164 N.W. 32 | N.D. | 1917
This is an appeal from an order of the district court of Cass county sustaining demurrers of the various defendants to a complaint. Omitting the formal allegations, the complaint is as follows :
“That, on or about the 21st day of June, 1915, the said district court duly authorized plaintiff, as such receiver, to bring this action.
*164 “That, on or about the 10th day of January, 1914, said bank was a going concern, but indebted, in large amounts, to.divers persons; and its ability to meet and discharge its obligations to its depositors and other creditors was questioned by the public, and grave danger existed that the depositors and other creditors would institute a run upon said bank and demand payment of deposits in such unusual amounts that it would b'e unable to realize upon its assets expeditiously enough to enable it to meet such calls; and, in truth and in fact, the assets of said bank were of such character they could not be realized upon in sufficient amounts to meet calls being made and about to be made by its depositors and other creditors; and there was grave danger that it would be compelled to suspend payment, and go into liquidation, and have its affairs closed up by a receiver.
“That the assets of said bank were actually worth and of the value of $85,000, to be used, realized upon, collected, and handled in the continuation of the business of said bank in the due and ordinary course of its banking business, and said bank was possessed of a business good will of large value; but a large part of such assets were in the form of second and third securities upon property, securing the obligations of persons against whom immediate collection could not be enforced and the collection of which would require a considerable period of time, extensions, renewals, and in many cases, the advancement of money, by said bank, for the protection of said securities; and, as a whole, the character of said assets were such that, unless held, handled, used, and collected in the regular and continued conduct of the banking business of said bank, or if attempted to be handled, collected, or used by a receiver or assignee,, or otherwise than in the continuation of the regular business of said bank, they would become immediately greatly depreciated in value, and, in many cases, practically worthless.
“That, at said time, the defendants and financial concerns in which they were interested were creditors of said bank to the amount of several thousand dollars, and holders of its stock as collateral security, and it was the mutual desire, and to the mutual interest of said bank and the defendants, that the bank continued as a going concern and preserve its good will until its assets could be realized upon to their full value in the regular course of its banking business; and it was then endeavoring to convert into cash all its assets immediately available for that purpose*165 for the express and only purpose of meeting the demands of its depositors and immediately maturing obligations, which endeavors and purpose were then and there communicated by it to defendants, who had full and complete knowledge thereof.
“That it was then and there discussed, between said bank and said defendants, and fully understood by all thereof, that, to avoid an immediate suspension of business by said bank, its assets must be converted into cash as expeditiously as possible to meet the claims of depositors and immediately maturing demands; and that a failure to so realize upon and convert such assets as were available into cash would inevitably lead to an early suspension of business by said bank, which would in turn lead to an immediate and large depreciation in the value of its assets and the total loss of the good will of the business as a going concern.
“That, on or about the said 10th day of January, 1914, the defendants, jointly and severally, did contract and agree with said bank as follows, to wit: That said bank should turn out and deliver to the defendants such of its unpledged bills receivable as they, the defendants, should elect to receive as collateral security, and, in consideration thereof, and of the promise to repay the same, and the legal liability arising to repay the same, they, the defendants, would advance to said bank,- and place at its disposal, sufficient cash to meet all its obligations and enable it to continue the regular course of its banking business; and, while it was then impossible to ascertain the exact amount necessary for the accomplishment of such purpose, it was -contemplated and understood that such amount would be upward of $20,000. That, in carrying out the terms of such agreement, the defendants did select, and said bank did turn over and deliver to them, bills receivable to the value of about $20,000, to be held by the defendants as collateral to such advances, and which made up and constituted the assets of such bank that were of the character that could be speedily converted into cash or made available to enable said bank to continue in business.
“VI.
“That at the time of making such agreement the said bank and the defendants had full knowledge of all the facts and circumstances set*166 forth in subdivision number five hereof, and contracted with special reference thereto and with a full understanding that the moneys agreed to be advanced by them were to be used by the bank for the specia purpose of meeting the demands of depositors and holders of immediately maturing claims; that, after devesting itself of the assets pledged to them as aforesaid, said bank would have no means of raising money to meet such claims; that the inevitable result of a failure to advance such money would be the suspension of business by said bank, its insolvency, and the consequent depreciation of the value of its assets; and the-entire loss of the value of the business good will.
“That thereupon the defendants repudiated their said agreement and refused to advance any money to said bank to enable it to continue in business.
“VII.
“That, by reason of the default of defendants in failing and refusing to advance and furnish to said bank the cash necessary to enable it to continue in business, it was forced to close its doors and discontinue its banking business; and, as direct results thereof, the proceedings were commenced as hereinbefore mentioned, resulting in the appointment of this plaintiff as receiver; and, by reason of the premises, the assets of said bank, which were of the value of $85,000, were reduced to the value of only $40,000, and the value of its good will was entirely destroyed, to the damage of said bank, its stockholders, and creditors of $50,000.
“Wherefore, plaintiff demands judgments against the defendants and each of them for the sum of $50,000, with interest from and since January 15, 1914.”
To the above complaint a demurrer was interposed on behalf of defendant Ilanna, and separate demurrers were filed by the defendants the First National Bank and E. J. Weiser. The demurrers raise the following questions: (1) The sufficiency of the facts alleged to constitute a cause of action; (2) the misjoinder of causes of action and parties defendant; and (3) the legal capacity of plaintiff to sue.
In support of the order of the trial court sustaining the demurrers, the counsel for respondents contend:
(a) That the contract or agreement set forth in the complaint is so uncertain and indefinite as to render it void;
(c) That the contract, if such there be, is ultra, vires and void as to the defendant First National Bank; and
(d) That the contract or agreement relied upon is within the Statute of Frauds.
The complaint alleges an agreement between the Medina State Bank, on the one side, and the defendants, jointly and severally, on the other, whereby the hank should deliver such of its unpaid bills receivable as the defendant should elect to receive as collateral security, in consideration of which and of the promise to repay, the defendants would advance to the plaintiff bank sufficient cash to meet all its obligations and enable it to continue its banking business. It is further alleged as the understanding of the parties at the time that the amount needed would be upward of $20,000. While the complaint is replete with allegations setting forth the inducement of the contract and circumstances which, if proved, might be proper to consider in determining the amount of damages recoverable, — allegations in aggravation of damages, — the foregoing statement comprises all the allegations touching the terms of the contract entered into. Immediately following the foregoing is an allegation of at least a partial performance of the agreement set forth. It is alleged that, in carrying out the terms of the agreement, the defendant selected and the plaintiff delivered to them bills receivable of the approximate value of $20,000, for the purpose of furnishing collateral to such advances, which bills made up and constituted the assets of the bank that were of such character as to be readily convertible into cash. A careful examination of the allegations of the contract, construed in the light of the inducing matter, but separate and apart from the allegations as to what was done under it, leads us to conclude that, as a wholly executory, bilateral contract it was not enforceable, by reason of a lack of mutuality of obligations. Viewed as an executory contract, it is clear that the State Bank of Medina bound itself to borrow no money from the defendants, either absolutely or conditionally. If the plaintiff bank had, after making the agreement above referred to, found another bank or an individual that would have been willing to advance the necessary cash upon more favorable terms than those alleged, or rea
There are many cases in the books in which it is held that damages may be recovered for breach of contract, where the measure of performance is indefinite in the sense that exact quantities cannot be determined in advance; as where, for instance, the quantity is to be determined by the necessities of a business or the reasonable requirements of a factory. Hickey v. O’Brien, 123 Mich. 611, 49 L.R.A. 594, 81 Am. St. Rep. 227, 82 N. W. 241; E. G. Dailey Co. v. Clark Can Co. 128 Mich. 591,
In so far as the complaint purports to state a cause of action for the breach of a wholly executory contract to loan money, and in so far as the special damages are predicated upon the breach of such a contract, the complaint is demurrable and the special damages are not recoverable.
But the foregoing considerations do not wholly dispose of the questions raised on this appeal. The complaint alleges more than a purely executory contract. It alleges, as hereinbefore stated, the circumstances in which the parties were negotiating, their purposes, and the objects which they had in view, as well as the doing of certain things by way of conforming to those purposes and realizing the objects. These allegations give rise to an additional inquiry to determine whether a cause of action in contract is stated.
A contract may fail wholly as an executory agreement carrying mutual obligations of the parties from the time it is made, and yet result in contractual obligations depending upon what is done in pursuance of it. Says Baron Park in the case of Kennaway v. Treleavan, 5 Mees. & W. 498, 151 Eng. Reprint, 211: "But a great number of cases are of contracts not binding on both sides at the time when made, and in which the whole duty tobe performed rests with one of the contract
Where an agreement is largely executed, and where its apparent obligations have been carried out in expectation of the making of a contract in the future, it has been held by highly respectable authority that even the agreement to make such a contract in the future is not a nullity. Slade v. Lexington, 141 Ky. 214, 32 L.R.A.(N.S.) 201, 132 S. W. 404. In this case there was an agreement between plaintiff and defendant to the effect that the plaintiff should supply water to the defendant city for twenty-five years, the defendant having an option
In the case of Chicago & G. E. R. Co. v. Dane, 43 N. Y. 240, the •defendant wrote' a letter agreeing to receive and transport not exceeding 600 tons of freight, on account of the Chicago & Great Eastern Eailroad Company, the addressee of the letter. The plaintiff Eailway Company, promptly answered the letter as follows: “In behalf of this company I assent to your agreement, and will be bound by its terms.” The court held that the word “agree” in the defendant’s letter was equivalent to “offer,” and that the plaintiff offeree had manifested an unqualified assent to the terms of the offer. No contract resulted, for the reason that the plaintiff had in no way bound itself by its acceptance. The court, in speaking of the effect of the purported acceptance, said (page 242) : “This amounted to nothing more than the acceptance of an option by the plaintiff for the transportation of such quantity of iron by the defendants as it chose; and had there been a consideration given to the defendants for such option, the defendants would have been bound to transport for the plaintiff such iron as it required within the time and quantity specified, the plaintiff having its election not to require the transportation of any. . . . There being no consideration for the promise of the defendants, except this acceptance by the plaintiff,' and
In the case of Thayer v. Burchard, 99 Mass. 508, the alleged contract upon which the action was founded was quite similar to that in the case of Chicago & G. E. R. Co. v. Dane, supra. Plaintiffs, who expected to buy grain in the West, obtained from defendants a statement of the rates at which it was willing to receive and transport such grain. Defendants had written to the effect that they would take flour and grain from plaintiffs and ship at certain rates. This proposition was accepted by plaintiffs. In speaking of the effect of the acceptance,, the court said (page 518) : “The plaintiffs did not, by their acceptance of the terms, engage to furnish goods for transportation. Although they should purchase goods for that purpose, they might, at any time before their delivery at Schenectady and notice to the defendants to transport them, divert them to another route. Until such delivery and notice, there was no mutuality of obligation. The matter stood, in this respect, as upon an open proposition by the defendants, which the plaintiffs might make operative as a contract by delivering goods and calling-for their transportation. To extend the obligation of the defendants beyond that limit would leave it, as it seems to us, without limit and without mutuality.”
In Minnesota Lumber Co. v. Whitebreast Coal Co. supra, 160 Ill. 85, 31 L.R.A. 529, 43 N. E. 774, a lumber company had bound itself in a “memorandum of contract” to “buy its requirements of anthracite coal” for a certain season from the coal company. It was urged that the contract was void for uncertainty and for want of mutuality. In holding the contract valid the court uses the following language: “Contracts should be construed in the light of the circumstances surrounding the parties, and of the objects which they evidently had in view. The circumstances, which both parties had in view at the time of making the contract, may be referred to for the pprpose of determining the meaning of doubtful expressions. Courts will seek to discover and give effect
In the case of Jones v. Vance Shoe Co. 115 Fed. 707 (cited by respondents), the contract sued- on was a contract to pay into the treasury of the Smith-Jones Company $20,000 cash, to guarantee certain notes to the amount of $25,000, “and to provide, as a loan to the said Smith-Jones Company, whatever additional capital is needed to provide for 3 working fund.” The breach assigned was the failure to perform the •obligation of the clause quoted above. The contract was held too indefinite to afford a basis for recovery. It should be noted that the action was brought by one stockholder against another, — it appearing that the ■defendant owned two thirds of the stock, while the plaintiff owned less than one third, and that, in addition to paying the $20,000 in cash into the treasury of the company when the contract was made, defendant had supplied the company with money to carry on its business for six months. It was charged in the declaration that the defendant, through its officers, controlled the Smith-Jones Company. The court thought that the question of the .reasonableness of the time during which defendant should supply the working capital was properly determined by the •directors of the Smith-Jones Company. Burthermore, inasmuch as the details concerning the loans were left to be controlled by the directors •of the Smith-Jones Company, and inasmuch as defendant, on account •of its stock ownership, properly controlled the board of directors and had the largest interest at stake in the Smith-Jones Company, there was no foundation for a recovery by the plaintiff.
The court did say that it was content to place the judgment on the vagueness of the stipulations in the contract; but it must be borne in mind that the defendant furnished all the money that was demanded by the board of directors of the Smith-Jones Company, and that plain
In United Press v. New York Press Co. 164 N. Y. 406, 53 L.R.A. 288, 58 N. E. 527 (also cited by respondents), suit was brought for breach of an executory contract under which plaintiff was to deliver to defendant a news report and defendant to pay “not exceeding $300 during each and every week.” The contract was made in 1892 and it was to continue until 1900. The court laid down the rule that the agreement must be neither vague nor indefinite; and they held that the contract in question, which provided for no. rate of compensation and no fixed price at which the defendant was bound to take and pay for the news report, was lacking in the element of mutuality. It must be remembered that the damages were predicated upon the provisions of the contract, which were wholly executory; that is, upon the obligation to-continue to take the news report in the future. In passing it might be noted that this case has been thought open to criticism on the ground that the contract realy bound the defendant to pay at regular rates for news up to $300 per week. See 14 Harvard L. Eev. 463.
In the case at bar it is alleged that the defendants selected and the plaintiff turned over to them bills receivable to the value of about $20,-000; and that this was done in pursuance of the agreement whereby the defendants had undertaken to loan money to the plaintiff bank. Even though the defendants’ promise was not binding at the time it was made, by reason of a lack of a corresponding obligation on the part of the plaintiff to borrow money, yet they are in the position, as a result of the agreement (using this term in the sense common understanding, rather than as referring to a legally binding contract) entered into, of offering to loan to the plaintiff money in exchange for collateral to be selected by the defendants and turned over by plaintiff. The plaintiff alleges a full compliance with the terms upon which the defendants were willing and offered to loan money, and it further alleges that the-defendants repudiated their agreement and “refused to advance any money to said bank to enable it to continue in business.”
We are of the opinion that a contractual relation between the Medina State Bank and the defendants sprang into existence by reason of the selection and acceptance by the defendants of the collateral security. In the absence of any express agreement or understanding, the defend
It is true that the complaint sets forth no specific promise to loan a definite sum of money, but we are satisfied that, if the evidence should clearly establish the facts alleged with reference to the understanding of - the parties at the time, the jury would have a right to infer from such facts an agreement to advance what would be considered a reasonable sum, in view of all the circumstances, including the value of the-securities turned over. This matter, however, must depend wholly upon the evidence to be adduced at the trial. It must be borne in mind that the transaction alleged is unusual; that it was made for a special purpose; and that defendants had an apparent interest in the accomplishment of the objects sought to be attained, chief of which was the continued existence of the bank. It is not only alleged that the assets-turned over to the defendants were of the value of about $20,000, but it is also alleged that they constituted “the assets of (the) bank that were of the character that could be speedily converted into cash or made-available to enable such bank to continue in business.” A contract may be somewhat ambiguous and indefinite, not merely as a result of words-employed by the parties, but as a consequence of more or less equivocal acts as well. In such cases it is fundamental that, in measuring the-obligation which one assumes by reason of his words or conduct, it is competent to consider the surrounding circumstances, in order that the-
Assuming for the purpose of this discussion that the plaintiff will be .able upon the trial to establish facts rendering the defendants obligated to loan a sum of money to the plaintiff which would have been sufficient to have enabled it to continue its business, it must yet be determined whether the damages resulting from the breach of this obligation would necessarily be so speculative and uncertain as to afford no basis for recovery. It is true that the complaint alleges special facts as a basis for the recovery of damages which it might be difficult to establish with sufficient certainty as to cause and effect, to afford a legal basis for the recovery of special or even substantial damages in any amount; but we are of the opinion that the allegations are sufficient to support a recovery of substantial damages if the difficulties of making proof are successfully met. Plaintiff alleges “that, by reason of the default of defendants in failing and refusing to advance and furnish to said bank the cash necessary to enable it to continue in business, it was forced to close its doors and discontinue its banking business; and, as direct results thereof, the proceedings (receivership) were commenced as hereinbefore mentioned.” If the plaintiff can prove this allegation with ■sufficient directness and certainty as to render improbable all other causes of the result alleged than that attributable to these defendants, we have no doubt that the law will be satisfied in its requirement of certainty of causation. As to the recovery of the special damages which the plaintiff asks, he may safely rely upon the rule announced in the case of Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Reprint, 145, 23 L. J. Exch. N. S. 179, 2 C. L. R. 517, 18 Jur. 358, 2 Week. Rep. 302,
It is claimed that the contract is ultra vires and void as to the de
The further contention that the contract is within the Statute of Frauds is practically disposed of in the previous discussion. The allegations are held sufficient to charge the defendants with an obligation to loan, money. The contract is not brought within the Statute of Frauds by réason of the incidental effect it might have. Had the alleged agreement been performed, it is true that the obligations of the plaintiff owing to third persons would have been discharged, but this, would not bring the contract within the statute. The statute is generally construed to be applicable to that situation in which the defendant promisor undertakes to pay a debt that a third person owes to the promisee and to whose obligation the defendant’s promise is collateral. Furthermore, the complaint nowhere alleges the contract to be verbal, and it is elementary that when such is the case the complaint is not objectionable on demurrer.
The order appealed from is reversed and the cause remanded for further proceedings according to law.