Court Opinion

ID: 9448439
Source: CourtListenerOpinion
Date Created: 2023-08-03 23:36:12.4555+00
Date Added: 2024-06-11T17:31:26.213468
License: Public Domain

FAHY, Circuit Judge
(concurring in part and dissenting in part).
For the reasons given by Chief Judge MILLER in his opinion for the court I concur in affirmance of the judgment in favor of the appellees in No. 16,416.
In No. 16,400 I dissent. I agree with the position of the majority that the measure of damages for breach of the contract is the difference between the contract price and the costs and expenditures which would have been incurred by the partnership had it been permitted to render full performance. See J. D. Hedin Const. Co. v. F. S. Bowen Elec. Co., 106 U.S.App.D.C. 386, 388, 273 F.2d 511, 513. My disagreement lies in the application of this measure of damages to the facts of our case.
For the purpose of explaining my position I accept, as does the majority opinion, the finding of the District Court that the value of Partridge’s supervisory service was |7.50 an hour and that the partnership, through the partner Partridge, would have been required to spend an average of four hours a day in supervising the work the partnership had contracted to perform. I also accept the *253figures set forth in the opinion as representing the amounts which would have been expended in paying the firm’s employee Stange, and the incidental costs of fulfilling the contract. But I think the court is mistaken in concluding from these facts that there would have been no profit to the partnership had it been permitted to complete performance of the contract. In the circumstances of this case the value per hour of Partridge’s supervisory services was not a cost to be added as if it were a cost of carrying out the contract, and which, if so added, would eliminate any profit by lifting the cost of complete performance to an amount equal to or in excess of the payments to be received by the partnership from Norair.
The partnership was not paying Partridge $7.50 an hour or any similar amount in supervising the work of the firm’s employee on the project. The only remuneration to be received by Partridge, or by his co-partner, was a proportionate share of the profits earned by the partnership business. A partner’s time, in the absence of agreement, is freely given to the firm of which he is a member, and, absent agreement, he is not entitled to compensation for his services in attending to firm business. He is under a duty to render such services.1
Underlying the decisions relied upon by the majority is the basic assumption that the costs to be taken into consideration before arriving at profits must actually be incurred. There is a refinement in some of the cases that even if such costs are not to be incurred the abstract value of the services which would have been required to complete performance must be estimated, added to costs and thus used to diminish profits. But this refinement is not of general application and rests, as it seems to me, upon assumptions which this record does not permit us to make.
An examination of the cases indicates that in many instances the contractor was devoting a substantial amount of his time to performance of the contract, as would a hired employee. The courts have assumed that in these circumstances the defendant’s breach has released the plaintiff from further performance, thereby permitting him to utilize his time for other profitable ventures. A failure to deduct the value of his time would therefore give plaintiff a double recovery. If, for example, Partridge, after the wrongful termination of the contract by Norair, utilized the four hours a day, from which he was thus released, so as to earn a similar amount elsewhere he could not recover from Norair since that would result in a double recovery. But if, as the evidence in this case shows, Partridge was not able to earn other compensation by utilizing the time he would have spent supervising performance of the contract, there would be no double recovery should Norair be required to compensate for the loss brought about by its unlawful termination of the contract.
As above stated, Partridge was not being paid a salary by his partnership. The time spent by him in supervision was not an out-of-pocket cost or expenditure by the firm in performing the contract. By deducting the value of Partridge’s services as if it would have been an item of cost, the court has deprived the partnership of the profits it would have earned had it been permitted to complete the contract.
The above approach to the problem has been carefully analyzed and approved in Apex Metal Stamping Co. v. Alexander & Sawyer, Inc., 48 N.J.Super. 476, 138 A.2d 568 (App.Div.1958), where it is pointed out that such cases as this should be decided on their own factual basis and not on an unrealistic and, in some instances, as here, purely fictional, assumption with respect to costs. In Apex • Metal, the court said in part:
“The defendant’s argument is that the cost of production for this purpose should have included the value of the services of the partners on the theory that these were supervisory *254or management services necessary in the production attendant upon completion of the contract. There is considerable general authority in support of this viewpoint. * * * Examination of the cases cited, however, will indicate that, by and large, they involve contract undertakings in which the owner or contracting party is devoting a substantial part of his personal efforts and time to the work just as would a hired employee, and it is apparently assumed that since the defendant’s default has released the party from further involvement in the performance of the contract and made him available for other employment of his time and effort, a failure to deduct the value of the time would, in effect, give plaintiff a double recovery as to that element of the cost of production.
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“A more realistic approach would place each such case on its own factual basis, requiring an initial assumption that the value of the contractor’s time be included in the cost of production, but permitting the plaintiff to show, if he can, that the actual loss of bargain resulting from the breach does not call for diminution by that factor because the default has not, in fact, freed the contractor for attention to other enterprises in which he has been able with equal profit to deploy his efforts * * * » 48 N.J.Super. at 484-485, 138 A.2d at 572-573.
This is the situation presented by this record. In my opinion, therefore, the most that Norair is entitled to on this appeal is a remand for further evidentiary exploration, if Norair so desires, of the facts regarding the possibility of a double recovery, or possibly of neglect2 on the part of Partridge to earn what he reasonably could have earned for the partnership through utilization of the time made available by the illegal termination of the contract.3 If, as presently appears, there would have been no double recovery and no such neglect, then the partnership would be entitled to damages measured by the loss of profits, that is, the difference between the contract price of $7.50 per hour and the actual costs which would have been paid out in performance of the contract, without including among the cost items the value of the supervisory time which would have been expended by Partridge had the contract gone to completion.
My views do not turn, as the majority opinion seems to suggest, upon a method of internal bookkeeping; nor do I say that the partner’s time was worth nothing, when he worked at some income producing task. What I do say is that in my opinion when Norair breached the contract the value of the partner’s time when working may not properly be said to be a cost the partnership would have incurred in fulfilling this contract. To say otherwise is to say that if the value of a partner’s time is the same as the contract price to be paid the partnership the partners can earn no profit under such a contract and cannot recover any damages *255for its breach. This is an interesting way of permitting a contract to be broken without consequences to the one who breaks it, notwithstanding the fact that the other party actually suffers a pecuniary loss when it is not recouped by other employment of his time.
The court suggests that it would be unfair to adopt my theory of this case because a corporation could not recover from Norair in similar circumstances. But the corporation would incur the actual costs represented by the salary or wages of the supervising employee. The employee would receive the benefit of this compensation, and, of course, the profit of the corporation could be calculated only after such an expenditure was taken into account. Presumably the employee would be transferred to other work producing an income for the corporation, if released from the contract job because of the termination of the contract.

. See Crane, Partnership § 65, at 349-54 (2d ed. 1952).

. I deliberately leave vague this idea of neglect because my views in dissent do not prevail in this case. In that situation I prefer to leave open for the future this aspect of the matter.

. In Joske v. Pleasants, 15 Tex.Civ.App. 433, 39 S.W. 586, 590 (1897), an action to recover damages for breach of a building contract, the court found that the proper measure of damages was “the difference between the contract price and the actual cost of construction * * * less the value of the contractor’s time (if he found other employment in which his time was equally or more valuable) that would have been employed in the performance of the contract.” This decision supports my position in that the deduction of the value of a contractor’s time is made dependent upon whether he obtained equally profitable employment of Ms released time resulting from the breach of contract. If he did, the value of such time will be deducted from the expected gains under the contract since if it was not the contractor would be the recipient of a double recovery. If not, the value of his time or service should not be considered in the cost of completion. See Annot., 50 A.L.R. 1399, 1400 (1927).