Pratt v. S. Freeman & Sons Manufacturing Co.

92 N.W. 368, 115 Wis. 648, 1902 Wisc. LEXIS 266

• Court: Wisconsin Supreme Court
• Decided: November 28, 1902
• Status: Published

Opinion

Maeshall, J.

The view we take of this case renders some of the questions discussed in the briefs of counsel unimportant, if not entirely immaterial to the vital question to be solved. By looking at the facts disclosed in the light of the true situation of parties to an executory sale contract, authorizing the vendee to sell the subject thereof to a third person, and the purpose and effect of making such sale, the case will appear to be a very simple one and the assignments of error require no- very lengthy treatment.

If a person contracts to sell and deliver property to another on credit, not retaining any lien thereon, specifically, to secure the1 purchase money, the presumption is that he acts upon the belief that the latter is solvent, and on condition that he will so remain. If there is a breach in that regard before control of the property passes to the buyer, the seller may withdraw from the contract the element of credit and insist that it shall stand only as an agreement to sell for cash upon delivery of the property, and that the contract as so modified shall be executed; and upon the buyer's neglect or refusal to perform, the seller may have a choice of several remedies for the wrong:

“The seller may store the property for the buyer and sue for the purchase price; or may sell the property as agent for the vendee and recover any deficiency resulting; or may keep the property as his own and recover the difference between the contract price and the market price at the time and place of delivery.” Van Brocklen v. Smeallie, 140 N. Y. 70, 75, 35 N. E. 415.

In case he elects to take the second remedy mentioned, the sale of the property is but a mere means of determining the precise amount of the damages caused by the breach, while the incidental effect is to satisfy the loss suffered by the vendor so far as the proceeds of the sale will accomplish that result. Every executory contract for the sale of property upon credit is presumed to' have embodied in it the features referred to. Mechem, Sales, § 1647. That is elementary. It is a mistake to suppose that when an executory contract of tire character we are considering has been once rightfully modified by eliminating therefrom the element of credit, sacb element can be revived merely by subsequent ability of the executory vendee to pay for the property. Notwithstanding such subsequent ability, his rights will remain the same as if the contract had originally contemplated cash payment to the vendor upon delivery of the property. It is also a mistake to suppose that when the modified contract is once breached by the neglect or refusal of the vendee to take the property and pay therefor at the place of delivery, giving the vendor the right to proceed to recover damages for the wrong, he can be debarred from pursuing his remedy by less than an actual tender to him of the amount due upon the contract. Immediately upon the vendee’s refusing or neglecting, when required to do so, to comply with the sale contract by paying for the property and accepting delivery thereof, the cause of action of the vendor becomes complete and his right to enforce the same by such appropriate remedies as he may elect to pursue perfect. If he chooses to liquidate his •damages by a sale of the property and incidentally to recover his loss so far as the proceeds of the sale will effect that result, failure to give notice of the intention to sell the property, and failure to do that which is reasonably necessary to secure the best price obtainable therefor, does not give the vendee any right to rescind his contract, but renders the result of the sale not binding on him as to the amount of the vendor’s loss by the former’s breach, and he will remain liable to the latter for the full market value of the property less his actual damages, independently of the sale. ' The sale in such circumstances is but a method, as before indicated, of enforcing a right to damages for breach of contract, and of making evidence of the precise amount of such damages. The sale, when properly conducted, the executory vendee having been so notified of the intention to make it as to give 1pm reasonable opportunity to prevent it by paying 'his debt, constitutes a basis, binding on him, for computing the damages for which he is liable. The rule governing the subject was laid down in T. B. Scott L. Co. v. Hafner-Lothman Mfg. Co. 91 Wis. 667, 65 N. W. 513, in these words:

“If a resale is made and tbe evidence shows that all reasonable efforts were made to secure the best price obtainable, or that the price obtained was a fair one, it settles the question of the market value, so that the damages become liquidated.”

The idea is that when the executory vendee of property breaks his agreement to take and pay for the property, the measure of damages is the difference between the market value thereof and the contract price; but the vendor must necessarily establish that as a basis for his claim. If he sues for his damages without selling the property, or without selling the same with proper* regard to the rights of the executory vendee, he takes upon himself the burden of establishing the fair market value of the goods at the time of tire breach. So it is said that notice to the vendee of the vendor’s intention to make the sale, and the sale, with proper regard to the interests of the former*, merely create definite and conclusive evidence of such market value. T. B. Scott L. Co. v. Hafner-Lothman Mfg. Co., supra; Gehl v. Milwaukee P. Co. 105 Wis. 573, 81 N. W. 666; Davis S. O. Co. v. Atlanta G. Co. 109 Ga. 607, 34 S. E. 1101; Mechem, Sales, §§ 1649, 1650.

There is no controversy here but that the Central Navigation & Construction Company, before the boiler was ready for delivery, became hopelessly insolvent. Consequently there can be no- controversy but that respondent had the right to withdraw from the contract the element of credit. It did so. There is also no controversy as to whether, upon that being done, it required the navigation company to comply with the modified agreement by a day named or it would proceed to enforce its legal remedy for the breach by selling the boiler. Manifestly,- at that stage in the relations between the parties there was but one way for the navigation company to prevent respondent from treating the contract as broken, viz.: by complying with it; and but one way of doing that, viz.: by seasonably tendering to respondent at the place for delivery of the boiler, the balance of the agreed purchase money, being the sum of $4,000. Mere ability to do so, or the making of an arrangement to obtain money therefor, did not affect respondent’s rights in the slightest degree. That answers effectually appellant’s first complaint that the trial court erred in rejecting evidence going to show that at the time of the resale parties stood ready to advance to the company money necessary to pay for the boiler; also the second assignment of error, that the court should have directed a verdict for plaintiff since there was no right to sell the boiler in the face of the fact that the navigation company was able to take and pay therefor. It was given ample notice that the property would be sold unless the full amount of $4,000 was paid. Not only was payment not made as demanded, but notice was sent to respondent that the navigation company was willing to pay. only $3,067, $933 less than the amount due. The sum and substance of its several communications to respondent -prior to the resale was that it insisted upon taking the property without fully complying with the modified contract, and that respondent should desist from efforts to liquidate its damages notwithstanding no tender was made of the full amount due for the property. It seems clear that the attitude of appellant’s assignor was such that respondent was fully justified in regarding the contract with such assignor broken. It follows that it had the legal right to liquidate , its damages by a resale of the property. Timely notice to such assignor of its intention to do so, and the failure of such assignor to respond by tendering the amount due for the boiler, was sufficient to put the latter in default. Notice of the time and place of the sale was not necessary. Meehem, Sales, § 163?.

The point is made that the navigation company did not make default, because it had the right to inspect the boiler before paying therefor and that it was not allowed to do so. The conclusive answer to that is that, before any demand in that regard was made, the company indicated, as before shown, a willingness to pay only $3,067 as the balance due, while the true balance was $4,000, and that its attitude thenceforward did not change, and that no sum whatever was actually, tendered respondent.

The further reason is suggested, why a verdict should have been directed for plaintiff, that the navigation company was not given a reasonable time to take the boiler after the element of credit in tire executory contract was eliminated; that respondent proceeded with undue haste to disable itself from complying with the modified contract. That position seems to be untenable in view of the undisputed fact, several times alluded to, that respondent did not treat the contract as broken till the company, in response to the former’s demand for the full payment of the balance of $4,000, assumed an attitude in effect refusing to pay that sum.

It is further suggested that respondent breached the contract and gave the navigation company a right to rescind and sue for the down-payment on the boiler because of the sale thereof for $4,300 cash in the face of an offer of $4,400 part cash and the balance on time extending over four months. In that counsel for appellant loses sight of the fact that such a sale is primarily to malee evidence of the precise amount of damages suffered by the breach which gives rise to the right to make the sale. Irregularities in procedure to effect the sale do not forfeit the right of sale, but render the result not binding on the parties concerned as evidence. That is all. The rule on the subject was clearly worked out, as it seems, in T. B. Scott L. Co. v. Hafner-Lothman Mfg. Co. 91 Wis. 667, 65 N. W. 513, thus:

“In an action for damages for refusal on the part of the vendee to accept goods as agreed in his contract of purchase, the measme of damages is the difference between the market value of such goods at the time of the breach and the price the vendee agreed to pay; and when a sale is made within a reasonable time, though made at auction, . the price obtained is evidence to be considered on the question of the market value at the time of such breach; and if a resale is made and the evidence shows that all reasonable efforts were made to secure the best price obtainable, or that the price obtained was a fair one, it settles the question of the market value so that the damages become liquidated.”

In the light of that the record does not disclose any reasonable ground for complaint in regard to the manner the sale was conducted. There is no controversy but that, in view of the nature of the property and the limited number of customers therefor, a private sale, through an agent competent to manage such a transaction, was proper; and there is no evidence that the amount realized was not the fair market value of the boiler. If we should conclude that respondent did not proceed in a way reasonably calculated to secure the best price obtainable for the property, the result would still stand as evidence of the market value thereof and warrant the verdict of the jury, since there was no opposing evidence. But we cannot so conclude. The only circumstance pointed to as indicating that the sale was not fairly conducted is that a cash purchaser was accepted, while a customer stood ready to take the property for $100 more, paying part cash and the balance in one, two, three, and four months. That point is hardly worthy of serious consideration. Obviously, the only purpose of the sale being to make evidence of market value binding upon the navigation company, a cash sale was the ■only one proper. It would be a very novel proceeding to attempt to prove market value of property, as between, parties, adversely situated, by wbat the property would sell 'for on credit.

There is a further assignment of error in that the court refused to permit proof that the failure of respondent to comply with its contract on time tended to- produce the insolvency of the navigation company and its consequent inability to take and pay for the boiler. The insistence of the navigation company upon taking the property notwithstanding the breach as to time of completing it waived any right it might otherwise have had to rescind the contract. That seems plain. That left it bound to perform the contract with the element of credit removed, not waiving, however, any claim it might have for damages because of respondent’s breach. No such claim for damages was suggested upon the trial as. an excuse for not paying the full amount due respondent previous to the sale, nor as having been assigned to appellant, nor as having any existence as a justification for failure to take the property according to the contract. A person cannot waive his right to' rescind a contract because of a breach thereof by the other party thereto', and at the same time, rightfully, himself breach it, giving such other a right to a remedy for his loss occasioned thereby, and then rescind the contract because such other invokes such remedy. Benj. Sales, § 782. The navigation company having elected to stand by the contract notwithstanding the breach as to time of completing the boiler, the right of respondent was not. impaired to enforce it, holding the company liable for damages for any breach on its part, and being liable to the company for any damage caused to it by a violation of its right as regards the time of the completion of the boiler. The doctrine of election of remedies applies, that one having-been chosen, all others are deemed waived. Warren v. Landry, 74 Wis. 144, 42 N. W. 247; Crook v. First Nat. Bank, 83 Wis. 31, 52 N. W. 1131; Bank of Lodi v. Wash-burn F. L. & P. Co. 98 Wis. 547, 74 N. W. 363; Carroll v. Fethers, 102 Wis. 436, 78 N. W. 604; Barth v. Loeffelholtz, 108 Wis. 562, 84 N. W. 846; Fuller-Warren Co. v. Harter, 110 Wis. 80, 85 N. W. 698; Clausen v. Head, 110 Wis. 405, 85 N. W. 1028.

Complaint is made because the court did not rule that respondent was not entitled to charge the navigation company with $150 paid the agent who sold the boiler, since he also took pay as agent of the purchaser. We apprehend it would be a sufficient answer to that to suggest that if such were the case it could not avail appellant for support of his cause of action for damages based on rescission of the contract; but no reason whatever is perceived why respondent is not entitled, under the circumstances, to charge the amount paid its agent as part of the reasonable expenses of converting the boiler into money. The money was paid in the honest exercise, with due care, of the right to sell the property, and that satisfied respondent’s duty to the navigation company. It was by no means an insurer of the company’s interests. It was only required to proceed honestly, using all the care that could be reasonably expected under the circumstances, to secure the best price obtainable for the property.

Error is predicated on the refusal of the trial court to give this instruction:

“In so selling the defendant must act in good faith and Tinder such circumstances as will be best calculated to produce the fair value of the property. In determining whether such sale was made in good faith you may consider the absence of notice to the Central Navigation & Construction Company of the time and place of sale, which is important and tends to show a lack of the good faith required.”

That was properly refused upon several grounds: (1) Notice of the time and place of the sale, to the navigation company, was not essential, in any event, as regards the right of respondent to liquidate its damages. Mechem, Sales, § 1637. (2) Since it was proper to sell the boiler at private sale (T. B. Scott L. Co. v. Hafner-Lothman Mfg. Co. 91 Wis. 667, 65 N. W. 513), notice of the time andlplace of sale was obviously impracticable. (3) It is improper to state to a jury that any particular evidentiary circumstance is important as bearing upon the existence or non-existence of some material disputed fact, unless that is so as a matter of law; and such was not the case in the instance under discussion.

This instruction was given, and error assigned thereon:

“If from the conduct of said company the defendant had a right to reasonably believe that said company did not intend to pay said sum, or were unable to pay the same, then you may find that they were acting in good faith in electing to sell to others.”

That indicates that the trial court did not have a very clear conception of the purpose of the sale, — that the election to make the sale was a mere indication of an election of remedies for the'recovery of damages for a breach of contract. Since respondent had a right to treat the contract as broken, it was not bound to consult the navigation company at all, or regard its interests in merely choosing a remedy for the breach. If the instruction be viewed as indicating that respondent was burdened with any condition as regards its right to make a choice of remedies, it was manifestly wrong, but non-prejudicial to appellant. If it be viewed as referring to the action of respondent in treating the contract of the navigation company as broken, then it is free from error, since, as we have seen, after notifying the company that cash upon delivery of the property would be required and a consummation of the contract in that way insisted upon within a time named, the company’s attitude was such as to indicate that it refused to do so.

The court used language to tire jury to> the effect that, since respondent elected to sell the property, though it was bound in making the sale to proceed in such a manner as was reasonably calculated to secure tbe best price obtainable therefor, it was not bound to accept the highest price- offered regardless of its own interests, so long as the rejection of such price was consistent with the interests of the navigation company. As applied to the facts to which the court undoubtedly referred, the instruction was certainly free from error. Moreover, we fail to see any error in it as the statement of an abstract proposition of law. Certainly, respondent was not obliged to accept an offer to buy the property on credit. The court might well have gone further and said that respondent was not bound to sell on credit at all. The right to make the sale necessarily included the right to make it so as to convert the property into money, not into mere promises to pay money.

We apprehend that if at all points the court had kept definitely in mind that an election to treat the contract as broken was one thing, and choosing and enforcing a remedy for the loss caused by the breach another thing, and that the manner of enforcing it went only to the character of the result as evidence of the amount of the loss caused by the breach, the instructions given to the jury would have been somewhat different. But we fail to perceive any prejudicial error in those we have specially referred to, or any of the others. Justice seems to have been done in the case.

By ihe Court.- — The judgment is affirmed.