Commercial Investment Co. v. National Bank of Commerce

Fullerton, C. J. —

In this action the appellant sought to recover from the respondent $43,595.78, as damages for a breach of a contract In its complaint the appellant alleged, in substance, that, for some years prior to the 10th day of September, 1892, it had extensive business dealings with respondent, during the course of which it became indebted to the respondent in the sum of $10,666.66 on its own account, the sum of $6,519.94 on account of notes discounted by the respondent which had not been paid by the makers' thereof, and the further sum of $10,570.98 on account of notes upon which it was an accommodation endorser; that it owned .at such time a large amount of real property of the then value of $101,250, but upon which there were sundry mortgages which, taken together, and with the indebtedness above mentioned, aggregated the sum of $43,988.22; that on the date above named the appellant and respondent, at the request of the respondent, mutually agreed to settle up and discontinue their business relations; that, during the course of such settlement, differences arose between them as to such settlement, and the respondent threatened the appellant with suit; that it was also threatened with suit by certain of the mortgagees holding mortgages upon its real property; and that, “for the purpose of arriving at a compromise and settlement of all the liabilities of plaintiff to defendant, and of all matters of difference and dispute between them of what soever nature, express or implied, and also of the said mortgage liens upon said premises, with the express object and purpose of avoiding any suits, or other proceedings at law*,” it entered into an agreement of settlement with the respondent, being partly in writing and in part oral, the terms of which were, in substance, these: The appellant agreed to pay to the respondent, on accounts other than those above mentioned, the sum of $16,320.64, and, in satisfastion of the above mentioned accounts, agreed to deed to the respondent the real property above referred to. In consideration for which the respondent agreed, (1) to cancel all of the obligations of the appellant to the respondent; (2) return to the appellant the collateral held by it as security for such indebtedness; (3) accept the deed to the real property mentioned; (4) assume and pay all of the mortgages thereon; (5) not sue appellant on any of such indebtedness; (6) that it would not permit appellant to be sued on account of any of the mortgages then upon the real property, but would pay the same according to the terms thereof, and save the respondent harmless from all interest, costs, and expenses thereof; and (7) that it would grant to the appellant one year in which to repurchase the real property or any part thereof.

It alleged that the conditions of the agreement which were to be performed on the part of the appellant, as well as those numbered 1, 2, 3, and 5, on the part of the respondent, were oral;- that those numbered 4 and 1 were in writing, while that numbered 6 was partly in writing and partly oral. It alleged, also, that the appellant performed all of the agreements on its part to be kept and performed; that the respondent failed to keep its part of the agreement in that it refused to pay a certain mortgage for $2,300, made to the Mason Mortgage Loan Company, by the appellant, on lands included within the deed; and caused and induced the owner and holder of the same to institute proceedings against the appellant for the foreclosure thereof; that, in pursuance of the respondent’s request, the holder of the note and mortgage did begin such an action, in which the respondent appeared and filed an answer denying any liability on its part to pay the note and mortgage, and alleging that the deed above mentioned was never delivered to it, or accepted by it, nor by any person lawfully authorized to act for it in that behalf; that the appellant was compelled to and did appear in the action and enforce against the respondent the agreement above mentioned, so successfully, in fact, that judgment was rendered against the respondent, as the principal debtor, for the amount due upon the note and mortgage; that the appellant appealed to the supreme .court from such judgment, that the same was there affirmed, with increased costs against the respondent, and that the respondent had never paid any part of such judgment, nor the costs, nor any part of any of such sums.

It was further alleged that the respondent entered into a conspiracy with one Deming and others, for the purpose of avoiding the payment of the judgment, and that, to harass and embarrass the respondent, and thereby make- it pay the judgment, it instituted a suit for the purpose of securing a rescission of the sale of the note and mortgage from Deming, who formerly owned it, to "Wheeler, who was plaintiff in the action in which the judgment was recovered, making the appellant a party defendant therein, compelling it to appear and procure a dismissal of the action as to itself.

It is further alleged that, by reason of these acts, the respondent has refused to carry out the contract, and has destroyed and rendered nugatory the object and purpose of the agreement, and the benefits therefrom which would otherwise have accrued to the appellant; that the premises conveyed have greatly depreciated, and are of small value, and that the appellant has elected to' recover damages from the defendant rather than have a rescission of the contract. It then alleges that the difference in value of the property at the time of the conveyance and the amount it received for it was $45,595.78, and demands judgment for that sum, with interest at the legal rate from the 10th day of September, 1892, the date of the deed above mentioned.

On the motion of the respondent, the court struck á portion of the allegations of the complaint, whereupon the respondent, after the appellant had refused to amend, answered as to the remainder. It admitted that it had contested the payment of the note and mortgage mentioned in the complaint on the theory that it was not obligated to pay the same, but averred that judgment had been given against it in spite of such contest; and further pleaded with reference thereto that the judgment had been fully paid by it before the commencement of the pending action, in part by a seizure, and appropriation to satisfaction of the judgment, of its money by the sheriff who had a writ of execution in his hands for the collection of tire judgment, and by a voluntary payment on its part of the balance.

The reply of the appellant admitted the seizure by the sheriff of the money of the plaintiff in satisfaction of the mortgage judgment, and its final application to the satisfaction thereof, but reiterated its statement to the effect that a contest was instituted by the respondent through Deming, and prosecuted by it until February, 1902, when it was finally dismissed on the application of the appellant, and that the money in the hand of the sheriff was not actually applied on the judgment until that date. On the filing of the reply, the respondent moved for a judgment in its favor on the pleadings, which motion the court granted, dismissing the appellant’s action, and entering a judgment for costs in favor of the respondent.

From the ioregoing statement it will be observed that the complaint was drawn on the theory that, because the respondent failed to keep that part of its agreement wherein it covenanted that it would not sue or permit the appellant to be sued on any of the indebtedness mentioned in the contract, the appellant had the right to rescind the contract in part, and recover as damages the consideration given for the violated portion of the agreement, regardless of the question of the amount of damages it had suffered because of the breach, or whether it has suffered damages on account thereof at all.

But we think the appellant has mistaken its remedy. When a contract is divisible into separata or distinct parts, equity sometimes permits the injured party to rescind, on equitable terms,' one such part, while adhering to another independent part; but where the contract is an entirety, or where there is but one entire consideration for a number of conditions, the contract must generally be rescinded as a whole, if rescinded at all. There can be no partial rescission and a refunding of a portion of the consideration, unless it be in an extreme case where there is no possible remedy other than through such a proceeding. The conditions shown in the complaint before us do not call for any such extreme remedy. For the breach of the condition complained of here, the remedy is found in an action to recover the actual damages suffered because of such breach of the condition. These ordinarily would be the expenses incurred in compelling the respondent to perform its covenants, and the losses it suffered because of the failure on the part of the respondent to save it from being sued, but it could not be that part of the whole consideration which the appellant claims to have paid to obtain this particular covenant. The consideration paid is rarely, if ever, the measure of damages for the breach of a covenant. The fundamental idea of damages, in all such cases, is compensation for the injury suffered, and, be this greater or less than the consideration paid to secure the covenant, it is the amount, and the only amount, that can be recovered because of a breach thereof. As the complaint shows no special damages, the court did not err in holding that no cause of action was stated on which substantial damages could be recovered.

! It is said, however, that the complaint contains averments sufficient to show a right to nominal damages, and that the judgment must be reversed because the trial court did not permit a recovery for nominal damages. But we have held that this court will not, where the sole object of the action is the recovery of damages, reverse a judgment because the court erroneously failed to direct judgment for nominal damages. Johnson v. Cook 24 Wash. 474, 64 Pac. 729. Whether the plaintiff .does, or does not, recover, affects only the question of costs, and the appellate court will not entertain an appeal for the sole purpose of determining, who is entitled to costs in the court below. The judgment is affirmed. ¡

Mount,. Dunbab, Andebs, and Hadley, JJ., concur.