Sackett v. Spindler

California Court of Appeal · 1967 · Contracts

Contractsmaterial breachanticipatory repudiationnewspaper contracttotal breachpartial breachmaterialityuncertainty of performance

Facts

Spindler agreed in writing to sell Sackett all 6,316 shares of S & S Newspapers, owner of the Santa Clara Journal, for $85,000 payable in installments, with delivery of the stock free of encumbrances upon final payment. Sackett paid $6,000 on time, later paid $19,800, and then gave a check for the remaining balance, but the check was dishonored for insufficient funds. Spindler had placed most of the endorsed stock certificates in escrow with Sackett's attorneys, reclaimed them after the check did not clear, and repeatedly extended Sackett's time to pay, but Sackett still did not tender cash or its equivalent. After the newspaper's financial condition worsened, Spindler took steps to keep it operating, later sold half the stock for $10,000, repurchased it, and ultimately sold all shares for $22,000 netting $20,680.

Issue

Did Sackett's failure to pay the balance constitute a total, actionable breach permitting Spindler to terminate the contract and recover damages, or was Sackett discharged because Spindler rescinded by reclaiming the stock or repudiated the contract on October 5? If damages were proper, what was the correct measure, and were mitigation and prejudgment interest properly resolved?

Rule

Failure to perform an unconditional promise when due is a breach unless excused. Whether that breach is total or partial depends on materiality, assessed by factors including the extent of expected benefit lost, adequacy of damages, part performance, hardship of termination, the defaulting party's culpability, and the uncertainty that the remainder will be performed. In a contract for sale of corporate stock where title has not passed, damages are generally the difference between contract price and market price at the time and place of delivery, but if no market is available the court may use resale price or other evidence of value; prejudgment interest is unavailable on damages not certain or capable of being made certain by calculation.

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In Portland, Oregon, Nora Kim agreed in writing to buy all shares of Cascade Weekly, a closely held publishing corporation, from Daniel Ruiz for $120,000, payable in three installments. Nora paid the first two installments, then twice sent emails saying financing was "almost done," missed two extended deadlines, and never tendered the final balance in cash or its equivalent while Daniel kept the business operating at personal expense.

On these facts, when Daniel finally tells Nora the deal is over and sues for breach, which is the strongest analysis?

Explanation. The majority opinion holds that whether a breach is total or partial depends on materiality. Relevant factors include part performance, culpability, and especially the uncertainty that the breaching party will perform the remainder. Repeated assurances do not prevent a finding of total breach where actual performance remains extremely uncertain. Here, despite partial payment, Nora missed multiple extended deadlines and never tendered the balance, so Daniel could treat the nonperformance as total.