Suter v. Lockwood Dental Co.

45 App. D.C. 92, 1916 U.S. App. LEXIS 2659

• Court: Court of Appeals for the D.C. Circuit
• Decided: April 17, 1916
• Docket: No. 2902
• Status: Published

Opinions

Mr. Justice Siddons,

of the Supreme Court of the District of Columbia, who sat with the Court in the hearing and determination of the appeal in the place "of Mr. Chief Justice Shepard, delivered the opinion of the Court:

The record discloses no opinion announced by the learned justice who tried the case below, but in the appellant’s brief (page 13), he assumes to quote an oral opinion delivered in disposing of the motion to quash, in which the justice is made to say that “I have decided to grant the motion, the principal reason being that I do not think the affidavit sets out any breach of the contract. It does not allege that the plaintiff was discharged, that he was refused an opportunity to work, or any other matter of breach than the fact that the defendant company was proceeding to dispose of its property by public sale. Of course, that was not a breach of the contract, for the reason that the property of the defendant was still there. While it might make it more difficult for him to recover, it did not amount to a specific breach, which is required to support am attachment. There are other reasons, but that alone will make it necessary for me to grant the motion.”

Whatever of conflict of judicial opinion there formerly may have been with respect to the question whether there can be an anticipatory breach of a contract which will sustain an action of damages for the breach, the question has been settled for this jurisdiction by the decision of the Supreme Court of the United States in the case of Roehm v. Horst, 178 U. S. 1, 44 L. ed. 953, 20 Sup. Ct. Rep. 780, which has been very generally followed by State and Federal courts. In that case the court explicitly gave its approval to the rule declared in Hochster v. De La Tour, 2 El. & Bl. 678, 6 Eng. Rul. Cas. 576, from the opinion of which the Supreme Court quotes at length. In the English case referred to, the plaintiff and defendant had entered into a contract whereby the defendant undertook to employ the plaintiff as a courier for three months from June 1, 1852, on certain terms. On the 11th of May immediately preceding the date fixed for the commencement of the service by the plaintiff as courier, the defendant wrote to him that he had changed his mind, and declined to avail himself of the plaintiff’s services. Thereupon, and on May 22, the plaintiff brought his action at law for the breach of the contract, and it was ruled that as there could be a breach of contract before the time fixed for performance, a positive and absolute refusal to carry out the contract prior to the date of actual default amounted to such a breach. One of the justices who heard the case on appeal observed, during the course of the argument, that “when a party announces his intention not to fulfil the contract, the other side may take him at his word and rescind the contractand he expressed his inclination to think that where such an announcement has been made the other party may say: “Since you have announced that you will not go on with the contract, I will consent that it shall be at an end from this time; but I will hold you liable for the damage I have sustained;” and Lord Chief Justice Campbell, in delivering the opinion of the court, stated that “it seems strange that the defendant, after renouncing his contract, and absolutely declaring that he will never act under -it, should be permitted to object that faith is given to his assertion, and that an opportunity is not left to him of changing his mind.”

Again, he said: “The man who wrongfully renounces a contract into which he has deliberately entered cannot justly complain if he is immediately sued for a compensation in damages by the man whom he has injured; and it seems reasonable to allow an option to the injured party, either to sue immediately, or to wait till the time when the act was to be done, still holding it as prospectively binding for the exercise of this option, which may be advantageous to the innocent party, and cannot be prejudicial to the wrongdoer.”

And in the case of Johnstone v. Milling, L. R. 16 Q. B. Div. 467, 472, also cited with approval by the supreme, court, Lord Justice Bowen said: “We have, therefore, to consider upon what principles and under what circumstances it must be held that a promisee who finds himself confronted with a declaration of intention by the promisor not to carry out the contract when the time for performance arrives, may treat the contract as broken, and sue for the breach thereof. It would seem on principle that the declaration of such intention by the promisor is not in itself and unless acted on by the promisee a breach of the contract; and that it only becomes a breach when it is converted by force of what follows it into a wrongful renunciation of the contract. Its real operation appears to be to give the promisee the right of electing either to treat the declaration as bruium fulmen, and holding fast to the contract, to wait till the time for its performance has arrived, or to act upon it, and treat it as a final assertion by the promisor that he is no longer bound by the contract, and a wrongful renunciation of the contractual relation into which he has entered. But such declaration only becomes a wrongful act if the promisee elects to treat it as such. If he does so elect, it becomes a breach of contract, and he can recover upon it as such.”

Does the case made out by the pleadings and supporting affidavits come within the principle of the De La Tour Case ? On the part of the defendant it is strongly contended that it does not. It is insisted by the defendant that the plaintiff had not been discharged from his employment by the company, that no sale of the business of the company had taken place, and that there was no assurance that it ever would have taken place even if the action by the plaintiff had not rendered it impossible; that even if a sale had occurred, nothing sufficiently appears to justify the claim that the plaintiff may not have continued to receive the salary contracted to be paid to him; that the mere adoption of the resolution to discontinue the business did not disable the company from continuing it, and that at any moment up to the time of the sale it could have recalled its action, and even if a sale had been attempted but none made, the company could have continued in the conduct of the business which it was carrying on. '

Let us examine these contentions in the light of the facts which are sufficiently pleaded in the declaration and set out in the supporting affidavits, for on a motion to quash an attachment for such grounds as are here alleged, the moving party, as in the case of a demurrant, is held, for the purposes of the motion, to admit the facts sufficiently or well pleaded.

It js to be observed that the plaintiff was employed by the defendant because of his long familiarity with thé details of the business; that his services were required only in the conduct of that business.- He was to receive as compensation a salary of $60 per week, and at the end of each year, should he continue as manager of the business for the stipulated period of the contract — ten years — from Anna M. Lockwood, ten shares of the capital stock;. and it is to be presumed that during the four years'and more that he had rendered services under the contract, he had received from this lady at least forty shayes of the stock. He alleges that at the time of the adoption of the resolution,” to which he made objection, he was then the owner and holder of forty-three shares of the capital stock. He therefore was deeply concerned as a stockholder of the company, that it should continue to be a profitable business, for if he served out the full term of employment; he would, at the expiration of that period, have been the owner of one tenth of. its capital stock; and it is to be borne in mind that the transfer of these shares of stock to him were.a part of the consideration for the services to- be rendered. In the most formal way, the company declared its resolution to discontinue this business, and by sale completely to devest itself of every asset, including the good will, essential to its continued existence.

The plaintiff did not bring his action until the very day upon which the sale was advertised to take place, which was to be at 11 o’clock in the morning, and the action was probably instituted not more than two hours before the time of sale. Up to that moment he had no reason to believe that the company had any intention of recalling its action.. On the contrary, everything that it did in furtherance of the resolution pointed directly the other way. It had posted a sign on the premises occupied by the company and in which the business was carried on, in which the sale to take place was described as a “dissolution sale of this valuable dental supply business.” The advertisement of sale clearly indicates that not only was the physical property of the company to be sold, but “also good will and unexpired lease of said premises, and all other property rights and privileges of every nature belonging to it.”

Not only that, the business itself was discontinued twenty-six days before the day advertised for the sale, and the supporting affidavits allege a substantial discontinuance of the business from the same date. Are not acts and conduct of this character quite as significant and informing of an anticipated termination of the services of the plaintiff by the defendant, as if it had said to him in so many words, “From and after the 27th day of October next, your services will no longer be required by this company.”

What was actually done by the defendant in effect informed the plaintiff in unmistakable terms that the business, to conduct which he had been employed as manager, was to be discontinued and sold, and his services would therefore no longer be required. It is urged that the company might have recalled its action or failed in its sale. But so it might have recalled the notice of his discharge had the company notified him in so many words. Why, in reason and justice, should he have been required to wait to see if the announced purpose of the company could be effected by a sale, which in the most solemn way it declared it would make, when he is not required to wait and see whether a notification of a discharge from employment will be recalled before the time that the employment is to begin, or, having begun, before it has been terminated by the expiration of the contract period ?

While the judgment appealed from is a judgment quashing atachments that had been issued, and follows a motion to quash based upon the alleged insufficiency of the supporting affidavits, it is proper to observe that the judgment was not entered until November 29, 1915, and before this date, but following the filing of the motion to quash, the defendant company pleaded to the declaration, supporting his pleas by an affidavit of Anna. M. Lockwood,' the president of the defendant company, and these pleas and the supporting affidavit appear in the record before us. By the third plea, the defendant, among other things, alleges the unprofitable character of the business mentioned in the agreement, for the breach of which this action was instituted, and the consequent resolution adopted by the stockholders whereby they determined to sell and directed the sale of said business, because the same was proved to be and was in fact unprofitable, and concludes: “Wherefore this defendant alleges that its purpose to sell and the advertisement of notice of its purpose to sell its said business, in said declaration mentioned, did not constitute a violation or breach of said agreement on its behalf.” And the supporting affidavit in substance repeats the allegations of this plea. From these facts, it may be observed that the defendant, after it was informed of the claims made by the plaintiff in his declaration and supporting affidavits, reaffirmed what was the determination of its stockholders and of the corporation, — to sell the business.

It is not unworthy of notice that the resolution of sale provided in a somewhat unusual manner that one of its stockholders, owning 949 of the 1,000 shares of the capital stock of the défendant company, who was also a creditor, might become a purchaser at the sale under favorable circumstances to her. Indeed, there is justification for the contention that is made for the appellant, that the object of the resolution was, not to get rid of an unprofitable business, but to put an end to an undesirable contract. It is true that the resolution recites that the business is unprofitable and that the company is unable to pay its debts, and yet it did not hesitate to advise possible or prospective purchasers that it was a “valuable dental supply business.” Either this was a false and misleading statement, or the statements in the resolution that the business was unprofitable 'and the earnings insufficient to pay its current expenses and its outstanding indebtedness or any dividend upon its stock were false.

It should be added that there was nothing to lead the plaintiff to think that the company intended resuming business, for the resolution contemplated and provides for a distribution of tbe net proceeds of sale among the stockholders.

For the purposes of the determination of this appeal, it must be regarded that the business was profitable, was a dividend-paying business, and was a “valuable dental supply business,” as the company declared it to be in some of its advertising matter. It being so, there was every inducement to Anna M. Lockwood to take it over at the sale, free and discharged of the obligations of this contract.

Did not the plaintiff, having knowledge of conditions such as these, have the right to conclude that the company intended to put an end to his contract with it, accept as true the representations made by the company that it was going to close up the business, and sell out lock, stock, and barrel, and therefore did he not have a right to take such action promptly as the law afforded him for the assertion of the rights given to him under the contract? We think he did, and that he was within his rights to accept the order of sale as a final termination of his contract. There is no difference in principle between this case and that underlying the decision of Hochster v. De La Tour, the doctrine of which has received so emphatic an approval by the supreme court.

To the foregoing may be added that twenty-six days before the sale, the company actually discontinued its business. It is true that the supporting affidavits say that it “substantially” discontinued its business, and the appellee insists that the use of this adverb made the statement one of a conclusion, not of a fact. The contention is based upon a ' "'‘onception of the meaning of the word.

The latest edition of the Century Dictionary defines the word “substantially” as follows: “With reality of existence; truly; really; effectually,” and in its adjective form, as “real; actually existing; true; actual.”

According to this definition, the supporting affidavits in this case alleged that the company “effectually,” “really,” discontinued its business. And citation of cases is not needed to show bow often it bas been beld that a contract wbicb bas been “substantially performed,” bas been sufficiently performed to maintain an action for tbe consideration.

Tbe substantial discontinuance of tbe business may not mean perhaps that tbe doors were closed, but it may fairly be inferred that,, having determined to sell out tbe business, having announced the day and hour of sale by advertisement in a daily newspaper and otherwise, it did little more than keep its doors open for the advantage that this would give in tbe making of a sale of tbe business in an unimpaired form. And, if it is true, as for tbe purposes of this appeal we must assume that it was, that there bad been a substantial discontinuance of a profitable business for tbe conduct of wbicb tbe plaintiff bad been employed, this fact constituted a breach of tbe contract of employment, and be was entirely justified under tbe law in taking prompt steps to protect bis very considerable interests which were at stake.

This brings us to a brief consideration of tbe remaining contention of the appellee of sufficient importance to notice, and that is that tbe supporting affidavits did not set out, as required by section 445 of the Code [31 Stat. at L. 1258, chap. 854], where tbe ease is to recover damages for tbe breach of a contract, ^“specifically and in detail * * * tbe actual damage resulting therefrom.”

Assuming it to be the fact that under tbe contract there remained of the period of employment, five years and nine months yet to run, bis salary at tbe rate of $60 per week for this period of time would have amounted to tbe sum of $17,940, and in addition tbe. value of bis stock and holdings in tbe company, which, as we have already seen, increased at tbe rate of ten shares per year. It appears that tbe actual capital employed in tbe business was $39,503.85, and at tbe rate of net earnings of tbe company, as represented by tbe results of tbe company’s operations for tbe fiscal year ending June 30, 1915, a few months before tbe projected sale, tbe capital employed would have received in dividends in excess of 10 per cent, and on tbe par value of the stock the dividends would have been slightly less than 5 per cent.

These are facts that are set out in the declaration and supporting affidavits, and while it may be true that they do not amount to a statement of the precise damages that the plaintiff may have suffered, we think they are sufficiently specific and in detail. Indeed, it is difficult to conceive how a more specific and detailed setting out of the damage resulting could be made, considering that after all this is an action to recover damages for the breach of a contract that did not stipulate a liquidated amount for such breach. We do not consider that the attachment statute is only meant to apply to those actions for damages for breach of contract which are precisely liquidated and ascertained. The object of the statute undoubtedly is to require such a statement of the damages suffered as will be informing to the defendant and enable him to prepare himself to meet the issue tendered, and this requirement, we think, has been met in the supporting affidavits. And when it is borne in mind that before an attachment is issued in such a case as this, the plaintiff must first file a bond, executed by himself with surety to be approved, “in twice the amount of his claim, conditioned to make good to the defendant all costs and damages which he may sustain by reason of the wrongful suing out of the attachment,” so strict an interpretation of its provisions as seems to have been made by the trial court is not required.

In the light of these considerations, we are of opinion that error was committed by the learned justice who tried the case, in granting the motion to quash, and the judgment must therefore be reversed.

We add that nothing in this opinion is to be construed as an intimation as to the merits of the controversy. As to whether this business was profitable or unprofitable, we do not express an opinion.

The judgment must be reversed, with costs to appellant, and it is so ordered. Reversed and remanded.