Court Opinion

ID: 3841001
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:10:14.572602+00
Date Added: 2024-06-11T07:40:34.011903
License: Public Domain

Original opinion amplified on petition for rehearing June 15, 1943                        ON PETITION FOR REHEARING                             (138 P.2d 916)
The appellants Public Market Company of Portland, Reconstruction Finance Corporation, and the First National Bank of Portland (Oregon) have filed a petition for rehearing in which they ask the court to amplify its opinion with respect to the measure of damages. Specifically, they urge that the Market Company is entitled to recover interest from the date of the breach of the contract on the amount of any damages that may be awarded it. In view of the importance of the question and the fact that it had not heretofore been presented, we called for oral argument.
In our former opinion we held that the city undertook, by the provisions of the contract, to create a special fund by the issuance and sale of public market utility certificates out of which to pay the consideration agreed upon, and that the Market Company had agreed to look for payment solely to the fund so to be created. *Page 622 
We further held that the city had breached the contract by wrongfully refusing to endeavor to create the fund. We likened the case to the so-called local improvement cases in this state in which it is held that a city will not be permitted to escape liability on a contract for work performed by neglecting to levy an assessment in order to create the fund to which the contractor has agreed to look for payment of the contract price; but we pointed out that in that class of cases the city has received the full benefit of the contractor's work and the latter's measure of damages is the full contract price, whereas, in the case at bar, the Market Company owns the land and the building which it erected thereon and, consequently, its recovery is limited to the contract price diminished by the value of the property at the time of the breach.
In the city improvement cases interest has been uniformly allowed: J.H. Tillman Co. v. Seaside, 145 Or. 239, 256,25 P.2d 917; Dennis v. McMinnville, 128 Or. 101, 269 P. 221;O'Neil v. Portland, 59 Or. 84, 87, 113 P. 655 (and cases there cited); and we are of the opinion that the precedents thus established should be followed here unless there is something in the nature of the present case which, under our statute governing the allowance of interest and the decisions construing it, stands in the way.
Section 66-101, O.C.L.A., so far as now material, provides:
    "The rate of interest in this state shall be six per centum per annum and no more, and shall be payable in the following cases, to wit:
    "(1) On all moneys after the same becomes due; * * *
    "(4) On money due upon the settlement of matured accounts from the day the balance is ascertained." *Page 623
The city contends that, since the damages are unliquidated, they are not "moneys" within the meaning of Subd. 1, and undoubtedly there are decisions of this court which support that view. See, Richardson v. Investment Company, 124 Or. 569, 572,264 P. 458, 265 P. 1117; Duncan Lumber Co. v. Willapa LumberCo., 93 Or. 386, 400, 182 P. 172, 183 P. 476; Propst v. WilliamHanley Co., 94 Or. 397, 404, 185 P. 766; City of Seaside v.Oregon Surety and Casualty Co., 87 Or. 624, 634, 171 P. 396;Williams v. Pacific Surety Co., 77 Or. 210, 221, 146 P. 147, 149 P. 524. The city has also cited upon this point Compton v.Hammond Lumber Co., 154 Or. 650, 652, 61 P.2d 1257; but, as that was an action by a seaman to recover damages for a skin disease caused by the defendant's failure to provide sanitary quarters and for subsistence, it can have little, if any, bearing on the present question.
We need not pause to inquire whether, as the appellants argue, these decisions — other than the Compton case — denying interest upon unliquidated claims, are distinguishable because based upon the statute as it read and was construed before the radical amendment of Subd. 1 by Ch. 358, General Laws of Oregon 1917. That would be difficult to say because the construction of the statute before amendment was not always uniform. See, Sargent v.American Bank and Trust Co., 80 Or. 16, 39-46, 154 P. 759, 156 P. 431; Carnahan Mfg. Co. v. Beebe-Bowles Co., 80 Or. 124, 129,156 P. 584. It is sufficient that in the most recent case of breach of an express contract construing the amended statute this court has departed from the doctrine to which it had previously and consistently adhered. North Pacific Construction Co. v.Wallowa County, 119 Or. 565, 249 P. 1100, was a suit by a contractor who *Page 624 
had performed work for a county to set aside the award of an engineer and to obtain a proper allowance for the work performed and not yet paid for. Under its contract with the county to construct two pieces of road the determination of the engineer as to the amount or quantity of work was made final and binding on the parties, and it was provided that within thirty-five days from the filing of the final estimate the county should pay the contractor the balance due after deducting all previous payments. This court held that the award made by the engineer was grossly inadequate, determined the amount to which the contractor was entitled, and further held that, under the first subdivision of § 66-101, O.C.L.A., the contractor was entitled to interest on the balance found due, saying, after refusing to allow certain elements of damage claimed:
    "The plaintiff must be content with the interest on the amount of money that ought to have been paid to it thirty-five days after the filing of the report, which report must be considered as amended to include the sum we have allowed." 119 Or. 572.
This decision is unquestionably authority for the allowance of interest on unliquidated damages growing out of the breach of a contract. It was so considered by the Circuit Court of Appeals for the Ninth Circuit in Northern Pacific Ry. Co. v. Twohy Bros.Co., 95 F.2d 220. There, under a provision of the contract, a contractor, engaged in constructing a branch line railway for a railway company, was given the right to haul commercial freight upon the branch line during the period of construction, and was to be paid $1 per car mile on the total car miles which the railway hauled. It was found that the railway had breached this provision of the contract by preventing the contractor from hauling *Page 625 
the commercial freight, and that the contractor was entitled to recover the $1 per car mile agreed upon, diminished by the contractor's cost of handling, together with the interest on that amount from the date that it should have been paid. The court thought that Williams v. Pacific Surety Co., supra, and DuncanLumber Co. v. Willapa Lumber Co., supra, were overruled by the reasoning in North Pacific Construction Co. v. Wallowa County, supra, "so far as they hold that any lack of liquidation of damages defeats any right to interest under the Oregon statute", and allowed interest on the authority of the Wallowa County case.
In this conclusion we think that the Circuit Court of Appeals was right. We are of the opinion, moreover, that the fact that the damages are unliquidated is not necessarily a bar to the allowance of interest, and that "no right reason exists for drawing an arbitrary distinction between liquidated and unliquidated damages." Bernhard v. Rochester German InsuranceCo., 79 Conn. 388, 398, 65 A. 134, 8 Ann. Cas. 298. The tendency of modern authority is to disregard such a distinction (Restatement, Contracts, § 337, pp. 542-548), at least where "the demand is of such a nature that its exact pecuniary amount was either ascertained, or ascertainable by simple computation, or by reference to generally recognized standards such as market price", and where "the time from which interest, if allowed, must run, — that is, a time of definite default or tort-feasance, — can be ascertained." 1 Sedg. on Damages (9th Ed.) 571, § 300.
In this case both of these elements are present.
The city argues that any damages that might be awarded would constitute "moneys due on settlement of matured accounts", interest on which, under Subd. *Page 626 
4 of the statute, is payable only "from the day the balance is ascertained". The basis of this contention is that an accounting must be had under various provisions of the contract in order to determine the exact amount which the city would have had to pay had it complied with the contract. For example, under Paragraph 2 the Market Company agreed to install in the market building certain equipment and the city agreed to pay to the Market Company the actual cost price of such equipment plus ten per cent, and under Paragraph 6 the Market Company agreed to pay to the city all prepayments of rent and deposits based upon the unexpired portions of existing leases. To determine these and other similar matters an accounting will be necessary. The argument of the city in this connection proceeds very much as though the recovery would be upon the contract, instead of for its breach. Were this the case the question would be foreclosed because it is provided in Paragraph 6 that "as of the date of said conveyances and assignments and of the making of said payment by the City to the Company there shall be an accounting" and that "all payments due from the City to the Company hereunder, if unpaid to the Company when due, shall thereafter bear interest at the rate of six per cent (6%) per annum payable quarter-annually."
The recovery, however, would not be on the contract, but of damages for its breach, though the suit is technically exdelicto. The city agreed to pay the Market Company $1,244,790.66 upon completion of its obligations under the contract and tender of proper conveyance and other documents. The exact amount to be paid, however, would no doubt be affected by other provisions to some of which attention has been called, and *Page 627 
the difference between that amount, when ascertained, and the value of the property at the time of the breach would be the measure of the Market Company's damages. In a sense the balancing of accounts would enter into that determination, but only as incidental to the ultimate question of the extent of the damages. The Market Company, if it prevails, will not recover money due upon the settlement of matured accounts, but damages suffered as the result of a breach of contract — "moneys after the same become due".
We see nothing unjust or inequitable in the allowance of interest in such circumstances. The situation is not unlike that portrayed by Circuit Judge Denman in Northern Pacific Ry. Co. v.Twohy Bros. Co., supra, when he said:
    "* * * if the railway rightfully permits the contractor to earn the commercial haulage, but wrongfully refuses to pay what is due the contractor, he must pay interest from the date the moneys were due. If, on the other hand, it commits two wrongful breaches of the contract, first, in preventing its performance, and, second, in nonpayment of the amount due, the dual breach enables the contract breaker to have the use of the moneys due the contractor and deprive the contractor of its use until the court compels its payment — here, $125,000 for ten years." 95 F.2d 226.
In the instant case, if the city had created the fund but refused to pay the money, it would have been liable for interest under the terms of the contract. Why its liability should be any the less because it refused to create the fund, thus compelling the plaintiff to resort to the only remedy left open to it — what is technically an action for tort, but in substance one based on the breach of a contractual obligation —, is not easy to perceive. *Page 628 
The damages, if any, which the plaintiff will recover will, as we have seen, represent the difference between the value of the property at the time of the breach and the agreed purchase price. The money and its use have been wrongfully withheld from the Market Company by the city ever since the breach. The city ought not to be heard to complain that it did not know and does not now know how much it should pay, because, when called upon to perform, it passed a resolution which in effect denied the existence of a contract with the Market Company and attempted to wash its hands of the whole business. Nor, in our opinion, is there merit in the argument that the exaction of interest would be unfair because, as a result of our decision "the charter will be violated and the burden upon the people will be as great as if a general obligation had been assumed and held valid." The city contended before this court that it had entered into a special fund contract with the Market Company; we so held, and, having done so, we are of the opinion that there is nothing in the nature of a municipal corporation which renders it immune from the duty to make just compensation, including the payment of interest in a proper case, to one whose contractual rights it has violated.
We, of course, neither express nor intimate an opinion that the Market Company is entitled to damages. That question remains to be determined by the trial court upon a consideration of the evidence to be adduced as to the amount of the purchase price and the market value of the property at the time of the breach.
The petition for amplification of the opinion is granted. *Page 629