Poposkey v. Munkwitz

32 N.W. 35, 68 Wis. 322, 1887 Wisc. LEXIS 83

• Court: Wisconsin Supreme Court
• Decided: March 1, 1887
• Status: Published

Opinion

LyoN, J.

This action was brought to recover damages for the failure of the defendant to put the plaintiff in the possession of the store No. 411 Broadway, Milwaukee, leased by the former to the latter, at the time stipulated' in the lease as the commencement of the term. It is substantially an action for a breach of the covenant for quiet enjoyment .contained in the lease. 1 Tayl. Landl. & Ten. § 309. This appeal presents for determination the question, What is the true rule of damages for a breach of that covenant in that case, in view of the facts proved and offered to be proved therein?

The rule is undoubtedly the same as in an action for a breach of covenants for title 'in .an absolute conveyance. That is to say. had the plaintiff purchased the store No. 411 Broadway of the defendant, and taken an absolute conveyance thereof instead of a lease for five or more years, under the same circumstances which existed when the lease was executed, the measure of his damages for a breach of the covenants for title in such conveyance would be the same that it is for a breach of the covepant for quiet enjoyment in the lease. 3 Suth. Dam. 147; Blossom v. Knox, 3 Pin. 262. Indeed, the covenant for quiet enjoyment is one of the covenants for title in a conveyance. Rawle, Gov. 17. It is also said to be “ an assurance consequent upon a defective title.” Id. 125.

The general rule of damages which obtains in England and many of our sister states for a breach of covenant for title was first authoritatively laid down in 1775, in the case, in the common pleas of Flureau v. Thornhill, 2 W. Bl. 1078. The defendant covenanted to sell the plaintiff a rent for a term of years issuing out of leasehold premises, but, without fault on his part, the defendant was unable to make good title thereto. The plaintiff claimed damages for the loss of his bargain, but it was held that he was not entitled thereto. De G-bey, C. J., said: “ Upon a contract for a purchase, if the title proves bad, and the vendor is (without fraud) incapable of making a good one, I do not think the purchaser can be entitled to any damages for the fancied goodness of the bargain which he supposes he has lost.” BlacKstoNE, J., said: “ These contracts are merely upon condition, frequently expressed, but always implied, that the vendor has a good title.” The rule of the above case has been much considered in both England and this country; and while its scope has been more clearly defined, and its application somewhat limited by later adjudications, the rule itself, as applied to cases in which the vendor honestly believed he had a good title but the title failed for some defect not known to him and of which he was not chargeable with notice, is now firmly established in the jurisprudence of England by the judgment of the House of Lords in Bain v. Fothergill, L. R. 7 Eng. & Ir. App. 158. As already observed, the rule prevails in several of the United States, including this state, under the limitations just mentioned of good faith and excusable ignorance of the vendor of defects in his 'title. Indeed, these are scarcely limitations but rather an interpretation of the qualification “ without fraud,” in the opinion by De Gbey, O. J., in the principal case. The rule as it now stands has been applied in this state in Rich v. Johnson, 2 Pin. 88; Blossom v. Knox, 3 Pin. 262; Nichol v. Alexander, 28 Wis. 118; Messer v. Oestreich, 52 Wis. 684, and in other cases.

Under this or any other rule, the plaintiff is entitled to recover the consideration paid by him on account of the purchase. Hence, in the present case, whatever may be the measure of damages, the plaintiff should have recovered the amount he advanced for rent-and interest thereon. The reason given by the circuit judge for excluding this amount from the plaintiff’s recovery, to wit, that he could recover the rent from Uhlig, the tenant under the paramount lease, is conceived to be unsound. The plaintiff did not purchase a term subject to the lease of Uhlig, but an absolute term; and while he might perhaps have treated his lease as an assignment of the rents accruing under the prior lease, and collected the same from Uhlig, there is no rule of law which compels him to do so. Indeed, had he done so, it possibly might have operated as a waiver of any claim for damages for the breach of the covenant sued upon.

The limitations of the rule of Flureau v. Thornhill, or rather the exceptions thereto, are well stated in 3 Suth. Dam. 149, as follows: “Where a lessor knows, or is chargeable with notice, of such defect of his title that he cannot assure to his lessee quiet enjoyment for the term which such lessor assumes to grant; where he refuses, in violation of his agreement, to give a lease or possession pursuant to a lease, having the ability to fulfil, as well as where the lessor evicts his tenant, —he is chargeable with full damages for compensation, and the doctrine of Flureau v. Thornhill has no application. On this general proposition the authorities agree. In such cases the difference between the rent to be paid and the actual value of the premises at the time of the— breach for the unexpired term is considered the natural and proximate damages. Where the lessee is deprived of the possession and enjoyment under such circumstances, the lessor is either guilty of intentional 'wrong, or he has made the lease and assumed the obligation to assure the lessee’s quiet enjoyment with a culpable'ignorance of defects in his title, or on the chance of afterwards acquiring one. In neither case has he any claim to favorable consideration; and he is not excused, on the doctrine of Flureau v. Thorn-hill^ from making good any loss which the lessee may suffer from being deprived of the demised premises for the whole or any part of the stipulated term.” This quotation doubtless contains a correct statement of the law acted upon in all the states, as well in those which have adopted the rule in Flureau v. Thornhill as in those which have not.

We are clear that this case comes within the exception. When the defendant leased the store to the plaintiff, he knew that there was a valid paramount lease upon the premises, executed -by himself to Wilde & Uhlig, having seventeen or eighteen months to run after the commencement of the plaintiff’s term. There is no claim that the former lessees had forfeited their - lease. Indeed, the defendant afterwards made an unsuccessful attempt to evict "them by legal proceedings for an alleged breach of the covenants of their lease, occurring after the execution of the plaintiff’s lease. But it was held there was no breach. Munkwitz v. Uhlig, 64 Wis. 380. These proceedings are in evidence. Hence the defendant knew, when he leased the store to the plaintiff, of a defect in his title which prevented him from assuring to the plaintiff the quiet enjoyment of the leased premises. He thus entered into the contract on the chance of being able afterwards to avoid iu some way his lease to Wilde & Uhlig, but having no legal cause for avoiding it. These facts deprive him of the protection of the rule in Flureau v. Thornhill, and bring the lease within the rule above quoted from Sutherland. In other words, the case is thus brought within the general rule which prevails in actions for breaches of contracts, that the plaintiff shall recover the loss he has proximately sustained by reason of the breach.

But, in order to determine what elements of loss come within the general rule, it is necessary to apply other rules of law to the particular case. In the present case (perhaps in most cases) the rules laid down in the leading case of Hadley v. Baxendale, 9 Exch. 341, 26 Eng. L. & Eq. 398, which have many times been approved by this court, are sufficient. 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; Walsh v. C., M. & St. P. R. Co. 42 Wis. 30; Hammer v. Schœnfelder, 47 Wis. 455; Brown v. C., M. & St. P. R. Co. 54 Wis. 342; Cockburn v. Ashland Lumber Co. 54 Wis. 619; McNamara v. Clintonville, 62 Wis. 207; Thomas, B. & W. Mfg. Co. v. W., St. L. & P. R. Co. 62 Wis. 642; see, also, Richardson v. Chynoweth, 26 Wis. 656. See, also, a very learned and elaborate note on the rule in the principal case, in which a great number of cases are cited and discussed, in 1 Sedg. Ham. 218-239. These rules can best be stated by a quotation from the opinion in the principal case by Aldeesok, B. He says: “Where two parties have made a contract which "one of them has broken, the damages which the other party ought to receive in respect of such breach of contract -should be such as may fairly and reasonably be considered either arising naturally, i. e-., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known arid communicated. f^But, on the other hand, if. these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally and in the great multitude of cases not affected by any special circumstances from such a breach of contract. For, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms' as to the damages in that case, and of this advantage it would be very~unjust to deprive them.”

Another rule having its foundation in natural justice should here be stated. In any case of a breach of contract the party injured should use reasonable diligence and make all reasonable effort to reduce to a minimum the damages resulting from such breach. The necessary expenses incurred by him in so doing may be recovered in an action for such breach. This rule was early laid down by this court in Bradley v. Benton, 3 Wis. 557, and has been followed since. For a full statement of the rule, and refer-enees to numerous adjudications sustaining it, see 1 Suth. Dam. 148. Under this rule, when the plaintiff was informed that the defendant could'not give him possession of the store as he had covenanted to do (which information was received by the plaintiff November Ith, being eight days before the commencement of his term), it became his duty to use all reasonable efforts to procure another suitable place in which to-carry on his business, if the damages which otherwise would result from the breach of the defendant’s covenant would be thereby diminished. We do not think, however, the plaintiff could be lawfully required to take another store out of the vicinity in which he was doing business when he took the lease from the defendant. By removing to a remote part of the city, he might and probably would, to some extent at least, have lost the goodwill of his business, which it is alleged he had carried on successfully for a series of years in the vicinity of the store No. 411 Broadway. Neither was he required to take another store not reasonably well adapted to his business.

Fi’om the foregoing rules, and the partial application of them already suggested, we think the following propositions are established:

(1) The plaintiff is entitled to recover the sum he paid as rent when the lease was executed, and interest thereon; and also the necessary expense of removing some of his goods to the store, with defendant’s consent, and taking them therefrom after he failed to get possession of the store.

(2) If the defendant did not know, when he executed the lease, the purposes for which the plaintiff hired the store or the uses to which he intended to put it, the measure of the plaintiff’s damages for breach of the covenant for quiet enjoyment (in addition to the special damages just mentioned) would be that adopted by the trial judge; that is, the difference between the rent reserved in the lease and the actual rental value of the store without regard to what it is used for, which the jury found to be $200 per annum. All these are natural and proximate damages resulting from the breach. s

(3) If the defendant then knew that the plaintiff was carrying on the business stated in the complaint and hired the store No. 411 Broadway for the_ purpose of continuing the same business therein, and if, in the exercise of reasonable diligence, the plaintiff might, have procured another store, reasonably well adapted to his said business ánd in the same vicinity, that is, in a location\n which he could have 'preserved and retained substantially the good-will of his former business, the rule of damages, in addition to the special items first above mentioned, will be the difference between the rent reserved in the lease and the actual rental value of the leased store for the purpose of carrying on such business therein. In such case the actual rental value would ordinarily be measured by the amount of rent the plaintiff would be compelled to pay for another store equally well adapted to his business. If he could obtain another store for the same rent he was to pay the defendant, or less, of course he would suffer no general damages for the defendant’s breach of covenant, and his recovery in that behalf would be confined to nominal damages, in addition to the special damages first above mentioned. If, however, the expenses of removing to another store would have been greater than they would have been in removing to the store No. 411 Broadway, such excess would also be a proper item of damages.

(4) If the plaintiff could reasonably have procured another suitable store for his business, he cannot recover for damages to his business, because, by leasing and continuing his business in such other store, he might have avoided such damages.

(5) But knowing that the plaintiff hired the store for the purpose of continuing his former business therein (if he did know it), and haying executed the lease with knowledge that he could not put the plaintiff in possession of the store at the stipulated time because of his prior outstanding lease, the defendant took the risk of the plaintiff' being able to procure another suitable store for his business. The inability of the latter to do so would render the defendant liable for the damages resulting to plaintiff’s business 'by reason of the breach of covenant complained of. This is plainly within the rule of Hadley v. Baxendale, supra, because, under such circumstances, the parties may fairly be considered to have contemplated that the breach of the covenant would necessarily destroy or greatly impair the value of plaintiff’s business. It should be observed that if the plaintiff recovers for damages to his business, he cannot also recover the value of his lease under the above second or third proposition, because such value is necessarily a factor in estimating the damages to the business. Smith v. Wunderlich, 70 Ill. 426, 433. He may, however, in that case, recover the special damages mentioned in the first proposition, for these are not such factors.

It follows that the testimony which was offered by the plaintiff to show that the defendant knew, when he executed the lease to the plaintiff, that the latter was carrying on the business before mentioned in the same vicinity and took the lease of the store for the purpose and with the intention of continuing such business therein, and that he was unable, in the exercise of due diligence, to find another store suitable for his business, was competent and should have been received. Further, after the plaintiff makes a prima facie case entitling him to recover for damages to his business, proof should be received, under the pleadings, to show the value of such business.

Ve agree with Mr. Justice Paiub, in Shepard v. Milwaukee G. L. Co. 15 Wis. 318, that to ascertain the value of a business an inquiry as to the profits thereof is necessary. Probably value and net ¡profits are convertible terms as applied to a business. Yet the law in many cases gives damages for breaches of contracts, based on prospective profits, when the}r are' fairly witbin the contemplation of the parties,'are not too remote and conjectural, and are susceptible of being ascertained with reasonable certainty. If the plaintiff shows himself entitled to recover for damages to his business, the character, extent, and • value of his established business when the lease was executed and before, will furnish a guide to the jury in assessing the prospective and probable value thereof had the plaintiff ’been permitted to transfer it to the store No. 411 Broadway. Carried on in “the immediate vicinity of the old stand, and by the same' person, presumably the business would have been equally prosperous. This presumption may be rebutted by proof of-facts and circumstances tending to show that the business would probably have been less remunerative had it been so continued.

It was said in argument that no case can be found which gives damages for the loss of anticipated profits, because a landlord fails to give possession at the time agreed upon. This is scarcely a correct statement. The case of Ward v. Smith, 11 Price, 19, cited by Hr. Justice Paine in Shepard v. Milwaukee G. L. Co. supra, seems to be just such a case. It is conceded that if the plaintiff had not a business already built up and established in the same vicinity, which, with its good-will, could have been transferred to the store No. 411 Broadway, there would be no basis upon which to estimate the prospective value of the business which the plaintiff would have done there had he obtained possession and carried on the business therein. In such case, profits would probably be too conjectural and uncertain to be the basis'of a recovery. Some, of the cases refer to this distinction. In Chapman v. Kirby, 49 Ill. 211, the court, in speaking of the case of Green v. Williams, 45 Ill. 206, say: “ In that case the lessee had not entered upon the term, had not built up or established a business, and had not suffered such a loss. There was not in that case any basis upon which to determine whether there ever would be any profits, or upon which to estimate them.” In the present ease the offer was to prove facts which would have shown a sujf-ffcient basis to determine whether there would be profits, and upon which they might be estimated.

For the errors above indicated, the judgment of the circuit court must be reversed, and the cause will be remanded for a new trial.

By the Oourt.— It is so ordered.