Kane v. Jenkinson

14 F. Cas. 121, 10 Nat. Bank. Reg. 316

• Court: District Court, E.D. Michigan
• Decided: July 1, 1873
• Status: Published

Opinion

LONGYEAR, District Judge.

It is entirely, clear that Jenkinson, the seller, was in no manner in default on his part, but that on the contrary the contract was terminated solely on account of the default of the Parkes, the purchasers. There are cases holding that an action will lie in such case by the purchaser to recover payments made, especially where, as in this case, the contract contains no express provision conferring upon the seller the right to rescind and retain payments made, in case of default on the part of the purchaser. The following cases so hold: Preston v. Whitney, 23 Mich. 260; Hickock v. Hoyt, 33 Conn. 553; Fancher v. Goodman, 29 Barb. 315; Mallory v. Lord, Id. 454; Crooks v. Moore, 1 Sandf. 297; Wheeler v. Mather, 56 Ill. 241, 251.

But the supreme court of the United States have, in explicit terms, decided that no action by the purchaser will lie in such case. Hansbrough v. Peck, 5 Wall. [72 U. S.] 497. At page 506, the late Justice Nelson delivering the opinion of the court, it is laid down that no rule is better settled than this: “That the party who has advanced money, or done an act, in part performance of the agreement, and then stops short and refuses to proceed to its ultimate conclusion, the other party being ready and willing to proceed and fulfill all his stipulations according to the contract, will not be permitted to recover back what has been thus advanced or done.” It is true, the contract in that case was for the sale of real estate; but it is difficult to conceive of any distinction on principle between such a contract and one for the sale of personal property. It is also true that in that case the contract contained an express provision for a forfeiture of payments in case of default by the purchaser; but it is to be observed that the court do not place the decision on that ground. On the contrary, the decision appears to be based upon the broad general principle enunciated in the above quotation without any qualification whatever. And this is still more evident from a perusal of the cases cited in support of the decision, in some of which the contract contained no provision for a forfeiture of payments. The cases so cited are Green v. Green, 9 Cow. 46; Ketchum v. Evertson, 13 Johns. 364; Leonard v. Morgan, 6 Gray, 412; Haynes v. Hart, 42 Barb. 58, and Chrisman v. Miller, 21 Ill. 236.

In the case of Green v. Green, there was a provision for forfeiture of payments, but it is not made a basis of the decision, expressly or impliedly, but the contrary appears. The case contains a discussion of the question as to what amounts to a rescission in such cases. At page 50, Chief Justice Savage, speaking for the court, says, “But unless there is an agreement, express or implied, to rescind, the party claiming that the contract is rescinded, must support that claim upon the fact of a violation of the contract by. the other party.” And at page 51, he says, “I forbear the citation of more cases. I have found none of a recovery, where the party wishing to consider the contract rescinded has not shown a breach of the contract on the other side, or what was equal to it”

In the case of Ketchum v. Evertson there was no provision for a forfeiture of payments; and the court made the same ruling as in Green v. Green. At page 365, Spencer, J., delivering the opinion of the court, says, “It would be an alarming doctrine to hold that the plaintiffs might violate the contract, and, because they chose to do so, make their own infraction of the agreement the basis for an action for money had and received.” “Every man,” says that learned judge, “who makes a bad bargain, and has advanced money upon it, would have the same right to recover it back that the plaintiffs have.” These remarks, it seems to me, are well founded in reason, and they have a marked application to the present case. The learned judge proceeds: “The defendants’ subsequent sale of the land does not alter the case; the plaintiffs had not only abandoned the possession, but expressly refused to proceed, and renounced the'contract. To say that the subsequent sale of the land gives a right to the plaintiffs to recover back the money paid on the contract, would, in effect, be saying, that the defendant could never sell without subjecting himself to an action by the plaintiffs.” This commends itself to my judgment as entirely sound in principle; and it constitutes a full and complete answer to the position of the plaintiff in the present case— that the facts that the defendant treated the logs as his own after the default of the Parkes, and subsequently sold them as his own, constituted a rescission of the contract on his part — and conferred upon the Parkes, and upon the plaintiff as their assignee, a right of action to recover-back the money paid in advance upon the contract.

The case of Haynes v. Hart [supra], was based upon a contract for the sale of personal property, and in its incidents was very much like the case now under consideration, except that in that case the purchaser had the use of the property until default on his part, and it was provided in the contract that the seller could retake possession in case of such default, which he had done; but there was no provision for forfeiture of payments. At pages 59 to 60, Johnson, J., delivering the opinion of the court, however, says: “I think no case can be found where a purchaser has been allowed to recover back partial payments after default in making further payments, where the purchaser has merely kept the property agreed to be sold, or sold it to another in consequence of such default. In order,” he says, “to entitle the purchaser to recover under such circumstances, he must show that the other party has been guilty of some breach on his part, or of some act in hostility to the contract. Here,” he adds, “the party fails to get the property bargained for because he neglected and refused to pay the purchase price, and the owner takes it, as he would have a right to do, without any such provision in the agreement.”

The foregoing quotations from cases cited by Justice Nelson, in Hansbrough v. Peck [supra], I think show conclusively that in the latter case the supreme court intended that the application of the rule there laid down should be fully as broad as the language used implies, and without any qualifications whatever. See, also, Dermott v. Jones, 2 Wall. [69 U. S.] 1, 9; Harris v. Bradley, 9 Ind. 166, 168.

The rule thus established is based upon a solid foundation, viz.: The sacredness and inviolability of contracts. It assumes that the law will not presume an agreement to pay back money, which has been paid upon a contract containing no such provision, and under which the money paid became at once the property of the party against whom such presumption is sought to be raised, where such party has done nothing on his part to forfeit the same. As a matter of strict law, as well as of right and justice between the parties, the rule commends itself to my judgment; and were I at liberty to disregard it I should not feel disposed to do so.

I hold, therefore, upon the authority of Hansbrough v. Peck, supra, which is absolutely binding upon this court, as well as upon principle, that the Parkes having been solely in fault, and the defendant having been in no manner in fault, the former could not have recovered from the latter the money paid in advance upon the contract if bankruptcy had not intervened, and the plaintiff, as assignee of the Parkes, occupies no better position, and therefore he cannot recover.

But the plaintiff could not recover in this case even under the decisions that hold that payments made under the circumstances stated may be recovered back. In those cases the right of recovery is based mainly upon a failure of consideration, in consequence of which it is held that the seller holds the money so paid without having rendered an equivalent, and hence that equity and good conscience require that he should return the same to the purchaser. No rule, however, is anywhere more fully recognized and enforced than the following is in and by those same decisions, viz.: That where in such case the seller has been in no manner in fault the same equity and good conscience which require him to refund the money paid, at the same time entitles him to retain so much of it as is necessary to fully indemnify him for all the damages he may have suffered in consequence of the non-performance on the part of the purchaser. Preston v. Whitney, 23 Mich. 260, 267; Hickock v. Hoyt, 33 Conn. 553, 559; Crooks v. Moore, 1 Sandf. 297, 300; Mallory v. Lord, 29 Barb. 454, 464; Ganson v. Madigan, 13 Wis. 67; Allen v. Jarvis, 20 Conn. 38; Haskell v. McHenry, 4 Cal. 411; Leonard v. Morgan, 6 Gray, 412, 415; see, also, dissenting opinions of Justices Scott and Lawrence in Wheeler v. Mather, 56 Ill. 251, 253.

Whether the measure of damages which defendant would have the right to retain would be the difference between the contract price and the price re-sold for, or between the former and the market value at the time of Parkes’ default, it is unnecessary to consider in this case, because I find that upon either basis the damages exceed the amount of the advance payment. Neither is it necessary to consider whether the difference between the contract price and the price resold for can be resorted to in any ease where such a resale has been made without notice to the former purchaser, as is held by some of the cases above cited; because I am of opinion that the notice given in the case was sufficient to comply with those decisions.

The only objection made to the notice in this ease is that it did not specify that Jenkinson would look to the Parkes for any deficiency in case of a re-sale. This objection is founded upon a single decision of one of the supreme courts of the state of New York. The decision referred to is the case of Fancher v. Goodman, 29 Barb. 315, 317. The language used by the court in that case would seem to sustain the objection; but one can hardly avoid the impression that the language was carelessly used, and was not intended in the full force of the words used and in the connection in which the words occur in the printed opinion. This is still more evident from a perusal of the opinion of the court in the only case cited, viz.: Crooks v. Moore, 1 Sandf. 297, in which, at page 302, the court says, “'On his default the seller had a right to sell it on notice to him, and to look to him for the deficiency, if any, by way of damages for breach of his con-, tract.” There it was spoken of as a right “to look to him,” etc., on account of the notice of re-sale having been given, and not as an essential part of the notice itself. In this latter case (Crooks v. Moore), the notice was simply that the seller “would put the goods on the market next day, if payment was not made that day.” The sale was not made until several days after, and the notice was held sufficient, and the seller recovered damages for the deficiency. In that case it was also held that the re-sale need not be by auction, provided it appears that it was made for the best price that could be obtained. In the present case the re-sale was made for more than the market value at the time of the default. No complaint can, therefore, be made on account of the price obtained.

The final default of the Parkes took place August 26th, 1S72. The contract was terminated thereby and the defendant was under no obligation to longer hold the logs for them, or to tender to them any of the remaining portion of the logs not then ready for delivery. Masterton v. Mayor, etc., of Brooklyn, 7 Hill, 61; Hosmer v. Wilson, 7 Mich. 294; Platt v. Brand, 26 Mich. 173. In the aspect of the ease in which we are now considering it, the rights and liabilities of the parties would have to be determined as they stood at the time of the default. At that time the defendant had received from the Parkes’ one thousand dollars, and at the same time he suffered in consequence of their default a loss of the profits he would otherwise have made. Taking matters as they then stood, the logs not having then been re-sold, defendant’s loss of profit would have to be measured by the excess of the contract price over the then market value. It is true some of the logs were re-sold soon after, and for more than the market value at the time of the default. But they were so re-sold on time, and it is questionable if the price thus obtained could be considered a fair basis upon which to determine the loss of profits. It is unnecessary, however, as before remarked, to determine that question here, because, even on that basis, as we shall presently see, the damages would be greater than the advance payment.

It was claimed on the argument, and such was the impression of the court as then, expressed, that in no event could the defend- | ant claim damages for loss of profits on mole than seven hundred thousand feet ready for delivery at the time of the default. On more mature reflection, however, I am satisfied the position is not a sound one, and that defendant would be entitled to damages for loss of profits on the whole quantity covered by the contract. The defendant was under no obligation to get all the logs down and have the whole ready for delivery a't one time. Tlie contract imposed upon the Parkes’ the obligation to receive the logs and pay for them as fast as delivered. The defendant had the undoubted right to deliver in such lots or portions as he might see fit; and, as we have already seen, he was under no obligation to deliver, or tender for delivery, any more, after the failure of the Parkes’ to receive and pay for the seven hundred thousand feet which were tendered. If afterwards, and before a re-sale, they had tendered performance on their part, the question would be presented in quite a different light; but they did not do so, neither did the plaintiff after his appointment as as-signee. The contract covered the logs which were not tendered as well as those which were, and defendants’ loss of profits attached as well to the one class as to the other. If, however, we adopt market value as the basis for determining the loss we need not go beyond the seven hundred thousand feet tendered: because the contract price being nine dollars and sixty cents, and the market value at the time of default eight dollars per-thousand feet, the loss of profits on the seven hundred thousand feet alone would be one thousand one hundred and twenty dollars — more than sufficient to absorb the whole amount of the payment made in advance. If we adopt the price re-sold for. so far as the logs were re-sold, as the proper basis, then we would have the following result: The contract price being nine dollars and sixty cents, and the price resold for nine dollars per thousand feet, the loss on the one million two hundred and twenty-nine thousand feet re-sold would be seven hundred and thirty-four dollars and forty cents. To this must be added the loss on the logs still on hand, for which we have no other basis than their market value at the time of the default, to wit, eight dollars per thousand feet. The quantity still on hand was shown to be three hundred and five thousand feet. The loss upon this quantity on the above basis would be four hundred and eighty-eight dollars, which being added to the seven hundred and thirty-four dollars and forty cents, loss on the quantity re-sold, shows a total loss of one thousand two hundred and twenty-two dollars and forty cents, again more than absorbing the payment made in advance.

It is, therefore, entirely apparent that, as first stated, even if an action would lie in a case like the present, there would be nothing due the iflaintiff here, and the action could not be maintained. I prefer, however, to put the decision of the case upon the first proposition, viz.: That the contract having been terminated solely on account of the default of the purchaser, 'the seller having been ready to perform on his part, an action does not lie by the former, or by their as-signee in bankruptcy, to recover back the payments made by them previous to their default.