Gross v. Heckert

97 N.W. 952, 120 Wis. 314, 1904 Wisc. LEXIS 79

• Court: Wisconsin Supreme Court
• Decided: January 12, 1904
• Status: Published

Opinion

Marshall, J.

We are unable to discover any warrant in "the evidence for the decision that plaintiff, before the commencement of this action and the happening of the events upon which his claim for damages is based, assigned his lease to the S. C. Ilerbst Importing Company, incapacitating himself from bringing such action for want of being the real party in interest. The evidence is clear that the assignment, if one was effected, though absolute in form, was for security only. It seems that it must have been supposed in the court below, either that it was not competent to show by parol evidence the real nature of the assignment, or that a mere mortgaging of the leasehold interest rendered the mortgagee the real party^in interest to prosecute for a breach on the part of the lessor. The law is so clearly the other way as to both propositions that it seems unnecessary to spend time discussing the matter at any great length. As to the first proposition the following decisions-of this court are decisive : Butler v. Butler, 46 Wis. 430, 1 N. W. 70; Rockwell v. Humphrey, 57 Wis. 410, 15 N. W. 394; Manufacturers’ Bank v. Rugee, 59 Wis. 221, 18 N W. 251; Lamson v. Moffat 61 Wis. 153, 21 N. W. 62; First Nat. Bank v. Damm, 63 Wis. 249, 23 N. W. 497; McCormick v. Herndon, 86 Wis. 449, 56 N. W. 1097; Bertschy v. Bank of Sheboygan, 89 Wis. 473, 61 N. W. 1115; Jourdain v. Fox, 90 Wis. 99, 62 N. W. 936. As to tbe second point tbe following decisions are likewise clear: Landauer v. Espenhain, 95 Wis. 169, 70 N. W. 287; Chase v. Dodge, 111 Wis. 70, 86 N. W. 548. Tbe test of whether one is tbe real party in interest within the meaning of tbe statute is, Does be satisfy tbe call for tbe person who has tbe right to control and receive tbe fruits of tbe litigation ? Tbe rule is stated in a recent ably written work thus:

“Tbe real party in interest, within tbe meaning of this provision of tbe code, is tbe person who will be entitled to tbe benefits of tbe action if successful; one who is actually and substantially interested in tbe subject-matter, as distinguished from one who has only a nominal, formal, or technical interest in or connection with it.” 15 Ency. PI. & Pr. 710.

A mere mortgagee of an interest in realty, which, at tbe best for respondent, was tbe situation of tbe assignee of the lease, possesses only a lien to the extent of tbe obligation secured by tbe mortgage. Independently of such obligation it constitutes no interest whatever in tbe thing mortgaged. Tbe extinguishment of tbe obligation, without any other act. whatever ipso facto extinguishes tbe lien. Brinkman v. Jones, 44 Wis. 498; Fred Miller B. Co. v. Manasse, 99 Wis. 99, 74 N. W. 539. Tbe evidence in this case shows .that the obligation to secure which tbe assignment of the lease in question was made, if one was in fact effected, never ripened into an indebtedness due or to become due, and that it was wholly extinguished before the commencement of this action, thereby leaving tbe plaintiff not only the real party in interest to prosecute the cause of action in suit, but the sole party interested therein.

As appears by the statement of facts, the referee neglected to find on the subject of respondent’s knowledge that appellant intended to use the leased premises for a saloon business, and to prepare therefor so as to be able to commence such business at the beginning of his term. That WO-S a matter in issue on the pleadings and was an-important feature of appellant’s case as bearing on the damages recoverable of the respondent, under the rule in Hadley v. Baxendale, 9 Exch. 341, which has been often approved in this court, and applied, as will be seen, to the particular class of cases to which the one before us belongs. Such rule may be stated as follows: The damages recoverable for breach of contract are such as may fairly and reasonably be considered the natural and proximate result thereof, and in the light of circumstances, special or otherwise, known to both parties at the time of making the contract, may reasonably be supposed to have been in contemplation by them as the probable result of such breach. The number of eases here, where that has been applied is very large. The following are a few of them: Shepard v. Milwaukee G. L. Co. 15 Wis. 318; Hibbard v. W. U. Tel. Co. 33 Wis. 558; Candee v. W. U. Tel. Co. 34 Wis. 471; Hammer v. Schoenfelder, 47 Wis. 455, 2 N. W. 1129; McNamara v. Clintonville, 62 Wis. 207, 22 N. W. 472. The rule is usually stated omitting the feature as to> special circumstances, as the cases .where that is important are exceptional. The following are in the exceptional class Cockburn v. Ashland L. Co. 54 Wis. 619, 12 N. W. 49; Guetzkow Bros. Co. v. A. H. Andrews & Co. 92 Wis. 214, 66 N. W. 119. That it applies where, as in a case like this,, a lease is made covering in whole or in part an outstanding term, the circumstances being such that tbe lessor knowns or ought to know that his lessee will not -be able to enjoy such term according to the agreement, is held in Poposkey v. Munkwitz, 68 Wis. 322, 331, 32 N. W. 35, to which, appellant’s counsel refers and upon which he confidently relies. As there shown, ordinarily the rule of damages for failure of title to a leasehold term is the same as •for such failure as to an absolute conveyance of realty with warranty. The amount recoverable is confined to the consideration, with interest. If rent has been paid to apply upon any portion of0 the term which the lessee is prevented from enjoying, that may be recovered with legal interest. If no sum has been so paid, the damages are deemed to be nominal only. The exceptional circumstance referred to, of the lessor being chargeable with knowledge at the time of making the lease that his lessee will not be able to take possession of the leased premises and enjoy his term according to agreement is deemed to render him guilty of a greater wrong than that of a mere breach of contract to assure the lessee in the quiet enjoyment of the leased premises. He is deemed to be guilty of a wrong of a fraudulent character and amenable to damages under the general rule applicable to contracts.

The evidence was substantially undisputed and conclusive that when the lease was made respondent knew the use the premises were to be devoted to and that appellant purposed preparing, prior to the commencement of his term, for the enjoyment thereof. There should consequently have been a finding accordingly, and appellant should have been given the benefit of the staté of the' case thus shown to exist in considering the evidence and making findings as to damages caused by the breach complained of. The errors in not doing so are here for correction, appellant having specially requested proper findings on the subject and saved exceptions to the refusal to make them.

Appellant requested a finding to the effect that, relying upon the agreement to put him in possession of the leased premises, he incurred obligations and paid out money in anticipation of enjoying his term, which was largely lost by reason of respondent’s failure to enable bim to do so. Tbe evidence was • undisputed in regard to that matter. That error' was committed in refusing to make tbe findings requested follows necessarily from wbat bas been said.

According to tbe evidence, one of tbe obligations incurred by appellant as stated in tbe foregoing paragraph is $917 for salo.on fixtures, wbicb, by reason of tbe breach, were not worth to bim, at tbe time thereof, to exceed $650, and be thereby suffered a loss of $267. Tbe finding that tbe value of tbe fixtures at tbe time of tbe commencement of tbe suit was $815 seems not to be based upon any evidence in tbe case, ■and to have been made without appreciating tbe fact that tbe true measure of appellant’s damages in respect to tbe matter was tbe difference between tbe contract price for tbe property and tbe market price thereof in cash at tbe time of tbe breach, with interest from such time. Upon just wbat theory the finding of $815 was made we are unable to discover. Tbe error assigned in respect thereto is sustained.

Tbe item of $150 damages claimed by appellant on account of matting, wbicb tbe undisputed evidence shows became worthless on bis bands because of tbe breach complained of, -seems to have been rejected upon tbe theory that tbe contract for tbe property was not enforceable by reason of sec. 2308, ‘Stats. 1898, since it was wholly verbal and executory, and nothing was paid thereon, nor was any part of tbe property •ever delivered. That statute relates only to executory sales of property; not to contracts for tbe manufacture and sale of property. Meincke v. Falk, 55 Wis. 427, 13 N. W. 545; Boyington v. Sweeney, 77 Wis. 55, 58, 45 N. W. 938; Goodland v. LeClair, 78 Wis. 176, 178, 47 N. W. 268. Tbe distinction between a contract of sale where there is nothing for tbe seller to do but to tender tbe property, and a contract requiring tbe executory vendor to manufacture or produce tbe article by the use of bis capital and labor and then tender the same, tbe former being within and tbe latter without the statute, is clearly shown in Meincke v. Falk, supra. It is easily seen that a mere contract of sale, contemplating thereafter only a tender of the subject thereof upon the one side and payment of the consideration therefor upon the other, is quite different from such as the contract here. That the statute deals with the former only is clear from the fact that by its terms it plainly indicates that a part execution of the contract by one party, accepted by the other, takes it out of the statute. A contract to sell an article which contemplates that the vendor shall first manufacture it by the use of labor and capital implies that the application of such labor and capital in the execution of the agreement is to be accepted as the work of manufacture progresses, contingent upon the thing, when produced, corresponding to that ordered. The result is that, as soon as the process of manufacture commences the contract is no longer wholly executory. When the article contracted for is ready for delivery and the situation is such that it might then form the subject of a sale within the meaning of the statute, the real contract has been substantially performed upon one side. To allow the statute of frauds to then interfere with the final consummation of the agreement would be a use thereof to perpetrate fraud instead of to prevent fraud. That is not allowable. There should have been a finding to the effect that appellant was damaged by the breach complained of, on account of loss on the matting, in the sum of $150 and interest.

Appellant complains because of the finding that the gas and electrical fixtures — costing $136 and by reason of respondent’s fault left of no account to him except what he could obtain therefor at a resale — were worth $90; and that the glassware, costing $398.99 and by respondent’s fault left in the same situation, was reasonably worth to appellant $361.66. Such complaint seems to be fully warranted. The.finding appears to have been made quite independently of the evidence or the correct rule of law applicable to the subject. As before indicated, tbe measure of appellant’s damages as to such matters was tbe difference between tbe cost price of tbe goods and tbe amount wbicb, under tbe circumstances, tbe same were reasonably worth at tbe time of tbe breach. Had appellant resold tbe property in a way reasonably calculated to produce tbe fair market value thereof, tbe amount thus obtained would have been evidence of such value; and bad a sale been made in a way reasonably calculated to produce tbe best price obtainable, tbe net result would have been binding upon respondent as tbe true value. Pratt v. S. Freeman & Sons Mfg. Co. 115 Wis. 648, 92 N. W. 368; T. B. Scott L. Co. v. Hafner-Lothman Mfg. Co. 91 Wis. 667, 65 N. W. 513. Not having so established tbe fair market value of tbe property at tbe time of tbe breach, it was necessary to do so by other competent evidence. Evidence ivas produced in that regard, and, looking at tbe saíne as favorably as we reasonably can for respondent, tbe damages suffered by appellant as to tbe electrical and gas fixtures was $111, and as to tbe glassware, $154.80. A finding to that effect should have been made.

Complaint is made because of there being no finding as to 'damages suffered by appellant on tbe stock of liquors for wbicb be incurred a liability of $1,623.15 and paid $162.85 -for a release therefrom. It is sufficient to say on that subject that appellant wholly failed to produce any evidence as to tbe market value of tbe goods at tbe time of tbe breach; hence there was no opportunity for a finding to be made in respect to tbe matter, based upon tbe rule of damages applicable •thereto. It is quite likely that if tbe settlement between appellant and bis vendor, whereby a sum of! money was paid to tbe latter for a release of tbe former from bis indebtedness, were regarded as establishing the difference between tbe amount of such indebtedness and the value of tbe property involved at tbe time of tbe breach, it would be as favorable to respondent as if such value were established by competent evidence. But tbe evidence of tbe settlement does not constitute legal proof of tbe essential fact; therefore tbe • claim for damages on this branch of tbe case wholly fails. For aught tbe record shows tbe stock of liquors at tbe time of respondent’s breach may have been worth much more than tbe purchase price thereof.

Further complaint is made because only $50 in the aggregate was found to have been paid out by appellant in addition to expenditures for merchandise during the course of his preparations to occupy the leased premises. In support of that, reference is made particularly to the circumstance that appellant made an advanced payment of $50 to a person engaged by him to aid in conducting the saloon business. Since only such damages are recoverable as under all the circumstances both parties at the time of entering into the contract may reasonably be presumed to have anticipated would in the natural course of things probably result from a breach thereof, it is difficult to see how a loan of money, so to speak,, in anticipation of the borrower repaying the same by the performance of labor, as in this case, can be recovered because such payment was prevented. The purchase by appellant of furniture and stock for use in running the saloon business, in anticipation of enjoying the leased premises, respondent should have reasonably expected would occur under the circumstances ; but not the hiring of assistants and the payment to them of wages in advance. The former would and the latter would not be circumstances happening according to the natural course of things within the rule above stated. The advance of wages being thus not recoverable, we are unable to reach a conclusion that the finding of the court under consideration is contrary to the clear preponderance of the evidence.

There was evidence to the effect that appellant paid $60 for storing and caring for the saloon fixtures during some eight months subsequent to the breach complained of, and $24.50 in attempting to mate an auction sale thereof November 25, 1901, with the other property purchased for use in the saloon business, which sale he was prevented from making by reason of interference on the part of respondent, in that the latter served a notice on the auctioneer to the effect that if he proceeded with the sale as contemplated he would incur pecuniary responsibility, as the property was involved in litigation and the title thereto in dispute. Error is assigned because no findings were made to the effect that appellant suffered recoverable' damages in respect to such matters to the amount of the expenditures mentioned. The sole legitimate purpose of the proposed sale was to create evidence of the market value of the goods at the time of the breach complained of. The result of the sale, had one been made under circumstances fairly calculated by the result to indicate such value, would have been competent evidence thereof. One of the important requisites of such circumstances was such proximity of the time of the sale to that of the breach as to render the result not likely to be unfavorably influenced by conditions occurring subsequent to such breach. 2 Mechem, Sales § 1642. Counsel’s theory in insisting ’ upon allowance of expenditures in preparing for the auction sale, we assume, is that appellant had a right to create evidence in his behalf in the manner attempted; that up to the time of the wrongful interference, rendering his effort in that regard ineffective, all requisites were satisfied to cause such efforts to produce legitimate evidence; that the value of the property thus shown would have been the sum received upon the sale less the expenses incurred, thus making good to him such outlay; and that he should not, therefore, be prejudiced as to such expense by respondent’s conduct. Whether mere fruitless expenditure of money by one party in an effort to obtain evidence on the subject of damages in a case like this, though the barrenness of the result be produced by his adversary, is a proper element of damages recoverable in the action, is by no means free from doubt. We need not, bow-over, solve it bere, since we are unable to bold that if tbe proposed sale bad taken place tbe result would bave constituted legitimate evidence in tbe case. Tbe time tbe sale was to take place was too remote from tbe date of tbe breach to be deemed reasonable in tbe absence of some explanation thereof and some evidence that tbe property at tbe late date would probably bave 'brought substantially tbe price obtainable at or about tbe time of tbe breach. Eor that reason, if for no other, it is considered that no error was committed in not finding in appellant’s favor as to tbe expenses of tbe proposed sale. Tbe same reason condemns tbe claim for $60 for storing and caring for tbe saloon fixtures. Since tbe difference between tbe value of tbe property at the time of tbe breach and tbe purchase price thereof, with interest upon such difference from such time, is the limit of legal damages, no allowance for storing and caring for tbe property coirld be awarded except as part of tbe legitimate expenses of a sale made to create evidence of such value.

Error is assigned on tbe failure to find that tbe value of appellant’s term exceeded tbe rent reserved therefor, and to award him damages for tbe excess. Since, as we bave seen, because of respondent’s wrong in assuring appellant a term which be shquld bave known be could not make good as agreed, be is liable for full damages under tbe rule we bave stated, that necessarily includes any excess in tbe value of tlie term over tbe cost agreed upon, so far as warranted by evidence, enabling tbe court to measure it with some reasonable degree of certainty; and tbe same should bave been found and awarded to appellant. Tbe difficulty of appellant’s position in respect to tbe matter, however, is -that there does not seem to be any evidence upon which tbe court below could properly bave acted in bis favor. There is general evidence as to tbe leased premises being exceptionally valuable for tbe business they were leased for, and other evidence to tbe effect tbat tbe tenant wbo occupied tbe premises before tbe commencement of appellant’s term made a profit of $2,000 per year. Tbat may all be true, and yet tbe value of tbe use to appellant not bave been in excess of tbe rent reserved, since for augbt tbat appears be could bave rented otlicr premises just as valuable in tbe same locality, and at ■tbe same or a less price. Poposkey v. Munkwitz, 68 Wis. 322, 32 N. W. 35. Again, tbe fact tbat another person made $2,000 per year using tbe premises for a saloon business is not proof tbat appellant could bave established such a business and conducted it with like success. Tbe personal element in tbe matter is an important feature. Tbat would be obvious without direct evidence in respect thereto; but such evidence was given and preserved in tbe record. In a proper case and upon proper evidence, a person damnified by tbe wrongful conduct of another, preventing such person from ■making profits in a business enterprise which he otherwise would bave made; may recover of such other for bis loss; but, as has often been said by this court, tbe law in tbat regard is quite liable to operate unjustly and oppressively, and therefore it should be administered with caution and with strict regard to tbe rules applicable to tbe establishment of tbe damages. Guetzkow Bros. Co. v. A. H. Andrews & Co. 92 Wis. 214, 66 N. W. 119; Wright v. Mulvaney, 78 Wis. 89, 46 N. W. 1045; Pewaukee M. Co. v. Howitt, 86 Wis. 270, 56 N. W. 784; Bierbach v. Goodyear R. Co. 54 Wis. 208, 11 N. W. 514; Anderson v. Sloane, 72 Wis. 566, 40 N. W. 214. So it is held tbat prospective profits should not be allowed without evidence to base the' same on sufficiently certain to remove tbe result from tbe realms of pure conjecture. There are many instances where it has been held tbat past profits of a business constitute a legitimate basis from which to estimate, with sufficient certainty to satisfy judicial requirements, future profits in tbe same business conducted in substantially tbe same manner. Treat v. Hiles, 81 Wis. 280, 50 N. W. 896, and Schumaker v. Heinemann, 99 Wis. 251, 74 N. W. 785, are instances of that. Rut there is no authority, we venture to say, to support the proposition that what one person realized for profits in a business conducted in a particular location, such business being of a character dependent largely upon the personal following and qualities of the proprietor, constitutes a legitimate basis upon which to estimate with judicial certainty, so to speak, what another person might make in the same location by engaging in the same business, upon the former removing to a new location, taking with him, so far as practicable, the good will of the old one, as the evidence shows was done in this case. Profits based on such uncertain data would be too speculative by far to be worthy of judicial recognition.

The result of the foregoing is that recoverable damages were shown in this case and should have been properly found in appellant’s favor as follows: $267 for loss on the saloon fixtures; $150 for loss on the matting; $154.80 for loss on the glassware; $111 for loss on the gas fixtures, and $50 fop-expenses; in all $732.80, and interest thereon from the time of the breach, April 1, 1901. Interest is allowable as part of the damages and necessary to fully indemnify appellant for the result of respondent’s wrongful conduct. J. I. Case Plow Works v. Niles & S. Co. 107 Wis. 9, 82 N. W. 568; McCall Co. v. Icks, 107 Wis. 232, 83 N. W. 300.

By the Court. — The judgment is reversed, and the cause remanded with directions to render judgment in favor of the appellant in accordance with this opinion.