Source: https://caselaw.findlaw.com/us-supreme-court/178/1.html
Timestamp: 2019-04-25 12:55:43+00:00

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This was an action for breach of four certain contracts, brought 2 [178 U.S. 1, 2] by Paul R. G. Horst and others against John Roehm in the circuit court of the United States for the eastern district of Pennsylvania, in January, 1897, and was tried under a stipulation, waiving a jury, before Dallas, circuit judge, who made a special finding of facts, and, on the facts so found, gave judgment for plaintiffs. 84 Fed. Rep. 565. The case was carried by defendant to the circuit court of appeals for the third circuit, and the judgment of the circuit court was affirmed. 62 U. S. App. 520, 91 Fed. Rep. 345, 33 C. C. A. 550. Thereupon Roehm applied to this court for a writ of certiorari, which was granted, and the cause subsequently heard here.
"Memorandum of agreement made and entered into by and between Horst Brothers, doing business in the city of New York, parties of the first part, and John Roehm, party of the second part.
"Witnesseth: That the said parties of the first part agree to sell and deliver to the party of the second part, and that the party of the second part agrees to purchase, pay for, and receive from the party of the first part, one hundred (100) bales, prime Pacific coast hops of the crop of 1896. Three and one half pounds tare to be deducted on each bale. Said hops to be delivered ex dock or store, New York city, and to be paid for in net cash ten days from date of arrival at the rate of twenty-two (22) cents per pound.
"Time of shipment, 20 bales each month, October, November, December, January, and February, except as hereafter provided.
"If at any time a difference of opinion shall exist regarding the quality or condition of any hops submitted or tendered under this agreement, each party shall select an arbitrator, to whom the question of the quality and condition shall be submitted, [178 U.S. 1, 3] and, in case of their disagreement, a third arbitrator shall be selected by the two thus chosen, and the decision of a majority of the three shall be final; and in case the decision shall be that the hops tendered are not equal to the quality above called for, the parties of the first part shall, within thirty days after receipt of written notice of such decision, submit samples or tender delivery to the party of the second part, other hops, in fulfilment of this agreement, and party of the second part agrees to receive same.
'The months named in each of these contracts respectively, as 'time of shipment,' must, under the custom of the trade, be understood as meaning the months so named, which would follow next after the summer months of the year of the crop referred to in the particular contract.
'On June 23d, 1896, the firm of Horst Brothers was dissolved, and Paul R. G. Horst assigned to his copartners, E. Clemens Horst and Louis A. Horst, the use plaintiffs, all the interest of him, the said Paul R. G. Horst, in the said contracts.
"Dear Sir: We beg to inform you that the partnership of Horst Brothers has been this day dissolved.
Horst Brothers.' [178 U.S. 1, 4] 'To this, under date of June 27th, 1896, the defendant replied, saying: . . . 'I suppose that your reason for giving me the notice is on account of the contracts which I had with your late firm, . . . which, of course, you cannot fulfil. I therefore consider the contracts annulled ad will make other arrangements for the purchase of the hops I may need, and you may consider this as release from liability on your part to comply with the contracts.' In answer to this, Horst Brothers in liquidation addressed a letter to the defendant, which he duly received, in which it was said that he had misconstrued the notice of dissolution sent out to the trade; that its meaning was that no new contracts would be made and no new business undertaken by the firm of Horst Brothers; and in which it was further stated that, 'so far as the firm or business is concerned, the firm will discharge its obligations and will try to collect its claims. It does not ask for any release or discharge, and will punctually live up to all the contracts which it has made with you.' This communication was not replied to.
'In October, 1896, the first shipment of 20 bales of hops under the contracts was made, and the invoice and bill of lading covering that shipment were sent to the defendant, who, on October 24th, 1896, by telegram and letter, acknowledged receipt of the bill of lading and bill of particulars, but, upon the ground set up in his letter of June 27, 1896, declined to receive the hops.
"Dear Sirs: In response to your letters dated 3d and 4th inst., state that before shipping me any hops always send me samples from which I can select lots, the same as you have been doing in the past.
"Gentlemen: Yours of October 9, inclosing bill of lading and bill of particulars per 20 bales of hops forwarded me under the terms of contract of August 25, 1893, was received, and I have wired you that I decline to receive the same. I notified you under date of June 27, 1896, that, owing to the dissolution of the copartnership with which I originally contracted and the fact that this firm was no longer in existence, I considered my contract at an end, and will make arrangements for purchasing my supplies elsewhere. I am advised that I am under no obligations by that contract to accept supplies from you. If you desire to bill these goods at the current market rate under a new contract, I will accept them if upon inspection they are of the quality desired; otherwise they will remain at the freight station subject to your order.
The contention that Roehm was entitled to treat the contract as determined by the retirement of one of the members of the [178 U.S. 1, 7] firm of Horst Brothers, and the assignment of his interest to his copartners, was not renewed in this court.
Messrs. Samuel Dickson, R. O. Moon, and Richard C. Dale for petitioner.
Messrs. F. P. Prichard and John Garver for respondents.
It is conceded that the contracts set out in the finding of facts were four of ten simultaneous contracts, for 100 bales each, covering the furnishings of 1,000 bales of hops during a period of five years, of which 600 bales had been delivered and paid for. If the transaction could be treated as amounting to a single contract for 1,000 bales, the breach alleged would have occurred while the contract was in the course of performance; but plaintiffs' declaration or statement of demand averred the execution of the four contracts, 'two for the purchase and sale of Pacific coast hops of the crop of 1896, and two for the purchase and sale of Pacific coast hops of the crop of 1897,' set them out in extenso, and claimed recovery for breach thereof, and in this view of the case, while as to the first of the four contracts, the time to commence performance had arrived, and the October shipment had been tendered and refused, the breach as to the other three contracts was the refusal to perform before the time for performance had arrived.
The first contract falls within the rule that a contract may be broken by the renunciation of liability under it in the course of performance and suit may be immediately instituted. But the other three contracts involve the question whether, where the contract is renounced before performance is due, and the renunciation goes to the whole contract, and is absolute and unequivocal, the injured party may treat the breach as complete and bring his action at once. Defendant repudiated all [178 U.S. 1, 8] liability for hops of the crop of 1896 and of the crop of 1897, and notified plaintiffs that he should make (according to a letter of his attorney in the record that he had made) arrangements to purchase his stock of other parties, whereupon plaintiffs brought suit. The question is therefore presented, in respect of the three contracts, whether plaintiffs were entitled to sue at once or were obliged to wait until the tie came for the first month's delivery under each of them.
It is not disputed that if one party to a contract has destroyed the subject-matter, or disabled himself so as to make performance impossible, his conduct is equivalent to a breach of the contract, although the time for performance has not arrived; and also that if a contract provides for a series of acts, and actual default is made in the performance of one of them, accompanied by a refusal to perform the rest, the other party need not perform, but may treat the refusal as a breach of the entire contract, and recover accordingly.
And the doctrine that there may be an anticipatory breach of an executory contract by an absolute refusal to perform it has become the settled law of England as applied to contracts for services, for marriage, and for the manufacture or sale of goods. The cases are extensively commented on in the notes to Cutter v. Powell, 2 Smith, Lead. Cas. 1212, 1220, 9th edition by Richard Henn Collins and Arbuthnot. Some of these, though quite familiar, may well be referred to.
In Hochster v. De la Tour, 2 El. & Bl. 678, plaintiff, in April, 1852, had agreed to serve defendant, and defendant had undertaken to employ plaintiff, as courier, for three months from June 1st, on certain terms. On the 11th of May, defendant wrote plaintiff that he had changed his mind, and declined to avail himself of plaintiff's services. Thereupon, and on May 22d, plaintiff brought an action at law for breach of contract in that defendant, before the said 1st of June, though plaintiff was always ready and willing to perform, refused to engage plaintiff or perform his promise, and then wrongfully exonerated plaintiff from the performance of the agreement, to his damage. And it was ruled that as there could be a breach of contract before the time fixed for performance, a positive and [178 U.S. 1, 9] absolute refusal to carry out the contract prior to the date of actual default amounted to such a breach.
In the course of the argument, Mr. Justice Crompton observed: 'When a party announces his intention not to fulfil the contract, the other side may take him at his word and rescind the contract. That word 'rescind' implies that both parties have agreed that the contract shall be at an end, as if it had never been. But I am inclined to think that the party may also 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 I will proceed to make that damage as little as possible by making the best use I can of my liberty."
The case of Danube & B. S. Railway & K. Harbour Co. v. Xenos, 11 C. B. N. S. 152, is state i n the headnotes thus: On the 9th of July, A, by his agent, agreed to receive certain goods of B on board his ship to be carried to a foreign port,-the shipment to commence on the 1st of August. On the 21st of July A wrote to B, stating that he did not hold himself responsible for the contract, the agent having no authority to make it; and on the 23d he wrote again offering a substituted contract, but still repudiating the original contract. B, by his attorneys, gave A notice that he should hold him bound by the original contract, and that, if he persisted in refusing to perform it, he (B) should forthwith proceed to make other arrangements for forwarding the goods to their destination, and look to him for any loss. On the 1st of August, A. again wrote to B, stating that he was then prepared to receive the goods on board his ship, making no allusion to [178 U.S. 1, 12] the original contract. B had, however, in the meantime entered into a negotiation with one for the conveyance of the goods by another ship, which negotiation ended in a contract for that purpose with on the 2d of August. B thereupon sued A for refusing to receive the goods pursuant to his contract; and A brought a cross action against B for refusing to ship. Upon a special case stating these facts: Held, that it was competent to B to treat A's renunciation as a breach of the contract; and that the fact of such renunciation afforded a good answer to the cross action of A, and sustained B's plea that before breach A discharged him from the performance of the agreement.
The case was heard on error in the exchequer chamber before Cockburn, Ch. J., Pollock, C. B., Wightman, J., Crompton, J., Channell, B., and Wilde, B.; and the judgment of the common pleas was unanimously affirmed. 13 C. B. N. S. 825.
In Dingley v. Oler, 117 U.S. 490 , 29 L e d. 984, 6 Sup. Ct. Rep. 850, it was held that the case did not come within the rule laid down in Hochster v. De la Tour, but within Avery v. Bowden and Johnstone v. Milling, since, in the view entertained by the court, there was not a renunciation of the contract by a total refusal to perform.
Again, in Dingley v. Oler, 11 Fed. Rep. 372, Lowell, J., applied the rule in the circuit court for the district of Maine, and, after citing Hochster v. De la Tour, Frost v. Knight, and other cases, said: 'These cases seem to me to be founded in good sense, and to rest on strong grounds of convenience, however difficult it may be to reconcile them with the strictest logic.' And see Foss-Schneider Brewing Co. v. Bullock, 16 U. S. App. 311, 59 Fed. Rep. 83, 8 C. C. A. 14; Edward Hines Lumber Co. v. Alley, 43 U. S. App. 169, 73 Fed. Rep. 603, 19 C. C. A. 599; Marks v. Van Eeghen, 57 U. S. App. 149, 85 Fed. Rep. 853, 30 C. C. A. 208.
The great weight of authority in the state courts is to the sae effect, as will appear by reference to the cases cited in the margin.
The rule is disapproved in Daniels v. Newton, 114 Mass. 530, and in Stanford v. McGill, 6 N. D. 536, 38 L. R. A. 760, 72 N. W. 938, on elaborate consideration. The opinion of Judge Wells in Daniels v. Newton is generally regarded as containing all that could be said in opposition to the decision of Hochster v. De la Tour, and one of the propositions on which the opinion rests is that the adoption of the rule in the instance of ordinary contracts would necessitate its adoption in the case of commercial paper. But we are unable to assent to that view. In the case of an ordinary money contract, such as a promissory note, or a bond, the consideration has passed; there are no mutual obligations; and cases of that sort do not fall within the reason of the rule.
We think it obvious that both as to renunciation after commencement of performance and renunciation before the time for performance has arrived, money contracts, pure and simple, stand on a different footing from executory contracts for the purchase and sale of goods.
But there are many cases in which, before the time fixed for performance, one of the contracting parties may do that which amounts to a breach and furnishes a ground of damages. It has always been the law that where a party deliberately incapacitates himeslf or renders performance of his contract impossible, his act amounts to an injury to the other party, which gives the other party a cause of action for breach of contract; yet this would seem to be inconsistent with the reasoning in Daniels v. Newton, though it is not there in terms decided 'that [178 U.S. 1, 19] an absolute refusal to perform a contract, after the time and under the conditions in which plaintiff is entitled to require performance, is not a breach of the contract, even although the contract is by its terms to continue in the future.' Parker v. Russell, 133 Mass. 74.
We think that there can be no controlling distinction on this point between the two classes of cases, and that it is proper to consider the reasonableness of the conclusion that the absolute renunciation of particular contracts constitutes such a breach as to justify immediate action and recovery therefor. The parties to a contract which is wholly executory have a right to the maintenance of the contractual relations up to the time for performance, as well as to a performance of the contract when due. If it appear that the party who makes an absolute refusal intends thereby to put an end to the contract so far as performance is concerned, and that the other party must accept this position, why should there not be speedy action and settlement in regard to the rights of the parties? Why should a locus poenitentice be awarded to the party whose wrongful action has placed the other at such disadvantage? What reasonable distinction per se is there between liability for a refusal to perform future acts to be done under a contract in course of performance and liability for a refusal to perform the whole contract made before the time for commencement of performance?
As Lord Chief Justice Cockburn observed in Frost v. Knight, the promisee has the right to insist on the contract as subsisting and effective before the arrival of the time for its performance, and its unimpaired and unimpeached efficacy may be essential to his interests, dealing as he may with rights acquired under it in various ways for his benefit and advantage. And of all [178 U.S. 1, 20] such advantage, the repudiation of the contract by the other party, and the announem ent that it never will be fulfilled, must of course deprive him. While by acting on such repudiation and the taking of timely measures, the promisee may in many cases avert, or, at all events, materially lessen, the injurious effects which would otherwise flow from the nonfulfilment of the contract.
During the argument of Cort v. Ambergate, N. & B. & F. Junction R. Co. 17 Q. B. 127, Erle, J., made this suggestion: 'Suppose the contract was that plaintiff should send a ship to a certain port for cargo, and defendant should there load one on board; but defendant wrote word that he could not furnish a cargo; must the ship be sent to return empty?' And if it was not necessary for the ship owner to send his ship, it is not perceived why he should be compelled to wait until the time fixed for the loading of the ship at the remote port before bringing suit upon the contract.
If in this case these ten hop contracts had been written into one contract for the supply of hops for five years in instalments, then when the default happened in October, 1896, it cannot be denied that an immediate action could have been brought in which damages could have been recovered in advance for the breach of the agreement to deliver during the two remaining years. But treating the four outstanding contracts as separate contracts, why is it not equally reasonable that an unqualified and positive refusal to perform them constitutes such a breach that damages could be recovered in an immediate action? Why should plaintiff be compelled to bring four suits instead of one? For the reasons above stated, and having reference to the state of the authorities on the subject, our conclusion is that the rule laid down in Hochster v. De la Tour is a reasonable and proper rule to be applied in this case and in many others arising out of the transactions of commerce of the present day.
As to the question of damages, if the action is not premature, the rule is applicable that plaintiff is entitled to compensation based, as far as possible, on the ascertainment of what he would have suffered by the continued breach of the other party down to the time of complete performance, less any abatement by [178 U.S. 1, 21] reason of circumstances of which he ought reasonably to have availed himself. If a vendor is to manufacture goods, and during the process of manufacture the contract is repudiated, he is not bound to complete the manufacture, and estimate his damages by the difference between the market price and the contract price, but the measure of damage is the difference between the contract price and the cost of performance. Hinckley v. Pittsburgh Bessemer Steel co. 121 U.S. 264 , 30 L. ed, 967, 7 Sup. Ct. Rep. 875. Even if in such cases the manufacturer actually obtains his profits before the time fixed for performance, and recovers on a basids of cost which might have been increased or diminished by subsequent events, the party who broke the contract before the time for complete performance cannot complain, for he took the risk involved in such anticipation. If the vendor has to buy instead of to manufacture, the same principle prevails, and he may show what was the value of the contract by showing for what price he could have made subcontracts, just as the cost of manufacture in the case of a manufacturer may be shown. Although he may receive his money earlier in this way, and may gain, or lose, by the estimation of his damage in advance of the time for performance, still, as we have seen, he has the right to accept the situation tendered him, and the other party cannot complain.
In this case plaintiffs showed at what prices they could have made subcontracts for forward deliveries according to the contracts in suit, and the difference between the prices fixed by the contracts sued on and those was correctly allowed.
Fox v. Kitton, 19 Ill. 518; Kadish v. Young, 108 Ill. 170, 43 Am. Rep. 548; John A. Roepling's Sons' Co. v. Lock-Stitch Fence Co. 130 Ill. 660, 22 N. E. 518; Lake Shore & M. S. R. Co. v. Richards, 152 Ill. 59, 30 L. R. A. 33, 38 N. E. 773; Burtis v. Thompson, 42 N. Y. 246, 1 Am. Rep. 516; Windmuller v. Pope, 107 N. Y. 674, 14 N. E. 436; Mountjoy v. Metzger, 9 Phila. 10; Zuck v. McClure, 98 Pa. 541; Hocking v. Hamilton, 158 Pa. 107, 27 Atl. 836; Dugan v. Anderson, 36 Md. 567, 11 Am. Rep. 509; Hosmer v. Wilson, 7 Mich. 294, 74 Am. Dec. 716; Platt v. Brand, 26 Mich. 173; Crabtree v. Messersmith, 19 Iowa, 179; McCormick v. Basal, 46 Iowa, 235; Kurtz v. Frank, 76 Ind. 594, 40 Am. Rep. 275; Cobb v. Hall, 33 Vt. 233; Davis v. Grand Rapids School Furniture Co. 41 W. Va. 717, 24 S. E. 630; and other cases cited in the text-books and encyclopaedias.

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