous repudiation of its obligations. The theater was not quite completed by the 1st of October, but defendant accepted it and conducted the business in it until November 16th, and then, on account of differences with Kyle and other reasons, sold out the lease, with the contracts made with dramatic and opera companies for performances, to Kyle, the latter paying $15,000, returning $2000 paid by defendant in advance for rent for the first year, and agreeing to pay appellee $200 per annum for services in securing companies during the term of the lease.

Upon the trial in the District Court the plaintiff claimed the right to recover one-half of the net proceeds of the sale of the lease less proper deductions, but the trial judge instructed the jury that they had "nothing to do with the amount received by defendant from Kyle for the termination of the lease," and defined the measure of damages as one-half of the profits that would have been derived from the business had it been carried on, after deducting the $3000 bonus, and $5000 rent, which plaintiff would have had to pay. Upon appeal the Court of Civil Appeals was of the opinion that this was error, holding that plaintiff, upon the facts stated, was entitled to the recovery claimed by him, and accordingly rendered judgment in his favor. The defendant now assigns this as error, and we must hold that its position is well founded.

The contract was one of which performance was to commence in future. The petition distinctly alleged a breach of this contract and the accrual to plaintiff of a cause of action for damages through defendant's repudiation on September 10th, before the time for performance had come. The allegation of the subsequent sale of the lease was only the assertion of a claim for damages because of the breach alleged, and not of a cause of action first accruing from such sale. Before the time when defendant was bound to perform, it could not, by its renunciation of its obligation, put an end to the contract; but by its action it left the plaintiff at liberty, if he saw fit, to take it at its word, and treat its conduct as a breach and the contract as thereby terminated, and hold the defendant responsible for the damages resulting. This is plainly the cause of action pleaded. The allegation of such a repudiation and the assertion of a cause of action growing out of it leaves no doubt, upon the pleading, of plaintiff's election to treat this act of the defendant as a breach of the contract. He must be held, in his recovery, to that position, and his damages can not be measured by rules which might be applicable had he based his conduct and his suit upon a different theory inconsistent with that upon which he sues. The following statement of the principles governing such cases in Frost v. Knight, L.R. 7 Exch., 112, has commanded the acceptance of most of the text writers and courts in England and America:

"The law with reference to a contract to be performed at a future time, where the party bound to performance announces prior to the time his intention not to perform it, as established by the cases of Hochster v. De la Tour and the Danube and Black Sea Company v. Xenos on the one hand, and Avery v. Bowden, Reid v. Hoskins and Barwick v. Buda on the other, may be thus stated. The promisee, if he pleases, may treat the notice of intention as inoperative, and await the time when the contract is to be executed, and then hold the other party responsible for all the consequences of nonperformance; but in that case he keeps the contract alive for the benefit of the other party as well as his own; he remains subject to all his own obligations and liabilities under it, and enables the other party not only to complete the contract, if so advised, notwithstanding his previous repudiation of it, but also to take advantage of any supervening circumstances which would justify him in declining to complete it.

"On the other hand, the promisee may, if he thinks proper, treat the repudiation of the other party as a wrongful putting an end to the contract, and may at once bring an action as on a breach of it; and in such action he will be entitled to such damages as would have arisen from the nonperformance of the contract at the appointed time, subject, however, to abatement in respect of any circumstances which may have afforded him the means of mitigating his loss."

When the promisee adopts the latter course, treating the contract as broken and himself as discharged from his obligations under it, he resolves his right into a mere cause of action for damages. He is no longer concerned with the disposition which the promissor may make of the subject matter of the contract. Kadish v. Young, 108 Ill. 170; Johnstone v. Milling, 16 Q.B. Div., 467; Roper v. Johnson, L.R. 8 C.P., 167; Roehen v. Horst, 178 U.S. 1; Anson on Con., 368 et seq., and authorities cited; Cyclopedia Law and Procedure, 635-637, and authorities cited.

In Johnstone v. Milling, supra, the rule was thus stated: "Where one party assumes to renounce the contract, that is, by anticipation, refuses to perform it, he thereby, so far as he is concerned, declares his intention then and there to rescind the contract. Such a renunciation does not, of course, amount to a rescission of the contract, because one party to a contract can not by himself rescind it, but, by wrongfully making such a renunciation of the contract, he entitles the other party, if he pleases, to agree to the contract being put an end to, subject to the retention by him of his right to bring an action in respect of such wrongful rescission. The other party may adopt such renunciation of the contract by so acting upon it as in effect to declare that he too treats the contract as at an end, except for the purpose of bringing an action upon it for the damages sustained by him in consequence of such renunciation." The necessary consequence of both parties treating the contract as terminated by the renunciation of September 10th, as averred in the petition, was to prevent the accrual of any specific interest plaintiff might, by a different course, have acquired and preserved in the lease, the business to be conducted under it, and the proceeds of the sale of same. Had he sued upon the theory that he had kept alive the contract and acquired and preserved a right in the subject matter until the sale took place, a different question would be presented. It is upon that view that plaintiff now attempts to sustain the judgment of the Court of Civil Appeals. If such a case is made by the evidence, which need not be considered, it is not only not supported by but is irreconcilable with the case made by the pleading; for it is very clear from the authorities that a contract can not be thus treated, for one purpose, as subsisting, and for another purpose as at an end. Upon such a repudiation of an executory agreement by one party, the other may make his choice between the two courses open to him, but can neither confuse them together nor take both. Johnstone v. Milling, supra. It would seem to follow necessarily that the cause of action which plaintiff set up in his pleading entitled him, if sustained by the evidence, to recover only for the loss which he sustained from the breach alleged, which was the profit he would have made from the business. At any rate, he has no cause to complain that he was allowed to recover according to that standard. The disposition of the lease, which the termination of the contract left the defendant free to make as it saw fit, in no manner altered that cause of action. Whether or not the evidence, showing, as it did, a continued insistence upon the contract on plaintiff's part after the attempt of defendant to recede from it, justified a recovery upon the theory of the petition, we are not called upon to consider. If it did not, the plaintiff can not upon that ground complain, and the defendant neither appealed nor sought a reversal in the Court of Civil Appeals.

It follows from what we have said that the measure of damages applied by the Court of Civil Appeals was inappropriate to plaintiff's action as he made it by his pleading, and the judgment of that court will be reversed, and the judgment of the District Court will be affirmed.

Reversed and judgment of District Court affirmed.