Barnes v. Seligman

Van Brunt, P. J. In the statement of facts upon which the legal questions which are to be discussed arose it will not be necessary to advert to but a few of those found by the referee. This action was brought to recover $200,000, with interest from the 16th of May, 1872, as damages for the breach of a contract dated the 26th day of March, 1872, made by Joseph Seligman and George H. Brown with the plaintiff in the following language: “Oliver W. Barnes having, by instruments bearing even date herewith, assigned and transferred to us, George H. Brown and Joseph Seligman, all claims and demands against the New York City Central Underground Railway Company, and his title to certain subscriptions to the capital stock of said company, and also any interest he may have in a certain alleged contract made with the said company by Francis P. Byrne, and having also transferred sixty shares of stock in said company: Now we, George H. Brown and Joseph Seligman, do hereby, in consideration of the premises, and of one dollar to us paid by the said Oliver W. Barnes, agree that we will, upon certain amendments to the charter of the said New York City Central Underground Railway Company, now pending before the legislature of the state of New York, becoming a law, pay, or cause to be paid, to the said Oliver W. Barnes, his representatives and assigns, the sum of twenty-seven thousand ñve hundred dollars in currency of the United States, being the amount of certain advances made, and services rendered, by the said Barnes to the said railway company. And also that we will cause to be delivered to the said Barnes, or his assigns, at the time of the payment of the said money, two thousand shares of the capital stock of the said railway company, which said stock is to be full-paid stock. And we further agree with the said Oliver W. Barnes, his representatives and assigns, that, in the event of the said amendments not becoming a law at the present session of the legislature, we will either cause said money to be paid, and said two thousand shares of stock delivered, to the said Barnes, or his assigns, or have reassigned to the said Barnes, or his assigns, the claims, demands, and rights so assigned to us, and transfer to him, or his assigns, the said sixty shares of stock so transferred to us, the next day after the close of the present session of the legislature of New York. And we further agree that not more than one hundred additional shares of the stock of said company shall be issued until the said payment be made and stock delivered without the consent of the said Barnes, and that so much of said one hundred shares as shall be issued shall be transferred to the said Barnes, if we do not exercise our option of paying said twenty-seven thousand five hundred dollars, and delivering said two thousand shares, on the failure of the said amendments to become a law at the present session. And we further agree that no contract for the construction of the railway of the company shall be entered into without the consent of the said Barnes, until the said money shall be paid and the — 836 — stock delivered. In witness whereof we have hereunto set our hands and seals this twenty-sixth day of March, in the year one thousand eight hundred and seventy-two. George H. Brown. [Seal.] “Joseph Seligman. [Seal.]” Prior to and at the time of making said contract the said plaintiff owned, and had claims and demands against, the New York Central Underground ¡Railway Company, and a title to certain subscriptions to the capital stock of said company, and an interest in a contract made by one Byrne, and 60 shares of the capital stock of said company. At the date of the contract only 117 shares of the capital stock of the company had been paid in or issued, of which the plaintiff held 63 shares. On the day of the date of the contract 100 additional shares were issued, and no further or other issues of full-paid stock were ever made. The plaintiff performed the said contract on his part to che satisfaction of said Joseph Seligman and George H. Brown, and duly trans-, ferred the property mentioned in said contract. The amendments to the charter of said company, referred to in said contract, did not become a law at the session of the legislature mentioned in said contract, and the said session closed and adjourned sine die on or about the 14th of May, 1872. Neither Brown nor Seligman either reassigned, or caused to be reassigned or retransferred, to the plaintiff, or to any person on his behalf, the claims, demands, and rights assigned to them by said agreement of March 26, 1872, or have transferred to him or his assigns the said 60 shares of stock transferred to them, or any part of said property, or made any offer so to do. On the second day after the adjournment of the legislature, the plaintiff demanded from Seligman and Brown the payment-of the cash and delivery of the stock which said contract called for. Brown and Seligman, notwithstanding the failure of the passage of the proposed amendments to the charter, elected to keep the property transferred to them by the plaintiff, and to perform their contract with the plaintiff, and they subsequently paid to the plaintiff the sum of $27,-500, mentioned on said contract. But they never delivered, or offered to deliver, the 2,000 shares of full-paid stock mentioned in the contract. The referee found that the plaintiff had sustained no actual damage by the failure of Brown and Seligman to deliver to him the 2,000 shares of said stock, such finding being based upon proof that the stock had no actual value. He also found that the complaint should be dismissed as to the executors of Seligman, in that the action was commenced after the death of Joseph Seligman, against his executors, and the complaint did not contain any allegation of the insolvency of Brown. He further found that the plaintiff was entitled to judgment, against the defendant Brown for nominal damages, six cents. Upon application orders were made granting extra allowances, and from the judgment and orders thus made this appeal is taken. The appellant founds his appeal upon the claim that the learned referee-erred in the measure of the plaintiff’s damages, and this is the most important question involved. There is no dispute about the main facts of the ease. The plaintiff and the defendant Brown and Seligman entered into the contract to which attention has been called. The plaintiff performed his part of the contract, and assigned the property therein mentioned to Brown and Seligman, as therein required to do. Brown and Seligman accepted this property, and, after it had been ascertained that the amendments which were then pending before the legislature, and referred to in the contract, had not been passed, elected to keep to keep that property, and perform the contract upon their part, and paid the plaintiff $27,500 in cash, by the contract required to be paid. They attempted to deliver to the plaintiff the stock provided for in the contract, but this stock was not of the character required by the contract to be delivered to him,—namely, it was not full-paid stock,—-which the plaintiff, upon discovery of the fact, tendered back to them, demanding the full-paid shares to which he was entitled under the contract. It was also proven that. — 837 — the stock, if it had been delivered to the plaintiff, would probably have been valueless in his hands for the purposes of sale, and it was in view of this fact that the referee found that the plaintiff was only entitled to recover nominal damages. It is sought to support this finding by reference to the principles laid down by Sedgwick in discussing the measure of damages in actions on contract, at page 200, in which it is said: “The two cardinal principles which will be found to pervade and regulate this branch of our subject are—First, that the plaintiff must show himself to have sustained damage, or, in other words, that actual compensation will only be taken for actual loss; and, secondly, that the contract itself furnishes the measure of damages. ” And again, at page 203, it is said: “Where the contract is one by which the plaintiff is to receive, not money, but the transfer of certain property or services, then the value of the original consideration is not to be inquired into, but the value of the property or services is the measure of damages, because this is the remuneration fixed by the agreement. ” So, if the contract is to pay for services in property, the value of the property is the correct measure of damage. We are also referred to the case of McKnight v. Dunlop, 5 N. Y. 537, which was an action to recover damages of a vendor for the non-delivery of a quantity of malt, and it was held that the plaintiff was entitled to recover the difference between the contract price and the market value of the malt at the time of the refusal to deliver. The same rule was laid down in Pollen v. Le Roy, 30 N. Y. 549, and Windmuller v. Pope, 107 N. Y. 674, 14 N. E. Rep. 436. Indeed it is needless to cite authorities upon this proposition, because it is a rule which has long obtained, and is well settled. But there is another principle which is equally well established, namely, that the law will not permit a party to realize a profit by the breach of his contract. As was said by Judge Robinson, (Frankinstein v. Thomas, 4 Daly, 258:) “A contrary rule would afford to thieves and wrong-doers a premium for speculating upon a possible verdict of a jury founded upon the opinions of experts. ” In the cases to which attention has been called, the rule of damages was plain, because the articles which were dealt in were capable of procurement in the open market. There was no difficulty in supplying the deficiency, and no difficulty in determining what the difference of value wras at the time the contract was made and the time when it should have been fulfilled. The party could go into the open market, and indemnify himself by the purchase of the articles which were not delivered, and thus fix the amount of damages. And hence the rule which was established in the case of Wright v. Bank, 110 N. Y. 237, 18 N. E. Rep. 79, in which it was held, where a pledgee of corporate stock converted if. by an authorized sale thereof, and refused to purchase it upon demand, that it was the duty of the owner to replace it himself within a reasonable time, and the proper measure of damages is the highest market price during such reasonable time; in other words, what it would cost him to procure the property, so as to put himself in the same position that he was before the conversion, affords the measure of damages. The measure of damages, therefore, does not seem to be what the article would be worth to the party after he has procured it, but what it would cost him to procure it. It appears from the evidence in the case at bar that the only way in which this stock could be procured was by payment of the face value of that stock into the treasury of the company, and causing it to be issued by the corporation. There was no way in which the plaintiff could get possession of the 2,000 shares of stock which Brown and Seligman had agreed to give him, except by paying $200,000 into the treasury of the company, and causing the stock to be issued; and there was no other way in which Brown and Seligman could procure that stock for the purpose of carrying out the provisions of their contract. 27ofv, under the principles to which attention has been called, the measure of damages is the amount of money which it would take the plaintiff to put himself in the condition he would have occupied had the contract — 838 — been fulfilled. It is idle to say, in answer to this proposition, that the proof is that the stock -would have been worthless in the hands of the plaintiff so far as money value was concerned. That is not the question. Brown and Seligman had agreed to give Barnes, in exchange for the property which he transferred to them, 2,000 full-paid shares of said stock. If he could have gone into the market, and bought this stock, clearly his damages would have been what it would have cost him to procure it. It was not necessary that he should actually purchase it. That has never been held; but the rule is that the amount of damage is measured by what it would have cost him to replace the article which the parties contracting agreed to deliver. How the proof is without dispute that it would have cost Mr. Barnes $200,000 to have procured this stock, because it could only be procured in one way. Brown and Seligman knew this when they entered into this contract. They knew this fact after there had been a failure to pass the amendments to the charter in the legislature, and the legislature had adjourned, and when they had an opportunity to recede from the contract, and transfer to the plaintiff the property they had received from him, and ended their obligation to pay any money or deliver any stock to him. But with these facts staring them in the face, they chose to confirm the contract, to keep his property, and to pay him the $27,-500 in cash required by the contract. And they attempted to defraud him by delivering stock, under the contract, which in no manner fulfilled its requirements, which, upon discovery, the plaintiff returned, demanding the full-paid stock called for by the contract. At the time when Brown and Seligman confirmed the contract, they thought it was to their advantage to keep the plaintiff’s property, and obligate themselves to carry out the provisions of the contract upon their part. How can they be heard to say, after having got the plaintiff’s property: “ What we have agreed to give yon would have been worthless if you had got it, and therefore we will not pay you anything for what we received from you?” It is clear that no such rule of damages can possibly prevail. Our attention is called, in support of the proposition made by the defendants, to" the case of Kirschmann v. Lediard, 61 Barb. 573. In that case the defendant had agreed to organize a stock company for the manufacture of articles, under letters patent owned by plaintiff. The plaintiff agreed to transfer the letters to the company when formed, and he was to receive therefor from the defendant some cash and $50,000 in the capital stock of said company. The defendant failed to organize the company, and plaintiff sued for damages. The court directed a verdict for the plaintiff for $50,000, the nominal par value of said stock. This was overruled by the general term. “The plaintiff,” the court said, “was entitled to damages for a breach of the contract. The amount depended on the value of the stock after the corporation was formed,, to be proven by showing what sucii value would have been if the company had been formed, taking into consideration the property that was to be transferred, and also the fact that, by the breach of the contract, the plaintiff was released from the obligation to transfer the property. It may be that the stock would have been valuable, or it may be that the damages would be only nominal.” It is apparent, upon a consideration of the facts in the ease cited and those in the case at bar, that it is no authority for the proposition claimed upon the part of the defendant. In the case cited nothing had been done under the contract. The plaintiff had his property, and the defendant had not organized the company, and the question of damage was affected by the fact that the plaintiff was released from the obligation to transfer the property. In the case at bar the plaintiff had transferred the property. The defendants had it, and, when they had an oppoitunity to return it, refused to do so, preferring to confirm their contract,—an entirely different condition of affairs, even if the case of Kirschmann v. Lediard is to be considered as an authority upon this proposition as — 839 — to the measure of damages. There is another circumstance to be considered in determining that question. There was no possibility whatever of the defendants in that case being able to procure the $50,000 worth of stock. The company never was organized; they could not get the stock; no money could procure it; and consequently there was no way of determining what it would have cost to furnish the stock under the contract. In the case at bar it was entirely different. The property could be procured; it was only a question of paying the par value of the stock in order to obtain these shares. These two features clearly distinguish the cases, and it cannot be considered as an authority in favor of the proposition that a party to a contract is to be allowed to make money out of its breach. It is only necessary to call attention to the principles laid down in the case of Bruce v. Welch, 5 N. Y. Supp. 668, where it is distinctly held that good morals certainly forbid that a man should be allowed to derive benefit from a violation of his obligations to others; and the question is asked: “Does the law permit a wrong-doer to retain to himself advantages thus gained as against the person whom he has wronged?” In the case at bar the adoption of any other rule of damages would enable these defendants to keep the property which had been transferred to them without paying a cent for it, because the payment of the $27,500 has nothing to do with the question now under consideration. Their rights would have been precisely the same had no such sum been mentioned in the contract, and they had not been required to pay the same. Entirely in harmony with this proposition is the case of Johnson v. Hathorn, 2 Abb. Dec. 465. It seems to us that the only rule which can be adopted, as applicable to eases of this description, is that the damage which the party sustains by reason of the breach of that contract, if the property has a market price, is the market price for the property; or, if it has no market price, what it would cost to procure the same, if it was possible to do so. Any other rule of damages would relegate us to the realms of speculation alone. There would be no certainty, and it would be a violation of the rule to which attention has been called, viz., that the law will not allow a party to make a profit out of the violation of his contract to deliver certain articles which he is able to procure, but which he says' would be expensive for him to procure, and which, if he had procured them, would not have been of any use to the other contracting party. Of what avail the ownership of that stock would have been to the plaintiff we are not aware. It may have been of value to him outside of the mere question of market value. He may have had projects for the successful prosecution of which the ownership of this stock was necessary; and is it to be said that where a man bargains for a particular piece of property, which he deems is absolutely necessary for himself, but which may be worthless for anybody else, that he has no remedy because that piece of property, however valuable to himself, is worthless to others? We think, therefore, that an entirely erroneous rule was adopted as to the measure of damages, and that the proof as to what the plaintiff could have sold this property for was entirely immaterial. If it had no market value,—if it was not to be procured in the open market,—then what it would have cost to procure it seems to have been the only rational rule which could be adopted. Another question which is involved is the referee’s ruling dismissing the complaint as to the executors of Seligman. Seligman had died before the action was commenced, and the suit was brought against Brown and the executors of Seligman, without any allegation whatever as to the insolvency of Brown. It seems to us that the want of this allegation was fatal to the right of the plaintiff to recover as against the executors of Seligman. The contract sued upon was a joint obligation. It is clearly so from its language: and the general rule which prevails in reference to a contract is that, if several persons agree to perform a particular act, they are bound jointly, and not severally, in the absence of express words creating a several liability. This being — 840 — a joint contract at common law, the death of Seligman freed him from the joint liability, and absolutely discharged his estate. Equity, however, in order to prevent hardships of this kind arising from the technical rule of law, permitted the estate of a joint obligor to be sued, on the allegation that the creditor could not obtain satisfaction from the survivor because of his insolvency or otherwise. This rule of equity has been adopted in this state, and is part of its settled law. It is urged, however, upon the part of the appellant, that, there never having been any demurrer in this case, it has been held sufficient to prove the survivor’s insolvency at the trial, in which case the complaint should be amended to conform to the facts proved. It is a familiar rule that a complaint cannot be amended to conform to the facts proved where an objection has been taken in time to the proving of the fact, because of the insufficiency of the pleading; and the cases of Van Riper v. Poppenhausen, 43 N. Y. 68; Bank v. Morgan, 73 N. Y. 593; and Pope v. Cole, 55 N. Y. 124,—in no way conflict with this proposition. The questions decided in those cases were that, where proof was given of the insolvency under proper averments, a recovery might be had against the representatives of the deceased partner. It is further sought by the appellant to limit this doctrine to cases of partnership contracts. But we see no reason for the limitation. In fact in the case of Pope v. Cole the contrary doctrine is expressly recognized, although perhaps the question was not involved in the case. But the principles upon which those cases proceed, and the right to pursue the personal representatives rests, certainly make no such distinction as is claimed by the learned counsel; and that there is no distinction between the cases is apparent from the fact that it is not a legal right which is attempted to be enforced, but an equitable one. It was because equity intervened for the purpose of relieving from the hardship which arose by the discharge of the estate of a joint obligor who died, that any right of recovery whatever exists; and, in order that the hardship should exist, it is necessary that the impossibility of collecting the debt from the surviving obligor should appear. And hence arises the rule that, upon showing the insolvency of the surviving obligor, the estate of the deceased obligor may be called upon to pay. It being thus an equitable right simply which is enforced, the right to recover does not depend upon a question of partnership, but simply upon the fact that in law the estate of the joint obligor is discharged upon his death from any obligation under the contract; We think that, without the allegations as to the insolvency of Brown, it is clear that no action could be maintained against the estate of Seligman. The sections of the Code to which attention has been called do not seem to apply to the question here, this action being brought against a survivor of two joint obligors and the representatives of one who is dead. The question is also raised as to the refusal of the referee to allow the complaint to be amended. It is claimed by the counsel for the appellant that the referee refused to amend, upon the ground that it was immaterial, and then excluded the evidence offered, because such an allegation was not contained in the complaint. An examination of the record, however, does not support this proposition. It does not appear upon what ground the referee refused permission to amend. It is true that the amendment was objected to upon various grounds, among which was that it was wholly immaterial. The motion to amend was denied, and the objection sustained, and an exception taken; but upon what ground the motion was denied does not appear. The referee states in his opinion that he deemed it as a matter of dhcretion, and there is nothing in the record which controverts this proposition. We do not think, under the circumstances, that the referee was bound to allow this amendment upon the trial. If the parties desired to make a more formal application than could be made upon the trial, they had the opportunity to resort to the court, when the court could impose such conditions upon the allowance of the amend — 841 — ment as in its judgment might be necessary. But the referee was not compelled, in view of the situation of this case, to allow this allegation to be inserted as a matter of right; and, having no power to impose terms which would protect the rights of the defendants who were to be brought in, we do not see that there was any abuse of the discretion of the referee in this respect which could furnish any ground for a reversal of the judgment as to the defendants Seligman. There are also appeals from the orders granting extra allowances in this case. An extra allowance of $1,000 was granted to each of the defendants. Of course this order must fall with the reversal of the judgment as to the defendant Brown, and we think that, in view of the circumstances of this case, such allowance as to the defendants Seligman was improvidently granted. The defendants Seligman had an opportunity to raise by demurrer the objection which they did raise on the trial. They neglected so to do, preferring to go on and raise the objection upon the trial. They should not be allowed, in view of this condition of affairs, to get more costs, which are within the discretion of the court, than they would have got had they interposed a demurrer. We think, therefore, that the order granting them an extra allowance should be reversed, with $10 costs to the appellants, and that the judgment in favor of the defendants Seligman should be reduced to the sum of $1,361.51, and affirmed for that amount, without costs, and that the judgment as to the defendant Brown should be reversed, and a new trial ordered, with costs to appellant to abide the event.