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Theodore Sedgwick.

A treatise on the measure of damages, or, An inquiry into the principles which govern the amount of pecuniary compensation awarded by courts of justice (Volume 2) online

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So for breach of contract to give a 974; Board of Directors v. Roach, 174

mortgage to secure a loan from a third Fed. 949, 99 C. C. A. 453.

77



1218 DAMAGES IN ACTIONS ON CONTRACTS §§ 622, 623

§ 622c. To make a contract.

A contract to enter into a contract subjects the defendant
upon breach to the same damages as if he had made and broken
the second contract. ^^^ Thus for breach of a contract to give a
promissory note the measure of damages is the amount of
the note.^^^ If plaintiff is obUged to go to expense in order
to procure another to enter into the contract, he may recover
the- expense. So where defendant agreed to become surety on
plaintiff's bond the latter, upon breach, may recover the expense
of supplying a new bond."^

§ 623. To insure, or to assign a policy of insurance.

For breach of a contract to insure a house the plaintiff, if
the house is burnt without his knowledge of the breach, is en-
titled to recover the amount which would have been recovered
on the policy, that is, in general, the amount of the policy (not
exceeding however, the amount of the loss), less the pre-
miums. ^^^ The same rule applies in the case of a contract to
insure goods against fire.^^^ In the case of a valued policy, the
measure of damages is the face of the policy less the premiums;
as in case of a contract to insure a vessel. ^^^ And so for breach
of an agreement to keep alive a policy of life insurance the
measure of damages is the face of the policy, less the pre-
miums. ^"^ If the insurance company in which the defendant

"" Pratt t;. Hudson R. R. R., 21 N. Y. sellat, 1 Wash. C. C. 504, Fed. Cas.

305. No. 3827; Morris v. Summerl, 2 Wash.

'95 Minnesota: American Mfg. Co. v. C. C. 203, Fed. Cas. No. 9837.

Klarquist, 47 Minn. 344, 50 N. W. 243; New Jersey: Lchnois v. Egg Harbor

Deering v. Johnson, 80 Minn. 172, 90 Commercial Bank, 26 Atl. 797.

N. W. 363. Wisconsin: Campbell v. American

New York: Hanna v. Mills, 21 Wend. F. I. Co., 73 Wis. 100, 40 N. W. 661;

90. Franck v. Stout, 139 Wis. 223, 120

North Dakota: Kelly v. Pierce, 16 N. W. 867.

N. D. 234, 112 N. W. 995. Canada: Douglass v. Murphy, 16

Ohio: Stephenson v. Repp, 47 Oh. St. U. C. Q. B. 113.

551, 25 N. E. 803, 10 L. R. A. 620. ^^^ New Hampshire: Ela v. French,

Texas: Young v. Dalton, 83 Tex. 11 N. H. 356.

497, 18 S. W. 819. England: Ex parte Bateman, 8 D.

England: Robinson r. Robin.son, 29 M. & G. 263, 268; Smith v. Price, 2

Eng. L. & Eq. 212. F. & F. 748.

'»« Samuels v. Fidelity & C. Co., 49 •»« Miner ?>. Tagert, 3 Binn. (Pa.) 205.

Hun, 122, 1 N. Y. Supp. 850. ^oo Missouri: Scheele v. Lafayette

•i" United States: DcTaslct i;. Crou- Bank, 120 Mo. App. 611, 97 S. W. 621.



§ 623 TO INSURE 1219

should have taken out or kept alive a policy was insolvent at
the time when the loss should have been paid, the measure of
damages is the amount which could have been realized from
the policy. ^"^ .So where a defendant had agreed to procure
insurance for the plaintiff, but before the insurance was ef-
fected, the property was destroyed in the Chicago fire of 1872,
it was held that the defendant was not liable for the face value
of the policy, that he was only liable for the amount of divi-
dends which the company would have declared on a policy of
that face value. "°^

If, however, the plaintiff was informed of the breach a suffi-
cient time before the loss to place the insurance himself, he
cannot recover the amount which would have been recoverable
on the policy; for by the rule of avoidable consequences he
should have insured himself. The measure of damages is the
value of the policy at the time the failure to insure or the lapse
is discovered; which would be the cost of a policy. ^°^ In an
English case the defendant assigned a policy of insurance for
£1,000, on which he was to pay the premiums, to trustees for
his creditors by a deed containing a covenant that he would
do nothing to avoid the policy, which was subject to a condi-
tion that if the assured should go beyond the limits of Europe,
it should be void. He violated this covenant, thereby avoiding
the policy. It was held that the measure of damages was the
value of the policy at the time of the judgment, taking into
consideration the fact that the defendant had covenanted
to pay and should pay the premiums thereon. ^"^

The same principle applies to an agreement to assign a policy.

New York: Toplitz v. Baur, 161 N. Maine: Grindle v. Eastern Express

Y. 325, 55 N. E. 1059; Gray v. Murraj^, Co., 67 Me. 317, 24 Am. Rep. 31.

3 Johns. Ch. 167; Soule v. Union Bank, New York: Ainsworth v. Backus, 5

45 Barb. Ill, 30 How. Pr. 105; Bailey Hun, 414 (but see Douglass v. Murphy,

V. American D. & L. Co., 52 App. Div. 10 Up. Can. Q. B. 113, where the con-

402, 65 N. Y. Supp. 330. trary seems to be assumed).

-°i Sawyer v. Mayhew, 51 Me. 398. On this ground must be explained:

202 Chicago Building Society v. Crow- National Mahaiwe Bank v. Hand, 80

ell, 65 111. 453. Hun, 584, 30 N. Y. Supp. 508, 1133,

20' Illinois: Brant v. Gallup, 111 111. 89 Hun, 329, 35 N. Y. Supp. 449.

487, 53 Am. Rep. 638. 204 Hawkins v. Coulthurst, 5 B. & S.

Kentucky: Vaughan v. Reddick, 32 343.
Ky. L. Rep. 531, 106 S. W. 292.



1220 DAMAGES IN ACTIONS ON CONTRACTS § 624

So where the defendant sold the plaintiff a house, and agreed
to assign the policy of insurance upon it, the measure of dam-
ages upon a breach of the agreement is the cost of insurance
for the unexpired term of the policy; in other words, the value
of the policy. If the house is burned without insurance, the
plaintiff can recover nothing for loss of the insurance money,
for he should have insured himself; but is restricted in his re-
covery to the actual value of the policy at the time of breach. ^"^

^^Tiere defendant agreed with an agent to take from him an
insurance policy to take effect several months later, and then
refused to take the policy it was held that the agent could not
recover the entire amount of his commissions on the supposi-
tion that the policy would take effect at the later date and
would continue in effect throughout the term.^"^

§ 624. To work a farm on shares.

In an action for breach of a contract by which the defendant
agrees to cultivate a farm on shares, the measure of damages
is the profit which the plaintiff would have made if the contract
had been fulfilled. -°^ Where such an agreement was broken
by the owner of the farm, the fact that the plaintiff got another
farm to work was held immaterial. -°^ The value of the probable
crop has been held not too uncertain to form the basis of re-
covery between the parties; and the due proportion of the
probable net profit from cultivation may be recovered, -°^
whether the breach was by the owner -'° or by the laborer. -^^

^^ Massachusetts: Dodd v. Jones, 137 Pennsylvania: Hoy v. Grenoble, 34

Mass. 322. Pa. 9, 75 Am. Dec. 628.

New York: Elfenbeim v. Abbon- ^^ New York: Taylor v. Bradley, 4

danza, 64 Misc. 176, 118 N. Y. Supp. Abb. App. 363, 100 Am. Dec. 415.
1073. Pennsylvania: Wolf v. Studobaker,

=»«Woingrad v. Klotzky, 52 Mi.sc. 65 Pa. 459.
129, 101 N. Y. Supp. 588. 200 j^ ^g^ yor^ the rule appears to

^" California: Shoemaker v. Acker, be, to estimate the value of the chance

116 Cal. 239, 48 Pac. 62. at the time the contract was made, by

Michigan: McClure v. Thorpe, 68 estimating the probable profits and

Mich. 33. the probable cost: Taylor v. Bradley,

Missouri: Smock v. Smock, 37 Mo. 39 N. Y. 129; Ecker i'. Cottrell, 24

App. 56. App. Div. 496, 48 N. Y. Supp. 1031.

New York: Ecker v. Cottrell, 24 App. 210 Shoemaker v. Acker, 1 16 Cal. 239,

Div. 496, 48 N. Y. Supj). 1031. 48 Pac. 62.

2" Zachary v. Swangcr, 1 Ore. 92.



§§ 625, 626 FOR FORBEARANCE 1221

§ 625. To share the profits of a business.

For breach of a contract to share the profits of a business
the measure of damages is the amount of profits, if this can
be ascertained with sufficient certainty since that is the amount
which the plaintiff would have realized by performance. 2^-
So where the defendant agreed to supply steers for plaintiff
to fatten for market, profits to be divided, the measure of
damages is the probable profits. ^^^ In estimating future
profits there is of course an element of uncertainty, but the jury
must do its best to estimate them. If the business has been
disposed of by the defendant to a third party, profits realized
by him may be shown. ^^'^

§ 626. For forbearance.

* Contracts for forbearance are often entered into by creditors
for certain considerations, on which they forbear to pursue
their debtor during a given time. In a case of this kind, where
the plaintiff had recovered judgment against his debtor, the
defendant, in consideration that the plaintiff would forbear
to sue out execution for a certain time, agreed to erect a house
and lease it to the plaintiff; such erection and lease to be in
full satisfaction of the judgment. The agreement not being
performed, it was held that the value of the house was the
measure of damages, and not the difference between the amount
of the judgment and value of the house. "^^ ** For breach of a
contract to forbear committed by the creditor damages are
nominal merely, where a case for consequential damages is not

^'2 Colorado: Beckwith v. Talbot, 2 Texas: Gordon v. Sanborn (Tex. Civ.

Colo. 639 (to sell cattle on joint App.), 35 S. W. 291 (to buy in land on

account); Ramsay v. Meade, 37 Colo, forclosure and sell for benefit of mort-

465, 86 Pac. 1018 (to engage in mer- gagee).
cantile business as partners). Washington: Belch v. Big Store Co.,

Iowa: Dockstader v. Young M. C. 46 Wash. 1, 89 Pac. 174 (to conduct

Assoc, 109 N. W. 906 (to fit up athletic plumbing business for half profits),
ground, to be paid out of revenue). ^u j^ule v. McGregor, 117 la. 419,

New York: Crittenden v. Johnston, 90 N. W. 811.
7 App. Div. 258, 40 N. Y. Supp. 87 "^ Treat v. Hiles, 81 Wis. 280, 50 N.

(to manage a hotel on shares). W. 896.

Pennsylvania: Kenderdine H. C. F. ^is strutt v. Farlar, 16 M. & W. 249.

Co. V. Plumb, 182 Pa. 463, 38 Atl. 480 See Ellison v. Dove, 8 Blatchf. 571.
(to manufacture goods, plaintiff to
have half the profits of sale).



1222 DAMAGES IN ACTIONS ON CONTRACTS § 627

made out,^^^ and the creditor can recover only the amount for-
borne, with interest and costs to the sale. Damages sustained
by a forced sale of the property levied on are too remote. ^^^
The plaintiff cannot recover compensation for the expense of
raising money to pay the debt.-^^

Where, however, consequential damages are within the con-
templation of the parties they may be recovered. So, if the con-
tract includes an agreement to vacate an attachment, and upon
breach of this agreement the property is sold at judicial sale, the
measure of damages is the true value of the property less the
amount realized on the sale.-^^ And where the defendant had
the plaintiff arrested, the latter may also recover the expense
of obtaining a discharge.^-''

§ 627. Actions against stockholders.

* The measure of damages in actions brought by incorporated
companies against stockholders, upon calls made for payment
of stock, furnishes us with another subject of inquiry. Where
the defendant subscribed for stock which had been forfeited
by the company, it has been held in New York that the for-
feiture was not a bar to the action, but that the nominal value
of the stock forfeited, less the actual cash value at the time it
was declared forfeited, was the measure of compensation."^
And unless the value of the stock reaches the whole debt
and interest,-" the plaintiff must have judgment for the bal-
ance. ^-^ ** Where, in such actions, all the money subscribed
is necessary for the purpose intended, the recovery is of course
measured and limited by the amount subscribed; but if an
amount less than the amount subscribed is all that is in fact
required, it is held, in Illinois, that the recovery should be pro
rata.'^'^'^ A promise to subscribe for a certain amount of stock
in a plank-road company, to induce the selection of a particular

216 Roid V. Johnson, 132 Ind. 41G, 31 "o Smith v. Way, 6 All. (Mass.) 212.

N. E. 1107. 221 Heridmer Man. & H. Co. v. Small,

2" Indiana & I. C. Ry. v. Scearce, 23 21 Wend. 273.

Ind. 223. "2 g_ c. 2 Hill, 127.

2"* Dcyo V. Waggoner, 19 Johns. (N. "j Johnson v. Stear, 15 C. B. (N. S.)

Y.) 241. 330.

2" Cole V. Stearns, 23 Apj). Div. 446, "4 Miller v. Ballard, 46 111. 377.
48 N. Y. Supp. 318.



I



§ 627a TO BUY, SELL OR TRANSFER STOCK 1223

route, if accepted, is valid, and may be enforced. The measure
of damages is the difference between the value of the stock at
the time of the trial, and the amount agreed to be paid for it.-'-'^
On the other hand, on a breach of an agreement to give land for
Stock, if a specific performance cannot be decreed, in estimating
the damages, reference should be had not to the nominal value
of the stock, but to the land which ought to have been con-
veyed. ^^^

§ 627a. To buy, sell or transfer stock.

For breach of an agreement to buy stock, the seller may
recover the difference between the contract price and the
market value of the stock; - ^ or, if he is able to secure a transfer
to the purchaser on the books of the company the entire con-
tract price. ^^* He is also entitled to recover back assessments
levied on him after the date at which the defendant agreed to
buy the stock. ^^^ Where one sells stock to plaintiff with an
agreement to buy it back after a certain time or to secure a
purchaser for it at a certain price, and fails to keep his contract,
the measure of damages, upon tender of the stock, has been
held to be the agreed price, "^° together with a subsequent
assessment on the stock which the plaintiff was obliged to
pay.^^^ The damages cannot be reduced by showing that
plaintiff might have sold the shares during the period at the
agreed price, since he might keep them during that period if he
desired; ^^- but after breach he should take reasonable means
by sale of the stock to reduce the damages. -^^ In an action
against a corporation for failure to transfer stock on its books

"* Rhey y. Ebensburg& S. P. R. Co., given was that any other rule would

27 Pa. 261. defeat the object of the contract. This

226 Dayton & C. R. R. Co. v. Hatch, hardly seems sufficient, since a breach
1 Disney (Oh.), 84. necessarily defeats the object of the

227 Herd v. Thompson, 149 Pa. 434, contract, and the allowance of dam-
24 Atl. 282. ages is not to secure the object of the

228 Orr V. Bigelow, 20 Barb. (N. Y.) contract but to give compensation for
21. the defeat of such object.

229 California: Gay v. Dare, 103 Cal. 231 Gay v. Dare, 103 Cal. 454, 37 Pac.
454, 37 Pac. 466. 466.

New York: Orr v. Bigelow, 20 Barb. 232 ^ken v. Clark, 146 la. 436, 123

(N. Y.) 21. N. W. 379.

230 Campbell v. Woods, 122 Mo. 233 Davidor v. Bradford, 129 Wis.
App. 719, 99 S. W. 468. The reason 524, 109 N. W. 576.



1224



DAMAGES IN ACTIONS ON CONTRACTS



§628



to the plaintiff, the measure of damages is the value of the
stock ; the plaintiff losing his ownership in the stock by the act
of the company.-^^ And where a corporation failed to give a
stockholder an opportunity to subscribe to new stock at a
certain price, which he had a right to do, the measure of dam-
ages is the difference between the actual value of the stock and
the price at which he had the right to subscribe for it.-^^

In an action for breach of a contract to pay plaintiff for his
services by a certain amount of preferred stock in a corpora-
tion, it appeared that the corporation never issued such stock;
the plaintiff was nevertheless allowed to recover its estimated
value, if issued. ^^®

§ 628. By assignees of bankrupts.

* Interesting questions are often presented in suits by as-
signees seeking to enforce contracts made by the bankrupt.
In a case in assumpsit in the English Exchequer, the facts
were that the bankrupt had, previous to his bankruptcy, de-
livered to the defendant a bill of exchange for £600, which he
promised to discount, retaining £100 and the discount. He
kept the bill, however, and paid nothing to the bankrupt.
On this state of facts, the judge who tried the cause told the
jury that they were bound to give the £600, less the £100
and the discount. An effort was made to set the verdict aside,
on the ground that the cause should have been left to the jurj^



"^-i United Stales: Tayloe v. Turner,
23 Fed. Cas. No. 13,770, 2 Cranch C.
C. 203; Crosby Lumber Co. v. Smith,
51 Fed. 63.

New York: Commercial Bank v.
Kortwright, 22 Wend. 348 (affirming
Kortwright v. Commercial Bank, 20
Wend. 91) (highest value between re-
fusal and suit).

Pennsylvania: German U. B. & S. F.
As-soc. V. Sendmeyer, 50 Pa. G7 (value
at time of refusal).

So where a corporation issued l)f)nds
with the agreement that at maturity
they might be converted inio j)referred
Htock, and at maturity it f;iil<(i on
demand to rielivcr the .st(jck, the



measure of damages is the value of the
stock at the time of the demand.
Bratten v. Catawissa II. II., 211 Pa.
21, 60 Atl. 319.

In one case where the refusal was by
a building society, the plaintiff was
allowed to recover the amount paid on
the stock from time to time, as dues,
with interest from the times of pay-
ment. North America Bldg. Assoc.
V. Sutton, 35 Pa. 463, 78 Am. Dec. 349.

^•" Stokes V. Continental Trust Co.,
186 N. Y. 285, 78 N. E. 1090, 12 L. R.
A. (N. S.) 969.

"« Crichfield v. Juha, 147 Fed. 65,
77 C. C. A. 297.



§§ 629, 630 TO CONSTRUCT STATIONS, ETC. 1225

at large, and that the judge erred in telHng them, as a point of
law, that the sum above stated was the measure of damages.
But the charge was held right, and the court said: ''No doubt
all questions of damage are, strictly speaking, for the ']\\vy,
and however clear and plain may be the rule of law on which
the damages are to be found, the act of finding is for them.
But there are certain established rules according to which they
ought to find; and here there is a clear rule that the amount
which would have been received if the contract had been kept,
is the measure of damages if the contract is broken." -^"^ **

§ 629. Agreements for arbitration and award.

Where the defendant broke his contract to submit a dispute
to arbitrators, it was held that the plaintifT could recover sub-
stantial damages, although it was found that he had no valid
claim. The damages would include "expenses to which he had
been subjected by reason of his necessary preparation for a
trial before the arbitrators, on account of his own loss of time
and trouble, and in employing counsel, taking depositions,
payments to witnesses and arbitrators," and other expenditures;
but he could only recover these so far as they were not avail-
able for the trial of his cause before the court, for he had to
repair to the latter, and the only result of the defendant's act
was to make him incur the extra expenses. It was said that
the counsel fees were recoverable, for they were suitable and
properly incurred, and the plaintiff was deprived of their bene-
fit by the wrongful act of the defendant.-'^ If, however, no
extra expenses were incurred by reason of the agreement, nom-
inal damages only may be recovered. -^^

§ 630. To construct stations, etc.
Where a railroad company breaks an agreement to build a

2" Alder v. Keighley, 15 M. & W. ikf aine; Call ?;. Hagar, 69 Me. 521.

117. The equitable assignee in this Massachusetts: Pond v. Harris, 113

class of cases has no greater right than Mass. 114; New Haven & N. Co. v.

the plaintiffs in the record. Griffiths Hayden, 117 Mass. 433.

V. Perry, 1 E. & E. 680. But his right Ante, § 607.

is equal to theirs: Ashdown v. Inga- ^'^ Munson v. Straits of Dover S. S.

mells, 5 Ex. Div. 280. Co., 43 C. C. A. 57, 102 Fed. 926.

'-•■"* Georgia: McKenzie v. Mitchell,
123 Ga. 72, 51 S. E. 34.



1226 DAMAGES IN ACTIONS ON CONTRACTS § 630

station at any given place, the measure of damages is the en-
hanced value of the land had the depot been erected.-^" In
Missouri, Kansas & Texas Railway v. Fort Scott -^^ the com-
pany broke its contracts to extend its line to Fort Scott. It
was held that plaintiff could recover either the value of the
improvements for purposes of taxation, or, as the contract
was entire, the whole consideration paid in advance; but evi-
dence to show a decline in population and depreciation in real
estate was inadmissible as being too speculative. Where a
subscription was made to the stock of a railway company on
the condition that the railway should pass by a certain place,
which condition the company failed to comply with, but before
their failure the subscriber had paid his subscription by a trans-
fer of land to the company: in an action by the subscriber
against the company for breach of the agreement, the measure
of damages was held the value of the land at the time of the
transfer.-^^ \\'Tiere plaintiff conveyed to street railway a right
of way across her land and agreed to pay certain money in con-
sideration of which the railway agreed to extend its road over

"0 Alabama: Mobile & M. Ry. v. Arkansas: St. Louis, I. M. & S. Ry.

Gilmer, 85 Ala. 422, 5 So. 138. v. Berry, 86 Ark. 309, 110 S. W. 1049

Florida: Atlanta S. A. B. Ry. v. (distinguishing St. Louis & N. A. R.

Thomas (Fla.), 53 So. 510. R. v. Crandell, 75 Ark. 89, 86 S. W.

Indiana: Louisville, N. A. & C. Ry. 855, 112 Am. St. Rep. 42, where upon

V. Sumner, 106 Ind. 55, 5 N. E. 404, 55 the wrongful discontinuance of an es-

Am. Rep. 719. tablishcd station the diminution in

Iowa: Varna v. St. L. & C. R. Ry., value of buildings was allowed).

55 la. 677, 8 N. W. 624. Illinois: Rockford, R. L & St. L. R.

Kentucky: Louisville A. & P. V. E. R. v. Beckcmeier, 72 111. 267.

Ry. V. VVhipps, 18 Ky. 121, 80 S. W. Canada: Grand Tronc C. E. v. Black,

507; Louisville IL & St. L. Ry. v. Bas- 17 Rev. Leg. 669.

kett, 121 S. W. 957. And sec Soulh Carolina: Standard

Mississippi: Yazoo <k M. V. R. R. Supply Co. v. Carter, 81 S. C. 181, 62

V. Baldwin, 78 Miss. 57, 29 So. 763. S. E. 50, 19 L. R. A. (N. S.) 155.

Oregon: Blagen v. Thompson, 23 Ore. Ante, § 194.

239, 31 Pac. 647, 18 L. R. A. 315. Depreciation of adjacent land not

Pennsylvania: Wattorson v. AUe- naturally resulting from failure to

ghany V. R. R., 74 Pa. 208. build fhc station cannot be recovered.

Texas: Houston & T. C. Ry. v. Atlanta & S. A. B. Ry. v. Thomas (Fla.),

Molloy, 64 Tex. 607. 53 So. 510.

Washington: Belt v. Wiishington W. ^41 15 K-ip 435

P. Co., 24 W!i.sh. 3K7, 04 Pac. 525. 2« Jewef t ;-. Liiwrenceburgh & U.

Contra, on the ground that such in- M. Ry., 10 Ind. 539.
crcaac is too uncertain:



§ 631 TO BUILD FENCES, WALLS, ETC. 1227

the right of way granted, and to run cars at stated intervals,
without designating any period, and the extension was made
and operated for several years, then abandoned because not
profitable, the tracks taken up, and the right of way restored,
and plaintiff relieved from paying money, the court held that
the difference in value with road and expectation of continuing
to run in the future over the value without the road was the
proper measure of damages ; but the present value must be the
value in consideration of the possibility of getting the connec-
tion in some other way than through the action of the defend-
ant. ^^^ And where defendant sold a site for a lumber mill
with an agreement that the plaintiff should get track connec-
tions with the railroad, and connections were not furnished,
the measure of damages is the difference between the value of
the plant with and without the guaranteed connection. -^^
The expense of hauhng freight to a more distant point may
also be recovered. ^^^

§ 631. To build fences, walls, etc.

For breach of an agreement to build fences and cattle-guards,
the measure of damages is the cost of building them.^^^ But
where a sea-wall, built by the defendant, had not been con-
structed according to his agreement, and he had promised the
plaintiff to rebuild it, but failed to do so, and in reliance on
such promise, the plaintiff himself delayed rebuilding; the loss
of the use of the wharf, during the period of delay thus caused,
was held the direct and immediate consequence of the defend-
ant's failure, for which he was liable. ^^^ Where the grantee
failed to build a wall on his own land, according to agreement,



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