Cox v. McLaughlin

18 P. 100, 76 Cal. 60, 1881 Cal. LEXIS 2

• Court: California Supreme Court
• Decided: May 1, 1881
• Docket: No. 12189
• Status: Published

Opinions

The Court.

This cause has been before this court several times on an appeal, and it is unnecessary to restate the facts. The history of the case may be found in the following volumes of our reports: 44 Cal. 18; 47 Cal. 89; 54 Cal. 605; 52 Cal. 590; 63 Cal. 196. It is sufficient to say that in 1864 Charles McLaughlin, now deceased, entered into a contract with the Western Pacific Railroad Company to grade the road-bed of its railroad from near the city of San José to Sacramento, a distance of 123 miles, and to construct all the superstructures, etc., necessary to place the road in complete ' running order, for the sum of five million four hundred thousand dollars; and that in January, 1865, said McLaughlin made a contract with the plaintiff Cox and his associates, by the terms of which the latter were to grade that part of the road which lies between San José and Stockton, a distance of seventy-four and a quarter miles, to do the masonry work, and all things necessary for placing the cars, ties, and iron equipments on the track, for which McLaughlin was to pay them the sum of nine hundred thousand dollars. Cox afterwards became the assignee of all his associates. Payments were to be made by McLaughlin to Cox as the work progressed, at amounts to be fixed by the estimates of the-chief engineer of the said Western Pacific Railroad Company. Cox finished the first twenty miles, and part of the twenty-first mile, and received certain payments; but McLaughlin then failing to make further payments as provided in the contract, Cox was unable to proceed further with the work through want of funds, and abandoned it. Upon the former trials in the court below (except the first, when an attempt was made to enforce a mechanic’s lien), Cox persistently proceeded upon the theory that the failure of McLaughlin to make the payment due operated as a technical “prevention” ofjja, compliance with the contract by Cox, and that, ore, the latter could recover contract rates on the original contract, profits which he would have made, etc. This position was held repeatedly by this court to be untenable; and after the case was last here he amended his complaint in the court below, so as to aver a claim for the value of the work actually done, as upon a quantum meruü. The court below tried the case without a jury, found the value of the work, over and above all moneys paid, to be $98,228.49, and gave plaintiff judgment for said sum, with interest at statutory rates from June, 1866, the time of the failure of McLaughlin to make said payment. From this judgment, and from an order denying a new trial, defendant appeals. Said Charles McLaughlin, having in the mean time died, his executrix, Kate D. McLaughlin, was substituted as defendant. On the twenty-sixth day of Aprj.1, 1888, Kate D. McLaughlin, having died, J. 0. Pennie, administrator of the estate of said Charles McLaughlin, was made party defendant.

The main points made by the appellant are these: First, that the court abused its discretion in allowing said amendment to the complaint; second, that plaintiff should not recover because of a certain contract which he made with the chief engineer of the Western Pacific Railroad Company; third, that there is no evidence to support the finding as to the work actually done or its value; fourth, that no interest should have been allowed.

1. We think that there was no abuse of discretion in allowing the amendment setting up the quantum meruit. There were no new facts stated upon which a new cause of action was based. The facts as stated in all the complaints were substantially the same; and indeed, it is not clear that plaintiff could not have proceeded upon the theory of a quantum meruit under his former complaints. The same contracts, assignments, the work done, and materials furnished, performance by the plaintiff, the breach by the defendant, the existence of all the conditions precedent to payment, have appeared in all of the complaints as the basis upon which the right to compensation in the plaintiff rested. When this case was last here the court directed that the judgment should be reversed, and that judgment should be entered' in the court below on the findings for defendant.

Afterwards, on rehearing, the judgment of this court was modified so as to reverse the judgment of the lower court and send the case back for a new trial. There must have been some object in this modification, and in view of the facts which have been repeatedly before the court, it was evidently regarded as possible to frame a complaint which would enable the plaintiff to recover the reasonable value of the services rendered and materials furnished. Of course, unless the facts stated constitute a new cause of action, the plaintiff's cause is not barred by the statute of limitations.

2. Under the contract between the railroad company and McLaughlin, the road was to be constructed according to a general route and profile; but it was to be varied according to the directions of the chief engineer. Cox was to receive the round sum of nine hundred thousand dollars for his entire work between the points named in his contract with McLaughlin, whether the variations ordered by the engineer should make that work heavier or lighter. Under these circumstances, Cox entered into a secret contract with the person who, for part of the time, “was the engineer, that he would give to said engineer a certain percentage of the profits of his contract if he (the engineer) would, without impairing the character of the road, or doing anything to the disadvantage of the railroad company, make such variations, when it should be possible to do so, as would make the work, of said Cox less expensive. It is claimed that this constituted a breach of the contract by Cox, Myers & Co., a fraud upon the defendant, which iA any event should defeat the claim of the plaintiff. The court found that both the railroad company and McLaughlin were willing that the engineer should make the work lighter without injury to said interest; that the variations were made in some instances at the request of said company and McLaughlin, and were all submitted to and approved by them, and that the said contract between said engineer and Cox was not fraudulent. Under his agreement with Cox, the engineer, for a period of about three months, shared in the dividends of the contractors to the amount of three thousand five hundred dollars altogether. The original profile ihad to be succeeded by a definite location, which necessitated many changes, and these changes, as we have -seen, were sanctioned by all parties. It was possible for the engineer in making his definite location, by the exercise of extraordinary diligence and skill, to so perfect the work as to suit the convenience and the interest of all parties concerned. It appears that his work was done openly, and was in all respects indorsed. After the period mentioned, in which the engineer was receiving ten per cent under said agreement with Cox, a new contract was made between the contractors and McLaughlin. Assuming that the contract between the engineer and Cox was one not proper to have been made, we cannot see how McLaughlin was in any way injured by it, or that it should prevent plaintiff from recovering in this action. McLaughlin received all the benefit of Cox’s work, and was paid for it by the railroad company without objection. Furthermore, it is proper to say that this same claim of fraud has appeared in every answer and on every appeal without receiving any notice. If it has been passed upon in any respect, it must have been adversely to the defendant. We must assume that this court, on former appeals, has considered all the points, this one among the rest. The case has appeared here repeatedly upon substantially the same facts. If this point now made is good, it has always been good, and certainly would have been noticed in the former decisions of this court herein.

Again, if we admit that this agreement with the engineer was fraudulent and sufficient to prevent a recovery by Cox under his contract, the answer is, the present action is not upon such contract, but upon a quantum meruit for the value of the services and materials furnished.

3. After the lapse of a great many years, it was, of course, a difficult thing to show accurately the amount and value of the work actually done. The whole contract price for the entire distance of the road which was to have been built by Cox was nine hundred thousand dollars. McLaughlin himself was to be paid for the same work two million fifty-eight thousand dollars, absolutely, whether performed by him or for him by others; and he testified that the price which he was to be paid for the work was reasonable. Mann, the agent for McLaughlin who executed the contract for McLaughlin, testified that the contract was fair; that the price, with ten per cent kept back, would allow a man to build the road, and not give him much profit, if any. At the time the work was done the chief engineer believed that the work could not be done for the price named. Under their contract the contractors were entitled for the first twenty miles completed to the sum of $308,427.46. McLaughlin's contract with the railroad company entitled him to receive from it the sum of $440,000, and he actually cleared the sum of $131,573 profit on the first twenty miles. There was testimony showing that there are no means now of ascertaining how much earth and how much rock had been removed by the contractors upon the road. Defendant’s. witness, Stangroom, testified that the value of the labor performed and materials furnished by the subcontractors was $186,963. The plaintiff testified that the actual value of the work and material was more than the estimates made by the engineer; was, in fact, about $360,690. The court found that the value of the labor and materials was $285,918.49. It would seem, therefore, that the court took a sum which is nearly an average between the estimates made by the plaintiff and by Stan groom, and . rendered judgment accordingly. The . uncontradicted testimony shows that the work done was about four ninths of the whole work. The price to be paid for the entire work was nine hundred thousand dollars. The twenty miles were completed according to the contract in a good and workmanlike manner. Changes and deviations were made under the orders, and with the consent of McLaughlin and the railroad company. • The' work was turned over to the company by McLaughlin in fulfillment of his contract with the company, and according to estimates made on his behalf. If the rule be that the contractors are entitled to such proportion of the whole contract price as the work done bears to the whole work, then the evidence would warrant a judgment in favor of the plaintiff for four hundred thousand dollars; but we assume that the value must be determined regardless of the prices fixed in the contract, and it is sufficient to say that the evidence as to such value is conflicting, and the finding of the court is warranted by some of the testimony in the. case.

4. The court below allowed interest on the amount recovered from June 15, 1886. Appellants attack this portion of the judgment as unwarranted by the facts and law.

It may be stated, as a general principle, that interest is not allowed on unliquidated damages or demands.

This term “unliquidated damages” applies equally to cases of tort, as slander, assault and battery, etc., and to cases upon a quantum meruit, for goods sold and delivered or services rendered.

The reason of such denial of interest is said to be that the person liable does not know what sum he owes, and therefore can be in no default for not paying.

The damages in such cases are an uncertain quantity, depending upon no fixed standard, are referred to the wise discretion of a jury, and can never be made certain except by accord or verdict.

As to such damages there can be no default, and hence the initial point at which to fix the starting of interest is wanting.

To this general rule there are many exceptions, and while it is said “a demand is unliquidated if one party alone cannot make it certain,—when it cannot be made certain by mere calculation” (1 Sutherland on Damages, 610),—yet the same author in the next sentence adds, “the allowance of interest as damages is not dependent on this rigid test.” A review of the cases relied upon in support of this last assertion assert this proposition:—

“Whenever a debtor is in default for not paying money, delivering property, or rendering services in pursuance of his contract, justice requires that he should indemnify the creditor for the wrong which he has done him.” (Van Rensselaer v. Jewett, 2 N. Y. 135; 51 Am. Dec. 275; Lush v. Drure, 4 Wend. 313; Van Rensselaer v. Jones, 2 Barb. 643; Adams v. Fort Plain Bank, 36 N. Y. 255.)

These and many other cases which might be cited from New York were mainly based upon express contracts, in which money was to be paid, services rendered, or a duty to be performed at a fixed and certain time,—cases in which the default of the debtor at the fixed period was apparent, the amount of the recovery, and not the right to recover at all, being the sole question.

This further distinction may be drawn from the New York cases: notwithstanding the damages are unliquidated and not capable of ascertainment by computation, still, if they can be determined by computation, together with a reference to well-established market values, then interest may be recovered.

The reason given for this modification of the earlier rule is, that in many cases market values are so well established and so easily obtained, that it is easy for t.he debtor to obtain some proximate knowledge of how much he is to pay.

This distinction was noted by Selden, J., in McMahon v. New York and Erie R. R. Co., 20 N. Y. 463.

Under the law as held in New York at the present time, it is not far wide of the mark to say all the cases in which interest may be recovered by the creditor, upon an unliquidated demand for damages arising upon a contract, proceed upon the theory, first, that the damages are capable of ascertainment by calculation; second, that if not capable of being thus ascertained, they may be determined by reference to well-established market values, together'with computation; or, third, that the debtor is in default in not performing some obligation devolving upon him, whereby the amount of his debt could be rendered certain or susceptible of being made so by calculation.

These distinctions were referred to in McMahon v. New York and Erie R. R. Co., 20 N. Y. 463, and the right to recover interest upheld upon the third ground, namely, that it was the duty of defendant to have caused its engineer to furnish estimates of the work done, and that had hp done so the amount of the claim would have been so ascertained as to carry interest.

We have referred to some of the New York cases, for the reason that we think that they are in the advance upon the question of allowing interest upon unliquidated demands.

The case at bar is not an action upon an express contract between the parties; such a contract, it is true, existed, and had plaintiff recovered under it he would have been entitled to interest upon the several payments provided for therein from the dates at which they fell due; but for reasons not now necessary to be enumerated, a recovery upon the contract has been abandoned, and plaintiff counts upon a quantum meruit, for the performance of labor and services, precisely as he might have done had there been no contract.

His services and the material furnished by him were uncertain as to amount, character, value, and time of payment, until fixed by a verdict or findings of the court. They were not of a character to have a fixed or ascertainable market value.

They could not be ascertained by computation, either in extent or value. • Defendant was not in default for not ascertaining that which, outside of the abandoned contract, he could not ascertain except by an accord or by verdict, or its equivalent.

In Bank of California v. Northam, 51 Cal. 387, this court held that interest .could not be recovered upon an account for goods, wares, and merchandise sold and delivered. In Brady v. Wilcoxson, 44 Cal. 239, it was said: “ The plaintiffs are not entitled to interest. Their claim was an uncertain and unliquidated demand. The amount due cannot be ascertained from the face of the contract, but is to be settled by process of law on such demands; interest eo nomine cannot be allowed.”

The ease of Homer v. Hathaway, 33 Cal. 117, cited by respondent, was an action of trover, in which the rule as to damages is quite different from that in cases like the one at bar. The rule in such cases was, that the plaintiff could recover the value of the property, with legal interest from the time at which the value is estimated. (Douglass v. Kraft, 9 Cal. 562.) Section 3336 of our Civil Code has substantially continued the rule as it existed previously, with the addition that under certain specified circumstances no interest can be recovered.

In McFadden v. Crawford, 39 Cal. 662, which was an action for work, labor, and services, this court allowed interest on the demand from the date of the filing of the complaint, reversing the action of the court below, allowing interest from the rendition of the services.

The rule thus enunciated finds some support in Sutherland on Damages, where it is said: “After demand, or after commencement of suit, accounts generally bear interest. The commencement of suit is a formal demand. Accounts are generally made of items which represent money paid, goods sold and delivered, or services rendered, on request. They are severally demands on which interest may be claimed, though the price had not been fixed by agreement, and must be established by evidence.” (1 Sutherland on Damages, 616.)

Ttie same author adds that “where, however, the account or demand is for particulars, the value or amount of which cannot be measured or ascertained by reference to market rates, and are intrinsically uncertain, or the creditor’s demand of payment is excessive or vague, a different case is presented.”

The distinction mentioned is pointed out in many of the cases, and it is only by bearing it in mind that otherwise apparent conflict can be reconciled.

We are not prepared to say, in general terms, that no interest in any case can be recovered in an action upon contract for an unliquidated demand. Mix v. Miller, 57 Cal. 356, decided since the adoption of the code, and McFadden v. Crawford, supra, decided previously, attest the doctrine that in this state interest is allowable on such demand under some circumstances.

These were cases in which the contract had been fully performed by the creditors, the fruits thereof accepted by the debtors, without objection, and they were clearly in default, and in the latter case the only question was as to value.

But where, as in the case at bar, the amount of the services, their character and value, can only be established by evidence in court, or by an accord between the parties, and are not susceptible of ascertainment, either by computation or by reference to market rates, or other known standard, we are of opinion plaintiff is not entitled to interest prior to verdict or judgment.

The cause is remanded with directions to the court below to modify its judgment in favor of the plaintiff by striking out the interest, and leaving the judgment to stand in favor of plaintiff for $98,228.49, with interest thereon .at seven per -cent per .annum from October 21, 1886, the date of the entry of such judgment, together with costs of suit. The judgment and order are in all other respects affirmed.

Thornton, J., concurred in the judgment.

McKlnstry, J., did not participate in the decision.