D. Morrison & Co. v. Lovejoy

6 Minn. 319

• Court: Supreme Court of Minnesota
• Decided: December 15, 1861
• Status: Published

Opinion

By the Ooivrt —

Emmett, C. J.

— The complaint sets out in full, a conti’act under seal, dated March 31,1857, between the Plaintiffs as parties of the first part and Defendants as parties of the second part, whereby the Plaintiffs agree to run, operate and use for manufacturing lumber, exclusively for the Defendants, certain mills situated at St. Anthony, from the date of the contract until the 15th day of May, A. D. 1860. And the Defendants thereby agreed to furnish a sufficient quantity of logs to keep said mills in full operation during said period, and to pay to the Plaintiffs at the rate of five dollars per thousand feet, for sawing pine lumber, and seven dollars per thousand for hard wood. The Defendants were also to have the use of a lathe and a shingle machine, connected with the mills, and certain water power for which they were to pay a stipulated rent. They were also to take, if they elected so to do, certain logs which the Plaintiffs then had, at a price agreed upon.

The action is brought to recover an alleged balance due from the Defendants to the Plaintiffs for rent, logs furnished, and manufacturing done under said contract, and also dam•ages alleged to have accrued by reason of the Defendants refusing, on and after a certain date, to furnish logs to keep said mills in operation.

The Plaintiffs allege a full compliance on their part, and that they continued to manufacture up to the 2d day of September, 185Y, at which time the Defendants refused further to supply the mills as provided by the contract. They claim a balance due them at that time for sawing or manufacturing, and for rent of the lathe and shingle machine, and logs furnished under the contract, of $10,000. And also that .they have sustained damages, in the sum of $101,531, accruing to them between the said 2d day of September, 1857, and the 1st day of September, 1858, by reason of the Defendants refusing to furnish logs for the mills to manufacture after September 2, 1857.

The Defendants admit the making of the contract, but deny that there is anything due the Plaintiffs for rents, logs, or manufacturing as alleged. They also allege that by an understanding and agreement between the parties, had and made prior to and contemporaneous with the making of the agreement set forth in the complaint, the said agreement was connected with and based and dependent for its continuance, upon certain articles of submission to arbitration, executed by the parties at the same time, by which all matters of difference existing between the parties and arising out of a prior contract, were submitted to 'arbitrators for settlement. That the contract mentioned in the complaint was but one part of the general plan of compromise, and was to cease and become inoperative, in the event that the arbitration failed; and that the arbitrators under said submission having failed to agree, they, the Defendants, were absolved from the operations of the contract sued upon.

The Defendants set forth the contract upon which the submission to arbitration arose ; allege various breaches thereof by the Plaintiffs, and the damages sustained thereby, and set it up as a counterclaim against the demands of the Plaintiffs.

They further aver sundry breaches, on the part of the Plaintiffs, of the contract sued upon, and allege certain damages therefrom, which they also set up as a counterclaim to the Plaintiffs’' demands.

The action was tried by a jury. The Plaintiffs obtained a verdict in their favor* The Defendants made a motion for a new trial upon a case prepared and settled as provided by. statute; which motion being overruled, the case is brought to this Court by an appeal from the order denying a new trial.

The Appellants have deemed it necessary to raise each of the points made in the record separately, and for this reason perhaps, an unusually large number is presented, but, as very many of them refer to the same general questions or propositions, we do not think it essential that the various points should be considered in detail. We shall therefore confine ourselves to the general questions involved, or to such of them as appear to us material to the decision to which we have come. •

The Defendants first allege that the Court erred in admitting Hans and excluding Huy from the panel of jurors.

Both were challenged by. the Defendants for actual bias. In the case of Haus, the question of bias was by consent submitted to the Court and upon trial the challenge was found to be untrue. We consider this finding as conclusive under the statute; but even if it were not, we see nothing in the facts elicited upon the examination of the juror, showing actual bias.

In regard to the exclusion of Huy, the Defendants’ challenge was admitted by the Plaintiffs, and there was therefore nothing to try. We think the Court very properly refused the Defendants permission to examine the proposed juror, while the challenge remained, and the facts upon which it was grounded were not denied. It is only when the facts are denied that the statute provides for a trial. Comp. Stat., 115, section 28.

The Defendants however asked leave to withdraw the challenge. But this the judge refused to grant, and this refusal is alleged as error. We regard the application to withdraw the challenge as addressed to the discretion of the judge, and his action thereon cannot be reviewed in a superior Court, without express authority therefor given by statute, which authority we are unable to find.

We are aware that it has been asserted, that if a Court arbitrarily and without any sufficient reason set aside a juror properly selected, it will be ground for error. Hine vs. The State, 8 Humph., 597, (cited in 2 Gra. on New Trials, 194.) But that evidently was on tbe ground of a gross abuse of discretion, which is far from being true of this case. On the other hand Judge Story, in a case where on trial for murder two jurors, members of the Society of Friends, were set aside upon a mere suggestion of the fact, without examination as to their belief in regard to capital punishment, refused to set aside the verdict, and said that “even if a juror has been set aside for an insufficient cause, I do not know that it is matter of error, if the trial has been by a jury duly sworn and em-pannelled and above all exception. Neither the prisoner nor the government in such a case have suffered any injury.” 2 Mason, 91. We think the doctrine and reasoning of Judge Story apply with peculiar force to the case at bar ; for here too there has been a trial by a jury duly sworn and empan-nelled, and so far as we are advised above all exception.

There are other points made by the Defendants for the purpose of showing that the Court erred in refusing to permit them to prove by parol, according to their several offers, the understandings and agreements of the parties at and prior to the execution of. the contract on which action is brought. These different offers are in substance identical, though varying somewhat in form. They were directed to certain allegations of the answer and avowedly for the purpose of showing that the contract sued upon was to terminate in a certain contingency, before the period fixed by the contract itself, and that such contingency had happened before the breach complained of. It is however unnecessary to recapitulate them here, nor do we propose to discuss the several points and exceptions made to the rulings of the Court on the questions here involved, nor to review the mass of authorities to which we have been referred, because the view which we have taken on other points renders such a course unnecessary. Suffice it that in our opinion these several offers, however varied in form, were simply attempts to vary By parol the terms of the written contract, of which that concerning the time the contract was to continue was amongst the most material; and that all such evidence was properly excluded. And as to the offer of the Defendants to so amend their answer as to avoid the objection above named, and to show that what they offered to prove was omitted in writing the contract, through mistake and misapprehension, and their prayer for leave to reform and correct the contract in that respect; we think that the refusal of the j udge to permit such amendment and reformation affords no ground for reversal. The application was addressed to his discretion, and there is no just ground for claiming that, in the decision which he made, this discretion was abused.

We are unable also to discover error in the Court refusing to receive in evidence the submission papers referred to in the Defendants’ answer. They do n'ot appear to us to refer to the same subject matter as the contract sued upon, though executed the same day, or at the same time. There is no reference in the one to the other. The one relates to a settlement of difficulties existing between the parties, growing out of their transactions under a former contract; the other relates wholly to matters subsequent. The arrangement was quite natural-Differences had arisen between the parties as to their respective rights and liabilities under a prior contract, and they submit those differences to arbitrators, making an entirely new contract as to the future. The new contract does not by its-terms, depend in the least degree upon the success or failure-of the arbitration, nor is there any necessary connection between them. Each seems distinct and perfect in itself. And' if the arbitration fails and the submission papers do not afford' a remedy, the parties respectively have their remedy on the-agreement to which the arbitration referred.

During the trial the Defendants further offered in evidence, the prior agreement set up in the answer, dated Sept. 2, 1854, and the supplement thereto, and proposed to follow them up by proof of breaches on the part of the Plaintiffs and of the damages which the Defendants sustained thereby; but upon the Plaintiffs objecting thereto, the Court sustained the objection. They then offered in evidence said agreement and supplement, without any evidence of breaches or damages, but with no better success. And it is now urged that the Court erred in excluding such evidence.

The object of these several offers, was, doubtless, to estab-lisb the counter-claim set up in the answer; and whether the Court was right in rejecting the evidence may be determined by the sufficiency of the counter-claim as alleged.

It will not be seriously contended that the facts stated in the answer would constitute a valid set-off or counter-claim under the practice as it formerly stood; and if they are sufficient now, it is by virtue of the statute alone. The statute authorizes the defendant to set up a counter-claim by way of defence, and defines the nature of such counter-claim to be one existing in favor of the Defendant and against the Plaintiff, between whom a separate judgment might be had in the action, and must arise out of the following causes of action:

1. A cause of action arising out of the contract or transaction set forth in the complaint as the foundation of the-Plaintiff’s claim, or connected with the subject of the action.

2. In an action arising on obligation, any other cause of action also arising on obligation, and existing at the commencement of the suit. Comp. Stat. 541, sec. 71.

The first clause covers those cases which would have formerly fallen under the head of recoupment, and to some extent enlarges the operation of that class of cross claims. The Defendants’ claim in this action arising under a contract entirely distinct from that upon which the Plaintiffs’ claim is founded, and not being connected with the subject of the Plaintiffs’ action, could not be brought in under the first clause.

The second clause, however, is, in our judgment, broad enough to cover the counter-claim set up by the Defendants. The word “obligation” as used in the statute, means contract, and comprehends all causes of action .arising ex contractu, as distinguished from causes of action arising ex delicto. Any other construction would be at variance with the purpose of the code, which, throughout its entire scope and spirit, is aimed at the consolidation instead of dispersion of actions. It blends the Courts of Law and Equity, and permits, even enjoins the litigation and settlement of all equities existing between parties to an action, in one suit, which formerly could be only enforced by way of cross action or cross bill. Comp. Stat. p. 481. secs. 23-4. It permits but one form of action for the settlement of all claims of a private nature. Comp. Stat. ¶. 532, sec. 1; ¶. 480, secs. 19-20. This affords every reason to believe that it was not intended to restrict the number and character of claims that might be litigated in one action by the use of the word “obligation” in describing counter-claims. It is a term open to several interpretations. In its general and most extensive sense it is synonymous with duty. In a more technical meaning, it is a tie which binds us to pay or to do something agreeably to the laws and customs of the country in which the obligation is made. It also signifies the instrument or writing by which the contract is witnessed. It is also defined ’to be a deéd whereby a man binds himself under á penalty to do a thing; and the word in its most technical signification, ex vi termini, imports a sealed instrument. Bouvier’s Law Dic. Vol. 2., Obligation. It is needless to say that a much more appropriate word might have been selected to convey the'intention of the codifiers; but that is not to the purpose. ~We must give it such application as is in harmony with the spirit of the change sought to be made in the practice. Should we hold that it meant a sealed instrument exclusively, or even a written contract, we would abridge^the former rule of set-off very materially, and exclude many causes of action upon contracts express and implied to the interposition of which by a defendant, no philosophical objection has ever, nor can be successfully urged. Should we adopt the most extended signification the term will bear, we would introduce disorders into the practice which must readily suggest themselves to any mind at all familiar with the science of the law. We are of opinion that it was designed to enlarge the doctrine of set-off so as to include all causes of action arising ex oont/raotm, whether the damages are liquidated or unliquidated, and that the Defendants’ proof should have been received.

The remaining points made by the Defendants so far at least as we deem them material to the decision of the case, relate to the rule by which the damages sustained by the Plaintiffs, by reason of the failure of the Defendants to fur.nish lumber to be manufactured under the contract are to be measured. They refer as well to the rulings of the Court. upon the admission and rejection of evidence touching these damages, as to the instructions given and refused to be given to the jury on that question.

After a careful examination of the law in regard to the measure.of damages in cases of this kind, in which we have been greatly enlightened by the thorough discussion which counsel op either side gave to the question, we cannot resist the conclusion that the Court below erred in refusing to instruct the jury, that, in estimating the profits which the Plaintiffs might-have realized in the manufacture of lumber under the contract, from Sep. 2d, 1857, to Sep. 1st, 1858, they should take into consideration, as a part of the cost of manufacturing, the rent of the mills during said period.

When one party to an executory contract like that' on which this action is brought, refuses further to comply with it on his part, the other party has an immediate cause of action for said breach; and may sue at any time and recover the damages which he may have sustained, by being deprived of the benefits accruing to him under it; or he may treat the contract as continuing, and, by holding himself in readiness to perform on his part, may, from time to time, or at the expiration 'of the contract, sue and recover for the damages which he may have sustained at the time of the action. But the rule of damages differs materially according to the course pursued. If he treat the contract as ended and sue immediately upon the breach, his damages are to be measured by the value of the contract to him at the time it was broken ; and this value is estimated by the profits which he would have realized during the continuance of the contract, had it been faithfully carried out by the parties. But in estimating the profits which a party under such a contract would realize, allowance must be made for every item of cost and expense necessarily attending a full compliance on his part. If, therefore, the contract is for manufacturing a given article, and mills and machinery are necessarily employed in making it, the reasonable or usual rent, or value of the use of such mills or machinery enter into the costs of manufacture, and should be taken into consideration in estimating the profits, because the profits are as directly affected by such expenses as by any other. .

But should the party who is not in default pursue the other course, and, treating the contract as continuing, hold himself and his mills and machinery in readiness, and maintain his ability to perform the contract on his part; then his damages cannot be measured by the profits alone, which would probably have accrued to him; because they will not compensate him for the injury he has sustained. Let us suppose by way of illustration, an executory contract for the manufacture, at a given price, of some article which can be made by the use of mills and machinery only; and that the contract is to continue one year. That the usé of the mills and machinery, or the reasonable rent therefor for the term, is $ 10,000, and the other expenses necessarily attending the production of the article, would amount to $ 30,000, and that, at the contract price, the gross earnings of the manufacturer during the time would amount to $ 50,000. Here, then is a clear profit of $ 10,000 to the manufacturer; and if the other party should refuse to comply with the contract, and the manufacturer should also abandon it and sue for damages, these prospective profits would cover all the loss which he has really sustained. But then he may not desire or be in a condition to abandon the contract. He may have been at the expense of erecting milla and machinery to carry out the contract on his part; or may have rented them for the term, for the same purpose; and if, under such circumstances, he still holds himself and his milla and machinery in readiness, and maintains his. ability to perform on his part during the time fixed for the continuance of the contract, it is clear that the $ 10,000 profit which he might have made would not cover his loss ; for it would exhaust the whole of that sum to pay the rents which he has incurred, and he would derive no benefit whatever from his contract. And if, in the case supposed, the profits were $ 5,000 instead of $ 10,000, and the amount of damages which the party could recover were limited to the profits merely, he would be behindhand on the rent alone some $5,000, after applying towards its payment all the damages which he could recover.

If, therefore, the Plaintiffs in this action, after the Defendants had refused longer to furnish logs for the mills to manu-ufacture, had kept the mills in readiness to perform the contract on their part, np to the said 1st day of Sep. 1858, and had made proper allegations and proofs to that effect, the instruction which the Court gave to the jury in regard to-the rents of the mills in the meantime, would have been correct, although the mills may have remained idle during the whole period.

But we regard this action as one in which the Plaintiff's treat the contract as at an end, and sue to recover for the price of the work previously done, and materials, &c., furnished under it; and for damages sustained by reason of the Defendants’ abandonment after the 2d day of September, 1857. They do not allege a present and continuing readiness, willingness or ability to perform the contract after the alleged refusal of the Defendants further to furnish the mills. The gen.eral averment that “they have at all times and in all things kept and performed their contract ” is made before any breaches are assigned, and evidently refers to what was done prior to the abandonment of the contract by the Defendants on the 2d day of September, 1857. It is true that they allege and endeavored to prove that damages to the amount demanded for this cause of action, accrued to them during the time transpiring between the abandonment by the Defendants and the 1st of September, 1858, and predicate these damages upon the profits which they would have made during said time, but then it was their own fault that their allegations and proofs were thus limited. They were at liberty to claim less than they were entitled to, and to confine their allegations and proofs to any time within that limited by the contract.

The complaint, as to this cause of action, omitting the special allegations as to when and how the damages accrued, is, in form, about as the pleader would have drawn it, had the action been commenced immediately after the 2d of September, 1857, when the breach complained of occurred. There are no allegations upon which to found a claim for damages beyond the prospective profits which the Plaintiffs would have made out of the contract. They do not, as before stated aver that they held the mills in readiness to manufacture lumber for Defendants during any particular time after the 2d of September* 1857, while tbe proofs show that, soon, after tbe Defendants refused to proceed, under tbe contract, tbe Plaintiffs put it put of tbeir power to comply on tbeir part, by surrendering tbe mills to tbeir lessors.

It is in tbis view of tbe case that we regard tbe several objections of tbe Defendant, predicated upon tbe omission of Plaintiffs to allege and prove a present and continuing readiness and ability to comply on tbeir part as unimportant. Tbe Plaintiffs, without such allegations or proofs bad a right to recover damages for tbe injury sustained, to be estimated by tbe value of tbe contract to them at tbe time of tbe breach, or by tbe profits which they could have realized under if.

If, as we have before stated, tbe Plaintiffs bad held tbe mills in readiness to manufacture lumber for tbe Defendants under tbe contract, up to tbe said 2d day of September, 1858, and then sued for the damages sustained up to that time, making proper allegations and proofs of the fact of such continuance, readiness and ability, tbe rule of damages would have been different as we have endeavored to show. Tbe charge of tbe Court in regard to excluding tbe rent of tbe mills from tbe consideration of the jury, would then have been correct. But as tbe pleadings stand, we bold that tbe damages which tbe Plaintiffs sustained by tbe breach under consideration are to be measured by the profits which would have accrued to them bad tbe contract been faithfully kept by tbe Defendants, and that tbe jury should have been instructed that in estimating these profits tbe rent of tbe mills should be taken into consideration as part of tbe cost of manufacturing tbe lumber.

There must be a new trial of tbe case.