Court Opinion

ID: 6861098
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:48:45.85369+00
Date Added: 2024-06-11T16:05:14.683781
License: Public Domain

MANTON, Circuit Judge
(dissenting).
August 17, 1928, the bankrupt leased from the appellants for a term of years, commencing May 1, 1931, at stated rentals, real property in the city of Los Angeles, Cal. Paragraph 4 of the lease provided that the “Lessee agrees that upon delivery of possession to it, as herein provided, it will thereafter and within one (1) year from the date it receives possession of said demised premises, commence to remodel, alter and/or add to the present building located on said demised premises, and agrees to expend in such work not less than the sum of Sixty thousand dollars ($60,000) or, at lessee’s sole option, it may within said period of time, in lieu of remodeling and/or altering and/or otherwise reconditioning or changing the present building on said demised premises, build and construct a new building on said premises * . * * , said building in either event to cost not less than * * * $60,000. * * # 9f
It covenanted to complete the work within two years from the date it received possession. May 1, 1931, the bankrupt entered into actual possession of the premises other than a part occupied by a bakery company under a previous lease. As of that date, under the terms of the lease, the actual occupancy as acquired by the bankrupt was all it was entitled to; it was bound to accept such offer of possession. The bankrupt never occupied the whole premises, but its physical possession of part of the premises was coupled with a constructive possession of the remaining part, and it received the rents from the tenant occupying the remainder. July 14, 1932, after receiving this possession, a petition in bankruptcy was filed against the bankrupt, and prior thereto it had neither commenced to remodel the existing building nor had it commenced to erect a new building.
The question is presented as to when the time began to run when, within one year thereafter, the bankrupt was obliged to commence the remodeling of the old building or erection of the new building. Within the terms of the lease, possession was given to it May 1,1931, when it occupied all the premises except that occupied by the bakery company. It had until May 1, 1932, to fulfill its promise to commence the erection of a new building, or the remodeling of the old. The parties did not intend an actual occupancy of the whole of the premises, but only that occupancy which the bankrupt had on May 1, 1931. The lease for the bakery company contained a provision for five years’ renewal from June 30, 1931. The bakery company’s lease also contained a provision that, in the event that the lessee erected a new building, the lessor could cancel the bakery company’s lease upon a ninety-day notice at any time after July 1,1931. If such option for cancellation was exercised, and there was delay in the bakery company’s vacating, by paragraph 23(a) of the bankrupt’s lease, the time during which the lessee remained over and remained in possession was to be added to the time within which the bankrupt should be obligated to commence the construction of the new building, provided such holding over and delay was not occasioned or permitted through any fault on the part of the bankrupt. This provision illustrates that the time within which the bankrupt was to commence performance of the contract, under paragraph 4 of the lease, was to start running at the commencement of the bankrupt’s term on May 1, 1931. If, as appellee contends, the time within which the bankrupt was to commence performance under paragraph 4 was not to start running until the bakery company vacated and the bankrupt received actual possession of all the demised premises, then the provision of paragraph 23(a) has no purpose or meaning, for under such interpretation it would be unnecessary to add the time which the bakery company might hold over to the time within which the bankrupt was obligated to commence construction. The reason for granting to the bankrupt the benefit of an unlawful holdover by the bakery company was so that the time of performance by the bankrupt was to start running before the bakery company actually vacated the premises. The parties recognized the possibility of a hold-over. No provision was made for an equivalent benefit to the bankrupt in the event that the bakery company’s lease had run its normal course and the bakery company should then hold over after June 30, 1936. June, 1936, was beyond the date for performance by the bankrupt, and therefore a hold-over by the bakery company after that time was immaterial with respect to the performance of the building operation.
The parties made a distinction between what they meant by complete physical oceu*49pancy and the possession with a part of the property leased. When they intended physical possession of the entire demised premises, it was made plain, as evidenced by paragraph 10, “physical possession of the entire demised premises * * * free and clear of all tenants.” The possession to be delivered to the bankrupt under the lease was no more than a physical occupancy of the premises except that part occupied by the bakery company, plus a constructive possession of the bakery company’s leased part, and such was delivered on May 1,1931.
The time for performance by the commencement of remodeling or erection of a new building therefore began to run from May 1, 1931, and ended May 1, 1932, two and a half months prior to the bankruptcy petition. Thus fourteen and a half months after the bankrupt took possession expired, and no steps were taken to fulfill its agreement to remodel or build.
Was this failure of the bankrupt a breach of the entire agreement to expend at least $60,000 for remodeling or rebuilding? Williston on Contracts, § 1288, says:
“As a contract consists of a binding promise or set of promises, a breach of contract is a failure, without legal excuse, to perform any promise which forms the whole or part of a contract.”
There are two types of breach of contract — one, partial, and the other, total, and different consequences result from each. Where a breach is partial, the promisee has a right of action upon it, but ho has not such a right of action as to hold the promisor liable for a total breach. The entire contract is not turned into a right of action for damages until the breach becomes total. Williston on Contracts, § 1290. Whether the contract has been totally breached or only partially is a matter of degree.
There are tests helpful for this determination. Section 275 of the Restatement of the Law of Contracts, gives “Rules for Determining Materiality, of a Failure to Perform,” as follows:
“In determining the materiality of a failure fully to perform a promise the following circumstances are influential: (a) the extent to which the injured party will obtain the substantial benefit which he could have reasonably anticipated; (b) the extent to which the injured party may be adequately compensated in damages for lack of complete performance; „(e) the extent to which the party failing to perform has already partly performed or made preparations for performance; (d) the greater or less hardship on the party failing to perform in terminating the contract; (e) the willful, negligent or innocent behavior of the party failing to perform; (f) the greater or less uncertainty that the party failing to perform will perform the remainder of the contract.”
And section 276(e) says:
“If delay of one party in rendering a promised performance occurs before any part of his promise has been rendered, less delay discharges the duty of the other party than where there has been part performance of that promise.”
Williston (section 844) in discussing a breach in limine, says:
“Where a breach occurs at the very outset (a breach in limine) a stricter rule is applicable.”
A breach which might under some circumstances be only partial may become total when it occurs at the very outset, and a breach which might otherwise be considered partial may become total when it is either willful or negligent. Also where the promisor has not performed in any manner and to any extent, there is less reason for considering, a breach to be only partial. When the injured party will not receive any of the benefits of the promise, there is less reason for considering the breach to be only partial. Where there will be no greater hardship on the part of the promisor if the contract is considered totally breached than if it is considered partially breached, there is less reason for considering a breach to be only partial.
The bankrupt did not promise to commence on a certain day, but within one year. He allowed 34% months to expire, and failed to commence. He did not commence at any time within the 2% months after the expiration of the one year. Thus, there was clearly a broach of his promise to commence. It was a willful breach, and no attempt to explain it has been made. It was at the outset of the contract and was not merely a breach of a promise to commence on a certain day. Had the bankrupt commenced within a reasonable time after the period of time had expired, then it might be said that he had only failed to perform his promise at the time set, and that this was not material, and therefore not a total breach. But, having failed to commence at all and having then made it impossible to commence because of bankruptcy, and, indeed, without having prepared to commence, *50or evidenced any intent to commence, it is clear that the circumstances indicate a total breach of the contract.
There are no circumstances which would minimize this breach. The appellant will not receive any of the benefits to which they would have been entitled. There is an absence of any circumstances indicative of only a partial breach. The bankrupt unreasonably, without excuse, over a period specified in the contract and even longer, failed to perform any part of its promise to commence and complete remodeling or erecting as the contract required. Such was a breach of the entire contract.
It was as if an item of rent were due on May 1, 1932, which the parties had fixed at $60,000 (minimum cost of improvements on the premises). The appellant was entitled to this improvement of his premises, and has suffered damages accordingly which should be estimated at the cost of the improvements less a reasonable depreciation.
The claim should be allowed and the order reversed.