Court Opinion

ID: 9540970
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:21:18.342135+00
Date Added: 2024-06-11T15:01:56.271813
License: Public Domain

EDMONDS, J., Dissenting.
Certainly there is substantial evidence to support- the finding of the trial court that the appellants repudiated the lease and did not take possession of the property. But assuming that the provision of their agreement requiring repair of the water system is an independent covenant unrelated to the requirement “to work a minimum of 300,000 yards of channel annually’’ and entitling the lessors to recover separately for its breach, I cannot agree with the conclusion of my associates as to the measure of damages for the breach of the obligation to do the required amount of mining. In my opinion the theory upon which the judgment in this particular is affirmed is contrary to elementary rules of the law relating to contracts.
The appellants agreed to operate certain placer mining properties and the trial court found “that there was a minimum of 300,000 cubic yards [of gravel] of the average gross value of 50$ per cubic yard in said properties capable of being mined and removed by [them] . . . annually.’’ At the rate fixed by the lease, had the covenant been performed, the lessor would have received $15,000, which is the amount the trial court awarded in the judgment now affirmed.
The vice of allowing a recovery equaling the consideration of the contract is that it gives the lessor the amount of his royalty and, in addition, leaves him with his mineral deposit. To me, such an award clearly violates the legislative prohibition that “no person can recover a greater amount in damages for the breach of an obligation than he could have gained by the full performance thereof on both sides, except in the cases specified in the articles on exemplary damages and penal *44damages. ...” (Civ. Code, see. 3358.) This rule is a fundamental principle of contract law. As restated in Corpus Juris Secundum, the “plaintiff is not to be put in a better position by a recovery of damages for the breach of a contract than he would have been if there had been performance.” (25 C.J.S., Damages, sec. 74, pp. 565, 566.) By the decision in this case, the lessor recovers $15,000, the amount which it would have received had the contract been performed and also retains the 300,000 cubic yards of gold-bearing gravel; it gets full payment for the mineral deposit which it still has.
The fugacious qualities of petroleum substances justify courts in allowing the recovery of the full royalty upon them upon the breach of an obligation to produce oil and gas. However, to apply that measure of damages in a case such as the present one gives the landowner much more than he would have received had his contract been fully performed. The Supreme Court of Michigan recently refused to allow such a recovery and approved the rule stated by the trial judge as follows: ‘ ‘ The measure of damages for breach of ah implied contract to mine all the coal that may be reasonably mined is the stipulated rate for the quantity which could have reasonably been mined, but was not, deducting its value unmined.” Citing as authority Lyon v. Miller, 24 Pa. 392, and the note in 60 A.L.R. 935, it held that the plaintiff could not recover the full amount of rental agreed to be paid under a lease for the purpose of excavating clay. Again adopting the language of the trial judge, it said: “The reason why this rule is fair and equitable is that if the Court should award to plaintiff the value of the brick per thousand which could be manufactured from the remaining portion of the area, then not only would plaintiff have a judgment for the full amount, but during a normal period he would also be able to realize on re-sale, practically the same amount, and therefore, the harvest would be double, which in the opinion of the court, would work an injustice on the defendant. ’ ’ (Milligan v. Haggerty, 296 Mich. 62 [295 N.W. 560, 564] .)
The same measure of damages was recently applied by the federal court which held that the value of the deposit of coal not mined must be considered in reduction of the amount agreed to be paid under the contract. “When the lessee ceases to mine, the additional coal which he would have taken out if he had continued reverts to the lessor’s benefit to be taken out by him or some other sub-lessee. So the lessor’s damage in such case can not be said to be the full amount *45of the minimum royalties during the remainder of the lessee’s term.” (Whiteside v. Rocky Mountain Fuel Co., 101 F.2d 765, 768.)
The statement in Sumner’s Oil and Gas, quoted and relied upon in the majority opinion, that the leading case of Lyon v. Miller, 24 Pa. 392, has been disapproved by later cases in the same jurisdiction as well as by decisions of other courts, is not supported by authority. The only decision cited by the author to sustain his assertion is Berwind-White Coal Mining Co. v. Martin, 124 F. 313 [60 C.C.A. 27]. But the court in that case observed, “The defendant relies on Lyon v. Miller, 24 Pa. 392, and Kille v. Reading Iron Works, 141 Pa. 440 [21 A. 666]; but in neither of these was there any provision for the payment of a definite annual quantity whether mined or not, a most material distinction.” Because of such a provision in the contract before it, the stipulated annual installments were considered to be amounts of liquidated damages. In the present case the agreement is to pay a royalty of 10 per cent on the gross values of all minerals extracted from the property on a recovery basis of 50 cents per cubic yard.
The covenant in the contract of Swinerton and Morrison may be construed in either of two ways. If it is an agreement by the mine owner to sell a minimum of 300,000 cubic yards of gravel, the sale price being the stipulated royalty of 10 per cent of the gross recovery value of the gold content, then, under the theory of Lyon v. Miller, supra, the full amount of the royalty may be recovered only if the gravel has no value unmined, or if the lessor, as the seller, had affirmed the sale so as to transfer title to the appellants as the buyers. (See Civ. Code, sec. 1783.) But the record shows a finding based upon substantial evidence that the value of the gravel was 50 cents per cubic yard, and the respondent’s action for damages is inconsistent with a claim based upon a transfer of title.
If, on the other hand, the covenant is considered as one for the performance of services, that is, an agreement to mine a minimum of 300,000 cubic yards of gravel for a consideration of 90 per cent of the gross recovery value, the consideration for the appellants’ promise, which the lessor agreed to pay, must be deducted from the value of the services. This rule is illustrated by the American Law Institute in its discussion of section 335 of the Restatement of Contracts as follows: “A contracts to convey land to B in return for *46B’s'service for one year. B refuses to do the work. A can get judgment for the value of the service promised less the value of the land, retained by him.” In the present action, the respondent has retained the gravel from which the consideration for the appellants’ covenant to mine was to be obtained, and is allowed to recover the full value of the services agreed to be rendered.
And the rule of damages applied by a majority of the court is that upon proof of the breach of the contract, the mine owner at least established a prima facie ease entitling him to a judgment for the full amount of the royalty. This is, in effect, saying that if the owner of an automobile agreed to sell it for a stated amount, upon breach of the contract by the buyer he may sue for the consideration and in the absence of any evidence of value by the defendant, be entitled to retain his automobile and have judgment for the sale price. Such a doctrine is contrary to the elementary principle that in an action for damages, where the title to the subject matter remains in the vendor, the measure of recovery is the difference between the contract price and the value of what is retained, and it is a part of the plaintiff’s case to establish both factors from which the difference may be computed. (Boyles v. Kingsbaker Bros. Co., 5 Cal.2d 68 [53 P.2d 141] ; Coburn v. California Portland Cement Co., 144 Cal. 81 [77 P. 771]; San Francisco Milling Co., Ltd. v. Frye & Co., 2 Cal.App.2d 563 [38 P.2d 165]; Bonan v. Pacific Orient Co., 140 Cal.App. 68 [34 P.2d 1064]; Aimo v. Mitchell, 124 Cal.App. 497 [12 P.2d 1059]; Hougland v. Roth Blum Packing Co., 99 Cal.App. 631 [279 P. 159] ; Nye & Nissen v. Weed Lumber Co., 92 Cal.App. 598 [268 P. 659] ; Gopcevic v. California Packing Corp., 64 Cal.App. 132 [220 P. 1078]; Meyer v. McAllister, 24 Cal.App. 16 [140 P. 42]; Cuthill v. Peabody, 19 Cal.App. 304 [125 P. 926]; and see 22 Cal.Jur., p. 1062, see. 121.)
But even were the rule announced by the majority opinion correct, its conclusion still may not be justified by the facts of the case, for the uncontradicted evidence in the record shows that the gravel could be mined at a cost of 30 cents per cubic yard, thus yielding a profit of 20 cents per cubic yard.
Appellants’ petition for a rehearing was denied November 4, 1943. Edmonds, J., voted for a rehearing.